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PEOPLE. SHE HAD A POLITICAL DECISION TO MAKE. THAT IS TO AUTHORIZE. THIS AUTHORITY TAKEN WHEN SHE STARTED OFFICE. THE DECISION WAS TO ARBITRATE ON AN ISSUE THAT ALREADY HAS BEEN DECIDED BY THE COURTS. THE BANKS OFFENSES HAVE NEVER BEEN DENIED BY A COURT WHEN THE OPERATION HAS STARTED. THE SUPREME COURT DID REFORM A DECISION BY THE APPELLATE COURT. SHE POLITICALLY WAS CONFRONTED WITH THE DECISION THAT COULD BE CONSIDERED SOUND AT THE TIME. >> HER CHIEF OF STAFF, WE KNOW THAT THEY WERE PUBLICLY SUPPORTING. IS THIS POLITICAL? >> IT WOULD BE DIFFICULT TO SAY IT IS NOT POLITICAL. IT IS STRANGE THAT ALL OF THIS HAPPENED AS HE STEPPED DOWN FROM HIS PRESIDENCY. I DO THINK THERE IS A STRONG POLITICAL. >> THANK YOU SO MUCH. HE WAS A LAWYER IN PARIS. THE TRIAL KEEPS GOING ON. >> THANK YOU FOR A MUCH. MARK: IT’S TIME FOR A BERG BUSINESS FLASH. IT’S LOOK AT SOME OF THE BIGGEST BUSINESS STORIES. THEY WANT TO AVOID A GOVERNMENT BAILOUT FOR THE CAPITAL RAISING. THEY WILL STEP UP EFFORTS TO INVESTORS FOR EQUITY SWAPS. THEY’VE BEEN TRYING TO CLEAN UP THE BALANCE SHEET BY DISPOSING OF $30 BILLION IN BAD LOANS. THEY WILL SELL A MAJORITY STAKE. THE VALUE IS $2 BILLION. ALMOST A YEAR AGO, THE U.S. GOVERNMENT LOST A TRANSACTION WITH A CHINESE IRE FOR NATIONAL SECURITY REASONS. THEY WILL SELL ALMOST $17 BILLION TO IRAN. IT’S THE FIRST DEAL OF ITS KIND SINCE 1979. THEY MAY HAVE TO SELL THE DEAL TO PRESIDENT-ELECT DONALD TRUMP. DONALD TRUMP AS OPPOSED TO THE NUCLEAR DEAL WITH IRAN. THIS CLEARS THE WAY FOR THE BOEING. THAT IS THE LATEST BLOOMBERG BUSINESS FLASH. BATTLE OF THE CHARTS IS NEXT. WE BATTLE OVER THE YIELD CURVE. THIS IS BLOOMBERG. ♪ JULIE: IT IS TIME FOR OUR GLOBAL BATTLE OF THE CHARTS. WE LOOK AT SOME OF THE MOST TELLING CHARTS OF THE DAY. YOU CAN ASK THAT — ASSESS — ACCESS THEM ON THE BLOOMBERG. TAYLOR RIGGS IS RIGHT HERE BESIDES ME. TAYLOR: WE HAVE BEEN TALKING ABOUT THE 10 YEAR YIELD AND HITTING THE 2.5 RANGE. THAT IS A BIG DEAL. I WILL FIELD — WANT TO TAKE A LOOK AT THE YIELD CURVE IN GENERAL. A YEAR AGO, WHERE WE WERE WHEN THE FED RAISED RATES FOR THE FIRST TIME SINCE THE FINANCIAL CRISIS. THEN WE GO DOWN TO THE BLUE, WHICH IS THE DAY AFTER ELECTION DAY. WE POP UP. WE’RE MUCH STEEPER NOW ON THE WHITE WINE TODAY. THE 30 YEAR IS APPROACHING THE 320 MARK. THE 10 YEAR IS APPROACHING THAT 2.5 MARK. A LOT OF PEOPLE SAY THE 10 YEAR AT 3% IS MORE ELASTIC. WE ARE SEEKING OVER 200 BASIS POINTS TO JULIE: WHAT IF HE GOT? MARK: AND EASES PERMEATING IN CHINESE MARKETS. WE ARE TALKING ABOUT THE FED IN ITALY. DO KEEP ONE EYE ON CHINA. THIS WATCHED INTEREST REDUCTION OF CIRCUIT BREAKERS. IT REALLY RATTLED DOUBLE MARKETS. IT REDUCED VOLATILITY. HAVE A LOOK AT WHAT HAPPENED SINCE THEN. HIM TODAY ALONE, WE HAVE SEEN THE SHANGHAI INDEX, THE WHITE LINE GO UP 2.5% THE BLUE LINE IS ONE DOLLAR WHICH IS IN AT THE LOWEST LEVEL. ONE YEAR SOVEREIGN YIELD RAISED BY BUSINESS POINTS. THAT IS THE PURPLE LINE. THE QUESTION IS, WHAT IS THE REASON FOR THIS SYNCHRONIZED SELLOFF? YOU’VE GOT DONALD TRUMP QUESTIONING OF THE ONE CHINA POLICY. YOU’VE GOT THE CRACK DOWN ON INVESTMENTS. YOU HAVE CONCERNED THAT UPDATE PRICES ARE ABOUT TO FALL. THE BIG FEAR IS MAKING A RETURN TO WHAT HAPPENS IN JANUARY. THE UNPREDICTABLE NATURE OF DONALD TRUMP ON TRADE POLICY ONLY ADDS TO THE UNCERTAIN. IS THE NATURIST LARGEST BROKERAGE. IT SAID IT WAS MORE WORRIED ABOUT THE MONEY MARKET NOW THAN DURING THE 2013 CRUNCH GIVING ACCELERATING FUND FLOWS. AS WE APPROACH THE END OF 2000 EXCHANGE, ARE WE GOING TO SEE THE BEGINNING OF 2017. UNEASE IS VERY MUCH PERMEATING IN CHINA’S FINANCIAL MARKETS. SEE THE BEGINNINGI THINK — YES IT . MARKS CHART SCARES ME MORE. I’M GOING TO HAVE TO GIVE IT TO MARK TODAY. CHINA IS A VERY IMPORTANT ISSUE AT, ESPECIALLY IN THIS POLITICAL ENVIRONMENT. THANKS TO YOU BOTH. TAYLOR, COMEBACK BACK AND GIVE US ANOTHER ONE IN — ONE. MARK: HE IS GIVING THIS UP DATE ON THE BUDGET FOR NEXT YEAR. HE SAYS THE GOVERNMENT HAS MADE NO DECISIONS ON THE CUSTOMS UNION POST BREXIT. THEY ARE EXPRESSED — EXPRESSING CONCERN. THAT IS THE END OF US TODAY. IT WE WILL SEE YOU TOMORROW. >> IT IS NOON IN NEW YORK. I AM JULIE HYMAN. DAVID: WELCOME TO BLOOMBERG MARKETS. FROM BLOOMBERG’S WORLD HEADQUARTERS, WE’RE COVERING STORIES FROM NEW YORK TO THE UNIT. EXXON MOBIL CHAIRMAN REX TILLOTSON IS THE FRONT WANTED TO BE SECRETARY OF STATE. WE LOOK AT WHAT THIS COULD MEAN FOR OIL AND THE ENERGY MARKET AREA NON-OPEC MEMBER SAY THEY’RE READY TO DELIVER PRODUCTION CUTS. WE HEAR FROM DAVE RUBENSTEIN WHO WEIGHS IN ON THE STATE OF EUROPE AND THE MOST RECENT DEPLOYMENT BY DONALD TRUMP. ABIGAIL: WE ARE LOOKING AT MIXED TRADING HERE. WE HAVE THE DOW SLIGHTLY HIGHER WHICH PUTS THE DOW ON PACE FOR ANOTHER RECORD CLOSE. THE S&P IS TRADING MODERATELY LOWER. AT WHICH TIME, DID CARVE OUT ANOTHER RECORD HIGH. THE NASDAQ IS THE BIG LAGGARD TODAY. THESE DIVERGENCE ARE HAVING TO DO WITH SECTOR PERFORMANCE. WE TAKE A LOOK AT THE S&P. WE SEE THE TECH IS A BIG DRAG ON THE DAY. CONSUMER DISCRETIONARY IS ANOTHER. ENERGY IS REALLY HELPING OUT. MAYBE IF OIL CONTINUES THESE GAINS, IT CAN TURN THE S&P BACK INTO THE GREEN. AS HER WITH REALLY HAPPENING, THE DOW PERFORMANCE, WE HAVE A FEW MOVERS. JOHNSON & JOHNSON IS TRADING NICELY. ON A BULLISH MENTION I PARENTS, THEY SEE 20% UPSIDE ON JOHNSON & JOHNSON. EXXON AND CHEVRON ARE TRADING HIGHER ON THAT OIL STRENGTH. IT’S HIGHER THIS TIME AND IT COULD POWER THE S&P 500 AND THE DOW. WHAT’S DRAGGING ON THE S&P 500, WE ARE LOOKING AT PHARMACEUTICALS AND APPLE. APPLE IS DOWN AFTER A BIG WEEK LAST WEEK THEY HAD THEIR BEST WEEK SINCE SEPTEMBER. PHARMACEUTICALS IS DOWN 15% ON PAPER. ON THE NEWS THAT THE CEO IS RESIGNING AFTER AN IMPROPER SALES PROBE. SHARES ARE DOWN AND INVESTORS DO NOT LIKE THAT UNCERTAINTY. JULIE: GETTING BACK TO THE OIL STORY, THEY ARE GOING TO CUT OIL PRODUCTION MORE THAN EXPECTED. THEY ARE COMING AFTER NON-OPEC COMPANIES. IN A BLOOMBERG EXCLUSIVE, OIL COMPANIES ARE ALREADY TAKING MEASURES TO INTRODUCE THE COST. >> IN THE FIRST STAGE OF THE CUTS, YOU WILL BE ABLE TO SEE. WE HAVE ALREADY DISCUSSED THIS. COMPANIES ARE WELL AWARE OF WHAT THEY HAVE TO DO. THEY ARE CONSIDERING THESE STEPS. HE UNDERSTANDS THE BENEFITS OF THIS DEAL. THE DEAL IS IN PLACE AND THEY HAVE AGREED TO IT. THEY ARE ALREADY PREPARING FOR THE COSTS WHICH WILL TAKE PLACE STARTING IN JANUARY. AS WE SPEAK NOW, THEY ARE TAKING MEASURES. >> HOW DOES THAT MATERIALIZE? EACH COMPANY TAKE A PERCENTAGE? >> I WOULD LIKE TO STRESS ONCE AGAIN THAT COMPANIES HAVE AGREED VOLUNTARILY TO THIS. WE ARE AWARE OF THE TERMS. THEY SAID THEY WOULD JOIN IN. THIS IS CONCERNED — CONFIRMED WITH MY RECENT READING. THIS IS BEEN REACHED BY THE MINISTERS TODAY. WE WILL DO WHAT IS NECESSARY. THE PRODUCTION COSTS WILL BE SPLIT PORTION AT LEAST BETWEEN THEM. WE WOULD ALSO CREATE A PRODUCTION MONITORING COMMITTEE. WE WOULD BE DOING JUST AS THIS APPLIES TO MONITORING THEIR COMPLIANCE WITH AGREEMENTS WE REACHED. THE OBJECTIVE HERE WOULD BE A REGULAR BASIS. WE WANT TO HAVE A QUICK SET OF COMMUNICATION. I CANNOT STRESS THIS ENOUGH. THE COMPANY’S ARE ON A VOLUNTARY BASIS CORRECTING THEIR PRODUCTION WITHIN THIS AGREEMENT. >> THEY JUST SOLD $11 BILLION TO THE QATARIS. WHAT ELSE TO YOU SEE THEM BRINGING TO THE TABLE THE ON THEY JUSTCASH? >> WE ARE VERY POSITIVE ON THIS DEAL. IT HAS GONE AS PLANNED. IT IS ONE OF THE BIGGEST DEALS IN RUSSIA. AND GLOBALLY OVER THE RECENT TIMES. WE VIEW THIS AS A POSITIVE SIGN, BRINGING FOREIGN INVESTMENT INTO RUSSIA. >> WHAT IS A HEALTHY OIL PRICE FOR RUSSIA AND MARK WHAT YOU TARGETING? CONSIDERING THIS DEAL GOT DONE BECAUSE OF THE NON-OPEC MEMBERS, WOULD RUSSIA EVER JOIN OPEC? >> AS FAR AS PRICES ARE CONCERNED, WE TRY TO STAY AWAY FROM FORECASTING PRICES. WHAT I CAN TELL YOU IS THE CURRENT PRICE LEVEL IS FULLY SATISFACTORY TO US. RUSSIA IS NOT A MEMBER OF OPEC AND DOES NOT HAVE LANCE TO JOIN THE CARTEL. RUSSIA IS READY TO ENHANCE THE SIZE OF ITS OPERATION WITH OPEC COUNTRIES. I THINK THE DEAL PLAYS A SOLID FOUNDATION FOR THE FUTURE. JULIE: THAT WAS THE RUSSIAN INTERVIEW — ENERGY MINISTER. LET’S CHECK IN ON NEWS. MARK HAS MORE. MARK: DONALD’S LEADING CHOICE FOR SECRETARY OF STATE MAY HAVE TROUBLE WINNING CONFIRMATION WITH HIS TIES TO RUSSIA. SENATORS FROM BOTH PARTIES ARE BALKING. HE HAS TIES TO VLADIMIR PUTIN. THE PRESIDENT-ELECT SPOKE ON NBC. >> WE WANT SOMEBODY WHO IS ACCUSTOMED TO NEGOTIATING. HE HAS BEEN IN YEMEN AND CHINA AND RUSSIA. IT’S NOT LIKE VLADIMIR PUTIN ARE POUNDING DOWN VODKA AT LOCAL BARS. MARK: A FEDERAL JUDGE IS REJECTING A REQUEST TO RECOUNT PAPER BALLOTS IN PENNSYLVANIA. JILL STEIN WAS LOOKING TO RECOUNT GOING — VOTES IN A FEDERAL JUDGE HALTED MICHIGAN’S RECOUNT. THE WISCONSIN RECOUNT WILL CONCLUDE TODAY. TWO MEN WHO PROVIDED MONEY TO KEY SUSPECT IN THE PARIS AND BRUSSELS ATTACKS HAVE RECEIVED PRISON SENTENCES IN THE U.K.. HE WAS GIVEN A YEARS AND THE OTHER WAS RECEIVING THREE YEARS. THEY PROVIDED MONEY TO THE BOMBING SUSPECT IN JULY 2015. IS THE MAN IN THE HAT SEEN ON VIDEO JUST BEFORE THE MARCH BOMBING AT THE BRUSSELS AIRPORT. HE IS IN CUSTODY IN BELGIUM. GLOBAL NEWS 24 HOURS A DAY POWERED BY MORE THAN 2600 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES, THIS IS BLOOMBERG. I AM MARK CRUMPTON. DAVID: REX TILLOTSON IS THE FRONT RATER TO BE SECRETARY OF STATE. YES TO DECADES OF DEALMAKING WITH RUSSIA. HIS POPULARITY IN MOSCOW IS BEING SEEN AS A LIABILITY. JOINING US NOW IS BLOOMBERG INTELLIGENCE ANALYST. TELL US A BIT ABOUT THE HISTORY HERE BETWEEN REX TILLERSON AND RUSSIA. HE WAS ABLE TO PUSH THROUGH A NUMBER OF BIG DEALS. >> IT’S THOSE TIES THAT ATTRACTED THE INCOMING ADMINISTRATION AS A POSSIBLE SELECTION. IT’S A DEEP RELATIONSHIP. IT GOES BACK TO THE 90’S. IT STARTED OFF AND CONTINUED THEREAFTER, ESPECIALLY. IT’S A RELATIONSHIP THAT CAN BE LEVERED. IT COULD RESET THE RELATIONSHIP BETWEEN THE TWO COUNTRIES ON SOMETHING THEY CAN AGREE ON, THE IMPORTANCE OF ENERGY SECURITY. JULIE: THERE HAS BEEN ATTENTION ON HIS RELATIONSHIP WITH RUSSIA. WHAT ABOUT HIS OTHER COUNTRIES? VINCENT: AS HEAD OF EXXON, YOU WANT SOMEONE WITH A GLOBAL SCALE. HAVING AN APPRECIATION FOR THE DIFFERENT CULTURES, DIFFERENT VALUE SYSTEMS, DIFFERENT SOCIAL MORALS. IT ALLOWS YOU TO APPRECIATE THE INTRICATE RELATIONSHIP THAT ONE COUNTRY MUST HAVE WITH ANOTHER COUNTRY. IT’S TRANSACTIONAL. HE WAS THERE TO DO DEALS. IT’S MUTUALLY UNOFFICIAL, A SYMBIOTIC RELATIONSHIP. DAVID: HE HAS BEEN ON THE JOB SINCE 2006. HE HAD A QUOTATION IN THE NEW YORK TIMES HE WAS TAKING THIS JOB. HE SAID YOU SEE IS THE SAME OLD WINE IN A NEW BOTTLE. EXXON KIND OF RUNS ITSELF. REALLY, THIS COMPANY RUNS IN THE DIRECTION IT ALWAYS HAVE. HOW HAS HE CHANGED THE COUNTRY — COMPANY? VINCENT: ONE IS HIS RELATIONSHIP WITH RUSSIA. THE OTHER IS XT O, THAT WAS A MAJOR BET ON NATURAL GAS. THAT WAS A $35 BILLION THAT ON NATURAL GAS. I WOULD SAY THOSE ARE THE TWO MOST SIGNIFICANT ISSUES THAT HE — HAVE OCCURRED DURING HIS TENURE THERE. JULIE: IT LOOKS LIKE DARREN WOODS WOULD BE THE HEIR APPARENT TO TAKE OVER FROM TILLOTSON. HOW DOES HE COMPARE? HOW WILL HE CHANGE EXXON? VINCENT: THE ONE CHALLENGE FOR HIM IS TO VALIDATE THE INTEGRATED LAW. YOU ALL HAVE CERTAIN CHALLENGES. THERE IS A CHALLENGE AND WITH ENVIRONMENTAL ACTIVISTS. YOU HAVE RENEWABLES. YOU HAVE UPSTREAM PRODUCTION THAT HAS NOT THROWN IN A DECADE. HE COMES FROM A DIFFERENT SIDE OF THE BUSINESS. HE COMES FROM THE CHEMICAL SIDE OF THE BUSINESS. THAT HAS REALLY BEEN THE BALLAST OF THE ORGANIZATION. HE HAS RATIONALIZED THE BUSINESS. HE HAS SOLD OFF SOME PIECES. I THINK THERE IS AN APPRECIATION AND UNDERSTANDING THAT WE ARE IN A TIME OF UNCERTAINTY AND VOLATILITY IN PRICE OF OIL AND GAS. HE CAN BRING THAT EXPERTISE TO THE TABLE AND THE OVERALL ORGANIZATION. DAVID: WHAT DO WE KNOW ABOUT TILLOTSON’S ATTITUDES TOWARD CLIMATE CHANGE. VINCENT: I THINK THAT HIS SHIFTED SOMEWHAT. AS YOU CAN IMAGINE, AS THE HEAD OF AN ORGANIZATION THAT DEALS WITH OIL AND GAS THAT HE WOULD TAKE A SKEPTICAL POINT OF VIEW. JULIE: THAT HAS BEEN ONE OF THE EARLY POINTS OF CONTENTION REGARDING HIS POTENTIAL APPOINTMENT IS WHEN YOU TALK ABOUT THE PARIS CLIMATE AGREEMENT, HERE IS THE U.S. MAINE REPRESENTATIVE AROUND THE GLOBE AND HE WOULD NOT BE WILLING TO SUPPORT THAT. DO WE HAVE ANY REAL INDICATION WHETHER HE WOULD OR NOT? VINCENT: I DON’T KNOW THAT HE IS OFFERED ANY ON THE RECORD COMMENTARY. ENERGY SECURITY IS A FUNCTION OF NATIONAL SECURITY. IF YOU VIEW THROUGH THE PRISM OF THE GEOPOLITICAL TENSIONS ACROSS THE GLOBE, ESPECIALLY IN THE ENERGY SENSITIVE AREAS, YOU CAN UNDERSTAND WHY AN UNCONVENTIONAL PICK LIKE THIS WOULD ACTUALLY HELP US BETTER APPRECIATE THOSE TENSIONS ACROSS THE GLOBE. DAVID: THANKS SO MUCH. JULIE: COMING UP, IT’S OUR DEALS REPORTER. WE WILL TALK ABOUT THE FAILED MERGER OF VIACOM AND CBS. THIS IS BLOOMBERG. ♪ JULIE: THIS IS BLOOMBERG MARKETS. IT DAVID: THE FIRE, CBS DEAL HAS RELAXED — COLLAPSED. SHARES ABOVE COMPANIES FELL AS THE PLAN DISSOLVED. JOINING US IS THE M&A MANAGING EDITOR. HOW BIG OF A SURPRISE WAS THIS? >> IT’S A BIT OF A SURPRISE. WE PICKED UP OVER THE WEEKEND THAT LAST WAS RELUCTANT TO DO A DEAL. HE WANTED ASSURANCES THAT HE WAS GOING TO CONTROL OR HAVE CONTROL OF THE SHERRY SUMNER REDSTONE. HE WANTED TO KNOW HE COULD RUN THESE MIGHT COMPANIES WHICH ARE BIG AND WOULD REQUIRE A LOT OF WORK. OUR SENSE WAS SHE WAS RELUCTANT FOR THAT. SHE AND HER LAWYERS AT HER SIDE WANT TO MAKE IT LOOK LIKE THEY WERE OUT FRONT AND THEY WERE THE REASON THE DEAL FELL APART. JULIE: WHAT SHE THE ONE THAT MADE THE CALL? JEFF: IT’S NOT ENTIRELY CLEAR. WE WERE MAKING CALLS YESTERDAY. WE UNDERSTAND HE HAS THESE CONCERNS. TO THAT PLAY INTO HER COMING OUT? HE DID NOT WANT TO PAY A PREMIUM. THERE WERE A LOT OF RESEARCH ANALYST SAID THIS WAS GOING TO BE A VERY SMALL PREMIUM. VIACOM HAS MADE A PRESENTATION AROUND THANKSGIVING OR BEFORE THANKSGIVING THAT SHOWED THEY WANTED A PRETTY HEALTHY PREMIUM. IT’S A $15 BILLION COMPANY ALREADY. DAVID: YOU HAVE THESE DUELING VISIONS. YOU HAVE BOB BACK ISSUE IS RUNNING VIACOM NOW. WHAT IS HIS VISION? WHAT HAPPENS TO PARAMOUNT? JEFF: HE’S GOING TO HAVE TO CLEAN UP. THERE ARE PROBABLY GOING TO BE SOME JOB CUTS. I THINK YOU WILL PUSH MORE INTO INTERNATIONAL VIEWING. THAT IS PLACE THEY CAN USE THEMSELVES IN RETURN TO PROFITABILITY. CVS IS DOING OK. THEY DON’T WANT TO GIVE UP CONTROL. I DON’T THINK WERE GOING TO SEE CBS DOING A REALLY BIG DEAL. THERE ARE SOME SMALLER DEALS OUT THERE. LIKELY, THEY BOTH FEEL GOOD WHERE THEY ARE. JULIE: WILL THEY LOOK ELSEWHERE? JEFF: I DON’T KNOW. THEY’VE BEEN FOCUSED ON PERHAPS DOING THIS DEAL. THEY HAVEN’T GIVEN A GOOD SENSE OF WHAT THEIR STANDALONE PLAN IS. BY A, HAS BEEN A BIT MORE OPEN WITH RESTRUCTURING AND TRYING TO FIX SOME OF THE AREAS LIKE PARAMOUNT THAT HAVE BEEN LOSING MONEY. WHEN THESE COMPANIES BROKE INTO IN 2006, VIACOM WAS A STRONGER COMPANY. SINCE THEN, IT’S GONE IN A BAD DIRECTION. IT DOES SEEM LIKE CBS IS THE DOMINANT STUDIO. DAVID: DOES THIS AND THE SOAP OPERA? IS THERE STABILITY FOR THESE TWO COMPANIES? JEFF: I DON’T THINK SO. I WOULD NOT BE SURPRISED IF IN 12 MONTHS WE WERE TALKING ABOUT SOMETHING AGAIN. THE DEAL IS DEAD NOW. LET’S NOT RULE OUT 2017 OR 2018. AT SOME POINT, THE REDSTONE FAMILY SEES THE IMPORTANCE OF BRINGING THESE TWO COMPANIES TOGETHER. JULIE: WE’RE NOT DONE WITH YOU. HE IS STAYING WITH US. COMING UP, HIS INTERVIEW. HE HAS BEEN INVOLVED IN SEVERAL MAJOR DEALS, INCLUDING TIME WARNER, YAHOO!, AND DREAMWORKS. THIS IS BLOOMBERG. ♪ JULIE: THIS IS BLOOMBERG MARKETS. DAVID: LET’S TALK M&A IN THE MEDIA SPACE. TIME WARNER SALE TO AT&T IS STILL PENDING. JEFF IS STANDING BY WITH A PARTNER. I WILL TOSS OVER TWO. JEFF: IT’S GOOD TO SEE YOU. YOU HAVE BEEN ON ALL OF THESE BIG DEALS. WHAT’S GOING ON IN THE MEDIA YOU GOT NOT JUST THE AT&T DEAL AND YAHOO! VERIZON. WE HAVE THE COMCAST DEAL FOR DREAMWORKS. WHAT IS PUSHING THE SIN CELEBRATION — CONSOLIDATION? >> I THINK IF YOU LOOK AT TWO OF THE DEALS, IT’S ABOUT EXPANSION OF AN EXISTING PLATFORM. WHEN YOU LOOK MORE BROADLY, ONE OF THE FORCES DRIVING CONSOLIDATION IS THE NEED TO BE ABLE TO ADAPT QUICKLY, TO CHANGES HOW CONSUMERS ARE TAKING IN MEDIA ACROSS MORE PLATFORMS AND DEVICES. PEOPLE ARE LOOKING FOR MORE PERSONALIZED EXPERIENCES WITH MEDIA. I THINK THAT PROCESS IS GOING TO CONTINUE AS TECHNOLOGY EXPONENTIALLY ADVANCES. I THINK ONE OF THE THINGS YOU ARE SEEING IN AN EFFORT TO FIND