Some relatively bullish guidance. People still buying into the treasury market. Going up again, Third Straight day. I want to look at the skew index. This is the tail risk on the s p 500. It is holding at the 128 level. This is above the level we were at in early summer. This gives you some sense of why this market remains rangebound. A little bit of nervousness still out there. 600 trading at 392. They are still talking about breakout. His swansong. Arrivederci, draghi. Weak, particularly out of germany. Well. Ra getting hit as it is cutting way more than anticipated today. We have 250 basis points. A reasonably sizable move in the lira. Arkets watching for what comes next. Draghipresident mario tenure afteris releasing another round of stimulus to counter the slow down. Data confirmsg our previous assessment of wea kness in euro area growth dynamics, the practice of Downside Risk and muted inflation pressures. Lets bring in matt miller from frankfurt. What was the main takeaway here . The questions were about what draghi felt like he achieved. Fulfilledke he had his mandate. In terms of Monetary Policy there were no changes made but he did say he felt justified in making the controversial moves he made in september after he saw some of the surveys and the guy referenced unfortunately coming in at such low levels. Has turned into a partisan apparatus. They have been replaced with more dovish members. Hopefully Christine Lagarde will be able to unite them. The main takeaway that i would was talkingryone about today and yesterday is that draghi will be seen historically as the savior of the eru euro. Speechatever it takes and his actions certainly kept it together and kept it from trading with any kind of serious volatility. Now, we areon this joined by Gary Shilling, a correspondent but also president of Gary Shilling when you look at his legacy and what he did for the euro area, and the tone he sent for bankers around the world. You probably can credit him for saving the euro or certainly avoiding disaster. Allink draghi and virtually Central Banks dont understand the world we are in. They dont understand we are in an excess supply world and there are strong deflationary pressures. They think that stimulus is going to recreate the inflation that they want. They want inflation because they are afraid of deflation. Deflation. To buy in are fighting against the reality of the world. Globalization you have huge excess savings and Central Banks are impotent in this situation. This idea of having that inflation target of largely 2 has been incredibly elusive this cycle. They never say why they want to percent. But what i think they want it for is that they are so afraid of deflation, inventories build up, push prices down, suspicions are confirmed. Had deflation the last two decades. These guys want a cushion. If you stake out a target and cant beat it, you have a credibility problem. Guy lets talk negative rates. Is average discount rate 3. 9 . Have 50 on the ecb deposit rate. When do we pay the bill . My shop we are embarking on a study of what it is like to live in a low disciplinary inflation rate era. Nominalis its not rates, its real rates. Think abets what its telling us. It is certainly very disruptive and i dont think that Central Banks or governments have begun to deal with this because it is devastating for savers. Germans are typically the guys who saved but they have negative rates. Trillion ofke 15 negative rates. Savers ands tough on it hasnt done much for the buyers. Im getting nothing of a return on my fixed investment so im saving more for retirement. Guy can i talk about where bonds are priced right now . They are in an extraordinary position and during the draghi. Erm we saw them going down how mispriced do you think bunds are and if we saw a shift how quickly would we go back . I dont see it. If you want to recreate inflation, inflation is a matter of more demand than supply. Traditionally the way that you created inflation was Big Government spending in wartime. We looked at the u. S. Economy going back to 1749. Of the years all between war years and peacetime years, you find the average price increase was 12 in war and in peace time it was 1. 3 . You need some thing that creates that huge desire for government to spend big money and create that excess demand. Slowe probably in the deflationary world. We talk about that, we were staring into the abyss of 1. 4 on the 10 year a couple months ago. We have rebounded from that. Was that the bottom . About 1 oro talk lower . I dont think so. Did reach 2 for a few weeks. I think it bounced around. Are moving into a recession and we may already be there, you have further pressure on rates. I dont think we have seen the low and of the rates by a longshot. Guy what is that mean for equities . There is the argument now that the compete on stocks ought to be higher with low yields but if low yields are there because there is disinflation and not deflation and weak economies, that is where you are up on wouldnt well stop i buy the idea that you automatically increase your pressure. Broad. Been a very a broad period. If im right we are already in a recession. Out things like the sub mortgage meltdown. The s p 22 . It would be another decline from here of about 20 . There will lets check in with viviana hurtado. Lens to buy 20 billion of American Farm products if it finds a trade deal with the u. S. Bloomberg learned it would consider boosting purchases as part of future negotiations. Met was before the u. S. Started imposing tariffs. The European Union keeping Boris Johnson waiting. Thembassadors agreeing british Prime Minister should get more time to work out a brexit deal but they cant agree on how much time. Tight is pushing for a deadline and other countries want to give them the three months it has requested. And there could be another blackout in northern california. Toe Cutting Service customers in northern california. It is an attempt to keep powerlines from sparking wildfires. Other utilities are warning of shutoffs. And of right wing dictator Francisco Franco has been in the mausoleum since he died. His mother liam is considered offensive by many spaniards. This is bloomberg powered by more than 2700 journalists and analysts in more than 120 countries. Coming up, ford and tesla boast just both report earnings as well and they tell different stories. This is bloomberg. Live from new york. Guy lets catch up. We are looking at very small moves here in the u. S. You can see the s p 500 fractionally higher. Up by the techld sector. There, see the stocks most of the indexes in europe are higher. Lets look at the bloomberg terminal and see whats happening. Ore sectors have been higher only three of 11 sectors are higher. They bright spot of 8. 1 . A bright spot of that. Upwill see the s5 network 6. 5 . An announcement with amazon web services. That can support the idea there is a bottoming in the chip sector. Lets take a look at what is happening in the auto space. A surprise profit, record deliveries. The s p maymuch follow moodys and downgrade the credit rating. Its guy thank you very much indeed. Lets get a sense on what is happening in that space. Right . t ford get it why cant forget traction . They tried for a long time and its not working. They have been trying for the entire year or longer to get traction and they have headaches everywhere. There. Ses money General Motors has sales down and profits down. Ford lost money everywhere around the globe except north america. Down because they havent been producing enough, higher warranty costs higher incentive cost is hurting their outlook, so they rake things in and the market hates it. That is the story. They are not getting anything together in any one of their , and people are starting to question why they cant do it. One company that got it right is tesla. Is it going to be sustainable . Were some good numbers within teslas report. We are in a strange parallel universe when ford cant get a vehicle out the door and carmakers are supposed to do it out of muscle memory and elon musk sing tesla will have the model three produced on time, already starting in china with the new plan and hes never done it before. Did it. The shares are up on that. The sg any operating costs were all down. It does have some sustainable power to it. Investors are still dubious that they will continue to make money because tesla hasnt done that but when they start to get costs in line and get production ramped up on time it tells you that they are starting to get the operating part of this business under control. The shares have always traded on hope. Was superpowerful that they would get this vehicle to china and then there would be production snafus. Some real strength in the numbers and some good numbers looking forward for tesla. Day for the short. Just a quick comment on daimler. The cash flow looks impressive. What is it doing right . Side ofthe mercedes car the business. With daimler come up mercedes vehicles make a lot of money and they are starting to get some fraction. The concern on the horizon is what happens with diesel and that kind of thing but they are getting production issues cleared up they are getting sales improvements on the mercedes side. Here, we will hear from the southwest ceo. We will talk about the outlook for business and all the issues going on with the boeing 737. And the Biggest Program on this network, we will speak with bill and mariothe ecb draghi. This is bloomberg. Guy im guy johnson. Im Romaine Bostick and this is bloomberg markets. Time now for Bloomberg Business flash and a look at some of the biggest business stories going on right now. Sales in the revenue forecast falling far short of estimates. Itster says that advertising business will keep having an impact on daily act of users. The ceo mike roman says the macro environment remains challenging and American Airlines has cut its profit profit outlook for the year. A worker slow down over the summer. That is your business flash update. Guy thank you very much. We will be talking trash. The Waste Management ceo will be joining us shortly. We will be talking about that and whats happening in the wider economy. This is bloomberg. Everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. You can share 1, 3, or 10 gigs of data between lines, mix in lines of unlimited, and switch it up at any time. All with millions of secure wifi hotspots and the best