CONTENT WITH DISTRIBUTION IS GETTING THE PRODUCTION OF CONTENT CLOSER TO THE CONSUMER SO YOU ARE ABLE TO BE MORE NOBLE AND INNOVATIVE AND ADDRESS THEIR NEEDS. JEFF: THIS IS AN INTERNATIONAL PHENOMENON. LAST FRIDAY, FOX ANNOUNCES THEY AND SKY ARE IN TALKS. CONSUMERS IN EUROPE OR ASIA ARE THINKING THE SAME WAY. ERIC: IT’S THE SAME BASIC THESIS. I DON’T THINK THE FORCES DRIVING THIS CONSOLIDATION ARE UNIQUE TO THE UNITED STATES. THEY ARE LARGELY WITHOUT BORDERS. JEFF: HOW MUCH OF THIS IS DRIVEN — HOW MUCH OF ALL OF THIS CONSOLIDATION IS DRIVEN BY TECH COMPANIES BECOMING OBSOLETE IN A YEAR OR TWO? WHAT IS THE HOT PHONE IN 2010? IT’S DISMALLY OBSOLETE IN 2016. ERIC: I THINK THAT SOME VERY THE PHENOMENON THAT I JUST MENTIONED IS BIGGER THAN ANY PARTICULAR ADVICE. ONE OF THE UNDERLYING IDEA IS BEING ABLE TO ADAPT TO THOSE CHANGES. WE WILL SEE VIRTUAL-REALITY, WE WILL SEE ARTIFICIAL INTELLIGENCE. DEVICES ARE GOING TO CHANGE. YOU WILL HAVE VIDEO ON YOUR REFRIGERATOR. I THINK AS THAT HAPPENS, BEING CLOSE TO THE CONSUMER IS GOING TO ALLOW CONTENT PRODUCERS TO BE MORE NIMBLE. THERE IS A LITTLE BIT OF WHAT YOU’RE TALKING ABOUT. IF YOU LOOK AT TECH IN PARTICULAR, ONE OF THE STRATEGIC CHALLENGES OF ANY INCUMBENT IN THAT SPACE IS WORKING TO MAINTAIN RELEVANCE, IF AND HOW QUICKLY SNAPCHAT CAN BECOME WIDELY USED AND DISPLACE AN INCUMBENT. YOU HAVE SEEN M&A STRATEGY TO DEAL WITH THAT. FACEBOOK HAS BEEN VERY SMART ABOUT ITS ACQUISITIONS OVER THE LAST FIVE YEARS TO MAKE SURE THAT THEY OF ALL JEFF: THE AT&T TIME WARNER DEAL WAS A BIG DEAL. FURTHER PRECAUTIONS, SPECIAL THINGS YOU DID TO KEEP THIS TO A SMALL GROUP OF PEOPLE? ERIC: AS YOU WELL KNOW, IT’S VERY DIFFICULT TO KEEP ANY PUBLIC A — M&A. THERE ARE ONLY A FEW LEVERS YOU CAN POOL. YOU CAN BE THOUGHT FOR ABOUT WHERE YOU HAVE MEETINGS, PARTICULARLY WHEN YOU ARE DEALING WITH A HIGH-PROFILE EXECUTIVE. YOU CAN TRY TO GET ON AND TO AN ANNOUNCEMENT OR A QUICKLY. IT’S THAT KIND OF BLOCKING AND TACKLING. WHEN YOU HAVE A TRANSFORMATIVE DEAL IN THE MEDIA SPACE, WITH RECOGNIZABLE SENIOR EXECUTIVES, THE REAL DIFFERENCE IS NOT SO MUCH THE TACTICS. IT’S THE VIGILANCE. JEFF: SOMETIMES IT FEELS LIKE FOR ANY REASON THOSE DEALS SEEM TO LEAK, MORE SO THAN THE INDUSTRIAL MID — MIDWEST KIND OF DEAL. I THINK YOU SEE A LOT OF THOSE DEALS IN THE PRESS BEFORE THEY ARE ANNOUNCED. ERIC: IF YOU LOOK AT ANY PUBLIC DEAL, YOU START THE DEAL IN THIS DAY AND AGE PARENT FOR THE POSSIBILITY IT’S GOING TO LEAK AREA MEDIA IS PROBABLY MORE SENSITIVE THAN OTHERS BECAUSE IT IS VERY CONSUMER FACING AND HIGH PROFILE. JEFF: GOT IT. I WISH WE COULD KEEP TALKING. BACK TO YOU, DAVID AREA — DAVID. COME UP, DAVID RUBENSTEIN ON TURMOIL IN EUROPE AND WASHINGTON BUREAUCRACY UNDER A DONALD TRUMP ADMINISTRATION. THAT IS COMING UP NEXT. THIS IS BLOOMBERG. DAVID: LIVE FROM BLOOMBERG WORLD HEADQUARTERS IN NEW YORK, I’M DAVID GURA. JULIE: I’M JULIE HYMAN AND THIS IS “BLOOMBERG MARKETS.” LET’S START WITH HEADLINES. MARK CRUMPTON HAS MORE FROM OUR NEWSROOM. MARK: PRESIDENT-ELECT TRUMP IS SENDING FORMER PRESIDENTIAL RIVAL, CARLY FIORINA, AS DIRECTOR OF NATIONAL INTELLIGENCE. HE MET WITH THE FORMER HEWLETT-PACKARD CEO TODAY IN NEW YORK. >> WE TALKED ABOUT THE OPPORTUNITY THE PRESIDENT-ELECT HAS TO LITERALLY RESET THINGS. TO RESET THE TRAJECTORY OF THIS ECONOMY, TO RESET THE ROLE OF GOVERNMENT, TO RESET AMERICA’S ROLE IN THE WORLD AND HOW WE ARE PERCEIVED IN THE WORLD, AND I THINK THAT IS WHY HE IS GETTING SO MUCH FANTASTIC PEOPLE IN HIS ADMINISTRATION. MARK: TRUMP IS MEETING WITH AN ANOTHER FORMER PRESIDENT SHALL RIVAL TODAY, FORMER TEXAS GOVERNOR RICK PERRY. HE IS REPORTEDLY A CANDIDATE FOR ENERGY SECRETARY. JOHN KELLY HAS BEEN TAPPED TO HEAD HOMELAND SECURITY. HE JOINED THE MARINE CORPS IN 1970 AND RETIRED EARLIER THIS YEAR, WRAPPING UP THE FINAL THREE-YEAR POST AS HEAD OF U.S. CENTRAL COMMAND. HE FACES SENATE CONFIRMATION. A GROUP OF COALITION AIRSTRIKES TARGETING THE ISLAMIC STATE IS ALLEGING A LACK OF TRANSPARENCY AND A SENSE OF CIVILIAN CASUALTIES. THE REPORT BY LONDON-BASED AIR WAR SAYS THE NUMBER OF CIVILIANS KILLED BY LAST SUMMER IS AT LEAST 1500, MUCH HIGHER THAN THE U.S. ACKNOWLEDGED. PARASITES HAVE BEEN USED IN THE FIGHT AGAINST ISLAMIC STATE IN IRAQ AND SYRIA. THE U.S. SUPREME COURT HAS DECIDED NOT TO TAKE UP UNILATERAL SALES TAXES. A COLORADO LAW REQUIRES INTERNET RETAILERS TO TURN OVER CUSTOMER DATA TO PAY SALES TAXES THAT OWE. A RETAIL SALES GROUP SAYS THE MEASURE VIOLATES THE CONSTITUTION. GLOBAL NEWS 24 HOURS A DAY POWERED BY MORE THAN 2600 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES, I AM MARK COMPTON. JULIE: LET’S GET A QUICK CHECK ON U.S. STOCKS. THE MAJOR AVERAGES ARE LITTLE CHANGED. THE DOW IS VERY SLIGHTLY HIGHER, ONLY SEVEN POINTS. IT DID TOUCH AN INTRADAY RECORD TODAY WITH THE S&P AND THE NASDAQ STILL DECLINING. LET’S GO NOW TO BLOOMBERG’S ABIGAIL DOOLITTLE FOR WHAT IS ON THE MOVE. ABIGAIL: ONE OF THE BIG LAGGARDS IS THE SHARES OF LOCKHEED MARTIN , WHICH YOU CAN SEE IN THIS DROP IN THE TODAY CHART. THIS WAS AFTER DONALD TRUMP TWEETED EARLIER THAT THE F-35 COSTS ARE OUT OF CONTROL THAT BILLIONS OF DOLLARS CAN BE SAVED ON MILITARY PURCHASES OF SOME OTHERS AFTER JANUARY 20 OF NEXT YEAR. THIS IS ABOUT 20% OF LOCKHEED MARTIN’S REVENUES. THE STOCK IS ON PACE FOR ITS WORST DAY SINCE 2011. QUITE A DRAW. THE COMPANY DID RESPOND BY SAYING, “WE WELCOME THE OPPORTUNITY TO ADDRESS ANY QUESTIONS THE PRESIDENT-ELECT HAS ABOUT THE PROGRAM. IT’S A GREAT PROGRAM AND SINCE THE BEGINNING, WE HAVE INVESTED HUNDREDS OF MILLIONS OF DOLLARS TO REDUCE THE PRICE OF THE AIRPLANE BY MORE THAN 60% FROM THE ORIGINAL PRICE.” A BIT OF A CONVERSATION THEREBETWEEN DONALD TRUMP AND LOCKHEED MARTIN. THIS IS CERTAINLY DRAGHI ON SOME OF THE OTHER DEFENSE STOCKS, INCLUDING GENERAL DYNAMICS. WHEN WE TAKE A LOOK AT SPENDING OVER THE LAST YEAR, WE SEE THAT SOME OF THE CONCERN HERE IN THE U.S. IS $600 BILLION IN MILITARY SPENDING. THE NEXT CLOSEST IS CHINA WITH $215 BILLION. AND PRESENT DONALD TRUMP COMES DOWN HARD ON THIS, IT CERTAINLY WILL BE PART OF THESE COMPANIES. WE ARE LOOKING AT BOEING IN A BUS. — AND AIRBUS. BOTH OF THESE COMPANIES HAVE REACHED AGREEMENTS WITH IRAN AIR FOR DEALS. THE REASON FOR THIS AND THIS IS THE FIRST POSSIBLE AGREEMENT SINCE 1979 FOR $16.6 MILLION IN AIRPLANES. IT COULD REQUIRE THE AGREEMENT OF WASHINGTON. THAT IS WEIGHING ON THE SHARES A LITTLE BIT. FOR AIRBUS, IRAN AIR CEO SAYS THEY ARE CONFIDENT A DEAL WILL BE STRUCK WITHIN TWO WEEKS. JULIE: WE WILL BE TALKING MUCH MORE ABOUT LOCKHEED MARTIN AND SOME OF THE OTHER DEFENSE CONTRACTORS IN THE 1:00 P.M. HOUR. DAVID: FROM BREXIT TO THE UPCOMING FRENCH ELECTIONS, UNCERTAINTY SEEMS TO BE THE ONLY CERTAIN THING. EARLIER, DAVID RUBENSTEIN DISCUSSED HIS OUTLOOK FOR ITALY AND THE EUROPEAN UNION. DAVID RUBENSTEIN: THERE’S NO DOUBT THAT EUROPE IS IN A LITTLE BIT OF TURMOIL BECAUSE YOU HAVE FRENCH ELECTIONS COMING UP IN THE WINDOWS WITH THAT IS GOING TO GO. YOU HAVE THE U.K. TRY TO FIGURE OUT HOW TO GET OUT OF THE EU. GERMANY WILL HAVE ELECTIONS IN TWO YEARS AND AN ITALIAN GOVERNMENT UNCERTAINTY. THERE’S NO DOUBT THAT THE UNITED STATES HAS AN INTEREST IN A STRONG EUROPE, STRONGER THAN IT IS NOW. WE NOT JUST SITTING THERE SAYING TOO BAD FOR YOU. IT’S REALLY A SITUATION WHERE WE WANT TO HAVE A STRONG EUROPE AND WE PROBABLY SHOULD EXERCISE OUR OWN INFLUENCE IF WE CAN TO HAVE SOME IMPACT ON IT. I SUSPECT IN THE END THAT THE ECB AND THE EU WILL CREATE SOME CREDIBILITY TO WHAT THE ITALIAN GOVERNMENT WANTS TO DO AND BE MORE FLEXIBLE AND WORKING AT THIS BAILOUT. IF THE ITALIAN GOVERNMENT WERE TO BE IN SUCH TERRIBLE SHAPE, EUROPE WOULD BE GOING SOUTH BECAUSE OF IT AND IT WOULD NOT BE GOOD FOR ALL OF EUROPE. JONATHAN: EUROPE HAS BEEN THROUGH TWO CRISES. WITH THIS POLITICAL FRAGMENTATION NOW MORE THAN WE DID FIVE YEARS AGO, WE DO NOT TALK ABOUT THE DENOMINATION AT RISK IN THE SAME WAY. WHEN ARE WE GOING TO START HAVING REGULAR CONVERSATIONS ABOUT THE DOMINATION? >> I THINK IT’S POSSIBLE, BUT THE GREATER INTERESTING THING TO TALK ABOUT IS WHETHER OR NOT EUROPE CAN ACTUALLY COME TOGETHER AND LEADERS CAN COME TOGETHER TO COME UP WITH SOMETHING MAKES SENSE. THE THEORY OF THE EU AND THE FURY OF THE ECB AND THE THEORY OF THE EURO IS THAT IT WOULD BE BETTER OFF IF EVERYTHING WORKED TOGETHER AND WAS CORRELATED. DESPITE ALL OF THESE DEVICES, EUROPE SEEMS TO NOT BE WORKING TOGETHER AS COOPERATIVELY AS IT SHOULD. YOU REALLY NEED THE LEADERS IN EUROPE TO GET TOGETHER AND RECOGNIZE THAT THEY HAVE A POTENTIAL CRISIS THERE AND THEY HAVE TO BE MORE COOPERATIVE AND RECOGNIZE THAT ITALY CANNOT DO EVERYTHING THAT ECB RULES REQUIRE. IF GERMANY AND OTHERS DO NOT RELENT, YOU WILL HAVE BIGGER PROBLEMS IN EUROPE. >> D.C. EVIDENCE IS MOVING IN THAT DIRECTION? THERE WAS LOTS OF COMPLAINS ABOUT BUREAUCRATS AND BRUSSELS. THE LEADING CANDIDATE FOR FRANCE IS REALLY FOR REFORMING BRUSSELS. IS THERE MOVEMENT TOWARD REFORMATION? >>>> I THINK THERE’S A RECOGNITION THERE NEEDS TO BE SOME CHANGE. OBVIOUSLY THE EU PARLIAMENT THE OTHER DAY SPOKE. IT’S CLEARLY A RECOGNITION THAT THERE HAS TO BE SOME ADJUSTMENT, I BELIEVE, BECAUSE THE RULES ARE LITTLE TOO STRICT. YOU HAVE A BROKER SEE IN — A BUREAUCRACY IN BRUSSELS AND EVERYONE IS DISCONNECTED FROM IT. >> WITH THIS GROWTH AND STABILITY PACT, WILL THEY HAVE TO BUY BUDGETS ON THIS PILE? WHERE WE GOING TO GET SOME HELP THERE? YOU SPEAK TO A LOT OF FINANCIAL LEADERS REGULARLY. YOU SPOKE TO GOLDMAN SACHS RECENTLY. IT’S CLEAR THAT THE U.S. HAVE DONE A BETTER JOB OF ALLOWING BANKS TO FINANCE THE U.S. ECONOMY. WHEN ARE WE GOING TO SEE A PIVOT? >> IT’S NO DOUBT THAT AFTER THE GREAT RECESSION, THEY DO NOT CLEAN UP THEIR BALANCE SHEETS LIKE THE U.S. BANK. THEY ARE ALSO NOT LENDING AS MUCH AS THEY SHOULD OR U.S. BANKS ARE. I THINK THEY DO NEED TO LOOK AT THAT AND THE ECB NEEDS TO BE MORE AGGRESSIVE IN TELLING THE BANKS THEY OUGHT TO LEND MORE AND REALLY PROVIDE MORE SUPPORT. I THINK MARIO DRAGHI HAS DONE A SPECTACULAR JOB. UNFORTUNATELY YES TO LEAVE AT SOME POINT, BUT I THINK HE IS PROBABLY THE MOST IMPORTANT FINANCIAL FIGURE IN EUROPE FOR SURE. WHEN HE DOES GO, IT WILL BE A BIG PROBLEM. JULIE: WE ALSO ASKED DAVID RUBENSTEIN ABOUT A DONALD TRUMP PRESIDENCY AND SPECIFICALLY WHAT WILL WASHINGTON LOOK LIKE AFTER NOT DURATION. >> THERE’S NO DOUBT IT’S A DIFFERENT GROUP OF PEOPLE COMING TO GOVERNMENT THAN THE LAST EIGHT YEARS. WE WILL SEE WHAT HAPPENS. I DO KNOW THESE PEOPLE. BEING SUCCESSFUL IN BUSINESS DOES NOT MEAN YOU WILL BE SUCCESSFUL IN GOVERNMENT. BEING SUCCESSFUL IN GOVERNMENT DOES NOT MEAN YOU WILL BE SUCCESSFUL IN BUSINESS. WE WILL SEE HOW IT WORKS. SOMETIMES BUSINESS PEOPLE GOING TO GOVERNMENT AND DO VERY WELL AND SOMETIMES THEY DO NOT DO AS WELL. WE WILL HAVE TO SEE. >> YOU HAVE THE CABINET LOOKING LIKE A C SUITE AND THAT WILL BE AWESOME FOR BUSINESSES AND THEY WILL GET TO GROW LIKE BANANAS AND THE CORPORATE TAX RATE REALLY LOWER. IS THAT THE CORRECT LINKAGE TO MAKE? >> IN THE EUPHORIA OF A POSTELECTION PERIOD OF TIME, EVERYONE IS HAPPY WHO WON THE ELECTION. ANYTHING TO PEOPLE WHO HAVE DONE WELL IN THE BUSINESS SECTOR AND PRIVATE LIFE, YOU JUST DON’T KNOW. WHEN I WORKED IN THE CARTER ADMINISTRATION SEVERAL YEARS AGO, JIMMY CARTER HAD A DEMOCRATIC CONGRESS AND HE HAD BEEN AND NEWLY ELECTED DEMOCRATIC PRESENT. WE THOUGHT WE WE GET EVERYTHING THROUGH CONGRESS. TURNS OUT THE DEMOCRATS IN CONGRESS HAVE THEIR OWN IDEAS. THIS TIME THE REPUBLICANS AND COMMERCE MAY HAVE THEIR OWN IDEAS AS WELL. THE BIGGEST RISK THAT THE PRESENT ELECT WILL HAVE IS THAT EVERYTHING HE WANTS YOU WILL NOT GET THROUGH CONGRESS, SO HE WILL HAVE TO PICK AND CHOOSE. THERE WILL BE SOME DISAPPOINTMENT THAT ALL THE THINGS HE MAY WANT TO GET HE WILL NOT GET. >> IT’S ONE THING TO BE SECRETARY OF SOMETHING. THERE’S A STANDING BUREAUCRACY IN EACH ONE OF THESE AGENCIES. HENRY KISSINGER WROTE ABOUT THAT. >> THERE ARE 2 MILLION CIVILIAN EMPLOYEES IN THE FEDERAL GOVERNMENT AND THE PRESIDENT-ELECT IS GOING TO TAKE ABOUT 4000 OF THOSE NEW PEOPLE. HE MAY ONLY TAKE ABOUT 50 PEOPLE OR 100 PEOPLE BEFORE HE IS INAUGURATED. YOU HAVE 2 MILLION PEOPLE WORKING FOR YOU AND THAT BUREAUCRACY DOES NOT CHANGE. IT WILL TAKE SOME TIME. >> WHEN YOU HEAR THE RHETORIC AND PEOPLE BEING PUT OUT FOR NOMINATIONS, YOUR POTENTIAL TAKE FOR SECRETARY OF STATE, WHAT DOES THAT TELL YOU ABOUT U.S. FOREIGN-POLICY? IT’S MORE U.S. FOCUSED AND LESS GLOBAL AND COMPANY FRIENDLY. >> REXX IS A VERY TALENTED PERSON AND I RESPECT HIM A GREAT DEAL. HE SPENT MOST OF HIS LIFE REALLY WORKING AND RUNNING AROUND THE WORLD WORKING ON ENERGY PROJECTS. HE’S A TALENTED ENOUGH PERSON TO FIGURE OUT HOW TO DO THIS JOB. THE BIGGEST CHALLENGE HE IS GOING TO HAVE IS THAT THE STATE DEPARTMENT MAY NOT LIKE EXACTLY WHAT HE REPRESENTS. HE WILL HAVE TO DO WITH THAT, BUT I THINK IS COUNTED ENOUGH TO DO SO. >> IF YOU DID GET THE CALL, WHAT WOULD BE THE NUMBER ONE POLICY YOU WOULD WANT TO SEE THAT WOULD BE GOOD FOR BUSINESS AND THE ECONOMY? >> THE MOST OF WHAT BUSINESS PEOPLE WANT IS CERTAINTY. JUST TELL US WHAT YOU’RE GOING TO DO AND WHAT YOU WANT TO A COP WAS. WE CAN LIVE WITH LOTS OF DIFFERENT THINGS. TELL US WHAT THE POLICIES ARE GOING TO BE. WITH CERTAINTY, BUSINESS PEOPLE CAN REACT TO IT. JUST HAVE A VERY CERTAIN REALISTIC POLICY. THAT’S THE MOST IMPORTANT THING. REALISTIC POLICY AND THINGS THAT CAN REALISTICALLY GET DONE. I THINK THE ECONOMY WILL REFLECT THAT VERY WELL IF IT HAPPENS. JULIE: THAT WAS CARLISLE CEO RUBENSTEIN. THE ITALIAN PRIME MINISTER IS ANNOUNCING THE FORMATION OF THE NEW CABINET IN ROME. THE NEW GOVERNMENT WILL BE SWORN IN AT 2:00 P.M. EASTERN . YESTERDAY, THE PRESENT AS THE MINISTER — THE PRESIDENT ASKED THE MINISTER AND THAT SWEARING-IN WILL BE TAKING PLACE. DAVID: THERE’S A NEW SET OF ISRAEL AS WELL. ASHTON CARTER IS SPEAKING ISRAEL RIGHT NOW DURING A CEREMONY TO WELCOME THE ARRIVAL OF THE F-35 STRIKE FIGHTERS. I DON’T THINK WE’RE LOOKING AT THE RIGHT FOOTAGE. THIS WAS AFTER PRESIDENT ELECT DONALD TRUMP TOOK AIM ON THE PENTAGON’S MOST EXPENSIVE WEAPON SYSTEM YOU. COMING UP, WE’RE GOING TO THE LAS VEGAS MOTOR SPEEDWAY TO LOOK AT SOME OF THE MOST EXTENSIVE CARS AT FOR A SPIN. THIS IS BLOOMBERG. ♪ JULIE: YOU ARE WATCHING BLOOMBERG. I AND JULIE HYMAN. MARK: I MARK BARTON AND THIS IS YOUR GLOBAL BUSINESS REPORT. THE FALLOUT FROM THE RUNS A VOTE CONTINUES. — BREXIT VOTE CONTINUES. JULIE: BOEING MAKES ITS FIRST CELL TO IRAN AND MORE THAN THREE DECADES. NOW THE COMPANY HAS SELL THE DEAL TO PRESIDENT-ELECT TRUMP. MARK: INSIDER TRADING. A LOOK AT WHAT DEFINES IT AND THE WIDE RANGE OF PENALTIES FOR THIS CORPORATE CRIME. JULIE: CHINA HAS COMPLAINED TO THE WORLD TRADE ORGANIZATION ABOUT U.S. AND EUROPEAN UNION TERRACE. THE CHINESE WANT THE U.S. ANTI-E.U. TO QUIT USING AN EXAMPLE PRICES FROM OTHER NATIONS AND ANTI-DUMPING CASES . THEY SAY IT HAS ARTIFICIALLY RAISED TARIFFS ON CHINESE EXPORTS. MARK: IT’S THE WORST RATE IN SIX YEARS FOR THE LONDON HOUSING MARKET. ASKING PRICES FELL MORE THAN 4% FROM LAST MONTH AND HOUSE PRICES ARE DOWN 6%. IN APRIL TAX HIKE ON PROPERTY INVESTORS AND WORRIES ABOUT BREXIT HAVE HURT LUXURY HOME PRICES. BOEING SAYS THEY WILL SELL AIRPLANES TO IRAN. IT’S THE FIRST DEAL OF ITS KIND SINCE 1979. NOW BOEING MAY HAVE TO SELL THE DEAL TO PRESENT ELECT DONALD TRUMP. TRUMP IS OPPOSED TO THE AGREEMENT THAT USED IRAN SANCTIONS AND CLEAR THE WAY FOR BOEING SALES, . PRESIDENT-ELECT DONALD TRUMP IS REJECTING INTELLIGENCE ASSESSMENTS THAT RUSSIA TRIED TO HELP HIM WIN THE ELECTION. TRUMP SPOKE TO FOX NEWS. >> I THINK IT’S RIDICULOUS. I THINK IT’S ANOTHER EXCUSE. I DON’T BELIEVE IT. I DON’T KNOW WHY. THEY TALKED ABOUT ALL SORT OF THINGS AND WE COULD SAY ANOTHER EXCUSE. WE HAD A MASSIVE, LANDSLIDE VICTORY AS YOU KNOW IN THE ELECTORAL COLLEGE. I GUESS THE FINAL NUMBERS ARE 306 AND SHE IS DOWN TO A VERY LOW NUMBER. I DON’T BELIEVE IT AT ALL. MARK: A GROUP OF REPUBLICAN AND DEMOCRATIC SENATORS HAS CALLED FOR AN INVESTIGATION. LAWMAKERS SAY RUSSIA MEDDLING IN THE ELECTION IS A GREAT THREAT TO NATIONAL SECURITY. JULIE: TIMEOUT FOR A BLOOMBERG QUICK TAKE WHERE WE PROVIDE CONTEXT AND BACKGROUND ON ISSUES OF INTEREST. IT SEEMS OBVIOUS THAT FIRST GLANCE THAT INSIDER TRADING IS CHEATING. HEDGE FUND BILLIONAIRE FAMOUSLY WENT TO JAIL FOR DOING IT AND GEORGE SOROS PAID A BIG FINE, BUT IT IS AN OBVIOUS AT ALL. HERE’S THE SITUATION. IN THE U.S. WHERE PROSECUTORS HAVE VIGOROUSLY PURSUED INSIDER TRADING CASES, THERE IS NO CLEAR LAW DEFINING PRECISELY WHAT CONSTITUTES INSIDER TRADING AND WHAT DOES NOT. THERE’S ALSO A HUGE VARIANCE IN PENALTIES WITH A MAXIMUM TWO YEARS JAIL TIME AND TRANSFERS IS 20 IN THE U.S. AND SOUTH KOREA. THE U.S. UP IN COURT UPHELD A CALIFORNIA CONVICTION THAT RESOLVED WHAT SORT OF BENEFIT THE INSIDER MUST RECEIVE TO CONSTITUTE A CRIME. AN APPEALS COURT IN NEW YORK NARROW THE DEFINITION OF INSIDER TRADING AND MADE IT HARD TO BRING CASES. HERE’S THE BACKGROUND. INSIDER TRADING BECAME A CRIME IN THE U.S. THROUGH JUDICIAL INTERPRETATION OF 1934 LAW IN THE CLEANING OF MARKETS IN THE 1929 STOCK MARKET CRASH. ONE OF THE MOST FAMOUS CASES MADE A HOUSEHOLD NAME OF IVAN BOESKY, WHO WAS THOUGHT TO BE PART OF THE INSPIRATION FOR THE CHARACTER GORDON GEKKO IN THE 1987 FILM “WALL STREET.” AND THE U.K., INSIDER TRADING BECAME ILLEGAL IN THE 1980’S. WHILE LEGISLATION WAS NOT ENACTED UNTIL THE 1990’S IN GERMANY. JAPAN TIGHTENED THEIR INSIDER TRADING LAWS AFTER A SCANDAL EMBROILED PROMINENT FIRMS. INSIDER TRADING PROPONENTS CONTEND IT ALLOWS INFORMATION TO BE INCORPORATED INTO STOCK PRICES QUICKLY, MAKING THEM MORE ACCURATE. THE CONTRARY VIEW IS THAT ACCESS TO NONPUBLIC INFORMATION ALLOWS A SELECT FEW TO MAKE BIG BUCKS. TO COME TO LOCATE THE ISSUE, THE REAL INSIDERS ARE ALLOWED TO TRAIN THEIR OWN SOCKS AS LONG AS THE INFORMATION THEY ARE TRADING ON IS GENERALLY AVAILABLE. YOU CAN READ MORE ABOUT INSIDER TRADING AND ALL OF OUR QUICK TAKES ON BLOOMBERG. THAT IS YOUR GLOBAL BUSINESS REPORT. HEAD TO BLOOMBERG.COM FOR MORE BUSINESS STORIES. ♪ DAVID: MORE BREAKING NEWS OUT OF ITALY. THE PRIME MINISTER ANNOUNCED THE FORMATION OF HIS NEW CABINET. THERE’S A FINANCE MINISTER IN THE NEW GOVERNMENT AND ALSO THERE IS A NEW FOREIGN MINISTER FOR THE ITALIAN GOVERNMENT. THIS IS BLOOMBERG. ♪ DAVID: THIS IS “BLOOMBERG MARKETS.” FOR $12,000, LAMBORGHINI’S MOST DEVOTED CUSTOMERS DRIVE EXCLUSIVE SUPERCARS. MATT MILLER ATTENDED THE LAS VEGAS MOTOR SPEEDWAY TO SEE IF THE PROGRAM IS WORTH THE HIGH-PRICED HEAD FOR DRIVERS IN FOR THE BRAND. MATT: HERE AT THE LAS VEGAS MOTOR SPEEDWAY, BRAND LOYALISTS HAVE GATHERED. >> IT’S A SECOND DAY OF THE — >> IT’S AN ADVANCED DRIVING ACADEMY OFFERED TO LAMBORGHINI OWNERS. >> EVERYONE HAS TO TAKE THE PROGRAM BECAUSE YOUR LEVEL OF APPRECIATE IS JUST HIGHER. MATT: THEY GET A BIT OF CLASSROOM INSTRUCTION LIKE THE BEST WAY INTO AND OUT OF A CORNER. THE HIGHLIGHT IS THE HOURS ON THE TRACK WHERE THEY GET ONE-ON-ONE COACHING FROM PRO-LEVEL RACE DRIVERS. $12,000 IT’S YOU A SEAT IN THE SUPERCAR AS WELL AS COUNTLESS LAPSE IN THIS ROAD CAR. MOST IMPORTANTLY, SINCE ALL THESE PEOPLE OWN AND LAMBORGHINI, THE GET TO DRIVE THE SUPER RACECAR. THAT IS THE SUPER RACE THE CAR IN PRIVATE RACING LEAGUES. IT COSTS AN EXTRA $125,000. GETTING BEHIND THE WHEELS IS ONE OF THE MAJOR SELLING POINTS. >> THIS IS IT, DUDE. THIS IS A COMBINATION OF TWO DAYS OF INTENSIVE TRAINING. HOW WAS IT? >> AMAZING. MATT: I CAN’T WAIT. >> HOW WAS IT? MATT: INSANE. ALL RIGHT, I WILL BUY WANT TOO. WHEN READING HOLDS TIME TRIALS WERE ALL THE SOFTWARE DEVELOPERS, SECURITY CONSULTANTS, AND BRAIN SURGEONS GET TO SEE WHO IS REALLY THE FASTEST. THOSE WHO WENT TYPICALLY GET AN INVITATION TO A RACE WEEKEND, COMPLETE WITH TECH CREW AND A HELICOPTER RIDE TO THE TRACKS. >> IT’S FOR US WHO WANT TO BE SOMETHING WE WILL NEVER BE — A PROFESSIONAL RACECAR DRIVER — A PATHWAY TO GET AS CLOSE AS WE CAN GET. IT’S A MARKETING PLOY ALSO. MAYBE I SHOULD BUY THE RACE CAR AND STARTED RACING. MATT: THAT’S RIGHT — BY A TEAM. LAMBORGHINI HAS LITTLE PROBLEMS FINDING BUYERS FOR ITS PRODUCTS. MOST OF THE PARTICIPANTS ARE AMONG THE SUPER AND LAMBORGHINI WANTS TO PUT EVEN BIGGER BUCKS OUT TO START THEIR OWN TEAMS FOR PRIVATE RACING LINK. — PRIVATE RACING LEAGUE. >> IF I DID WELL IN THE COURSE, I WILL CONTINUE ON AS A RACER. >> THIS EXPERIENCE MADE ME WANT TO BUY SUPERCAR. MATT: SINCE THE TWO YEARS AND CELEBRITY ME HAS BEEN RUNNING THE PROGRAM, ONLY A HANDFUL OF PARTICIPANTS HAVE STARTED TEAMS, BUT THE NUMBER IS GROWING AND THAT’S THE KIND OF CONNECTION THE COMPANY AIMS TO FOSTER WITH ITS ACADEMIES, BUT YOU WILL WANT TO SIGN UP FAST. IT ONLY HAPPENS TWICE A YEAR. >> LAMBORGHINI WAS A SELF-MADE MAN. WHEN YOU TALK TO LAMBORGHINI OWNERS, SO MANY OF THEM ARE SELF-MADE INDIVIDUALS. WE DON’T HAVE TRUST FUND. WE WERE NOT GIVEN WHAT WE GOT. THAT IS THE SPIRIT. DAVID: THAT WAS OUR COLLEAGUE, MATT MILLER. FOR MORE, PURSUITS HAS THE FINEST DESTINATIONS IN YOUR LIFE, TRAVEL, AND PROPERTY . JULIE: LET’S TAKE A QUICK CHECK ON MARKETS BEFORE WE GO TO BREAK. THE DOW IS BARELY HOLDING ON TO ITS GAMES. WE STILL HAVE THE S&P AND THE NASDAQ LOWER. DIVERGENCE WITH OIL PRICES, WHICH ARE STRONGLY HIGHER TODAY, BUT NOT HELPING THE S&P 500 AS THE NASDAQ OVERWHELMED THEIR LOSSES. OIL PRICES GETTING A BOOST FROM THAT NON-OPEC AGREEMENT ON PRODUCTION CUTS. DAVID: FORMER AMBASSADOR TO SYRIA ON DONALD TRUMP’S POSSIBLE PICK FOR SECRETARY OF STATE. THIS IS BLOOMBERG. ♪ DAVID: IT IS 1:00 P.M. IN NEW YORK AND 2:00 A.M. IN HONG KONG. I’M DAVID GURA. JULIE: I AM JULIE HYMAN AND WELCOME TO “BLOOMBERG MARKETS.” ♪ JULIE: FROM BLOOMBERG WORLD HEADQUARTERS IN NEW YORK, WE’RE COVERING STORIES FROM SAN FRANCISCO TO PARIS AND INSMED PULLED THIS HOUR. — INSTABLE THIS HOUR. TODAY’S NOW FROM THE FEDERAL RESERVE DECISION AND WE HAVE A THREE CHARGE YOU CANNOT MISS AHEAD OF WEDNESDAY’S MEETING. BILL GATES AND MORE THAN A DOZEN OF THE WORLD’S WEALTHIEST INDIVIDUALS REVEAL A NEW $1 BILLION INVESTMENT FUND TO FOSTER MAJOR ADVANCES IN CLEAN ENERGY PRODUCTION. AND A SHAKEUP AT TO CHIPOTLE. THE CO-CEO LEAVES LEAVING THE CEO TO SURVIVE AFTER A FOOD CRISIS. ABIGAIL DOOLITTLE GAZA STRIP. — JOINS US NOW. ABIGAIL: CERTAINLY MORE RED THAN GREEN. THE DOW IS ON PACE TO CLOSE YET ANOTHER RECORD HIGH. THE S&P 500 EARLIER DID CARVE OUT YET ANOTHER INTRADAY RECORD HIGH. MUCH OF THIS COULD COME DOWN THE SECTOR COMPOSITION. THE NASDAQ IS BEING DRAGGED ON BY TECHNOLOGY AND BIOTECH. IT IS HELPING THE DOW AND WHAT HAD BEEN HELPING THE S&P 500 IS STILL HAVING THE ENERGY SECTOR. THIS IS A CHART OF THE S&P 500 ENERGY INDEX. WE SEE THE EARLIER TODAY, IT IS STILL NICELY HIGHER. IF THIS ENERGY SECTOR CAN COME OFF OF THE LOWS OF THE DAY, PERHAPS WE WILL SEE THE DOW GAINS BECOME MUCH STRONGER AND PERHAPS THE S&P 500 CAN TURN HIGHER ONCE AGAIN. IT CAN PERHAPS JOIN THE DOW FOR ANOTHER RECORD CLOSING HIGH. THERE’S A LOT TO TALK ABOUT THE IDEAS THAT STOCKS OF THESE CURRENT LEVELS WITH ALL THESE RECORD HIGHS THAT STOCKS ARE FROTHY. TAKE A LOOK AT G #BTV 5285. THIS CHART MAY GIVE CREDENCE TO THE IDEA. THIS IS A LONG-TERM CHART OF THE TRAILING 12 MONTH PRICE TO EARNINGS MULTIPLE ON THE S&P 500. IT’S BASICALLY A VALUATION METRIC. FOR A BULK OF THE TIME, IT HAS TRADED BETWEEN 12 AND 18 TIMES. ONE NOTABLE EXCEPTION BACK DURING THE TECH BUBBLE IS THAT WE HAD PE GO SKY HIGH. WE NOW HAVE THE S&P 500 PE CLIMBING ABOVE THAT RANGE AT LEVELS LAST SEEN IN 2002. PERHAPS THIS DOES GIVE SOME IDEA THAT VALUATION IS HIGH. WE ALL SEE BACK IN THE TECH BUBBLE THAT IT CLIMBED MUCH HIGHER. WILL BE INTERESTING TO SEE HOW THIS ALL PLAYS OUT. AS FOR WHAT IS THE TOP SECTOR AT THIS POINT, WE’RE LOOKING AT THE TELECOM STOCKS. AT&T AND VERIZON ARE BOTH SLIGHTLY HIGHER WHERE WE HAVE AN ANALYST SAYING THAT AT&T SHOULD BENEFIT FROM DEREGULATION AND LOWER TAX RATES. HE DID UPGRADE SHARES TO AN OUTPERFORM. SPRINT IS DOWN FOR ITS THIRD DAY IN A ROW. IT IS WORTH NOTING THAT THE FCC IS AUCTIONING OFF ANOTHER WAVE OF AIRWAVES TOMORROW. IT IS THE FOURTH WAVE AUCTIONS AROUND AIRWAVES. PERHAPS INVESTORS ARE TAKING THAT INTO CONSIDERATION. DAVID: ABIGAIL DOOLITTLE WITH THAT MARKET UPDATE. NOW LET’S CHECK IN ON THE BLUEBIRD FIRST WORD NEWS. MARK CRUMPTON HAS MORE FROM OUR NEWSROOM. MARK: SENATE MAJORITY LEADER MITCH MCCONNELL SAYS HE HAS “THE HIGHEST CONFIDENCE IN THE U.S. INTELLIGENCE COMMUNITY.” ‘S LEAKING TODAY ON CAPITOL HILL, THE KENTUCKY REPUBLICAN DEFENDED THE CIA AND ITS REPORTED FINDINGS THAT RUSSIA TRIED TO HELP DONALD TRUMP WIN THE PRESIDENCY THROUGH CYBER MEDDLING. MCCONNELL ALSO TOOK AIM AT MOSCOW. >> LET ME JUST BECAUSE MYSELF. THE RUSSIANS ARE NOT OUR FRIENDS. THEY INVADED CRIMEA. SENATOR MCCAIN AND I AND SOME OF OUR DEMOCRATIC FRIENDS MET WITH THE DELEGATION OF BALTIC COUNTRIES JUST THIS PAST WEEK TO SAY THAT THEY ARE NERVOUS ABOUT THE RUSSIANS. MARK: MCCONNELL’S DEFENSE OF THE CIA PUTS HIM AT ODDS WITH THE PRESIDENT-ELECT, WHO HAS REJECTED THE AGENCY’S FINDINGS. KELLYANNE CONWAY SAYS SHE “LIKELY DECLINED AN OFFER” TO SERVE AS PRESS SECRETARY FOR DONALD TRUMP. THAT IS ACCORDING TO POLITICO. SHE NOTED THAT WHOEVER TAKES THE POSITION WILL INHERIT A HOSTILE PRESS CORPS. CONWAY RECENTLY HINTED THAT SHE WOULD AVOID A FORMAL ROLE IN THE ADMINISTRATION. DEFENSE ATTORNEYS IN THE CHARLESTON CHURCH SHOOTING TRIAL ARE TRYING TO GET TESTIMONY FROM THE FIRST WITNESS GOT FROM THE RECORD. A SURVIVOR FROM THE ATTACK TESTIFIED LAST WEEK THAT DE LA RUE BELONGED “IN THE PIT OF HELL.” THE DEFENSE TEAMS ATTEMPT FOR A MISTRIAL OVER THE REMARKS FAIL. PROSECUTORS SAY ROOF WAS TRYING TO START A RACE WAR BY KILLING NINE BLACK CHURCHGOERS LAST YEAR. A MANHUNT IS UNDERWAY IN FRANCE FOR FOUR THESE WHO STOLE WHAT COULD BE MILLIONS OF DOLLARS IN GOLD. THEY STOLE IT FROM AN ARMORED TRUCK ON A MAJOR HIGHWAY NEAR LYONS. THEY SAID THE VEHICLE ON FIRE AND THE TWO DRIVERS INSIDE. THE DRIVERS WERE RESCUED THANKS TO TIP OFF FROM ONE WITNESS. GLOBAL NEWS 24 HOURS A DAY POWERED BY MORE THAN 2600 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES, I AM MARK UPTON. THIS IS BLOOMBERG. JULIE: FEDERAL RESERVE LEADERS ARE MEETING IN WASHINGTON THIS WEEK TO DISCUSS INTEREST RATES FOR THE FIRST TIME SINCE THE U.S. PRESENCE ELECTION — PRESIDENTIAL ELECTION. IT’S SET BETS ON GROWTH. MATT MOSLEY JOINS US NOW WITH A DECISION DAY GUIDE. WE COULD SAY THE EQUITY MARKETS HAVE BEEN SOARING IN ANTICIPATION OF STIMULUS ANTICIPATION WITH THE FED. WE ARE LOOKING AT THIS WITH CHARTS. I BELIEVE I HAVE YOUR FIRST CHART OF THE HER, WHICH IS A LOOK AT THE EMPLOYMENT RATE AMONG A SEGMENT OF THE POPULATION VERSUS WAGES. CAN YOU TALK US THROUGH THIS ?> MATT: EVERYTHING STARTS WITH THE JOBS REPORT AND IT WAS SOLID. IT GIVES THEM A GOOD INFERENCE INTO THIS UPCOMING MEETING WHERE THEY ARE EXPECTED TO RAISE RATES. THIS CHART SHOWS THE WHITE LINE IS 35 TO 44 EMPLOYMENT IN THE UNITED STATES. IT IS THAT HE MIDDLE DEMOGRAPHIC THAT YOU WOULD EXPECT TO SEE MOST LIKELY WORKING OF AN YOU Y. YOU CAN SEE LAST MONTH THAT HIT A HIGH AND THE CYCLE. THE BLUE LINE SHOWS PRIMATES WAGE GROWTH. THAT HAS REALLY LEFT UP RECENTLY AS WELL. WE ARE DEFINITELY GETTING THE STRONG EMPLOYMENT TRENDS AND FINALLY STARTING TO SEE THAT WAGE GROWTH WE HAVE BEEN WAITING FOR. IT’S A REALLY GOOD SIGN FOR THE FED AND IT MAKES AN EASY DECISION FOR THEM. JULIE: THAT’S THE EMPLOYMENT RATE AND NOT THE UNEMPLOYMENT RATE AMONG THOSE FOLKS. WE ARE SEEING STRONG EMPLOYMENT GROWTH AND STRONG WAGE GROWTH AMONG THE. THAT. DAVID: WHEN YOU LOOK AT THE AMOUNT OF FAT SPEAK GOING INTO THIS MEETING, IS THERE CONCERN THAT WE ARE AT FULL EMPLOYMENT AND IS THERE UNANIMITY? MATT: THE MEDIAN OF THE FOMC OFFICIAL SAID IT WAS AT 4.8%. THE JOBS REPORT ON FRIDAY SHOWED THAT UNEMPLOYMENT FELL FROM 4.9% TO 4.6%. IT WENT FROM ABOVE THE ESTIMATE OF THE NATURAL RATE TO BELOW IT. THAT COULD BE A POTENTIAL FULCRUM GOING FORWARD. THAT IS LIKE A KEY METRIC THAT IS A BIG PART OF THE FED NARRATIVE. ALREADY WE ARE HEARING FOR EXAMPLE SOME FED OFFICIALS WHO ARE CONSIDERED MORE DOVISH SAYING MAYBE WE DO NOT NEED AS MUCH FISCAL STIMULUS NOW AS THEY WERE TALKING ABOUT A FEW MONTHS AGO. THAT COULD BE A POTENTIAL BIG CHANGE. DAVID: LET’S PULL UP YOUR NEXT CHART. LOOKING HERE AT THE GOLDMAN SACHS U.S. SURPRISE INDEX. THAT IS IN BLUE. AND WHY IS THE EXPECTED PERCENTAGE POINTS OF FED TIGHTENING IN 2017. MATT: LOOKING BEYOND THE RATE HIKE EXPECTED THIS WEEK AND THE WHITE LINE IS WHAT THIS FOR NEXT YEAR. IT’S RIGHT IN LINE FOR THE FED’S LATEST PROJECTIONS. THE MARKET SEES TO RATE HIKES ROUGHLY NEXT YEAR COULD THAT IS . THAT IS BASICALLY WHERE THE MARKET WAS LAST YEAR. KIND OF A SIMILAR SETUP. THE ELECTION HAS PLAYED A PART IN THAT. THAT WHITE LINE WAS RIGHT AROUND THE BEGINNING OF NUMBER ONE — NOVEMBER WHEN THE ELECTION HAPPENED. THE BLUE LINE AND THIS IS REALLY IMPORTANT, TOO, THE ECONOMIC DATA HAS GOTTEN A LOT BETTER. THIS BLUE LINE SHOWS HOW MUCH ECONOMIC DATA ARE BEATING OR MISSING ANALYST FORECASTS AND THEY ARE BEATING FORECAST BY THE MOST SINCE 2014. THAT HAS REALLY HELPED TO BOOST RATES AND PROVIDE CONFIDENCE IN THE OUTLOOK FOR HIGHER YIELDS AS WELL. JULIE: LET’S GET TO THE NEXT CHART. THIS LOOKS AT WHAT IS HAPPENING IN THE HOUSING MARKET AND MORTGAGE RATES. AS EXPECTED, BECAUSE WE HAVE AN INCREASE IN 30 YEAR YIELDS, THAT MEANS AN INCREASE IN MORTGAGE RATES AS WELL. WE ARE SEEING AN UPTICK IN MORTGAGE APPLICATIONS. THAT’S UNUSUAL. WHEN RATES START TO GO UP, PEOPLE DON’T PANIC, BUT THEY RUSH TOGETHER MORTGAGE APPLICATIONS IN BEFORE THE RATES GO UP EVEN MORE. IS THAT ESSENTIALLY WHAT IS HAPPENING? MATT: THAT DOES LOOK LIKE HOW IT’S PLAYING OUT SO FAR. WE HAVE HAD THIS BIG SURGE IN MORTGAGE RATES AS WELL SINCE THE ELECTION. MORTGAGE APPLICATIONS HAVE EXCELLENT GONE UP AND NOT DOWN. THAT IS KIND OF SURPRISING BECAUSE IF YOU GO BACK TO THE TEMPER TANTRUM AND 2013 13, THE OTHER RED VERTICAL LINE IN THE BEGINNING OF THE CHART, YOU CAN SEE THAT AS SOON AS INTEREST RATES REALLY STARTED GOING UP, THAT WAS THE TOP FOR MORTGAGE APPLICATIONS AND THEN THEY STARTED TO FALL. THE BIG QUESTION IS THAT POTENTIAL DOWNSIDE OF BUYER INTEREST RATES IS TIGHTER FINANCIAL CONDITIONS. IF WE ARE GOING TO SEE THAT, WE WILL SEE THAT SHOW UP FIRST IN THE HOUSING MARKET. IT DOES LOOK LIKE WE ARE GETTING SOME OF THAT IN BRINGING BUYERS OFF THE SIDELINES NOW THAT RATES ARE GOING HIGHER. KEEP AN EYE ON MORTGAGE APPLICATIONS TO SEE IF THOSE TIGHTER FINANCIAL CONDITIONS ARE STARTING TO HAVE A NEGATIVE IMPACT ON THE ECONOMY. THAT IS SOMETHING THE FED MIGHT HAVE TO TAKE INTO ACCOUNT GOING FORWARD. JULIE: MATTHEW, THINK YOU SO MUCH, GIVING US A LITTLE PREVIEW OF THE FED THROUGH THESE VARIOUS CHARTS. DO NOT FORGET TO TUNE INTO THE SPECIAL COVERAGE OF THE FOMC MEETING ON WEDNESDAY BEGINNING AT 1:00 P.M. ON BLOOMBERG TELEVISION AND RADIO. DAVID: BILL GATES AND OF THE BUSINESS LEADERS ARE LAUNCHING A $1 BILLION CLEAN ENERGY FUND. WHERE THE FUND WILL INVEST ITS CASH NEXT. THIS IS BLOOMBERG. ♪ DAVID: THIS IS “BLOOMBERG MARKETS.” I’M DAVID GURA. JULIE: I’M JULIE HYMAN AND WE HAVE BREAKING NEWS REGARDING APPLE. THE REPORTING IS THAT APPLE HELD TALKS TO INVEST IN SOFTBANK’S $100 BILLION FUND. REMEMBER THAT SUN WAS JUST HOW BE — TOUTING THIS FUND AT TRUMP TOWER THE OTHER DAY I BELIEVE. THE DOW JONES IS REPORTING THAT APPLE HAS HELD TALKS TO INVEST $100 BILLION INTO THAT FUND. WE HAVE CORY JOHNSON WITH US TODAY WHO COVERS ALL THINGS TECH. WHAT IS YOUR TAKE ON THESE HEADLINES? CORY: TO ME HE’S A VERY IMPRESSIVE GUY AND HAS DONE AMAZING DEALS. HE DOES NOT HAVE $100 BILLION. HE WOULD LIKE TO HAVE $100 BILLION. I DON’T WANT TO SPEAK FOR YOU GUYS, BUT I’M GOING TO SPEAK AND SAY WE WOULD ALL LIKE TO HAVE $100 BILLION TO INVEST. APPLE IS A PLACE YOU WOULD WANT TO GO TO RAISE THAT MONEY. HE HAS GOT TO TALK TO SOFTBANK, AN IMPORTANT COMPANY AND TELL ME CAN OCCASIONS IN JAPAN AND WITH THEIR ROLES IN SPRINT AND BEYOND. THEY’VE OPENED UP IN OFFICE IN LONDON AND HOPE TO DO A LOT OF INVESTING. THERE’S A LOT OF COMMITMENT OF CAPITAL. SOME OF THE BIGGEST COMMITMENTS WE HAVE EVER SEEN. SOME BIG FUNDS IN SILICON VALLEY RAISING EVEN BIGGER FUNDS TO GO FORWARD, EVEN AS THERE’S A SORT OF FEELING A FROTHY THIS IN THE MARKET AND THEY MAY NOT BE AS MANY BIG IDEAS TO INVEST IN. I THINK IT’S AN INTERESTING TIME FOR THESE KIND OF INVESTMENTS BECAUSE WITH THE SUCCESS OF AMAZON WEB SERVICES AND RACKSPACE AND OTHER COMPANIES, THE COST OF STARTING A NEW COMPANY AND TECHNOLOGY IS MUCH LESS THAN IT HAS BEEN IN THE PAST. YOU HAVE THESE BIGGER FUNDS CHASING COMPANIES THAT NEED SMALLER AMOUNTS OF MONEY. IT’S A VERY INTERESTING TIME IN VENTURE CAPITAL. JULIE: DOES APPLE HAVE A HISTORY OF INVESTING IN THESE TYPE OF FUNDS?? CORY: IT WOULD CERTAINLY BE A STRETCH AND SOMETHING NEW. APPLE MADE AN INVESTMENT IN DIDI NOT EVEN A YEAR AGO THAT TURNED INTO ABOUT A 30% OR 40% GAIN IN ABOUT A THREE MONTH RETURN AFTER THE GROUP INVESTMENT. APPLE HAS USED THESE THINGS STRATEGICALLY