lte everywhere else. Its a different kind of wireless network, designed to save you money. Switch and save up to 400 a year on your wireless bill. Plus, get 250 back when you buy an eligible phone. Thats simple. Easy. Awesome. Call, click, or visit a store today. Guy im guy johnson. Get back to earnings and specifically Waste Management earnings. The shares are moving a little bit lower today. The ceo jim fish joins us right now here in new york. Thanks for being with us. Should point out some of the headline numbers did beat the streak they were looking for. But with the core Waste Management business there is a little bit of a slowdown. The core business is doing well. From a macro standpoint the consumer piece is really good and the industry pieces a little seeslow there is a wait and attitude on the industrial side. Theine woodstock about core business on the industrial side. Is that just a slowdown on industrial and macro activity . Gooden they dont have visibility into the macroeconomy sometimes they will tend to push those out and i think thats what we are seeing right now. Headed you think we are for a recession in 2020 . What we are seeing the consumer looks strong so i would tell you that if the consumer makes up 70 of the 2020 probably still looks reasonably good. Its hard to say about the industrial economy. Its more of a wait and see as opposed to a true slowdown. The rest of our business looks pretty good. Guy are you is a Company Investing less in Capital Equipment . Your customers are probably doing the same thing. Im just wondering how the trickle effect works. Was one of our highest capex years on record. More trucks and those two years combined than the previous four. We spent a lot on capital and we are also investing in recycle equipment. Are taking a step forward with technology and recycling and that will show up with capex and technology in 2020 as well. Kubot 2. 9 billion deals. What type of contribution to the results are you expecting . We think it will close in the first quarter. The business is 10 of our business. We will have to do vest a few things. Free cash flow should be somewhere in the 115 to 200 cash range and our cash flow is 1. 3 billion. I am curious what Consumer Trends youre are seeing right now. There is huge pressure to manage Plastic Waste. They are planning to take pet plastic back down to its base component. Technologysee the developing to manage Plastic Waste, and how technologically advanced do you think the u. S. Is versus other parts of the world . U. S. Has really taken some technological leaps here. The traditional Plastic Waste that we think of, Water Bottles and soda bottles, those have been managed well for a long those pieces of Plastic Waste that are lower value that we are looking to find another solution for, whether it is turning to Building Materials of some type or a better solution, we are investing a fair amount to do that and i think youll see some announcements from the next 12 months that are an advancement in how we manage Plastic Waste. Guy do you talk to the companies that produce this . How does it work throughout the entire supply chain . We spent time talking to all sides of the supply chain. I think we do a good job as does the industry of talking to all levels within the supply chain. Before you came in there was a lot of talk about recycling, not just Waste Management but overall beating on the decline. Are seeing the pressures come with china not buying as much recycling. What have you done to get the costs right . China stopped taking our material a couple years ago. Much material was contaminated coming over which meant we were having to process it quite a bit more and we were adding technology that improves the quality of the product on the backhand but at the same time it reduces labor costs by as much as 40 . With the slowdown in china that we saw, was that tied to the trade war or was that china moving on in a different direction . I think its the latter. The timing was about the same but it didnt have anything to do with the trade war. They didnt like importing this contaminated material and we had to clean it up. Guy up next we will carry up with the earnings conversation. Derek kelly is going to be coming up. This is bloomberg. Guy im guy johnson. This is bloomberg markets. Lets get to our stock of the hour. Twitter shares heading for their worst day in a year. Abigail doolittle is standing by with the damage. Abigail there is the damage right there. A moment ago as you mentioned the worst day in about a year, this as they put up a horrible third quarter. They missed earnings by 16 and sales by 6 . All, they missed the low end by as much as 10 . The company saying that privacy issues have weighed in. As far as the privacy issues weighing on the sales as well, they were saying that some of their technology was targeting users and once they took off that setting it helped cause a decline in revenue by about 3 . One right spot. If we go into the terminal and look at the chart we have here. What we are looking at in green is the Revenue Growth yearoveryear. They did add 6 million daily active users. Increase. Veryear those numbers are really going in the wrong direction. Guy lets turn to another earnings story. Southwest airlines reporting record thirdquarter net income this despite the continued grounding of the boeing 737 max. All of the other numbers look pretty good. The problem you have got is getting the max back into the air. Once you get it and once the faa clear it, how quickly can you turn things around . For have been telling folks some time that we have one issue and it is the max and Everything Else is in good shape. Right now we are working on an beumption that the max will ungrounded by the faa in december and based on that we have the backs published in our schedule taking bookings february 8 and forward. An assumption of 30 airplanes at that point and we own 34 at this point. I have to quickly add that the all of theirssed predicted schedule so far. The nice thing about where we stand today is that the final software has been submitted to the faa this week. We are at least in the so i thinkon process that is a great process. Whether they will be done with their review and ungrounded the airplane in december i dont know. Damaged has your relationship with boeing been as a result of this, and do you think that the departure of Kevin Mcallister will allow a reset . No. Kevin mcallister did a phenomenal job. He inherited this. I was very sad and sorry to see him go. Boeing has tremendous talent and stan deal is a wonderful executive. We have a great relationship with him as well. Is damages that have been is notd and none of this recoverable. Boeing is a great company. They have a wonderful history and need to get this behind them and look forward to a great future. We hope that that is the case because we want to be part of that. This idea of about getting some compensation or reimbursement with regard to the delays we are seeing. Power those talks proceeding . Its more than an idea. Boeing has set aside reserves for that and absolutely we are demanding that that be the case. We have suffered significant harm and it is a great setback for us. They are private conversations and they are progressing. We are anxious for those to get concluded. Objectives,rimary one is to settle with boeing on that and the other is to get the max safely back in the air. Part of the success of southwest was this idea of operating one type of plane, and you guys are obviously sticking , can you maketegy a case as to why that is not more of a risk in light of what 737 max . Ned with the i think i could make a case and i dont know how compelling it would be. As i pointed out that is a question that is a logical question to be asked. I would expect our board to ask that of us, we will be looking at that next year. Advantagesremendous having a single supplier and a single fleet type. We haveong those every pilot in our company that is an expert on the 737, switching between aircraft types and thats a huge advantage for us in terms of cost efficiency, but the disadvantage is obvious to you and us as something we will have to look at but that will be a question for next year. When did you last speak to airbus and what do you think of the 320 . We talk to airbus all the time. The people have tremendous leadership. They produce a terrific product as well. 8 think that the boeing max is the best airplane in the world. The a320 is a good competitor but it doesnt match the max 8. Boeing doesnt really have a competitor, as close a competitor to the airbus 220 which is something we have already been looking at, but we had already decided that the max was our future, we have orders for the max 7 in addition to the max 8. That is something we will have to take a hard look at next year. Having a320 fleet is clearly an advantage. How hard is it going to be to persuade the traveling public not to fly on an airbus aircraft and to fly on the max . You have toe will be once you get this aircraft back in the air to get the customers back . Im confident but you make an obvious and excellent point thoseis that there are who are unconvinced and it will , thecumbent upon boeing faa and the airlines including southwest to convince the traveling public that it is safe, as long as the airplane performs well i think that will be a nonissue. There are airplane issues around the world every day and most of them dont make headlines. It would be best if the max is returned to service and there arent nagging issues that are dogging the airplane, and hopefully there wont be. We have heard from delta which has claimed they are picking up business from southwest. What is your current capacity situation relative to the rest of the industry . There is no question that our competitors are picking up business. Will be down slightly in the Fourth Quarter for holiday reasons. I can explain that a little bit more but there is a unique quality schedule that we are not able to produce this year. We are about 8 below where we when have expected to be our capacity. Expected to grow this year. Our competitors know that. Airplanes,we get the we will put them in service and restore our presence in these markets. We try to trim our schedule gently in all of our markets so we are not impacting just one market. We are flyingrd less that less than we otherwise would. That will continue into next year. About