WANTS TO GET TO A PLACE THAT THEY ARE NOT OTHERWISE. THAT WAS UNUSUAL FOR APPLE ON PAPER, BUT IT LOOKS ENORMOUSLY SUCCESSFUL. WE WILL SEE THESE TALKS GO ANYWHERE. DAVID: LET’S HAVE IT TO TALK ABOUT A SMALLER FUND BY COMPARISON AT ALL THE $1 BILLION. IT IS THE BREAKTHROUGH ENERGY FUND THAT BILL GATES IS CHANTING HERE. WHAT DO WE KNOW ABOUT IT? CORY: IT’S A REALLY INTERESTING TIME FOR INVESTMENT RIGHT NOW BECAUSE YOU HAVE THIS INCOMING TRUMP ADMINISTRATION THAT HAS BEEN OPENLY HOSTILE TOWARD THE IDEA OF CLIMATE CHANGE, WHICH IS A REAL THING, BUT THEY DON’T BELIEVE IT. AND BE HARD TO FIND A GROUP OF PEOPLE WHO DON’T BELIEVE IT AS MUCH AS THEY HAVE DONE SO IN THE TRUMP ADMINISTRATION. IN PARTICULAR THEY HAVE BEEN CRITICAL OF PROGRAMS AND DEPARTMENT OF ENERGY THAT HAVE CHAMPIONED CHAMPION CLEAN TECHNOLOGY AND INVESTMENTS IN CLEAN TECHNOLOGY. NOW YOU HAVE BILL GATES AND JEFF BEZOS AND EVEN JACK MA AT ALIBABA INVESTING IN CURIOUS THINGS. THE NOTION THAT CLEANTECH INVESTMENT WILL HAVE TO COME FROM SOMEWHERE OTHER THAN THE FEDERAL GOVERNMENT, IT ALWAYS HAS, BUT CLEANTECH IS UNDER SIEGE RIGHT NOW AND LIKELY WILL BE UNDER SIEGE UNDER A TRUMP ADMINISTRATION. THESE BIG INVESTORS LOOKING AT THE PROBLEM OF TECHNOLOGY ARE SAYING THESE ARE LONG-TERM PROBLEMS THAT TAKE DEEP POCKETS AND LONG-TERM INVESTMENTS TO BECOME A SOLUTION. I THINK IT’S REALLY AN INTERESTING TIME FOR THEM. JULIE: IT’S ALSO INTERESTING LOOKING AT THESE HEAVY HITTERS INVESTING IN CLEANTECH. CLEANTECH ON THE ONE HAND IS TRYING TO DO GOOD IN THE EYES OF THESE INVESTORS, BUT THEN YOU HAVE THE SUCCESS OF THESE INVESTMENTS. THAT PART HAS NOT BEEN SO — CERTAINLY HAS NOT BEEN CONSISTENT IF YOU LOOK AT CLEANTECH. CORY: AND THEN DETERMINE SUCCESS, RIGHT? WAS TESLA A SUCCESS FOR EARLY INVESTORS? NOT AT ALL. I DO NOT KNOW HOW YOU DEFINE SUCCESS. I THINK THIS IS WHERE SOCIAL INVESTING GETS CHALLENGED. THEIR GOALS ARE GREATER THAN JUST A RETURN ON CAPITAL. THEY ALSO HAVE THE GOAL OF USING CAPITAL TO CHANGE THE WAY TECHNOLOGY OR BUSINESS WORKS. THAT CAN MAKE FOR TRICKY INVESTMENTS AND NOT GREAT FOR THE BOTTOM LINE. DAVID: CORY JOHNSON, GREAT TO SEE. YOU’LL HEAR FROM HIM IN 40 MINUTES TIME ON BLOOMBERG RADIO. JULIE: THE LATEST VICTIMS OF TRUMP’S TWITTER ACCOUNT — LOCKHEED MARTIN. SHARES ARE LOWER TODAY AFTER DONALD TRUMP WENT AFTER THE COSTLY PROGRAM ON TWITTER. THE IMPACT ON THE DEFENSE SECTOR AND A MECHANISM IS NEXT. THIS IS BLOOMBERG. ♪ DAVID: THIS IS “BLOOMBERG MARKETS.” I’M DAVID GURA. JULIE: I’M JULIE HYMAN AND SHARES OF LOCKHEED MARTIN CONTINUE TO STEALTH AND — TAILSPIN AFTER DONALD TRUMP TWEETED THAT THE F-35 PROGRAM AND ITS COSTS ARE OUT OF CONTROL. BILLIONS OF DOLLARS WILL BE SAVED AFTER PURCHASES ON GENERIC 20. IT IS THE COSTLY’S PROGRAM THAT HAS BEEN PLAGUED BY DELAYS AND OVERRUNS. JOINING US NOW IS BLOOMBERG INTELLIGENCE SENIOR AEROSPACE DEFENSE AN AIRLINE ANALYST GEORGE FERGUSON. LOCKHEED IS NOT THE ONLY STOCK DOWN TODAY. ANOTHER PARTICIPANT IN THE F-35 PROGRAM IS ALSO LOWER TODAY. IS THERE A WAY TO SORT OF REDUCE THE COST OF THIS PROGRAM? DOES DONALD TRUMP HAVE A POINT HERE? GEORGE: I THINK THERE’S A WAY TO REDUCE THE COST OF EVERY SINGLE DEFENSE PROGRAM. IT’S JUST A MATTER OF HOW HARD YOU WANT TO LOOK INTO EACH OF THEM. AND HOW AGGRESSIVE YOU WANT TO GET CUTS. HE TALKED ABOUT SAVING BILLIONS OF DOLLARS PER WE ARE TALKING ABOUT A PROGRAM THAT WILL BECOME THE LARGEST DEFENSE PROGRAM EVER, SOME $300 BILLION TO SPEND. TO FIND BILLIONS OF DOLLARS IN $300 BILLION IS NOT TERRIBLY AGGRESSIVE, BUT IT DOES SEND A SIGNAL TO THE REST OF THE DEFENSE ESTABLISHMENT AND THAT IS DONALD TRUMP AND HIS AND MINISTRATION IS NOT GOING TO INCREASE DEFENSE SPENDING AND NOT LOOK FOR MORE OUT OF DEFENSE CONTRACTORS. HE IS LOOKING FOR MORE VALUE. HE SAID THIS DURING THE CAMPAIGN. I THINK YOU WOULD LIKE TO BE ABLE TO BUY MORE DEFENSE WITH MAY BE SAME OR MAYBE A SLIGHT INCREASE IN DOLLARS, BUT HE WANTS TO BUY MORE DEFENSE. DAVID: WE ARE JOINED NOW BY A SENIOR DEFENSE ANALYST. HOW MUCH OF AN OUTLIER IS THIS PROGRAM, THE F-35 PROGRAM? THE PRESIDENT ELECT HOLDS IT UP AS AN EXEMPLAR. >> IT’S THE BIGGEST PROGRAM, SO IT’S GOING TO BE A STANDOUT AND ATTRACT LIGHTNING STRIKES FROM TIME TO TIME. A LOT OF THE PROBLEMS ASSOCIATED WITH THE PROGRAM HAVE ACTUALLY BEEN SOLVED. I THINK THE QUESTION WE THE TO ADDRESS GOING FORWARD IS HOW MUCH AS THE UNIT COST AND HOW DO WE IMPROVE THE CURVE? LOCKHEED HAS DONE A NICE JOB OF RECOVERING. JULIE: TO GEORGE’S POINT HERE, WHEN YOU GET, FROM TWEETING SOMETHING LIKE THIS AN INDICATION THAT PERHAPS HE IS NOT GOING TO BE AS BULLISH OR AS FAVORABLE TO THE DEFENSE INDUSTRY AS PERHAPS SOME HAD SUPPOSED POSTELECTION? HOWARD: WE CAN’T TELL YOU COULD IT’S ONLY TWEETS AND NOT FULL STATEMENTS. WHAT’S IMPORTANT IS THAT IF YOU ASK THE QUESTION ABOUT THE AVERAGE COST OF THE AIRPLANE, IT LOOKS BIG TO THE AVERAGE CONSUMER. YOU WANT TO SAY, WHY DOES THAT EXIST? I THINK THE QUESTIONS THAT HE ASKS — WHY? IS A GREAT QUESTION. IT’S PARTLY TO PROTECT PILOTS AND PARTLY TO PROTECT THE MOST SOPHISTICATED FIGHTER IN THE WORLD AND PARTLY BECAUSE IT CAN DO THINGS THAT NOBODY ELSE HAS EVER BEEN ABLE TO DO BEFORE. THERE IS A BALANCE HERE BETWEEN HOW MUCH IT COSTS AND WHAT THE VALUE TO THE U.S. MILITARY IS. THE WHOLE POINT IS THAT MAYBE HE IS ASKING THE REST QUESTIONS — RIGHT QUESTIONS AND UNITS TO SIT DOWN AND GET REALLY COMPLETE BRIEFINGS BOTH CLASSIFIED AND OTHERWISE AS TO WHAT THE RIGHT OUTCOME IS. DAVID: GEORGE FERGUSON, QUESTION IN LIGHT OF BOEING AND THE AIR FORCE ONE ORDERS. THEY ARE ON ORDER. I WONDER HOW MUCH A PRESIDENT ELECT CAN DO WHEN A DEAL HAS BEEN INKED IN TERMS OF BRING COSTS DOWN. GEORGE: THERE’S A LOT OF FOLLOW-UP CONTRACTS AND FOR SURE HE WILL HAVE AN OPPORTUNITY TO REALLY PUSH HIS AGENDA WITH F-35. I THINK THAT IS WHAT MOST MILITARY CONTRACTS. HE’S GOING TO FIND OUT THAT THERE IS A CONTRACT CADENCE THAT YOU CAN GET INSIDE AND MAKE CHANGES TO. JULIE: HOWARD, DOES THIS AFFECT YOUR INVESTMENT THESIS ON THESE COMPANIES TO HAVE THESE TWEETS COMING UP? IS AT THE VERY LEAST A RISK YOU HAVE TO CONSIDER NOW? HOWARD: I THINK IT’S A VERY FAIR POINT THAT IT’S A RISK. WE HAVE NOT BEEN RECOMMENDING LUCKY. WE PREFER BOEING OR NORTHRUP. BUT YOU KNOW WHAT THE BEAUTY OF THAT IS? THE CEO OF BOEING WENT AND HAD A CONVERSATION. WHEN YOU HAVE A CONVERSATION AND A DIALOGUE WITH PEOPLE LEARNING ABOUT NEW PROCESSES, YOU GAIN AN UNDERSTANDING TO APPROVE THE DECISION-MAKING. I THINK THIS INDUSTRY IN SOME WAYS IS MORE COMPLEX THAN ALMOST ANY YOU WILL EVER FIND. YOU THINK ABOUT THE 787. IT’S THE LARGEST CIVILIAN ENGINEERING PROJECT THAT MAN HAS EVER UNDERTAKEN. IT TAKES YEARS AND DECADES TO FULLY UNDERSTAND THE APPLICATION. TO SOME DEGREE, THE F-35 IS A LITTLE THE SAME WAY. I ALSO THINK BOEING HAS GOT A COMPETITIVE AIRCRAFT AND F-18. WE ARE TOO HOT PRODUCTION LINES. MAYBE THE NAVY BUYS MORE F-18S AND COMPENSATES FOR SOME OF THE F-35’S. DAVID: GEORGE FERGUSON, LAST QUESTION TO YOU HEAR ABOUT THE WAY THAT CONTRACTING IS DONE IN WASHINGTON, D.C.. THERE’S A TALK OF REFORMING THE PROCESS AND SILICON VALLEY LEADERS TALKING ABOUT THE DIFFICULTY OF WHAT IS. WITH THE CONTRAST IN WASHINGTON IN THE YEAR — WHAT IS THE CONTRACTOR WASHINGTON IN THE NEAR TERM? GEORGE: I THINK IT’S A GREAT IDEA AND THERE’S PLENTY OF WASTE IN THE SYSTEM THAT YOU COULD TRY TO TAKE OUT. THE CHALLENGE HERE IS THAT THERE’S NOT MANY COMPANIES THAT CAN DELIVER PLATFORMS LIKE THE F-35, NORTHRUP BOMBER PROGRAM, BOEING’S TANKER PROGRAM. YOU HAVE A LIMITED NUMBER OF CONTRACTORS THAT ACTUALLY DID ON THIS STUFF AND I THINK THAT’S WHERE YOU START TO RUN TO SOME OF THE CHALLENGES WHERE HE IS TRYING TO REFORM CONTRACTS AND DRIVE DOWN THE COSTS. YOU HAVE GOT A BASE OF CONTRACTS YOU CAN BUILD TO MAINTAIN YOUR HEALTH AND THEN YOU HAVE A LACK AGAIN A BIG DIVERSIFICATION TO PROVIDE IT. JULIE: WE HAVE GOT TO LEAVE IT THERE. GEORGE FERGUSON AND HOWARD RUBEL OF JEFFERIES GROUP. ♪ . . JULIE: LIVE FROM BLOOMBERG HEADQUARTERS IN NEW YORK, I’M JULIE HYMAN. DAVID: I’M DAVID GURA. MARK CRUMPTON HAS MORE FROM THE NEWSROOM. MARK: PRESIDENT ELECT DONALD TRUMP HAS NARROWED THE SEARCH FOR ENERGY SECRETARY TO FOUR PEOPLE. RICK PERRY IS SAID TO BE THE LEADING CANDIDATE. TWO DEMOCRATIC SENATORS FROM ENERGY PRODUCING STATES ARE ALSO IN THE MIX. THAT’S ACCORDING TO PEOPLE FAMILIAR WITH THE SELECTION PROCESS. IN DALLAS INVESTOR AND VICE CHAIRMAN OF THE TRUNK VICTORY COMMITTEE FUND IS SAID TO BE A CANDIDATE AS WELL. PRESIDENT OBAMA HAS AGREED TO RESERVE — TO LEASE OFFICE SPACE AT THE WORLD WILDLIFE FUND IN WASHINGTON, ACCORDING TO THE “WASHINGTON POST,” CITING TO IDENTIFIED OFFICIALS — TWO UNIDENTIFIED OFFICIALS FAMILIAR WITH THE PLAN. TURKEY IS STILL REELING OF THE AFTERSHOCK OF THE FAILED COUP ATTEMPT IN THE SUMMER. BEYOND ECONOMY — THE ECONOMY FELL AT AN AND HE WILL RATE OF 1.8%, THE FIRST TIME IN SEVEN YEARS IN TURKEY HAS ANNOUNCED A CONTRACTION. RECENT REPORTS INDICATE TURKISH CONSUMERS ARE SPENDING MORE IN THE FOURTH QUARTER. THE VICTIMS OF THE PULSE NIGHTCLUB SHOOTING IN ORLANDO, FLORIDA WERE REMEMBERED TODAY. SURVIVORS, STAFF, RELATIVES OF VICTIMS HAD A MOMENT OF SILENCE AT 2:02 A.M., THE EXACT TIME THAT THE GUNMAN STARTED SHOOTING INSIDE THE GAY NIGHTCLUB. THE NAMES OF EACH OF THE 49 PATRONS WHO WERE KILLED WERE READ. DOZENS OF OTHERS WERE ALSO INJURED IN THAT SHOOTING. GLOBAL NEWS, 24 HOURS A DAY, POWERED BY MORE THAN 2600 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I’M MARK CRUMPTON, THIS IS BLOOMBERG. JULIE: THANK YOU. PRESIDENT-ELECT DONALD TRUMP MAY BE CLOSER TO NAMING SECRETARY OF STATE AND THE FRONT RUNNER COMES FROM THE WORLD OF BIG OIL. YESTERDAY, HE TWEETED WHETHER I CHOOSE HIM OR NOT, REX TILLERSON , CHAIRMAN AND CEO OF EXXON, IS A WORLD-CLASS PLAYER AND DEALMAKER. STAY TUNED. AS ENTHUSIASTIC AS MR. TRUMP IS, SOME SENATORS ARE EXPRESSING RESERVATION BECAUSE OF HIS CLOSE TIES TO RUSSIA’S PRESIDENT, VLADIMIR PUTIN. >> VLADIMIR PUTIN IS A THUG, A BULLY, AND A MURDERER. ANYONE WHO DESCRIBES HIM AS ANYTHING ELSE IS LYING. WE CANNOT HAVE AN ACCOMMODATION WITH THE RUSSIANS UNTIL THEY UNDERSTAND WHAT RONALD REAGAN TAUGHT THEM, AND THAT IS PEACE THROUGH STRENGTH. RIGHT NOW, WE HAVE NO PIECE AND NO STRENGTH. I DON’T KNOW WHAT HIS RELATIONSHIP WITH VLADIMIR PUTIN WAS, I TELL YOU, IT’S A MATTER OF CONCERN TO ME. JULIE: JOINING US TO DISCUSS THE GEOPOLITICAL CIRCUMSTANCES AROUND THE APPOINTMENT TO SECRETARY OF STATE HAS SERVED AS AMBASSADOR TO ISRAEL AND SYRIA AND IS THE FORMER OCCIDENTAL PETROLEUM COMMISSIONER. HAVING AN ENERGY INDUSTRY BACKGROUND YOURSELF, PRESUMABLY YOU DON’T THINK THAT WOULD DISQUALIFY REX TILLERSON FROM SUCH A ROLE. WHAT WOULD HE BRING TO IT, FROM HAVING HAD THIS CORPORATE EXPERIENCE? >> IN MY EXPERIENCE, CEOS OF MAJOR ENERGY COMPANIES NECESSARILY HAVE GREAT INTERNATIONAL EXPERIENCE, BECAUSE OF THE MULTINATIONAL CHARACTER OF THESE CORPORATIONS. ESPECIALLY EXXON MOBIL IS THE LARGEST AND HAS OPERATIONS IN AT LEAST 50 COUNTRIES IN THE WORLD. AND REX TILLERSON AS CEO AND CHAIRMAN OF EXXON MOBIL HAS THE GREAT RESPONSIBILITY IN THAT POSITION OF NEGOTIATING WITH FOREIGN ENTITIES, LEADERS OF THE WORLD. AND BASICALLY HAS TO KNOW A LOT ABOUT WHAT’S GOING ON IN THAT COUNTRY BEFORE A CORPORATION LIKE EXXON MOBIL MAKES INVESTMENT DECISIONS. I THINK THE QUALIFICATIONS ON THE INTERNATIONAL SCENE ARE REALLY MORE POSITIVE THAN ANY NEGATIVES. DAVID: YOU KNOW THE SITUATION ON THE CORPORATE SIDE AND THE STATE DEPARTMENT SIDE, THIS IS A BYZANTINE NETWORK AND HIERARCHY IN WASHINGTON AND AROUND THE WORLD. IS IT ALL WORRISOME TO YOU THAT THE PERSON HEADING THAT ORGANIZATION WOULD HAVE NO FAMILIARITY WITH HOW THE STATE DEPARTMENT WORKS? MR. DJEREJIAN: THAT’S ALWAYS AN ISSUE WHEN YOU HAVE SOMEONE WHO DOESN’T HAVE THE POLITICAL EXPERIENCE AND HAS NOT WORKED IN GOVERNMENT. WHEN THEY COME INTO A TOP MANAGERIAL POSITION, AS YOU MENTIONED, THE BUREAUCRACY CAN BE QUITE BYZANTINE. WHEN YOU HAVE SOMEONE WHO IS A GOOD EXECUTIVE AND HAS GOOD LEADERSHIP SKILLS, HE OR SHE CAN SOMETIMES SEE THROUGH THAT WHEN THEY TAKE OVER THE BUREAUCRACY AND ADJUSTED — ADJUST IT TO THEIR OWN REQUIREMENTS. LET’S NOT FORGET GEORGE SCHULTZ, WHO CAME FROM DECK TELL. WHEN HE BROUGHT THAT TYPE OF EXPERTISE AND MANAGEMENT SKILLS INTO THE JOB. JULIE: TURNING TO THE ISSUE OF RUSSIA DIRECTLY, WHAT IS THE PROPER POSITIONING WITH REGARD TO THAT COUNTRY AT THIS POINT? MR. DJEREJIAN: WE HAVE A VERY DIFFICULT, CONTENTIOUS RELATIONSHIP WITH RUSSIA. IT HAS DETERIORATED IN RECENT YEARS, AND IT’S ONE OF THE MOST CRITICAL ISSUES ON THE INTERNATIONAL SCENE. IN MY PERSONAL VIEW, THE NEW AND ADMINISTRATION, THE TRUMP ADMINISTRATION HAS TO TAKE A LOOK AT THE U.S. RUSSIA RELATIONSHIP. IT’S A RELATIONSHIP THAT MATTERS AND IMPACT ON U.S. NATIONAL SECURITY INTERESTS IN A MAJOR WAY. LET’S NOT FORGET THAT RUSSIA STRADDLES THE EUROPE AND MIDDLE EAST ALL THE WAY TO CHINA. THERE ARE MANY ISSUES THAT WE NEED TO COME TO CERTAIN COMMON UNDERSTANDING, IF WE CAN, WITH RUSSIA. THIS IS AN OPPORTUNITY TO REENGAGE WITH THE STRATEGIC DIALOGUE. I DON’T MEAN A PHONY DIALOGUE, JUST FOR THE SAKE OF PROCEDURE AND THEATRICS, BUT A REAL SUBSTANTIVE DIALOGUE. WE ARE THE ISSUES THAT WE DIFFER ON? IS THERE ANY POTENTIAL OF RESOLVING THOSE ISSUES, SUCH AS IN SYRIA OR UKRAINE. AND ONE OF THE COMMON INTERESTS, THE COMMON INTEREST WE HAVE IN DEFEATING ISLAMIC RADICAL GROUPS, SUCH AS ISIS. I DON’T AGREE SHOULD SEE IT AS A PROBLEMATIC INITIAL APPROACH, BUT ONE THAT CAN PROVIDE A MOMENT FOR US TO RESTRUCTURE THIS RELATIONSHIP. JULIE: — DAVID: SINCE RICH ELLERSON’S — REX TILLERSON’S NAME WAS FLOATED, PERHAPS THAT TELLS US THE ADMINISTRATION’S PRIORITIES WHEN IT COMES TO FOREIGN POLICY. DO YOU WORRY ABOUT OTHER COUNTRIES THAT YOU WORRY ABOUT AT THIS POINT? I THINK ABOUT COUNTRIES IN THE MIDDLE EAST AND CHINA. ARE YOU CONVINCED THAT REX TILLERSON COULD ENGAGE WITH THOSE COMPANIES AS EASILY AS HE COULD WITH RUSSIA? MR. DJEREJIAN: HE HAS EXTENSIVE EXPERIENCE IN THE MIDDLE EAST AND DEALING WITH COUNTRIES IN THE GULF. I THINK HE HAS THE KNOWLEDGE BASE. WE DO NOT KNOW HOW TO STAND TO SINCE HIS KNOWLEDGE OF CHINA IS, BUT AGAIN, IF HE COMES TO THE STATE DEPARTMENT, HE WILL HAVE A VAST ARRAY OF EXPERTISE THAT IF HE IS LISTENING TO THAT EXPERTISE AND GAINS THE KNOWLEDGE, IT’S REALLY THE LEADERSHIP SKILLS THAT ARE REALLY IMPORTANT. ONE THING THAT A LOT OF THE COMMENTARY IS MISSING IS WHAT IS ESSENTIAL — NO MATTER WHO IT IS, NO MATTER WHO PRESIDENT-ELECT TRUMP CHOOSES, IT’S THAT PERSONAL, PROFESSIONAL RELATIONSHIP BETWEEN THE PRESIDENT AND SECRETARY OF STATE THAT IS CRITICAL. IF THAT RELATIONSHIP IS THERE, AS EXISTED BETWEEN BUSH 41 AND SECRETARY OF STATE JIM BAKER, THEY WERE A POWERFUL SCENE BECAUSE NO ONE COULD GET IN BETWEEN THOSE TWO MEN ON FOREIGN POLICY. WHEN BAKER SPOKE, EVERYONE KNEW HE WAS SPEAKING TO THE PRESIDENT OF THE UNITED STATES. THAT IS AN ESSENTIAL ELEMENTS OF THE CHOICE OF SECRETARY OF STATE. HE OR SHE MUST HAVE THE FULL CONFIDENCE OF THE PRESIDENT AND HAS TO BE PART OF THE INNER TEAM. JULIE: INTERESTING PERSPECTIVE ON THE RELATIONSHIP IS WHEN THE SECRETARY OF STATE AND THE PRESIDENT. ED DJEREJIAN. FORMER U.S. AMBASSADOR SYRIA AND ISRAEL. THANK YOU FOR YOUR TIME. MR. DJEREJIAN: MY PLEASURE. DAVID: WE DISCUSSED WHO IS STEPPING DOWN AND WHO IS RESUMING CONTROL, NEXT. THIS IS BLOOMBERG. ♪ DAVID: THIS IS “BLOOMBERG MARKETS,” I’M DAVID GURA. JULIE: I’M JULIE HYMAN. ABIGAIL: THE CHARTS DEAL WITH WHEN WILL TIGHTENING WITH THE POSSIBILITY OF THE FED TIGHTENING HURT STOCKS. WE HAVE SOCKS GOING HIGHER WITH THE THREAT OF TIGHTENING HURTING STOCKS. WE FIRST TAKE A LOOK AT G#BTV. THE BLOOMBERG ECONOMIC SURPRISE INDEX AND WHITE WAS DOWN YOUR LOWS, BASICALLY TELLING US THE ECONOMY WAS SOMEWHAT ON SHAKY HAVE — SHAKY GROUND. WE SEE THE S&P 500 AND THAT ECONOMIC SURPRISE CLIMBING HIGHER, TELLING US THE ECONOMY IS DOING BETTER THAN ANALYSTS AND STRATEGISTS WERE THINKING. PERHAPS THAT TELLS US THE ECONOMY AND STOCKS CAN HANDLE RATES GOING HIGHER, THAT’S WHAT WE DO HAVE A LITTLE BIT OF THIS DICHOTOMY. TAKE A LOOK OF THE NEXT CHART, WHICH SHOWS IN SLOW CYCLES, IT’S THE SECOND SLOW CYCLE THE PAINFUL FOR STOCKS. POSSIBLY THIS WEDNESDAY, WITH THE THAT STOCK WITH A LAG, THAT COULD BE WHAT WE’RE LOOKING AT. AND FINALLY, WHEN WAS IT A LITTLE LONG-TERM CHART THE GIVES GREAT PERSPECTIVE IN TERMS OF YIELD AND STOCKS, WE SEE THE S&P 500 HAS REALLY SHOT TO THE RECORD HIGHS. WHAT SEEMS TO HAVE SUPPORTED THE S&P 500 PERHAPS TO SOME DEGREE ARE RATES GOING LOWER, REALLY THAT EXTRA ORDINARY MONETARY POLICY HELPING TO FUEL RATES AND STOCKS GOING HIGHER. YIELDS GOING LOWER TELLS US BONDS ARE RALLYING. TO HAVE BONDS AND STOCKS RALLYING AT THE SAME TIME AS A BIT OF A DIFFERENCE. IT COULD BE INTERESTING, MAYBE WE GET BACK TO THE OLD PARADIGM OF BONDS SELLING OFF AS RATES GO HIGHER. GOING BACK TO THE IDEA THAT THE ECONOMY SUPPORTS THAT KIND OF RETURNS THAT DYNAMIC THAT IS CONSIDERED TO BE MORE NORMAL. JULIE: MAYBE IT’S NOT. WHAT WE THINK IS THAT NORMAL PARADIGM ISN’T A NORMAL AFTER NOT — AFTER ALL. DAVID: WE WILL GET SOME OF THE BIGGEST BUSINESS STORIES IN THE NEWS RIGHT NOW. WE START WITH CHAIR REDSTONE, THE PROPOSED MERGER OF CBS AND VIACOM. THEY NOTIFIED BOTH BOARDS TODAY, A PERSON FAMILIAR WITH THE MATTER SAYS VIACOM INTERIM CEO WILL BECOME THE COMPANY’S HERMIT LEADER. MEANWHILE, THE NEW YORK POST SAYS CBS IS PURSUING OTHER POTENTIAL DEALS. THE BROADCASTER ITSELF COULD BE OF INTEREST TO VERIZON. CREDIT SUISSE IS PLANNING ON SUBLEASING SPACE IN LONDON’S CANARY WHARF FINANCIAL DISTRICT. THE BANK AND SAID THEY WOULD CUT ABOUT 4200 WORKERS BY YEARS END. CREDIT SUISSE MAY SUBLET ELSEWHERE, INCLUDING ALL FOUR YARD, AS IT TRIES TO CUT RENTAL BILLS. THEY WILL START OFFERING GRAPHICS TIPS FOR ARTIFICIAL INTELLIGENCE USED IN DATA CENTERS. THE CHIPS OF THE COMPANY’S FIRST PRODUCT TO HELP COMPUTERS TRAIN THEMSELVES IN TASKS LIKE IMAGE RECOGNITION AND THEY EXPECT THE CHIPS TO GO ON SALE IN THE FIRST HALF OF NEXT YEAR. THAT IS THE BLOOMBERG BUSINESS FLASH. JULIE: CHIPOTLE SHARES ARE HIGHER TODAY AND THE CO-CEOS LEAVING THE EMBATTLED CHAIN, FOLLOWING A TOUGH YEAR FOR CHIPOTLE. THEY SUFFERED A SERIES OF FOODBORNE A LIST OUTBREAKS IN 2015 AND ARE STILL STRUGGLING TO REPAIR THEIR IMAGE. JOINING US IS CRAIG G MONA — CRAIG G MONA. HOW DOES THIS CHANGE HOW TO PULL IT WILL BE MANAGING? CRAIG: IT’S NOT CLEAR THAT IT WAS. IT’S THE FOUNDERS BABY AND HE IS TAKING SOLE CONTROL OF THE CRITICAL TIME. THE TURNAROUND HAS BEEN SLUGGISH AT BEST, IS NOT EVIDENT THAT THEY CAN TURN THIS THING AROUND AND HE IS SAYING I’M GOING TO BE SOLELY RESPONSIBLE FOR RUNNING OPERATIONS. HE’S ADMITTING THAT THESE RESTAURANTS ARE NOT BEING RUN PARTICULAR WELL. HALF OF THE RESTAURANTS AREN’T UP TO PAR. THIS IS IN TAKING CONTROL. DAVID: THE CREATOR OF CHIPOTLE, AND MONTY WAS THE GUIDED — THE GUY WHO WAS BROUGHT IN TO BE THE BUSINESS PART. CRAIG: MONTY MORAN WAS CEO WHEN IT WAS FLYING. FOR YIELDS, — FOR YEARS, THE STOCK WENT UP UNTIL HE HIT THIS MAJOR ISSUE. I DON’T THINK IT’S A FAILURE, HE WAS THE CEO IN CHARGE WHEN THEY REVOLUTIONIZED FAST FOOD WITH THEIR MODEL. JULIE: IF HE SAYS HALF THE STORES AREN’T UP TO PAR, WHAT DO YOU DO TO CHANGE THAT? CRAIG: THEY MADE THEIR BRAND BY BEING SIMPLE. YOU WALK IN AND SEE THE ASSEMBLY LINE, IT WAS A NOVEL CONCEPT. BUT ALL THE FOOD SAFETY STUFF HAS MADE A COMMENTATOR TO RUN THESE RESTAURANTS. THEY ARE NEARLY AS FAR AS FOOD PRINT AND A NEW SAFETY PROTOCOLS, BUT WE’VE TAKEN OUR EYE OFF THE BALL WHEN IT COMES TO THE CUSTOMER EXPERIENCE. THEY SPENT MILLIONS OF DOLLARS GETTING PEOPLE BACK WITH FREE BURRITOS. WHEN THEY COME BACK, THEY NEED TO BE REMINDED WHY THEY LIKE CHIPOTLE IN THE FIRST PLACE. DAVID: PRESUMABLY IT WAS THE BOARD THAT INFLUENCE THE DECISION. HOW MUCH CONFIDENCE IS THERE ON THE PART OF INVESTORS AT THIS TIME? CRAIG: THE BOARD HAS BEEN UNDER ATTACK, THEY’VE BEEN CALLED OLD, MALE, AND STALE. HE WOULDN’T SPECIFY IF THE END OF THIS YEAR OR END OF 2017, BUT WE ARE GOING TO SEE NEW BOARD MEMBERS. A LOT OF THEM HAVE BEEN ON THERE SINCE IT WAS A PRIVATE COMPANY OWNED PARTLY BY MCDONALD’S. THEY NEED SOME NEW BLOOD, BILL ACKMAN SAYS THIS DECISION WAS NOT AT THE REQUEST OF PERSHING, IT WAS HIS DECISION ON THE BOARD. PEOPLE DID SEE SIZE THEY CAN TURN IT AROUND. JULIE: ONE TO PULL IT WAS HIGH FLYING TO EXPLORE DIFFERENT VENTURES. CHOPHOUSE, THE PIZZA CHAIN, WHAT IS THE STATUS OF THOSE EFFORTS NOW THAT CHIPOTLE’S BUSINESSES DOWN. CRAIG: NO ONE QUESTIONED IT, THERE WAS AN ASIAN CONCEPT, A PIZZA CONCEPT. NOW THERE’S A LOT OF SCRUTINY. SHOULD THEY HAVE THEIR SOLE FOCUS ON GETTING THE PERRIGO THING RIGHT? — THE PERRIGO — THE BURRITO THING RIGHT? THERE’S A LOT OF QUESTIONS IN THE INVESTMENT COMMUNITY ABOUT WHETHER THEY SHOULD BE FOCUSING ON SIDE PROJECTS. DAVID: HE SAYS THE INABILITY TO RUN GOOD RESTAURANTS IS ALMOST MIND-BOGGLING. HOW MUCH CAN YOU EXTRAPOLATE THIS TO HOW THE RESTAURANTS ARE DOING? HOW DO THEY SHAKE OUT THROUGH THE INDUSTRY? CRAIG: THE THING FOR CHIPOTLE IS THEY HAVE TO FIGURE OUT HOW TO DO THE FOOD SAFETY STUFF AND RUN GREAT RESTAURANTS. IT SEEMS LIKE THEY SPENT THE LAST YEAR MAKING SURE THE FOOD WAS SAFE, WHICH THEY HAD TO DO. IT’S MUCH WORK OBLIGATED TO RUN THOSE RESTAURANTS AND THEY HAVE TO GET BACK TO DOING THAT AND DOING GREAT RESTAURANTS. IT’S BEEN A STRUGGLE SO FAR. JULIE: CRAIG GIAMMONA, TALKING TO US ABOUT CHIPOTLE. COMING UP ON “WHAT YOU MISSED,” DAVID WU WILL DISCUSS WHY TRUMP RAISING DOUBTS ABOUT THE ONE CHINA POLICY IS A BIG DEAL. THAT’S A 4:00 P.M. EASTERN. DAVID: AND IMF RESEARCHER TURNED VENEZUELAN WHISTLEBLOWER AND POTENTIAL ADVISOR TO THE DONALD TRUMP TRANSITION TEAM. WE SHOULD ISSUE TO HIM, NEXT. THIS IS BLOOMBERG. ♪ DAVID: THIS IS “BLOOMBERG MARKETS,” I’M DAVID GURA. THE GOVERNMENT OF VENEZUELA HAS A LOT OF ENEMIES IN WASHINGTON, BUT FEW MORE CONNECTED OR COMMITTED THEN MARTIN MOBILE. WE SPOKE TO EVEN BRONER ABOUT HIS PROFILE OF HIM. >> WE STARTED OUT LOOKING FOR A STORY ABOUT HOW LOOKING AT THIS SHOWS YOU HOW VENEZUELA HAS FALLEN APART. WE FOUND OURSELVES WITH HIM AND COMPLETE FASCINATED BY HIS WORLD. HE HAS BECOME A KIND OF BROKER, BRINGING WHO WANT TO GIVE TESTIMONY, AND FEELING TO HAVE NO CHOICE BUT TO GIVE TESTIMONY TO YOU AS OFFICIALS WERE PURSUING CASES OF DRUG TRAFFICKING. >> TAKE A STEP BACK. HE WAS A LOW-LEVEL EMPLOYEE. AT THE IMF. HOW DID HE BECOME TO BE THE CENTER OF WATCH — MUCH OF WHAT IS BAD IN VENEZUELA? ETHAN: HE CAME HERE TO STUDY ENGLISH FROM VENEZUELA. HE IS VENEZUELAN. HE CAME HERE IN 2000 AND HE STARTED WORKING AND MET A GUY IN A PARTY WHO BECAME — AN ISRAELI GUY WHO WENT TO WORK FOR A CONSULTING FIRM THAT WAS HIRED BY A BIG BANK THAT WAS WORRIED THAT MONEY COMING FOR A BANK THEY WANTED TO BUY IN PANAMA HAD IRANIAN MONEY COMING THROUGH IT, WHICH WOULD VIOLATE U.S. SANCTIONS AGAINST IRAN. FROM THERE, HE HAD A FREELANCER. >> WHERE DID HIS BUSINESS START UP ROCK — TO PROSPER? ETHAN: TO TAKE IT ONE STEP BACK, HE HAD BEEN AN INTERN FOR SEVERAL MONTHS THEY ALL COMPANY BEFORE COMING TO AMERICA — AT THE OIL COMPANY BEFORE COMING TO AMERICA. WHEN THIS GUY CAME TO HIM AND SAID IS THIS COMPANY INVOLVED WITH IRANIAN MONEY, HE CALLED A FRIEND AND IT ALL SORT OF OPENED UP. THE WHOLE BUNCH OF DOCUMENTS, HE WORKS THE STORY AND IT WAS PARTLY OUT OF PATRIOTISM. HE WASN’T MAKING ANY MONEY. BUT ULTIMATELY, HE REALIZED THAT U.S. AGENCIES WOULD PAY HIM TO BRING THESE FOLKS AND HE COULD ACT AS AN INTERMEDIARY HELPING THE PEOPLE WHO WANTED TO TALK CUT A DEAL WITH U.S. AGENCIES. IN THE AGENCIES PAID HIM. AND THEN THE FOLKS, SOME OF THEM WHO WERE WEALTHY, WERE WILLING TO PAY HIM TO HELP THEM GET OUT. AND ULTIMATELY, HE WENT TO WORK AS A CONSULTANT FOR BIG BANKS AND HEDGE FUNDS. >> HE ACTUALLY BROUGHT SOMETHING LIKE TWO DOZEN ELITES FROM VENEZUELA TO THE UNITED STATES TO TELL ABOUT WHAT WAS GOING WRONG IN VENEZUELA. SPECIFICALLY, THEIR GIANT OIL COMPANY. TALKING ABOUT FORMER GENERALS. ETHAN: ABSOLUTELY. THESE ARE VERY SERIOUS PEOPLE, SOME OF WHOM HAD BEEN INVOLVED OR SEEN BAD STUFF. SOME OF THEM WERE SUDDENLY BEING PURSUED BY THE REGIME IN VENEZUELA. AND MARTIN BECAME A GUY THEY KNEW WHO HAD LINKS TO U.S. AGENCIES, AND BECAME THEIR INTERMEDIARY. HE ALSO HAS A VERY CHARMING MANNER. HE SINCE YOU DOWN AND OFTEN THEY WOULD MEET AT A CARIBBEAN ISLAND. HE WOULD DOWNLOAD WHAT YOU KNEW, AS SOMEONE WHO WANTED TO GET THAT INFORMATION OUT. AND THEN HE WOULD FIGURE OUT WHERE IT COULD GO. HE ENDED UP BEING THIS AMAZING INTERMEDIARY. >> YOU MET HIM. ETHAN: I SPENT MANY HOURS WITH HIM. >> WEDNESDAY LIKE — WHAT IS HE LIKE? ETHAN: HE’S INTERESTING GUY. THE WORLD WE ARE TALKING ABOUT SEEMS LIKE AN UNDERWORLD. BUT MARTIN IS VERY CHARMING AND HE IS SORT OF A BULLDOZER AND THE PUSSYCAT AT THE SAME TIME. HE’S A GUY WHO CAN GET HIS WAY, BUT ALSO SORT OF MOVES YOU THROUGH HIS SINCERITY. YOU DON’T HAVE THE FEELING THAT HE IS OUT TO SCREW YOU, TO BE PERFECTLY HONEST. HE WANTS TO MOVE THIS THING ALONG. AND HE IS VERY UPSET ABOUT WHAT HAPPENED IN VENEZUELA AND HE WANTS TO HAVE THE GOVERNMENT BE MOVED OUT. DAVID: YOU CAN READ ETHAN’S LATEST STORY IN THE LATEST ISSUE OF “BLOOMBERG BUSINESSWEEK.” HEAR FROM THE REPORTERS EVERY SATURDAY AND SUNDAY ON BLOOMBERG TELEVISION. JULIE: COMING UP ON “BLOOMBERG MARKETS,” BILL COHEN DISCUSS THE NEW TELEVISION GIANTS. AT 2:20 EASTERN. THIS IS OVER. — THIS IS BLOOMBERG. ♪ SCARLET: IT’S 7:00 P.M. IN LONDON. I’M SCARLET FU. OLIVER: AND I’M OLIVER RENICK. WELCOME TO “BLOOMBERG MARKETS.” SCARLET: WE ARE LIVE IN BLOOMBERG WORLD HEADQUARTERS IN NEW YORK, COVERING STORIES OUT OF THE AND A, MOSCOW, AND LOS ANGELES. OIL IS FIGHTING TO A 17 MONTH HIGH AFTER SAUDI ARABIA PUTS DEEPER CUTS. AND THE 10 YEAR YIELD AT ONE POINT TOUCHING ITS HIGHEST SINCE 2014. EXXON MOBIL CEO REX TILLERSON SAID TO BE UNDER CONSIDERATION FOR U.S. SECRETARY OF STATE WITH TWO DECADES OF DEALMAKING IN RUSSIA UNDER HIS BELT. THE KREMLIN IS A PRODDING THE MOVE WHILE U.S. LAWMAKERS ARE RAISING SOME RED FLAGS. PRESIDENT-ELECT DONALD TRUMP TAKES AIM AT LOCKHEED’S F-35 FIGHTER JET PROGRAM, HIS TWEET SENDING DEFENSE STOCKS LOWER ON THE DAY. U.S. MARKETS CLOSE IN JUST UNDER TWO HOURS. AS GET A CHECK ON WHERE EQUITIES ARE TRADING WITH ABIGAIL DOOLITTLE. LOOKS LIKE AN EXTREME. ABIGAIL: — A MIXED BREED. ABIGAIL: IT IS, BUT IT HAS RECORD HIGHS. THE DOW UP TO A RECORD CLOSING HIGH. THE S&P 500 CARVED OUT ANOTHER FRESH INTRADAY RECORD HIGH. IT WILL BE INTERESTING TO SEE A STOCK — IF STOCKS CAN TURN HIGHER CLOSING. BUT THE NASDAQ HAS BEEN DOWN ALL DAY, DRAGGED DOWN BY TECHNOLOGY AND BIOTECH. AS FOR WHAT’S HOLDING BACK THE S&P AND THE DOW, WE’RE LOOKING AT THE FINANCIAL SECTOR, WE HAVE BANK OF AMERICA, JP MORGAN, ALL LOWER. STOCKS ARE TAKING A BIT OF A BREATHER, THE FINANCIAL SECTOR IS THE TOP SECTOR SINCE THE ELECTION, UP ABOUT 18% AHEAD OF TODAY ON GROWTH EXPECTATIONS. AS YIELDS OF CLIMBED HIGHER, THE 10 YEAR YIELD HIT A LEVEL NOT SEEN IN QUITE SOME TIME. NOW THOSE GAINS ARE REPAIRING. WE TAKE AN INTRADAY LOOK AT THE 10 YEAR YIELD, AND ALSO THE BLOOMBERG DOLLAR INDEX IN BLUE. THE BLOOMBERG DOLLAR INDEX HAS BEEN DOWN ALL DAY. IT APPEARS TO BE LEADING THE 10-YEAR GILTS DOWN — 10 YEAR YIELD DOWN. THIS MAY SUGGEST A FED RATE HIKE IS PRICED IN LARGELY ON WEDNESDAY AND THAT WE ARE NOW STARTING TO SEE A YIELD TRADE DOWN INTO THAT. TURNING TO A PART OF THE COMMODITY COMPLEX THAT HAS BEEN UNDER LOOKED TODAY BECAUSE OF OILS GAIN, NATURAL GAS, IS DOWN SHARPLY, DOWN 6%. HOPES FOR COLD WEATHER HAVE REALLY BEEN SNAPPED, RIGHT NOW WE ARE SEEING WARMER WEATHER THAN EXPECTED ON THIS. SOUTHWESTERN ENERGY AND RANGE RESOURCES TRADING LOWER. AS ACTUALLY HAVING ITS WORST TODAY IN QUITE SOME TIME. THERE IS SOME REASON TO THINK THIS COULD REVERSE. THIS IS G #BTW 42-28. THE LONG-TERM CHART OF NATURAL GAS. THEY PUT IN THE GOLDEN CROSS IN THE GOLDEN CROSS AND 50 DAY MOVING AVERAGE MOVED OUT TO THE 200 DAY MOVING AVERAGE. IT SPEAKS OF THE LAST OF THE BULLISH BUYING MOMENTUM. ONE WAS PUT IN EARLIER THIS YEAR, TELLING US WHILE IT MIGHT BE A BUFFER AND A VOLATILE RIDE, THE GAINS COULD BE AHEAD FOR SOME OF THOSE E&P STOCKS AS WELL. SCARLET: ABIGAIL DOOLITTLE, WE WILL KEEP AN EYE ON THAT. JULIE: — OLIVER: MARK CRUMPTON IS IN THE NEWSROOM WITH MORE. MARK: SPEAKER PAUL RYAN SAYS THE HOUSE INTELLIGENCE COMMITTEE WILL LOOK INTO CYBER THREATS SUCH AS HACKING BY RUSSIA OF THE DEMOCRATIC NATIONAL COMMITTEE AND HILLARY CLINTON’S PRESIDENTIAL CAMPAIGN. HE SAYS ANY INVESTIGATION SHOULD NOT CAST OUT ON WHAT HE CALLED THE CLEAR AND DECISIVE OUTCOME OF THIS ELECTION. MEANTIME, JOSH EARNEST HAD THIS TO SAY ABOUT THE INVESTIGATIONS. JOSH EARNEST: HE DIDN’T NEED A SECURITY CLEARANCE TO FIGURE OUT WHO BENEFITED FROM MALICIOUS RUSSIAN CYBER ACTIVITY. THE PRESIDENT-ELECT DIDN’T CALL INTO QUESTION. HE CALLED ON RUSSIA TO HACK HIS OPPONENTS. HE CALLED ON RUSSIA TO HACK SECRETARY CLINTON. MARK: ERNEST CALLED GOVERNMENT INTELLIGENCE OFFICIALS ACCURATE. SHOCK OF THE TOP HAS BEEN SENTENCED TO 10 YEARS FOR RACKETEERING SCHEME THAT INCLUDED MONEY LAUNDERING AND BRIBERY. THE FEDERAL JUDGE CALLED THE 60-YEAR-OLD DEMOCRATS CRIMES ASTONISHING. HE AND HIS TV ANCHOR WIFE HAD A $500,000 ANNUAL INCOME. HE INSISTS THAT JUST — THE JUSTICE DEPARTMENT’S RACKETEERING CASES LYRICALLY MOTIVATED. EGYPT’S PRESIDENT SAID A SUICIDE BOMBER CAUSED THE EXPLOSION THAT KILLED 24 CHRISTIANS IN A CHAPEL IN CAIRO. HUNDREDS ATTENDED THE MEMORIAL EARLIER TODAY FOR THOSE KILLED. IT WAS ONE OF THE DEADLIEST ATTACKS ON A RELIGIOUS MINORITY IN RECENT MEMORY. THE U.S. SUPREME COURT IS ALLOWING THE NFL $765 MILLION CONCUSSION AGREEMENT TO STAND. THE JUSTICES LEFT ALONE A FEDERAL APPELLATE RULING THAT THE DEAL, WHILE IMPERFECT, WAS A FAIR RESOLUTION OF CLAIMS FILED IN BEHALF OF MORE THAN 20,000 RETIRED PLAYERS. FORMER PLAYERS WHO OPPOSE THE ACCORD FEARED IT WOULD INADEQUATELY COMPENSATE THEM FOR THE BRAIN DAMAGE THEY MAY HAVE SUFFERED. GLOBAL NEWS, 24 HOURS A DAY, POWERED BY MORE THAN 2600 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I’M MARK CRUMPTON, THIS IS BLOOMBERG. OLIVER: THANK YOU, MARK. WILL WE SEE A DOWNTURN IN THE ECONOMY DURING A DONALD TRUMP PRESIDENCY? CARLYLE GROUP STEVE RUBENSTEIN WARNED THE U.S. DO WAS — WAS DUE FOR RECESSION. >> WE TEND TO HAVE RECESSIONS EVERY SEVEN YEARS IN THE UNITED STATES. AT SOME POINT, YOU CAN EXPECT A RECESSION. I DON’T THINK WE ARE HERE NOW, THERE’S NO INDICATION, BUT YOU DO EXPECT SOME SLOWDOWN AFTER PRETTY GOOD GROWTH IN THE LAST COUPLE OF YEARS. OLIVER: EARLIER TODAY ON BLOOMBERG “DAYBREAK AMERICA’S,” HE BACK STEPPED OFF OF ANY IMMEDIATE DOWNTURN. >> WHEN ALAN GREENSPAN WAS THE HEAD OF THE FED, THERE WAS SOME TALK THAT THE BUSINESS CYCLE HAD BEEN REPEALED BECAUSE WE POSTPONED RECESSION FOR QUITE SOME TIME. THAT TURNED OUT NOT TO BE THE CASE. SINCE WORLD WAR II, WE HAVE RECESSIONS ON AVERAGE EVERY SEVEN YEARS, BUT WE’VE GONE AS LONG AS NINE AND A HALF YEARS. WE PROBABLY PUSHED THE RECESSION DOWN THE ROAD A LITTLE BIT BECAUSE THE STOCK MARKET IS MORE BULLISH AND THERE IS MORE CONFIDENCE IN THE MARKET. AND WHETHER OR NOT THIS IS A, THERE’S NO DOUBT THAT WE ARE NOT LIKELY TO HAVE A RECESSION IN 2017. >> USTINOV IN PARLIAMENT AND SAID IT’S THE END, BOOM AND BUST. IF WE DON’T GET FISCAL STIMULUS THIS LATE IN THE CYCLE,, JIM OF BOOM AND HOW MUCH OF A BUST WILL SOON FOLLOW? >> NO ONE KNOWS. IF YOU ARE PUSHING IT DOWN THE ROAD AT SOME POINT, A DECLINE COULD BE GREATER THAN WOULD OTHERWISE BE THE CASE. I KNOW THAT WE ARE GOING TO SEE ANYTHING LIKE A 2006 OR SEVEN, WHERE WE ARE LIKELY TO GO INTO A GIGANTIC GREAT RECESSION. WHEN WE HAVE IT, WE WILL HAVE A MODEST RECESSION. IT’S NOT LIKE 2017 WE ARE LIKELY TO SEE A STIMULUS OUT OF THE CONGRESS AND LIKELY TO SEE TAX CUTS AND AS A RESULT, YOU PUSH DOWN ANY RECESSION FOR QUITE SOME TIME. >> HOW YOU PROCESS THAT AS AN INVESTOR AND MAKE DECISIONS? WHERE YOU AND YOUR CYCLE ABOUT BUYING AND SELLING. >> IN UNITED STATES, WE ARE VERY DETERMINED TO MAKE INVESTMENTS NOW BECAUSE WE THINK IT’S A PRETTY GOOD TIME TO INVEST. PRICES ARE NOT CHEAP BUT FINANCING IS AVAILABLE. IN EUROPE, PRICES ARE CHEAPER AND VERY ATTRACTIVE RIGHT NOW. ABOUT THE ANIMAL SPIRIT — >> WHAT ABOUT THE ANIMUS SPIRIT? >> WE ARE ALWAYS SELLING SOMEONE IS APPROPRIATE TO SELL, BUT RIGHT NOW, PRICES ARE HIGH. AS A FAIR AMOUNT OF SELLING GOING ON. IN SOME SECTORS, PRICES ARE DEPRESSED AND YOU CAN MAKE GOOD INVESTMENTS. THE SECTORS THAT ARE DOING WELL ARE THE ONES YOU WOULD WANT TO SELL. >> HELP US UNDERSTAND WHICH IS WHICH? INERGY, HE SAYS I HAVE NOTHING. WHERE IS THE DISTRESSED OPPORTUNITY? >> THEY NOT BE IN THE UNITED STATES RIGHT NOW. THERE MAY BE OTHER PARTS OF THE WORLD. WE’RE LOOKING AT GLOBAL INVESTMENTS. IN THE UNITED STATES, EVERYTHING IS DOING REASONABLY WELL. RIGHT NOW, I DON’T SEE A GIGANTIC AREA OF DISTRESS. SOME COMPANIES MAY HAVE BORROWED TOO MUCH AND WHILE THE SECTOR MIGHT BE GOOD, THE COMPANY ITSELF MAY NOT BE IN GREAT SHAPE