hawaii. There is a lot of fanfare with regard to your push into hawaii. Can you tell us the status of that . It is scaledback only in the sense that it has been referred and aided is because of the max. We are launching more flights next month. Of january we will be in line with our original plan. Romaine do you think you can be profitable in that market that hasnt really shown support for more than one Major Airline . Of course we do. We are at ahead of our progress in terms of the market. To be one of our better performing markets in a short period of time. We have a tremendous customer presence in california which is their number one vacation destination and we will do well there. Guy gary kelly, the ceo of southwest. Thank you for your time. This is bloomberg. This is bloomberg. Live at the investors conference oftoronto with ted gold more the head of credit at the londonbased alternative invest manager. It is a very perilous time for credit right now. There is a lot of economic uncertainty. We are seeing more and more dislocations, but it just expresses that fundamentals and junior underwriting is more important than ever. The first question i get from investors every single meeting is are we in a credit bubble . We are eight years into the cycle. Arememories of 2008 resident in peoples minds. We shouldnt be conscious but we do think there is pocket value. There does seem to be a difference between liquid credit and in liquid credit. So much of our system is based on ratings, capital because of that the difference is very widespread. Very challenging. Even with all of the money rushing into the private credit industry . Kim the thing that people miss is how much money has come out of the illiquid credit business. Banks had an 87 market share in 2007 and today it is 40 . Our biggest competitor used to be wells fargo and now they are our biggest financing partner. Have credit originators lost discipline yet . Market, weiddle havent seen a lot of bad behavior. In the liquid markets because there is left differential based on financials and more focus on i think youratings, will see a little bit more inefficient behavior. It was nice to the credit market kid a whiff of peril in work before the equityholders came around. Shopping eight 2 billiondollar 15 take. Would you have bought that . We are trained for 20 years and things like cash flows and fixed charge coverage ratios and our market has a hard time evaluating things that are enterprise values but not cash flows. You can generate 15 returns with upsides up to 30 returns. The reason that it prices at that level is that there are not a lot of people in the traditional credit markets who can price this stuff. But now fluff bank has come in with this rescue package. And yet we work is still trading at a 13 yield. Opine specifically on we work, but you are dead right. You see it all the time come up big disconnects on tech businesses. The equity markets are much more comfortable. Issue been a perpetual where you have seen big disconnects between debt equity markets and value. The courtlook across credit spectrum and illiquid credit, where is their value . Can see value in two places. One is originating or buying illiquid assets. Getting a rating or taking something that is illiquid and getting the optics of liquidity. That is one big theme we are. Ursuing today we bought alone that was unrated at 10 . Just getting that rating, or just doing Something Else really collapses that spread. We are not making a betterment cycle on fundamentals or other things but we are areng buying loans that we are happy to own but trying to create a catalyst to get an approved valuation. Thats one Market Opportunity threading liquid quite it into liquid like credit. We bring a lot of value to companies, and there are a lot of companies who dont want control. And things like m a and our ability to help them go to the next level. The big opportunities are what we call valueadded funding. Lend money to companies but act like a private equity sponsor. I love asking this question, are you surprised that the terms at which other credit providers are willing to give money to your private Equity Partner . I dont know. Where things are mostly priced today, private equity firms are being cautious about how they are leveraging opportunities. Its not uncommon for a firm to buy something 12 to 15 times and only leverage it six times. Were leveraging stuffed toy 92 debt to interest value. Providing instruments and pricing them at low levels but they are also well covered by enterprise value. How does your portfolio perform in a 2 gdp recession and a 5 gdp recession . Firstt of what we do is link. Our opportunistic business is 55 and the lending businesses 40 . To have material impairments we would have to go through a big cycle. See a 5 gdp scenario. Great to have you on bloomberg television. Goldfarb,at is ted member of the private and Equity Investment committee. The european close up next year on bloomberg. Guy arrivederci draghi. Mario bows out saying all successful monetary unions have stall capacity. When will europe get one . Stocks rise a bit but with the stoxx 600 approaching the critical market, are we set for a breakout, snap and facebook