YOUR IT — IN GREAT SHAPE. >> WE’VE SEEN A LOT OF GEOPOLITICAL RISK IN MARKETS NOT BEING ABLE TO PRICE IT IN. AS YOU LOOK AT EUROPE, HOW YOU PROCESS THINGS LIKE ITALY AND FRANCE AND EVEN GERMANY? >> THERE’S NO DOUBT THAT EUROPE IS MORE STRESSED THAN THE UNITED STATES. BECAUSE WHAT’S GOING ON IN ITALY AND THE BREXIT SITUATION AND FRANCE, THE UNCERTAINTY THERE IN TERMS OF WHO THE NEXT PRESIDENT WILL BE, AND THERE’S NO DOUBT THAT THERE’S A CHANCE FOR LOWER PRICES THAN BEFORE. EUROPE IS BEING HELPED A LOT BY QUALITATIVE EASING THAT THE ECB IS DONE AND THEY HAVE TO CONTINUE DOING THAT FOR QUITE SOME TIME. THERE’S NO DOUBT THE PRICES ARE CHEAPER IN EUROPE THAN ELSEWHERE. >> YOU TOUCHED ON THE AVAILABILITY OF FINANCING. THE PRICE OF CREDIT IS GOING TO CHANGE IN THE COMING YEARS. PERHAPS SIGNIFICANTLY. WHAT IS THAT GOING TO MEAN FOR YOU? >> OF THE FED WERE GOING TO INCREASE BY 20 BASIS POINTS THIS WEEK, I’M BUILT INTO THE MARKET. EVEN IF THEY WERE GOING 100 BASIS POINTS, THAT’S OUT OF GIGANTIC INCREASE. IF YOU WERE GOING TO HAVE AN INCREASE OF SEVERAL HUNDRED BASIS POINTS, THAT WOULD BE DIFFERENT. CREDIT AVAILABILITY IS A MUCH GREATER PROBLEM THAN CREDIT PRICING RIGHT NOW, BECAUSE THERE’S PLENTY OF CREDIT AVAILABILITY. IF THAT WERE TO GO AWAY, IT’S A PROBLEM. I DON’T SEE ANY SIGN OF THAT HAPPENING. >> YOUR CENTER, AND WE ARE THINGS LIKE REX TILLERSON GOING TO BE SECRETARY OF STATE. ADULT OF YESTERDAY QUESTIONING THE ONE CHILD POLICY. HOW DOES THAT AFFECT YOUR INVESTMENT WILL. >> WE’RE REALLY LOOKING AT LONGER-TERM INVESTMENTS, AND LONGER-TERM PROJECTIONS. BUT YOU HAVE TO TAKE INTO ACCOUNT WHEN PUBLIC FIGURES SAY IN TERMS OF THE STATEMENTS. I DON’T THINK IT WILL AFFECT WHAT WE DO IN TERMS OF A LONGER-TERM INVESTMENTS. WE’RE STILL BULLISH ON CHINA. SCARLET: THE MARKETS WERE FLYING TODAY BUT NOT ON CHINA. WHY ARE YOU BULLISH WHEN THERE SEEMS TO BE THE RISK OF TRADE WAR WITH THE U.S.? THEY WANT TO BURST THE PROPERTY BUBBLE. >> THERE ARE 1.4 BILLION PEOPLE IN CHINA. THEY ARE GROWING AT 6.5% OF THEIR GROWING AT 1.5, 1.7%. GIVEN THE SIZE OF THE POPULATION , WHILE THERE MAY BE TEMPORARY UPS AND DOWNS, THE AMOUNT OF PEOPLE ARE SIGNIFICANCE. IT’S A SMALL PERCENTAGE OF THEIR ECONOMY, THERE’S ENORMOUS OPPORTUNITY TO INVEST IN CHINA NOT BE CROWDED OUT BY SO MANY OTHER PEOPLE. >> ALAN GREENSPAN USED TO FAMOUSLY SAY THE MANAGER LOOKING AT CHINA IS YOU COULD TELL THE NUMBER BEFORE THE QUARTERS WAS OVER. I THINK THE ECONOMY IN CHINA IS TWO DIFFERENT ECONOMIES. THE STATE OWNED ENTERPRISES ECONOMY MAY BE GROWING AT 2% OR 3%. THE OTHER NUMERAL — THE ENTREPRENEURIAL ECONOMY IS ONLY 10% OR 11%. TOGETHER, IS ABOUT 6.5%, AND THOSE NUMBERS ARE LEGITIMATE. CHINESE LEADERS USE MANY THING TO FIGURE OUT WHAT THE NUMBERS ARE AND THEY USE ELECTRICITY TRANSMISSION AND THEY WOULD SAY 6.5% IS A PRETTY GOOD NUMBER. OLIVER: THAT WAS DAVID RUBENSTEIN, COFOUNDER AND CO-CEO OF THE CARLYLE GROUP SPEAKING EARLIER ON BLOOMBERG “DAYBREAK AMERICA’S.” YOU CAN CATCH YOU SHOW ANY TIME ONLINE AND THIS WEDNESDAY. SCARLET: PRESIDENT ELECT DONALD TRUMP TAKES AIM AT LOCKHEED MARTIN, LOCKHEED SHARES AT A ONE-MONTH LOW. YOU HAVE ROBERT BRUMMOND AND RAYTHEON EACH DOWN BY BETTER THAN 2%. A QUICK GLANCE AT ROME, ITALY THE SWEARING IN OF ITALY’S NEW PRIME MINISTER, ALONG WITH HIS NEW CABINET. THIS IS BLOOMBERG. ♪ SCARLET: THIS IS “BLOOMBERG MARKETS,” I’M SCARLET FU. OLIVER: I’M OLIVER RENICK. SCARLET: BREAKING NEWS, BARCLAYS, CITIGROUP, IS HELPING THE U.S. GOVERNMENT BROUGHT IN A CURRENCY INVESTIGATION. THEY AGREED TO ALLEGATIONS OF CURRENCY TAMPERING, BUT THE INFORMATION I GAVE UP AND RETURN IS NOW BEING USED BY THE GOVERNMENT TO BROADEN THIS INVESTIGATION INTO MANIPULATION OF THE FX MARKET. YOU HAVE JPMORGAN, BARCLAYS, AND CITIGROUP OPERATING — COOPERATING TO OFFER EVIDENCE OF AN ANTITRUST CONSPIRACY IN THE FX MARKET ON DIFFERENT CURRENCIES THAN THE ONE THAT WERE THE CENTER OF THE 2015 INVESTIGATION, ALL ACCORDING TO COURT PAPERS FILED BY THE GOVERNMENT AND BANKS IN ADVANCE OF SENTENCING IS SCHEDULED FOR LATER THIS WEEK. WE’LL EVEN I ON THIS FOR YOU. MEANTIME, IF YOU LOOK AT THE DEFENSE SECTOR, SHARES OF LOCKHEED MARTIN ARE UNDER PRESSURE TODAY AFTER PRESIDENT ELECT DONALD TRUMP TWEETED THE F-35 PROGRAM AT ITS COST ARE OUT OF CONTROL. TRUMP ALSO MENTIONED THE PROGRAM DURING HIS INTERVIEW ON FOX NEWS SUNDAY. DONALD TRUMP: I DON’T NEED A $4.2 BILLION AIRPLANE TO FLY AROUND IN. I DON’T NEED THAT. ESPECIALLY WHEN IT’S TOTALLY OUT OF CONTROL. THEY LOST CONTROL OF IT. I LET THEM KNOW THAT I WANT THIS. I JUST SEE THINGS THAT’S SO GOOD. THE F-35 PROGRAM WITH THE MONEY, THE HUNDREDS OF BILLIONS OF DOLLARS, IT’S OUT OF CONTROL. SCARLET: MEANWHILE, LOCKHEED MARTIN SAID IN A STATEMENT TODAY IT HAS WORKED TO LOWER THE PRICE OF THE F-35 ARE MORE THAN 60% AND WE WELCOME THE OPPORTUNITY TO ADDRESS ANY QUESTIONS THE PRESIDENT-ELECT HAS ABOUT THE PROGRAM. IT IS A GREAT PROGRAM. FOR MORE ON THIS, LET’S GET TO THE PRESS ANALYST FOR BLOOMBERG. DOUG, GIVE US SOME CONTEXT. IT SEEMS LIKE THE PRESIDENT-ELECT JUST BROUGHT UP THE F-35 PROGRAM WITH MY — WITHOUT MUCH PRODDING. WHY IS HE BRING THIS UP NOW? DOUG: IT’S THE GOVERNMENT’S BIGGEST DEFENSE PROGRAM RIGHT NOW. IN TOTALITY, THE GOVERNMENT ESTIMATES IT WILL COST ABOUT $400 BILLION TO BUY ALL OF THE F-35’S, AND THAT’S JUST THE U.S. ALONE. WE ARE FAR INTO THIS PROGRAM, THERE’S A LOT OF RISKS BEHIND THE PROGRAM. IF YOU LOOK AT IT AND WILL BASIS, THE U.S. WILL SPEND ABOUT $10 BILLION ON THE F-35 THIS YEAR. IN TERMS OF LOCKHEED NEXT YEAR, THEY EXPECT GENERATE ABOUT $12 MILLION OF THEIR TOTAL REVENUE. QUITE A BIT MORE THAN 20%. IT PROGRAM, THAT’S THE GENESIS TO THE POINT WHY PRESIDENT ELECT TRUMP IS COMING OUT THIS. OLIVER: YOU MENTIONED THE PROGRAM IS WELL UNDERWAY, YET TRADERS IN THE MARKET CLEARLY REACTED AND SOLD OFF LOCKHEED MARTIN PRETTY QUICKLY TODAY. WHAT ARE PEOPLE WORRIED ABOUT? WHAT WOULD YOU BE WORRIED ABOUT WHEN YOU LOOK AT WHAT THEY HAVE TO LOSE HERE? DOUG: THE BIGGEST CONCERN FROM ABROAD DEFENSE CONTRACTOR STANDPOINT, NOW THAT WE ARE TRANSITIONING TO THE NEW ADMINISTRATION UNDER PRESIDENT-ELECT DONALD TRUMP IS THE ATTACK OR FOCUS ON DEFENSE PROFITABILITY. WE THINK THE BIGGEST RISKS ARE IF THE NEW IT ADMINISTRATION FOCUSES ON COST AND CONTROLLING COSTS. IN ALL LIKELIHOOD, THE CONTRACTOR PROFITABLY MARGINS COULD SEE A DECLINE FROM THAT. THAT’S NOT TO SAY WE ARE NOT IN MORE OF A POSITIVE DEFENSE SPENDING OUTLOOK AND REVENUE AND PROFITS, WE EXPECT WILL RISE. THINK PROFITABILITY FROM A DEFENSE CONTRACTOR IS GOING TO BE THE BIGGEST FOCUS AS WE MOVE WITH THE NEW IT ADMINISTRATION. SCARLET: IF YOU GO INSIDE THE BLOOMBERG, IT’S NOT JUST LOCKHEED MARTIN THAT HAS BEEN SUFFERING IN THE WAKE OF HIS COMMENTS. RAYTHEON IS DOWN AS WELL. THIS IS A CHART FROM DAN CURTIS, THE BLUE PART IS HOW MUCH RAYTHEON GETS FROM THE DEPARTMENT OF DEFENSE, VARIES BETWEEN 60% TO 60% OF THE TOTAL, CLEARLY THIS IS NOT — 60% TO 68% OF THE TOTAL. CLEARLY THIS IS NOT JUST LUCKY BARTON. DOUG: THEY WERE SAYING DEFENSE COMPANY’S WERE GOING TO BENEFITS. SCARLET: A LITTLE BIT OF A HEAD SCRATCHING. THANK YOU, DOUG ROTHACKER. OLIVER: VIACOM IS LEFT OUT OF IN THE COLD AS DEAL TALKS WITH CBS COLLAPSE. THE CHANGE IN PLANS MAY BE GOOD NEWS FOR CBS. THIS IS BLOOMBERG. ♪ SCARLET: THIS IS “BLOOMBERG MARKETS,” I’M SCARLET FU. OLIVER: I AM OLIVER RENICK. THE VIACOM CBS DEAL HAS COLLAPSED, THEY WITHDREW A PROPOSED MERGER, ENDING NEGOTIATIONS FOR A COLOSSAL DEAL. THE ENTIRE DRAMA FROM THE GET GO, BILL: — BILL COHAN IS IN NEW YORK. HOW DO WE GET TO THIS POINT WHERE THINGS ARE FALLING APART? BILL: YOU KNOW, THEY EACH ESTABLISHED INDEPENDENT COMMITTEES OF THE BOARD TO ANALYZE THE POST TRANSACTION. THEY HIRED INVESTOR — INVESTMENT BANKERS AND THEY HAD SERIOUS NEGOTIATIONS ABOUT ALL THIS. AS BEST I CAN SURMISE, THEY WERE TRYING TO BUY VIACOM FOR AS LOW AS HE POSSIBLY COULD AND TAKE CONTROL OF IT. I’M SURE THE VIACOM BOARD AND ITS BANKERS DIDN’T WANT TO SELL FOR THE PRICE THAT HE WANTED TO PAY. I THINK YOU SHOULD A LOT OF DISCIPLINE HERE IN THIS IS PROBABLY THE RIGHT OUTCOME FOR BOTH COMPANIES. SCARLET: HE ALSO ATTACHED CONDITIONS TO A PURCHASE AND MERGER AS WELL. APPARENTLY HE WANTED CONTROL OVER THE REDSTONE FAMILIES VOTING SHARES. DO THINK HE KNEW THAT WAS PROBABLY ASKING FOR TOO MUCH? BILL: NOT NECESSARILY. I THINK THAT OBVIOUSLY, HE WAS THE GUY THAT THE REDSTONE FAMILY WANTED TO RUN BOTH COMPANIES. HE IS A PROVEN MEDIA EXECUTIVE, HE’S DONE GREAT THINGS THAT CBS, WHERE IS VIACOM HAS FALLEN ON HARD TIMES. IT’S NOT AT ALL SURPRISING THAT LES WOULD WANT TOTAL CONTROL AND BE ABLE TO GET DONE WHAT HE WANTED TO GET DONE AND VIACOM. BEING ABLE TO VOTE THE FAMILY SHARES IS PROBABLY PART OF THAT. I’M SURE IF THERE WAS A SERIOUS DISAGREEMENT, THEY MIGHT’VE BEEN ABLE TO WORK SINCE AND NOW. I SUSPECT IT BECAME DIFFICULT FOR THE VIACOM BOARD TO GET A FAIRNESS OPINION OVER THE PRICE THAT LESLIE WANTED TO PAY. OLIVER: HOW TOUGH WAS IT FOR THE CBS BOARD TO BACK AWAY FROM THIS DEAL? SHOULD WE BE GIVING THEM CREDIT TO NOT GIVING IN AND HOLDING ON? BILL: I THINK LESLIE DESERVES A LOT OF CREDIT FOR BEING DISCIPLINED AND NOT GIVING INTO THE DEAL. THERE WAS A LOT OF DEAL FEET AROUND THIS TRANSACTION. I’M SURE A LOT OF ICONS SHAREHOLDERS WOULD HAVE LOVED IF CBS HAD GOTTEN CONTROL OF THIS AND HAD HIM RUN THIS. LESLIE HAS ALWAYS SAID FROM THE BEGINNING THAT HE DID NOT WANT TO LOSE DISCIPLINE ON PRICE. HE WANTED TO MAKE SURE THAT MADE SENSE. I APPLAUD HIM AND GIVE HIM A LOT OF CREDIT. A LOT OF CEOS GIVE IN TO DEAL HEAT. HE SHOULD A LOT OF DISCIPLINE. IT DOES NOT MEAN THIS MIGHT NOT COME BACK. IT MIGHT BE A NEGOTIATING PLOY. OLIVER: YOU DON’T WITH A LOT OF THIS TYPE OF INVESTMENT BANKING AND DEALMAKING. WHENEVER FORCES PULLING BOTH WAYS ON THE COMPANY’S LEADER, IS THERE MORE THAN JUST THE DEAL TO INVESTMENT BANKERS, ETC.? BILL: THE FORCES ALIGN WANTED TO GET A DEAL DONE, BECAUSE THAT’S HOW BANKERS GET PAID AND EVERYONE GETS PRESTIGE AND TAKES VICTORY LAPS. I GIVE LESLIE A LOT OF MONEY FOR HAVING DISCIPLINE HERE. BUT JUST BECAUSE THIS FELLOW PART IN DECEMBER 2016, IT IS MEANT TO BE, THESE COMPANIES WERE TOGETHER 10 YEARS AGO AND WERE SPLIT APART. IF IT’S MEANT TO BE, IF THE CURRENT LEADERSHIP OF VIACOM DOESN’T GET THE JOB DONE AND THEY ARE KIND OF UNTESTED, THEY MIGHT VERY WELL TURN AGAIN TO LESLIE AND HAVE HIM BE THE SAVIOR AGAIN. THE REDSTONE FAMILY WANTS TO CREATE VALUE. BY COMES BACK — VIACOM STOCK IS DOWN, AND CBS HAS BEEN ON A TEAR. THEY WANT TO GET THE VALUE OF VIACOM UP AND THEY ARE HOPING THAT LESLIE CAN DO THAT FOR THEM. THIS WASN’T THE RIGHT PRICE AT THE RIGHT TIME. IT VERY WELL MAY COME BACK. SCARLET: A REMINDER THIS DEAL WAS MORE ABOUT PROPPING UP VIACOM THAT CBS. BILL COHAN, WHAT WOULD YOU LOOK AT THE NEXT STEP OF THE SAGA? BILL: THE DISAPPOINTED BY COUNT SHAREHOLDERS ARE GOING TO PUSH FOR A DEAL AND WE WILL SEE IT COME BACK. SCARLET: BILL COHAN. OLIVER: BLOOMBERG TV GET YOUR BEING EDITOR AND A CONTRIBUTOR TO BLOOMBERG VIEW. THANK YOU. SCARLET: A COMMODITIES CLOSE, OIL CLIMBING TO A SEVEN-MONTH HIGH AFTER NON-OPEC COUNTRIES JOIN IN ON THE DEAL. THIS IS BLOOMBERG. ♪ SCARLET: FROM BLOOMBERG WORLD HEADQUARTERS IN MIDTOWN MANHATTAN, THIS IS “BLOOMBERG MARKETS.” I’M SCARLET FU. OLIVER: I’M OLIVER RENICK. COMMODITY MARKETS ARE CLOSING IN NEW YORK. ABIGAIL DOOLITTLE HAS THE LATEST. >> LOTS OF MOVEMENT IN THE COMMODITY COMPLEX TODAY. WITHIN THE ENERGY COMPLEX WE HAVE A DIVERGENCE BETWEEN OIL AND NATURAL GAS, OIL TRADING HIGHER AS OPEC AND NOT MEMBERS AGREE TO CUT SUPPLIES. NATURAL GAS LOWER AS WEATHER IS WARMER THAN WHAT WAS ANTICIPATED EARLIER LAST MONTH. AS FOR PRECIOUS METALS, WE SEE SOME STRENGTH AS THE BLOOMBERG DOLLAR INDEX IS FALLING. WHAT STANDS ON THE MOST IS THE PERFORMANCE IN OIL, A BIG RALLY. WE WANTED TO TAKE A LOOK AT HOW THIS LOOKS FOR THE STOCK. TAKE A LOOK AT THE BLOOMBERG. ON TOP WE HAVE THE S&P 500 ENERGY OIL STOCK INDEX. REBOUNDING NICELY FROM THE LOWS OF LAST JANUARY, UP 50% SINCE THAT TIME. THE QUESTION IS IS THIS SECTOR OVERBOUGHT? THE RSI ON THE BOTTOM MAY INDICATE YES, THESE STOCKS ARE OVERBOUGHT, HITTING THE SELL LEVEL OF 70. WE SEE MUCH OF THE MOVEMENT HIGHER IN THE RSI HAS COME AFTER THE ELECTION. LET’S TAKE A LOOK AT A FEW OF THE TOP-PERFORMING STOCKS SINCE THE ELECTION. TRANSOCEAN, CHESAPEAKE ENERGY. INTERESTING THAT THERE ARE TWO DRILLERS THERE. ABSOLUTELY HUGE GAINS SINCE NOVEMBER 8. ONE SECTOR THAT INITIALLY FELL IN THE ENERGY COMPLEX BUT HAS NOW RECOVERED, THE NEW ENERGY INDEX, THE GRAIN STOCKS. INITIALLY FELL AFTER THE ELECTION BUT HAS NOW REGAINED AND IS UP 1%. PRETTY NICE RECOVERY THERE. SCARLET: THANK YOU. WE ARE GOING TO STICK WITH OIL. WE CAUGHT UP WITH RUSSIA’S OIL MINISTER IN AN EXCLUSIVE INTERVIEW. HERE IS WHAT HE HAD TO SAY ABOUT RUSSIA’S PRODUCTION CUTS. >> ALTHOUGH I HAVE AN IMPORTANT ROLE FROM THE MINISTERS, THE KEY ROLE SHOULD BE GIVEN TO OUR LEADERSHIP. I WOULD LIKE TO ESPECIALLY NOTE MR. PUTIN’S ROLE HERE, HAS BEEN VERY SUPPORTIVE OF THE DEAL, UNDERSTANDING THE IMPORTANCE AND THE NEED FOR THE DEAL TO BE DONE. HAVING THIS POLITICAL SUPPORT WHICH I JUST SPOKE ABOUT, THIS HAS HELPED US TO BUILD A VERY TRUSTFUL RELATIONSHIP WITH OUR PARTNERS FROM OPEC AND NON-OPEC COUNTRIES, ESPECIALLY SAUDI ARABIA, WITH WHICH WE NOW HAVE A PATH TO WORK TOGETHER. >> ARE THESE NON-OPEC CUTS GENUINE OR NATURAL DECLINES? >> I HAVE TO SAY THE SITUATION IS DIFFERENT COUNTRY BY COUNTRY. I WAS PLEASANTLY SURPRISED TO SEE SO MANY COUNTRIES RESPOND TO THE INVITATION BY OPEC AND RUSSIA TO PARTICIPATE IN THIS DEAL TO STABILIZE THE MARKETS. I WOULD SAY MOST OF THE COUNTRIES WHICH JOINED, IT’S IMPORTANT THAT THEY JOINED VOLUNTARILY, SO NOBODY WILL FORCE THEM TO REDUCE PRODUCTION. MOST OF THESE COUNTRIES WOULD TAKE ACTIVE MEASURES TO REDUCE PRODUCTION, AND THAT’S IMPORTANT. >> WHAT ABOUT THE REMAINDER, WHO WILL MAKE UP TO GET TO THE 600,000 BARRELS A DAY TARGET? >> IT IS IMPORTANT TO UNDERSTAND WE ARE NOT DOGMATIC. 600,000 BARRELS PER DAY WAS NOT THE ONLY POSSIBLE RESULT FOR US. THERE WILL BE COUNTRIES WHICH WOULD JOIN THE ARRANGEMENT, A DIFFERENT CLIENT BASIS, AND I THINK WE WOULD LIKELY BE ABLE TO ACHIEVE AN OVERALL PRODUCTION DECLINED HIGHER THAN THE 550 WHICH WE SPOKE ABOUT. ANOTHER KEY THING WHICH I WOULD LIKE TO HIGHLIGHT, THE AGREEMENT IS OPEN FOR OTHER PARTIES TO JOIN. THIS TIME THERE WERE 11 COUNTRIES HERE BUT THERE MAY BE OTHERS WILLING TO JOIN THE COULD NOT PARTICIPATE TODAY. WHAT IS IMPORTANT IS THAT THE DOORS ARE OPEN AND THAT THE PROCEEDINGS HAVE BEEN MADE, AND NOW WE HAVE A FRAMEWORK TO ACT. >> THE SAUDI OIL MINISTER SAID THAT HE WAS WORRIED TO CUT EVEN MORE, MAYBE BELOW 10 MILLION BARRELS A DAY. WOULD RUSSIA CUT BELOW 300,000? >> WE HAVE SIGNED A DEAL FOR SIX MONTHS. THIS IS THE FIRST STAGE WHICH WOULD LAST UNTIL THE END OF THE FIRST HALF. THERE IS A FRAMEWORK THAT ALLOWS US TO EXTEND THE DURATION OF THE AGREEMENT, BUT WE WILL BE MONITORING CLOSELY THE EFFECT OF THIS AGREEMENT ON THE MARKET, COMPLIANCE OF COUNTRIES, AND WE WILL BE MAKING A DECISION ABOUT WHETHER ANOTHER EXTENSION IS NECESSARY UPON COMPLETION OF THIS TERM. >> WHEN DOES RUSSIA BEGIN THEIR CURVING? >> THAT IS THE FIRST STAGE OF THE CUT. HE WOULD BE ABLE TO SEE AS EARLY AS JANUARY. I WOULD LIKE TO SAY THAT WE HAVE ALL OF YOU DISCUSSED THIS WITH COUNTRIES. COMPANIES ARE WELL AWARE OF WHAT THEY HAVE TO DO. CONSIDERING THIS IS A VOLUNTARY STEP WHICH THESE COUNTRIES ARE TAKING BECAUSE THEY UNDERSTAND THE BENEFITS OF THIS DEAL AND THEY ALSO UNDERSTAND THE DEAL IS IN PLACE AND HAVE AGREED TO IT. CONSIDERING THIS, THEY ARE PREPARING FOR THE COST WHICH WILL TAKE PLACE STARTING IN JANUARY. AS WE SPEAK, THEY ARE TAKING MEASURES AND IT IS ALREADY IN CLEAR PLANS. SCARLET: THAT WAS THE RUSSIAN ENERGY MANAGER ALEXANDER NOVAK. OLIVER: NOW TO PRESIDENT-ELECT’S SEARCH FOR SECRETARY OF STATE. REX TILLERSON IS REPORTEDLY THE TOP CANDIDATE. HE HAS TIES NOT ONLY TO THE OIL INDUSTRY BUT ALSO RUSSIA. RICHARD HAAS JOINED BLOOMBERG WITH MORE INSIGHT INTO THE TILLER SIN-RUSSIA RELATIONSHIP. >> THIS IS A HARD TRANSITION TO READ THE TEA LEAVES BUT IT WOULD SEEM THAT HE IS THE CLEAR FAVORITE. UNTIL IT IS OVER IT IS OVER. THE PRESIDENT SPOKE ABOUT HIM ON FOX YESTERDAY. IT WAS 90% LIKELY BUT THE LAST 10%. AS YOU SAW FROM JOHN MCCAIN, AS YOU ARE HEARING FROM OTHERS, MORE THAN ANYTHING ELSE, THIS QUESTION OF RUSSIA IS GOING TO BE CENTRAL TO HIS CONFIRMATION AND IT’S COMING AT A TIME WHEN RUSSIA IS EVERYWHERE IN THE NEWS BECAUSE OF THE WHOLE INTELLIGENCE BROUHAHA, TO WHAT EXTENT THE RUSSIANS WERE TRYING TO INTERFERE IN OUR ELECTIONS. >> ASSUMING IT IS MR. TILLERSON, IS IT AN ADVANTAGE OR DISADVANTAGE? OF COURSE, HE HAS DEALT WITH MR. BRUTON. >> THAT IS THE QUESTION THAT A LOT OF PEOPLE HAVE BEEN ASKING, THE NATURE OF THOSE DEALS, WHAT HAS HE ADVOCATED FOR IN THE WAY OF SANCTIONS, AND WHAT DOES HE THINK GOING FORWARD? IT IS WANTING TO BE A BUSINESSMAN, AND RUSSIA IS AN IMPORTANT PIECE OF REAL ESTATE. WHAT THEY WILL WANT TO HEAR NOW IS WHAT ARE THE POLICIES TOWARD RUSSIA ON UKRAINE, SYRIA, THE CONTINUATION OR NOT OF SANCTIONS? ALL OF THAT WILL COME TO THE FOUR. >> IN THE NEW YORKER, REX TILLERSON TO THE STATE DEPARTMENT. HOW MUCH IS THIS AN ADVANTAGE? >> REX TILLERSON, WHO I KNOW — HE SPOKE IN MY ORGANIZATION SEVERAL TIMES. HE KNOWS THE DETAILS OF THE PLACES HE OPERATES. HE HAS ALSO MET WITH A LOT OF GLOBAL LEADERS. ALL OF THAT IS CLEARLY TO THE GOOD. THAT SAID, HE HAS NOT HAD THE PUBLIC-SECTOR EXPERIENCE. IT IS DIFFERENT. IF YOU REMEMBER WHAT HAPPENED TO PAUL O’NEILL WHEN HE WENT FROM ALCOA TO THE TREASURY DEPARTMENT , IS NOT EXACTLY IN THE ANNALS OF BUREAUCRATIC SUCCESS. THERE IS ALSO A DIFFERENCE BETWEEN KNOWING THE GROUND TRUTHS ABOUT THE WORLD AND AMERICAN POLICY. MORE THAN ANYTHING, WHAT DON TRUMP THINKS. IF HE CONFIRMS TILLERSON, THAT IS THE ESSENTIAL PREREQUISITE. WHEN YOU CANNOT DO AS A SECRETARY OF STATE, WHAT WILL MAKE IT IMPOSSIBLE TO SUCCEED, IF PEOPLE AROUND THE WORLD SEE DAYLIGHT BETWEEN YOU AND YOUR BOSS. THEY WILL BELIEVE THAT THEY DON’T NEED TO TAKE YOU SERIOUSLY. OLIVER: THAT WAS RICHARD HAAS EARLIER. SCARLET: LET’S BOOKMARK THIS CONVERSATION ABOUT REX TILLERSON WITH SOME OTHER APPOINTMENTS THE PRESIDENT-ELECT COULD SOON BE MAKING. JOINING ME NOW IS OUR NEXT GUEST FROM TRUMP TOWER. CATHY MCMORRIS RODGERS JUST ENTER THE BUILDING, SHE HAD BEEN SEEN LINGERING IN THE LOBBY. WILL SHE BE NAMED INTERIOR SECRETARY? SHE HAS BEEN LISTED ON THE SHORTLIST. >> OUR REPORT IS THAT SHE IS AT THE TOP OF THE LIST. RIGHT NOW THEY ARE MEETING AGAIN TO TRY TO SEAL THE DEAL ON THIS APPOINTMENT. SHE IS VERY MUCH A PROPONENT ON DRILLING MORE ON FEDERAL LAND. SHE WANTS TO DO MORE DRILLING ON FEDERALLY OWNED LAND. THAT IS SOMETHING DONALD TRUMP HAS ALSO SUPPORTED. IF SHE GETS THIS POSITION, WE WILL SEE A DEPARTURE FROM THE OBAMA ADMINISTRATION’S POLICY REGARDING FEDERALLY OWNED LAND. OLIVER: WE ARE LOOKING AT REPRESENTATIVE MCMORRIS IN THE LOBBY RIGHT NOW. AS YOU ARE TALKING MORE ABOUT THIS, WHAT ELSE ARE WE LOOKING AT IN TERMS OF APPOINTMENT WE HAVE BEEN SEEING AT TRUMP TOWER? >> WE HAVE SEEN DONALD TRUMP MEETING WITH A NUMBER OF DIFFERENT PEOPLE THAT HE RAN AGAINST IN THE REPUBLICAN PRIMARY. HE MET WITH BEN CARSON, WHO WILL BE IS HELPING AND URBAN DEVELOPMENT SECRETARY. HE ALSO MET WITH CARLY FIORINA, WHO IS REPORTED TO BE LOOKED AT FOR THE DEPARTMENT OF NATIONAL INTELLIGENCE. HE WILL ALSO MEET WITH RICK PERRY WHO IS AT THE TOP OF HIS LIST FOR THE ENERGY DEPARTMENT. HE IS MEETING WITH PEOPLE THAT HE RAN AGAINST AND IS TRYING TO MEND REPUBLICAN FENCES AND GET A STRONG START TO HIS ADMINISTRATION WHEN HE TAKES OFFICE. SCARLET: MENDING REPUBLICAN FENCES, THAT’S AN INTERESTING PHRASE. WHEN DIFFERENT MEMBERS OF CONGRESS HEARD ABOUT REX TILLERSON AS POSSIBLE SECRETARY OF STATE THEY DID NOT REACT KINDLY. MARCO RUBIO AND JOHN MCCAIN BOTH PROTESTING AGAINST A POSSIBLE SECRETARY TILLERSON. WHAT CAN YOU TELL US ABOUT THIS DIVIDE BETWEEN MAINSTREAM REPUBLICANS AND THE PRESIDENT-ELECT? >> THIS IS GOING TO BE A TOUGH CHOICE, IT DONALD TRUMP SELECTS REX TILLERSON FOR SECRETARY OF STATE. HE IS ALREADY GETTING PUSHBACK FROM A NUMBER OF REPUBLICANS WHO ARE THE PEOPLE THAT HE WOULD HAVE TO RELY ON. IT’S A TIGHT MARGIN IN THE SENATE. WE EXPECT DEMOCRATS TO BE STAUNCHLY OPPOSED TO ALL OF DONALD TRUMP’S PICKS. IF YOU CHOOSE IS TILLERSON, HE WILL HAVE AN UPHILL BATTLE TO BE CONFIRMED WITH SENATOR MCCAIN, RUBIO, AND EVEN PEOPLE LIKE LINDSEY GRAHAM, CONCERNED ABOUT HIS CLOSE TIES TO RUSSIA AND VLADIMIR PUTIN. OLIVER: OBVIOUSLY, DONALD TRUMP HAS TALKED ABOUT ENERGY ON THE CAMPAIGN TRAIL BUT IT WAS NOT HIS BIGGEST RALLYING CALL. NOW HE IS PUTTING A LOT OF EMPHASIS ON TILLERSON, A BIG ENERGY GUY, WE HAVE A LOT OF TEXANS HEADING TO THE WHITE HOUSE. WHAT IS PERHAPS BEHIND US REFOCUS ON ENERGY? >> DONALD TRUMP SAYS HE WANTS TO MAKE AMERICA GREAT AGAIN, AND PART OF THAT IS REBUILDING A LOT OF THE JOBS THAT HAVE BEEN LOST IN ENERGY. HE WANTS TO MAKE SURE AMERICA USES ALL THE RESOURCES IT HAS AND IS SORT OF INCHING AWAY FROM PRESIDENT OBAMA’S FOCUS ON CLIMATE CHANGE. DONALD TRUMP HAS SAID HE IS NOT SURE IF CLIMATE CHANGE IS CAUSED BY MAN. HE WANTS TO MAKE SURE AMERICA IS USING ALL OF THEIR RESOURCES. AT THE SAME TIME, HE IS NOT SO SURE ABOUT CLIMATE CHANGE. THAT IS WHAT WE ARE SEEING WITH THESE PICKS. WE EXPECT DONALD TRUMP TO CONTINUE ALONG THIS PATH. SCARLET: THANK YOU. A VERY BUSY FIFTH AVENUE THERE, THANK YOU. WE SHOULD MENTION AS WELL, DAN YOUR AGAIN, THE PULITZER PRIZE-WINNING ENERGY AUTHOR SAYS THAT POTENTIAL PICKUP TILLERSON WOULD BE TREMENDOUS. HIS EXPERIENCE AND INTELLECT WOULD BE TREMENDOUS AND HE WOULD SEPARATE HIMSELF FROM EXXON. OLIVER: PLENTY TO SAY ABOUT HIS RELATIONSHIP WITH RUSSIA. SCARLET: LET’S GET A LOOK AT THE FIRST WORD NEWS. MARK CRUMPTON HAS MORE. MARK: IT IS OFFICIAL, JOHN KELLY HAS BEEN TAPPED TO HAVE THE DEPARTMENT OF HOMELAND SECURITY. THE ANNOUNCEMENT FROM PRESIDENT-ELECT TRUMP CAME THIS MORNING. KELLY, WHO JOINED THE MARINE CORPS IN 1970, RETIRED EARLIER THIS YEAR, WRAPPING UP A FINAL THREE-YEAR TOUR OF DUTY AS THE HEAD OF THE SOUTHERN COMMAND. KELLY FACES SENATE CONFIRMATION. THE KREMLIN IS DISPUTING CLAIMS IT USED HACKING TO INTERFERE WITH THE U.S. PRESIDENTIAL ELECTION TO AID PRESIDENT-ELECT TRUMP. THE PRESS SECRETARY TO VLADIMIR PUTIN TOLD REPORTERS TODAY THAT ALLEGATIONS ARE “NOTHING TO DO WITH REALITY.” TRUMP AND HIS TEAM ARE PUSHING BACK ON THOSE CLAIMS AS WELL. THE FORMER PORTUGUESE PRIME MINISTER WAS SWORN IN TODAY AS SECRETARY-GENERAL OF THE UNITED NATIONS. HE SUCCEEDS BAN KI-MOON AT THE END OF THE MONTH. HE IS THE NINTH U.N. CHIEF IN THE BODY’S 71-YEAR HISTORY. THE U.S. SUPREME COURT HAS DECIDED NOT TO TAKE UP A BATTLE OVER INTERNET SALES TAXES. JUSTICES LET STAND A COLORADO LAW THAT REQUIRES INTERNET RETAILERS TO TURN OVER CUSTOMER DATA IN AN EFFORT TO GET SHOPPERS TO PAY SALES TAXES THEY OWE. A RETAIL INDUSTRY TRADE GROUP SAYS THE MEASURE VIOLATES THE U.S. CONSTITUTION. GLOBAL NEWS 24 HOURS A DAY POWERED BY MORE THAN 2600 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. I’M MARK CRUMPTON. THIS IS BLOOMBERG. SCARLET: THANK YOU. COMING UP NEXT, IN THE MIDST OF THE RALLY IN CRUDE, TREASURIES ARE SELLING OFF FOR A THIRD DAY. THE 10-YEAR TOUCHING HIS LIES LEVELS SINCE 2014. THIS IS BLOOMBERG. ♪ OLIVER: THIS IS “BLOOMBERG MARKETS.” I’M OLIVER RENICK. SCARLET: I’M SCARLET FU. IT’S OFFICIAL NOW, GOLDMAN SACHS CEO AND PRESIDENT GARY COHN WILL BE JOINING JOB TRUMP AS DIRECTOR OF THE NATIONAL ECONOMIC COUNCIL. THE PRESIDENT-ELECT PUTTING OUT A PRESS RELEASE SAYING HE INTENDS TO APPOINT GARY COHN AS THE ASSISTANT TO THE PRESIDENT FOR ECONOMIC COUNCIL. OLIVER: THERE WAS A STORY OUT TODAY LOOKING AT WHO COULD REPLACE COHN. THEY MENTION SOME OF THE FRONT RUNNERS INCLUDE DAVID SOLOMON. ALSO THE ISSUE OF WHETHER OR NOT LLOYD BLANKFEIN WILL CHOOSE MULTIPLE EXECUTIVES TO REPLACE COHN. A LOT OF IMPORTANT DEVELOPMENT IS THEREFORE THE BANK, WHICH IS ON A TEAR, THE ELECTION. SCARLET: MEANTIME, IT IS TIME FOR THE BLOOMBERG BUSINESS FLASH. THE U.S. GOVERNMENT IS USING INFORMATION FROM BARCLAYS, J.P. MORGAN CHASE, AND CITIGROUP TO EXPAND ITS CURRENCY PROBE. THE BANKS HAVE COOPERATED TO PROVIDE EVIDENCE OF ACTIONS IN THE SPOT MARKETS. DEUTSCHE BANK COULD OPT FOR A MERGER, ACCORDING TO A REPORT, CITING THE HEAD OF INVESTMENT BANKING FOR EUROPE, AFRICA, AND THE MIDDLE EAST. HE ALSO DISMISSED SPECULATION ABOUT THE BANKS POSSIBLE WITHDRAWAL FROM THE U.S. MARKET. AETNA EXECUTIVES DEFENDED WITHDRAWAL FROM THE OBAMACARE HEALTH CARE EXCHANGE IN TESTIMONY TODAY. THEY TOLD THE JUDGE THAT THE COMPANY SHOULD HAVE EXITED ALL OF THE AFFORDABLE CARE ACT MARKETPLACES BECAUSE THE PROGRAM IS NOT ECONOMICALLY VIABLE. THE WITHDRAWAL CAME AFTER THE GOVERNMENT SUED INSURERS TO BLOCK THE MERGER. THAT IS YOUR BUSINESS FLASH UPDATE. OLIVER: THE SELLOFF IN TREASURIES EXTENDS TO A THIRD DAY AS OILS ROSE. THE YIELD ON 10-YEAR TREASURY BONDS ROSE TO 2% FOR THE FIRST TIME SINCE 2014. FOR SOME PERSPECTIVE, LET’S BRING IN JOE WEISENTHAL. NOT A HUGE SELLOFF TODAY BUT MORE RED AND MORE WEAKNESS IN THE BOND MARKET. >> IT WAS QUITE A BIT WORSE EARLIER IN THE DAY, YIELD SHOOTING HIGHER AGAIN. THE BIG QUESTION IS, IS THIS BOND ROUT A FUNCTION OF WHERE WE ARE IN THE CYCLE, ECONOMIC DATA, DATA LOOKING STRONG, INFLATION FIRMING, OR IS THIS AN EXPECTATION OF REAL POLICY REGIME CHANGE? IF YOU WOULD BELIEVE THAT, THAT IS WHY YOU KICKED INTO HIGH GEAR AFTER THE TRUMP ADMINISTRATION. WE DON’T KNOW THE ANSWER TO THAT YET BUT THAT’S THE QUESTION, DO WE HANG OUT IN THE 2 AREA OR DO WE SHOULD HIRE? SCARLET: WHICH ONLY TAKES US BACK TO ABOUT 2014. >> IF WE ARE HERE AND THIS IS A REFLECTION OF WHERE WE ARE IN THE DATA AND THEN YOU LOOK AT THE LONG, WE ARE STILL BASICALLY NOWHERE. IF YOU THINK THIS SELLOFF IN TREASURIES IS ABOUT SOMETHING CHANGING, AND THAT WOULD BE A MEANINGFUL HANDOFF FROM MONETARY TO FISCAL POLICY, MEANINGFUL CHANGE ON TRADE POLICY, DEEP POLICY CHANGES, IF THEY COME TO FRUITION, THEN WHO KNOWS WHERE WE COULD GO? OLIVER: WHAT I’M CURIOUS ABOUT IS THE FACT THAT TODAY WE HAVE YIELDS UP AGAIN TODAY BUT SOME OF THE BOND REPLACEMENT STOCKS THAT WE ALWAYS TALK ABOUT ARE DOING WELL, THEY WERE BACK ON FRIDAY AS WELL. ARE YOU INTERESTED IN WHETHER OR NOT THESE COMPANIES CAN DO WELL AS BOND SELLS OFF? >> I AM VERY INTRIGUED BY THAT. ON FRIDAY, WE WERE TALKING ABOUT THIS SWEET SPOT OF PEOPLE GOING INTO THESE BOND-LIKE STOCKS IN THE EQUITY MARKET TO GET THE BOTH OF BOTH WORLDS. THEY WANT THAT COUPON, THE YIELD, BUT THEY ALSO WANT THE UPSIDE SO THEY CAN KEEP A FOOT IN BOTH WORLDS. ESPECIALLY THE SUMMER, PEOPLE LOVED IT. EVERYONE WAS TALKING ABOUT HOW THEY WOULD BUY REITS BECAUSE THEY WERE BEING SPUN INTO THEIR OWN THING. IT IS IMPORTANT TO LOOK AT THOSE AS A GAUGE OF MARKET ENTHUSIASM. SCARLET: I WONDER TO WHAT EXTENT THE THERATECHNOLOGIES THE SELLOFF IN BONDS? WE HAVE NOT FIGURED OUT WHAT IS DRIVING THE SELLOFF. WHETHER IT IS CYCLICAL OR STRUCTURAL, MAYBE IT IS JUST SAFER TO WAIT. OLIVER: WE WILL START TO TAKE MORE NOTE OF IT ONCE WE GET HIGHER THAN 2.5. JOE WEISENTHAL, TODAY ON “WHAT’D YOU MISS?” DAVID WILL WILL GIVE HIS OUTLOOK ON CURRENCIES AHEAD OF THE FED. DISNEY GOES WRONG WITH HIS LATEST STAR WARS FILM, JUMPING OUT OF HIS TRILOGY AND TESTING A NEW STANDALONE MOVIE. BUT WILL THE STRATEGY PAYOFF? THIS IS BLOOMBERG. ♪ SCARLET: DISNEY’S NEWEST FILM ROGUE ONE OPENS UP ON FRIDAY DOMESTICALLY. DISNEY IS TESTING ON SOME NEW TACTICS HERE. JOINING US FROM L.A. IS CHRIS PALMERI. TALK ABOUT THE NEW TECH TAKES THAT DISNEY IS USING HERE. >> WHAT THEY HAVE PLANNED IS SIX FILMS, FIVE MORE LEFT IN THE SERIES. THEY ARE DOING ONE EVERY YEAR THROUGH 2020, ALTERNATING BETWEEN THE TRADITIONAL TRILOGY FORMAT WITH WHAT THEY ARE CALLING STANDALONE FILMS. ROGUE ONE IS THE FIRST OF THE STANDALONE PICTURES. IT FITS INTO THE OVERALL MYTHOLOGY OF “STAR WARS” BUT THE CHARACTERS WILL NOT BE RECURRING. OLIVER: GIVE US SOME PERSPECTIVE ON WHAT DISNEY EXPECTS TO MAKE FROM THE FILMS. THEY BOUGHT LUCASFILMS FOR ABOUT $4 BILLION. THE BUDGET FOR ROGUE ONE IS ABOUT $200 MILLION. WHAT WILL BE THE BENCHMARK FOR THEM TO SAY THAT WAS A GOOD JOB, LET’S DO IT AGAIN? >> DISNEY HAS NOT SAID SPECIFICALLY WHAT THEY ARE HOPING TO DO. WE HAVE TALKED TO ANALYSTS WHO SAID THE MOVIE MAY DO A HUNDRED MILLION DOLLARS WORLDWIDE, AND IN THAT CASE IT WILL BE PROFITABLE. IT CAN PROBABLY DO MORE THAN THAT, LIKELY THE SECOND-HIGHEST DECEMBER OPENING IN FILM HISTORY, AFTER ROGUE ONE. IT WILL HAVE A BIG OPENING, IT WILL DO WELL. IT IS JUST THAT LAST YEARS FILMS IT SO SPECTACULAR. $2 BILLION. IF IT DOES HALF OF THAT, IT WILL BE A HUGE HIT. SCARLET: I FIND IT FASCINATING THE COMPANY IS TRYING TO MANAGE EXPECTATIONS HERE AND TALK DOWN THE KIND OF MERCHANDISING OPPORTUNITY THAT ROGUE ONE PRESENTS. >> THEY EXPECT THIS QUARTER MERCHANDISE SALES PROFITS TO BE DOWN ABOUT 20%. YEAR-OVER-YEAR COMPARISONS, YOU JUST CANNOT TOP FORCE AWAKENS LAST YEAR, THAT WAS 10 YEARS OF PENT-UP DEMAND, PEOPLE WAITING IN LINE TO BUY THE TOYS. OLIVER: IT FEELS LIKE THERE IS SOME RISK BECAUSE THERE ARE NEW CHARACTERS, NEW PLOT LINE. THEY HAVE ANOTHER NEST EGG THEY CAN TAP INTO STORY WISE, HAN SOLO. THEY HAVE MORE COMING OUT. >> THERE IS A STANDALONE PICTURE AND THEN A THIRD ONE WHICH THEY HAVE NOT SAID WHAT WILL BE. THEY FOUND A WAY TO KEEP THE STORIES FRESH. MARVEL HAS DONE A GREAT JOB OF THAT. NO MATTER HOW MANY SUPERHERO MOVIES THEY HAVE, THEY CONTINUE TO DO WELL. IT IS REALLY LIKE A WAR MOVIE. YOU FEEL LIKE YOU ARE ON THE BEACHES OF NORMANDY WATCHING THIS. IT WILL DO WELL. SCARLET: WE SHALL SEE. THANK YOU, CHRIS. OLIVER: I SHALL SEE WEDNESDAY NIGHT. THE RUSSELL 2000 RECORD. OUR MORE GAINS IN STORE FOR THE SMALL-CAP INDEX? THIS IS BLOOMBERG. ♪ OLIVER: IT IS 3:00 IN NEW YORK, 8:00 IN LONDON. I’M OLIVER RENICK. SCARLET: I’M SCARLET FU. WELCOME TO “BLOOMBERG MARKETS.” OLIVER: WE ARE LIVE FROM BLOOMBERG WORLD HEADQUARTERS IN NEW YORK. WE ARE COVERING STORIES FROM DENVER, MOSCOW, AND CHINA. STOCKS ARE MIXED TODAY AS THE DOW TRIES TO CLOSE AT A NEW RECORD WHILE THE S&P IS GOING BACK-AND-FORTH IN THE RED AS TELECOMS AND UTILITIES LEADING THE WAY. CUTTING CORPORATE TAXES HAS BEEN ONE OF THE CENTRAL THEMES OF THE TRUNK CAMPAIGN. WHICH COMPANIES WILL BENEFIT THE MOST? IS THE DOOR CLOSING ON AAA’– CHIPOTLE’S CHANCE FOR A TURNAROUND WE ARE ONE HOUR FROM THE CLOSE OF TRADING. LET’S GET A CHECK ON THE MARKET WITH ABIGAIL DOOLITTLE. >> STOCKS ARE MIXED AT THIS POINT AND THIS MAY NOT LOOK LIKE A PICTURE OF STRENGTH BUT WE HAVE A RECORD HIGH. THE DOW IS ON PACE TO CLOSE AT YET ANOTHER RECORD HIGH. EARLIER CARVING OUT AN INTRADAY HIGH. THE NASDAQ HAS BEEN THE LAGGARDS TODAY, BEING DRAGGED BOTH BY ITS OVERWEIGHTING TO TECHNOLOGY AND BIOTECH. MUCH OF THE DIVERGENCE WE ARE SEEING AMONG THE AVERAGES TODAY SEEM TO HAVE TO DO WITH SECTOR PERFORMANCE. TAKE A LOOK AT THE S&P 500. THIS IS A TERRIFIC FUNCTION, IT GIVES A QUICK SNAPSHOT OF THE SECTOR COMPOSITION WITHIN AN INDEX. MIXED SECTOR COMPOSITION IN THE S&P 500. NOT TOO SURPRISING. AS OLIVER MENTIONED, TELECOM AND UTILITIES HAVE BEEN THE TOP PERFORMERS. AMONG THE WORST FINANCIALS. TELECOM STOCKS RISING TODAY, WE ARE LOOKING AT AT&T AND VERIZON. ANOTHER BOOST FOR THE TELECOM SECTOR BEYOND YIELDS FALLING OFF OF THEIR HIGHS OF THE DAY, AN UPGRADE AT BAIRD. THEY SAY AT&T IS LIKELY TO BENEFIT FROM THE POSSIBILITY OF NEW REGULATION AND LOWER TAXES. VERIZON TRADING HIGHER IN SYMPATHY. AS FOR THAT WORST PERFORMING SECTOR, FINANCIALS ARE TAKING A BIT OF A BREATHER. LOTS OF BREAD HERE. — RED HERE. OF COURSE, AS I MENTIONED, YIELDS ARE OFF OF THEIR HIGHS. THIS COULD WEIGH ON THESE STOCKS A BIT MORE, TOO. AND IT IS WORTH LOOKING AT THE 10-YEAR I YELLED, NOT JUST HAPPENING TODAY, BUT AHEAD OF THE FED MEETING POLICY MEETING — POLICY MEETING ON WEDNESDAY. MOST EXPECT THE FED TO RAISE RATES. THIS IS A LONG-TERM CHART LOOKING AT THE 10-YEAR ON TOP, ON TOP OF A DISSENTING TRADING RANGE HIM A BUT AT THE BOTTOM WE HAVE THE RSI, HITTING 60. THE LAST FIVE TIMES THIS HAS HAPPENED, IT TYPICALLY SIGNALED A REVERSAL, SO WE MAY SEE A MOVE BACK DOWN FOR THE 10-YEAR. A BIT OF A CONSOLIDATION, A PAUSE AFTER NOVEMBER’S BIGGEST MOVE UP IN THE 10-YEAR YIELD EVER. OLIVER: THANK YOU. THAT IS A GREAT CHART. SCARLET: I’M SURE IT WILL COME UP AGAIN. MOVING ON TO EQUITIES, PRESIDENT-ELECT DONALD TRUMP’S PLAN WOULD REDUCE TAXES FOR MOST INDIVIDUALS AND CORPORATE. JOINING US NOW IS THE CREDIT SUISSE CHIEF EQUITY STRATEGIST. YOU ARE LOOKING AT SMALL CAPS IN PARTICULAR. THEY HAVE HAD QUITE THE RUN-UP. CANNOT CONTINUE? >> WE WOULDN’T BE SURPRISED TO SEE A SMALL CONTROL OF DIGESTION, BUT THE TRADE IS NOT DONE. SCARLET: THIS IS A CHART THAT DAN CURTIS PUT TOGETHER, SHOWING THE RUSSELL 2000 20-DAY OF PERFORMANCE VERSUS THE S&P 500. HERE LAST WEEK THE PERFORMANCE WIDENED TO 9.3 PERCENTAGE POINTS. THAT IS THE MOST SINCE 2000. YOU CAN SEE WHAT HAPPENED AFTER THAT, A MASSIVE UNDERPERFORMANCE. OLIVER: I AM CURIOUS BECAUSE THERE IS THIS OUTPERFORMANCE, BUT HOW DO WE FIGURE OUT WHY IT’S HAPPENING? IS IT BECAUSE PEOPLE LOOKING AT TRADE POLICY THINKING IT IS DOMESTIC AND FAVORABLE, SO THEY WANT TO GET INTO SMALL-CAP STOCKS? >> WE SAW A EARLIER THIS YEAR, OUR MODEL ON SMALL VERSUS LARGE WAS BACK DOWN TO 1991 NOT QUITE THAT ATTRACTIVE IN EARLY NOVEMBER BUT STILL VERY DEEP IN TERMS OF SMALL VERSUS LARGE. OLIVER: SO SOME OF IT IS A VALUATION STORY. >> THAT IS HOW THE PARTY GOT STARTED ESSENTIALLY. TODAY YOU ARE BACK TO FAIR VALUE, BUT IT’S NOT EXPENSIVE YET. AS LONG AS STRONGER ECONOMIC GROWTH COMES THROUGH NEXT YEAR, WE SEE SOME PROMISE ON THIS TAX REFORM. ALSO, THE IMPOST TOWARD PROTECTIONISM BENEFITS DOMESTIC NAMES AS WELL. IT LEAVES THE TRADE HERE IS DIFFERENT THAN WHAT GOT THE PARTY STARTED. SCARLET: TO WHAT EXTENT DO YOU THINK INVESTORS HAVE BEGUN TO PRICE THAT IN? >> IN TERMS OF THE TAX REFORM? IT’S THE NUMBER ONE ISSUE WE ARE HEARING ABOUT POSTELECTION. AT THE END OF THE DAY, THOUGH, THERE IS STILL A LOT OF UNCERTAINTY ON THE TIMING. THE STREET WILL BE LOOKING FOR PROGRESS TO BE MADE. IT IS PARTIALLY PRICED IN AT THIS POINT. OLIVER: I KNOW FOR A WHILE, YOU SPECIALIZED IN SMALL-CAP, BUT WHEN YOU LOOK AT THE BROADER MARKET OVERALL, WHAT STANDS OUT TO YOU WHEN YOU THINK ABOUT — WE HAVE HEARD A LOT OF PEOPLE TALK ABOUT HOW WE MAY SEE MORE CAPEX UNDER A TRUMP ADMINISTRATION. WHAT DOES THAT DUE TO THE SHAREHOLDER FRIENDLY STOCKS, THE BUYBACKS? >> WE HAVE SEEN THAT KIND OF ACTIVITIES OF DONE MEANINGFULLY. DIVIDEND ACTIVITY IS ALSO STALLING OUT. HIS MONEY GOES TOWARD CAPEX, IT WILL BORROW FROM THE DIVIDEND STORY. AT THE SAME TIME, IF WE ARE REPUTED DOLLARS BACK ON, LOWER THE TAX RATE, I DON’T THINK THERE IS ANY GUARANTEE IT GOES TO CAPEX. YOU COULD SEE THEM GO BACK TO THESE SHAREHOLDER FROM THE STRATEGIES AS WELL. SCARLET: LAST WEEK, WE HAD A GUEST TALKING ABOUT HOW A LOT OF PEOPLE ARE PICKING UP ON SMALL CAPS BECAUSE THE BIG CAPS CERTAINLY SUFFER FROM THE STRONGER DOLLAR. YET, IS STRONGER DOLLAR MEANS TIGHTER FINANCIAL CONDITIONS, WHICH TEND TO BE WORSE FOR SMALL CAPS. OLIVER: I THINK THERE IS AN UNDERSTANDING THAT MAY NOT ALWAYS BE PERFECT, THAT A RISING DOLLAR IS LARGE — BAD FOR LARGE-CAP COMPANIES. BUT IF THAT’S HAPPENING WHILE THE ECONOMY IS EXPANDING, ARE THESE STOCKS GOING TO DO WELL? >> A LARGE CAPS TEND TO BE A TOUCH MORE SENSITIVE TO THE STRENGTHENING DOLLAR, SO EVEN THOUGH IT IS NEGATIVE FOR EVERYTHING, SMALL CAPS MAY BE A LITTLE BETTER OFF THERE. ONE THING HAVE TO THINK ABOUT NEXT YEAR IS HIGHER VOLATILITY IN THE MARKETS. TRADITIONALLY, PEOPLE THINK ABOUT AS BAD FOR SMALL-CAP STOCKS. WE HAD TOLD TO REMEMBER, WHEN THE NEXT SWINGS UP, HISTORICALLY THAT IS A GOOD BUYING OPPORTUNITY FOR THE LONG-TERM. WE DID A STUDY LOOKING BACK VARIES YEARS AT DIFFERENT AVERAGE LEVELS OF THE VIX. IF THE AVERAGE LEVEL AS THE YEAR STAYS BELOW 25, SMALL CAPS CAN STILL OUTPERFORM. WHEN YOU CROSS BETWEEN FIVE THRESHOLD, THAT IS WHEN ALL CAPS TEND TO HAVE TROUBLE ON AN ANNUAL BASIS. AS LONG AS IT IS NOT TOO BAD, YOU CAN STILL GET OUTPERFORMANCE. OLIVER: TO YOUR POINT, THIS IS A CHART LOOKING AT YOUR POINT IN TERMS OF VOLATILITY EXPECTATIONS. THIS IS THE VIX AND THE RUSSELL 2000 EXPECTATIONS. THE NUMBER GOES UP IN SMALL CAPS . WHEN I THINK ABOUT THE VOLATILITY, I THINK BACK-AND-FORTH, SMALL CAPS HAVING A HIGHER DATA. I FEEL LIKE THERE IS RISK ASSOCIATED WITH THAT. >> THE WAY I DESCRIBE SMALL CAPS, IT IS A SHOW ME STORY. YOU CANNOT BUY THEM ANYMORE BECAUSE THEY ARE CHEAP. THE NEWS FLOW HAS TO COME THROUGH AT THIS POINT. WHAT’S INTERESTING, IF WE GET THOSE SPIKES IN THE VIX, IF WE GET THOSE SPIKES, WE ARE GOING TO GET CHEAP IN A HURRY. THEN YOU WILL HAVE THE BUYING OPPORTUNITY. I THINK IT WILL BE A VOLATILE MARCH HIGHER, BUT YOU STILL HAVE THOSE OPPORTUNITIES. SCARLET: AND OF COURSE, WE NEED TO DELEGATE BETWEEN SECTORS. FINANCIALS HAVE BEEN ON A TEAR BECAUSE OF EXPECTATIONS THAT THEY WOULD BENEFIT. WHICH SECTORS DO YOU WANT TO BE IN VERSES WHICH YOU WANT TO STAY OUT OF? >> WE LIKE THE BANKS BUT WE SEE MORE OPPORTUNITY IN AREAS LIKE INSURANCE. THERE IS STILL A LOT MORE ROOM FOR EARNINGS EXPECTATIONS TO COME UP. ONE AREA THAT STILL LOOKS VERY COMPELLING IS RETAIL. THAT IS ANOTHER AREA WE ARE LOOKING AT. TRANSPORTATION IS ANOTHER. OLIVER: THE GENESIS FOR THIS IS A NOTE FROM YOUR FORMER EMPLOYER, CITI, LOOKING AT HIS MACRO TREND WHERE INVESTORS ARE LOOKING AT RISKIER PARTS OF THE MARKET, LOOKING AT SOME OF THE BEAT UP NAMES AS OPPOSED TO THOSE THAT WILL SHOW GROWTH. THE ASSOCIATE THAT WITH AN EMERGING MARKET A LOT OF TIMES, BUT INVESTORS HERE IN THE U.S. HAVE PREFERRED TO KEEP THE MONEY HERE. INSTEAD YOU HAVE THESE ARE STOCKS LAGGING A BIT. ANY CHANCE THAT IF YOU LOOK AT MORE RISK ON, THEY WOULD MOVE THAT TO EMERGING MARKET CAPITAL? >> WE DEFINITELY HEAR THAT FROM AN ASSET ALLOCATION PERSPECTIVE. I DON’T DO WORK ON EM STOCKS, SO I CANNOT COMMENT THERE, BUT YOU TEND TO SEE THOSE ROTATIONS FROM SIGN — TIME TO TIME. SCARLET: THANK YOU VERY MUCH. LET’S GET TO THE FIRST WORD NEWS. MARK CRUMPTON IS IN THE NEWSROOM. MARK: GOLDMAN SACHS PRESIDENT AND CEO GARY COHN HAS ACCEPTED A JOB AS PRESIDENT-ELECT TRUMP’S CHIEF ECONOMIC POLICY ADVISER, ACCORDING TO MR. TRUMP’S TRANSITION TEAM. HE SPENT MORE THAN 25 YEARS AT THE INVESTMENT BANK. SENATE MAJORITY LEADER MITCH MCCONNELL SAYS HE HAS THE “HIGHEST CONFIDENCE IN THE U.S. INTELLIGENCE COMMUNITY.” SPEAKING ON CAPITOL HILL, THE REPUBLICAN DEFENDED THE CIA AND ITS REPORTED FINDING THAT RUSSIA TRY TO HELP DONALD TRUMP WIN THE PRESIDENCY THROUGH CYBER PEDDLING. MCCONNELL ALSO TOOK AIM AT MOSCOW. >> LET ME SPEAK FOR MYSELF. THE RUSSIANS ARE NOT OUR FRIENDS. THEY INVADED CRIMEA. SENATOR MCCAIN AND I AND SOME OF OUR DEMOCRATIC FRIENDS MET WITH A DELEGATION FROM THE BALTIC COUNTRIES JUST THIS PAST WEEK TO SAY THAT THEY ARE NERVOUS ABOUT THE RUSSIANS, TO PUT IT MILDLY. MARK: MCCONNELL’S DEFENSE OF THE CIA PUTS HIM AT ODDS WITH THE PRESIDENT-ELECT TO HAS REJECTED THE AGENCY’S FINDINGS. IN ITALY, PAOLO GENTOLINI HAS BEEN SWORN IN AS PRIME MINISTER AFTER HE SUBMITTED THE LINEUP OF HIS NEW GOVERNMENT. MATTEO RENZI HAD BEEN SERVING AS CARETAKER PRIME MINISTER AFTER RESIGNING LAST WEEK FOLLOWING VOTER REJECTION OF HIS PROPOSED CONSTITUTIONAL REFORMS. THE EUROPEAN UNION WILL SET UP FOR THE FIRST TIME THURSDAY. HOW IT WILL DISCUSSED ITS BREXIT NEGOTIATIONS WITH THE U.K. ACCORDING TO A DRAFT, EU GOVERNMENTS WILL BE ASKED TO PROCEED SWIFTLY IN AUTHORIZING THE OPENING OF THE NEGOTIATIONS. THAT WILL OCCUR ONCE BRITISH PRIME MINISTER THERESA MAY TRIGGERS ARTICLE 50 OF THE LISBON TREATY TO FORMALLY START THE WITHDRAWAL. GLOBAL NEWS 24 HOURS A DAY POWERED BY MORE THAN 2600 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. I’M MARK CRUMPTON. THIS IS BLOOMBERG. OLIVER: COMING UP, SHARES OF AAA ON PACE FOR THEIR BEST DAY IN NEARLY A MONTH. FOUNDER STEVE BELL’S RETAKING THE TOP JOB. THIS IS BLOOMBERG. ♪ SCARLET: THIS IS “BLOOMBERG MARKETS.” I’M SCARLET FU. OLIVER: I’M OLIVER RENICK. TIME FOR THE BLOOMBERG BUSINESS FLASH, A LOOK AT SOME OF THE BIGGEST STORIES IN THE NEWS RIGHT NOW. A SENATE TOP REPUBLICAN IS MOURNING THE CURRENT LEVEL OF U.S. DEBT IS DANGEROUS AND MAY WANT TO TAX OVERHAUL IN ORDER TO ADD TO THE DEFICIT. MITCH MCCONNELL MADE THE REMARKS ON CAPITOL HILL TODAY AND POSSIBLY PUT HIMSELF ON A COLLISION COURSE WITH PRESIDENT-ELECT TRUMP. HE IS PROPOSING TO AND I CAN BIGGEST TAX CUTS SINCE THE 1980’S. O’CONNELL ALSO POURED WATER ON A MASSIVE STIMULUS PACKAGE. APPLE HAS HELD TALKS ABOUT INVESTING IN A $100 BILLION TECHNOLOGY FUND. THIS IS ACCORDING TO A PERSON WITH KNOWLEDGE OF THE DISCUSSION. APPLE MAY CONTRIBUTE $1 BILLION TO THE FUND WHICH WOULD GIVE THE COMPANY INSIGHT INTO INCOMING TECHNOLOGIES. CREDIT SUISSE SAYS IT PLANS TO SELL THEIR SPACE IN THE LONDON FINANCIAL DISTRICT, ACCORDING TO PEOPLE FAMILIAR. THE MOVE COMES AFTER THE BANK SAID IT WOULD CUT 4200 WORKERS BY THE END OF THE YEAR. CREDIT SUISSE MAY SELL OTHER SPACE IN BUILDINGS IN THE EASTERN LONDON FINANCIAL DISTRICT AS IT SEEKS TO CUT HIGH RENTAL BILLS. SCARLET: SHARES OF CHIPOTLE ARE RISING TODAY ON NEWS THAT MONTY MORAN HAS STEPPED DOWN AS THE HEAD OF THE BURRITO CHAIN, LEAVING STEVE ELLIS AS THE SOLE CHIEF EXECUTIVE. THE MOVE FOLLOWS A TOUGH YEAR AS THE COMPANY TRIES TO RECOVER FROM A SERIES OF FOODBORNE ILLNESS PROBLEMS. JOINING US NOW IS OUR TWO GUESTS. GREG, LET’S START WITH YOU. WHO IS MONTY MORAN, WHAT WAS HIS CONTRIBUTION, HOW WILL THE COMPANY FEEL HIS ABSENCE? >> HE WAS COO WHEN THE COMPANY WAS DOING WELL. STEVE ELLS IS SORT OF THE CULINARY BACKGROUND, THE FOODIE, MORAN WAS THE OPERATIONS GUY RUNNING THE RESTAURANT, MAKING SURE THE TRAINS RAN ON TIME. THAT HAS BEEN A PROBLEM WITH THEM, THIS RECOVERY HAS FALTERED. WE HAD HEARD ELLS SAY THAT HE IS NOT HAPPY WITH AS MANY AS HALF OF THE RESTAURANTS, WHICH IS STARTLING. OLIVER: TWO PEOPLE RUNNING A COMPANY, ONE LEAVES AFTER A WHILE. DOES NOT SOUND LIKE A WHOLE LOT, BUT AS YOU HAVE BEEN WRITING, YOU HAVE BEEN TALKING FOR A WHILE THAT THIS MAKE SENSE. >> PEOPLE HAVE BEEN PUSHING FOR THEM TO DISBAND THE CO-CEO STRUCTURE. THEY SAY THEY NEEDED SOMEONE IN CHARGE RESPONSIBLE FOR EVERYTHING. WHEN THERE IS ONE PERSON RESPONSIBLE, YOU KNOW THE BUCK STOPS WITH THEM. BUT IT IS NOT JUST MORAN, WE ARE WAITING TO SEE IF THERE WILL BE MORE BOARD CHANGES. I WROTE A COLUMN TODAY SAYING THAT ELLS JUST BOUGHT HIMSELF SOME MORE TIME, BUT HE COULD BE NEXT. SCARLET: WE HAVE SEEN THIS PLAY OUT FOR ABOUT A YEAR, AND THESE TEND TO SHOW SIGNS AT THIS POINT. I WONDER IF YOU CAN COMPARE AND CONTRAST THIS FOOD SAFETY ISSUE AT CHIPOTLE COMPARED TO YUM! BRANDS, WHO ALSO HAD ITS SHARE OF PROBLEMS. >> I THINK THE DIFFERENCE WITH SCHIPHOL LARRY, IT HIT AT THE HEART OF THEIR BRAND. THEY WERE KNOWN FOR HIGHER QUALITY INGREDIENTS, AND THEY HAD THIS HEALTH HALO AROUND THE COMPANY, AND THIS HIT THEM HARD. IT HAS BEEN A SLUGGISH RECOVERY. PEOPLE ARE GETTING IMPATIENT IN THE INVESTMENT COMMUNITY ABOUT WHEN THE NUMBERS WILL START TO TURN AROUND. IF WE DO NOT SEE SOME PROGRESS THERE GOING TO -25, THEY SHOULD BE ABLE TO DO BETTER ON THAT. THAT WOULD BE A BAD SIGN IF THEY CANNOT PUT THOSE NUMBERS OF. OLIVER: WHAT IS THE BENCHMARK WHERE INVESTORS WILL SAY, IT LOOKS GOOD, BUT SIX MONTHS FROM NOW, WE NEED TO SEE THE NUMBERS LINEUP? >> THERE JUST NEEDS TO BE A SENSE THAT IT IS MOVING IN THE RIGHT DIRECTION, AND THAT’S BEEN IN SHORT SUPPLY RIGHT NOW. SCARLET: WE HAVE SEEN FORMER FOUNDERS RIDE TO THE RESCUE, HOWARD SCHULTZ, JACK DORSEY. THOSE COMPANY GOING IN DIFFERENT DIRECTIONS FOLLOWING THE RETURN OF THEIR FOUNDER. WHAT IS CHIPOTLE HOPING TO DO BY INSTALLING THE FOUNDER BACK IN THE POSITION OF SOLE DECISION-MAKING? >> I THINK ELLS HAS THE CREDIBILITY OF STARTING THE BRAND, HE HAS THE PASSION FOR IT, NOT UNLIKE WHAT SCHULTZ DID WITH STARBUCKS. SO YOU SEE THESE FOLKS COMING IN AND RE-ENERGIZING FOLKS. THE THING IS, ELLS HAS BEEN THERE THESE PAST YEARS, SO I DON’T KNOW THAT IT HAS HAD THE SAME PUSH IT HAS HAD BEFORE. A.B. IF HE SAYS TO HIS EMPLOYEES, I’M IN CHARGE, I’M GOING TO DO SOMETHING DIFFERENTLY, MAYBE HE WILL GET PEOPLE EXPIRED AGAIN — INSPIRED AGAIN. OLIVER: WE ALSO KNOW ABOUT ANOTHER PLAYER ON THIS, ON THE INVESTMENT SIDE, BILL ACKMAN. WHAT DO WE KNOW ABOUT WHAT ROLE HE WILL PLAY IN THIS AS THIS COMPANY STARTS TO GET THE WHEELS MOVING IN THE OPPOSITE DIRECTION, IMPROVING THE SITUATION? >> AT EXTENT TO HEAR MORE ABOUT THAT TODAY AT 5:00, THEY WILL BE HAVING A CALL WITH ANALYSTS AND INVESTORS. BILL ACKMAN HAS TAKEN A 10% STAKE IN THE COMPANY. HE HAS PRAISE THE FOUNDERS, HE THINKS CHIPOTLE IS THE GREATEST. HE EATS THERE. THIS IS NOT SOMETHING WHERE HE IS COMING IN AND SAYING I’M REALLY GOING AFTER THEM AND ALL WITH THEIR HEADS OR ANYTHING LIKE THAT. HE WANTS THEM TO DO WELL. WE WILL SEE WHAT HE CAN DO. SCARLET: I’M GLAD YOU BRING UP THE CONFERENCE CALL THEY WILL BE HOLDING TONIGHT. WHAT ARE INVESTORS AND ANALYST LOOKING FOR THE COMPANY TO ANSWER TONIGHT? >> PROBABLY SOME SPECIFICS ABOUT WHAT YOU ARE ASKING, ELLS HAS BEEN THERE, SO WHAT DOES THIS MEAN FOR THE COMPANY STRUCTURE, WHAT DOES THIS MEAN FOR 2017? HE HAS SPECIFIC IDEAS FOR HOW TO GET THE SALES GOING AGAIN. HE SAYS THEY SPENT ALL OF THESE MILLIONS OF DOLLARS GETTING THESE PEOPLE BACK INTO THE RESTAURANTS WITH FREE BURRITOS, BUT THEY ARE NOT PAYING LIKE THEY WERE. SO HOW IS HE GOING TO CHANGE THAT? OLIVER: WHO KNEW THAT BILL ACKMAN LIKES CHIPOTLE. SCARLET: THANK YOU SO MUCH. OLIVER: STILL AHEAD IN TODAY’S OPTIONS INSIDE, WE ARE TALKING POTENTIAL. THE STOCK IS UP 12% THIS YEAR. — POTASH. THIS IS BLOOMBERG. ♪ >> WELCOME BACK TO OLIVER: THIS IS “BLOOMBERG MARKETS.” I’M OLIVER RENICK. OLIVER: I’M SCARLET FU. –SCARLET: I’M SCARLET FU. IT IS TIME FOR THE OPTIONS INSIDE. >> JOINING ME TODAY IS JIM STRICKER OF MK M HOLDINGS. THINGS WERE JOINING US. YOU HAVE WITH YOU A TERRIFIC CHART OF IMPLIED CORRELATIONS. TALK US THROUGH THE CHART. >> LOTS OF TALK ABOUT A PARADIGM SHIFT POSTELECTION. A LOT OF DISPERSION. THE QUESTION IS OUT THERE, WHAT DOES THAT MEAN? THIS IS A GRAPH OF S&P 500 IMPLIED CORRELATION. IT HAS MOVED TO CYCLE LOAD. THIS MEASURES THE FORWARD-LOOKING EXPECTATION OF CORRELATION AMONG THE TOP 50 COMPONENTS OF THE S&P 500 BY MARKET CAP. HISTORICALLY, IF CORRELATION IS LOW, THE INVERSE OF THAT IS DISPERSION. THAT MEANS INDIVIDUAL STOCKS, SECTORS ARE FLYING ALL OVER THE PLACE, MOVING ON THEIR OWN IDIOSYNCRATIC FACTS. THAT, OVER THE COURSE OF TIME, HAS BEEN A VERY HEALTHY ENVIRONMENT, PARTICULARLY FOR ACTIVE MANAGERS. THAT IS ONE WAY TO PUT CONTEXT TO PUT CONTEXT AROUND WHAT’S BEEN HAPPENING AFTER THE ELECTION. >> AND THAT IS AN INDICATOR THAT STOCKS ARE OVERBOUGHT RIGHT NOW, THE DATA WITH AN RSI ABOVE 25. BUT THIS SUGGEST THAT THEY COULD GO HIGHER? >> CERTAINLY WE HAVE BEEN TALKING FOR THE LAST SEVERAL WEEKS, USE OPTIONS TO EXPLOIT THIS. WE WANT TO REMAIN LONG, LEVERED INTO 2017. IF YOU NEED TO SELL LONG STOCKS, LOOK TO EPOCRATES THAT VIA OPTIONS. IF THERE IS A STOCK YOU LOVE, LOOK TO ADD LONG. THAT COULD MEAN BUYING CALLS OUT RIGHT, IT COULD MEAN BUYING CALL SPREADS THAT ARE STOCK SPECIFIC. WE WANT TO KEEP THE PEDAL TO THE METAL INTO 2017. >> TURNING TO YOUR TRADE, I KNOW THAT YOUR TECHNICIAN IS SAYING THERE IS ROOM IN THE FERTILIZER STOCKS. YOUR TRADE IS ON POTASH. TALK US THROUGH THAT. >> MULTIYEAR DOWNTREND, FLAT LINE BLOWS ALL YEAR. WHAT JONATHAN TALKED ABOUT TODAY IS A BULLISH REVERSAL IN THIS SECTOR. YOU COULD POTENTIALLY LAYER ON A REFLATION ELEMENT TO THIS TRADE. PLENTY OF FUNDAMENTAL ANALYSTS HAVE COME OUT AND DOWNGRADED A FEW OF THESE DOCS. WHAT WE WANT TO DO IS TAKE ADVANTAGE OF THIS POSITIVE BACKDROP WE SEE, IMPLIED VOLATILITY BEING LOW, GO OUT TO MARCH OF NEXT YEAR, BUY THE 21 STRIKE. YOU PAY ABOUT $.75 FOR THEM. NICE TRAY TO GET LONG DIRECTIONAL EXPOSURE. >> WE HAVE TO LEAVE IT THERE, THANK YOU. SCARLET: STILL AHEAD, BANK OF AMERICA MERRILL LYNCH HEAD OF RESEARCH DAVID WU JOINS “WHAT’D YOU MISS?.” HE IS CALLING U.S. CHINA RELATIONS ONE OF THE BIGGEST THINGS TO WATCH FOR IN 2017. IT SHOULD BE A GREAT CONVERSATION. OLIVER: WE WILL DEFINITELY BE WATCHING. THANKS SO MUCH. THIS IS BLOOMBERG. ♪ MARK: A FEDERAL JUDGE IS REQUESTING DEBT REJECTING A REQUEST TO RECOUNT THE BALLOTS IN PENNSYLVANIA. GREEN PARTY CANDIDATE JILL STEIN HAD SOUGHT RECOUNTS IN PENNSYLVANIA, MICHIGAN, AND WISCONSIN. A FEDERAL JUDGE HALTED MICHIGAN’S RECOUNT. WISCONSIN’S HAS BEEN COMPLETED AND THE STATE ELECTIONS COMMISSION IS PLANNING TO VOTE TO CERTIFY THE RESULTS. DONALD TRUMP NARROWLY WON ALL THREE STATES OVER HILLARY CLINTON. >> AT THE DIRECTOR JAMES COMEY SWUNG THE ELECTION. THEY HAD TO THE PRESIDENCY TO DOWNFALL. DEMOCRATS WOULD HAVE WON THE WHITE HOUSE AND REGAINED CONTROL OF THE SENATE’S INTERNET FOR COMEY’S HANDLING OF SECRETARY CLINTON PLUS EMAIL SERVER INVESTIGATION AND ALLEGATIONS OF RUSSIAN HACKING. IN PHILADELPHIA, A CONGRESSMAN HAS BEEN SENTENCED TO PRISON FOR A RACKETEERING SCHEME THAT INCLUDED MONEY LAUNDERING AND BRIBERY. A FEDERAL JUDGE CALLED THE SIX-YEAR-OLD DEMOCRAT’S CRIMES ASTONISHING THAT THE EDITORS TV ANCHOR WIFE HAD $500,000 IN ANNUAL INCOME. HE INSISTED THAT THE JUSTICE DEPARTMENT VASQUEZ WAS LIKELY MOTIVATED. ANTONIA TARAS WAS SWORN IN AS SECRETARY-GENERAL OF UNITED NATIONS. HE SAYS THAT THE NINTH U.N. CHIEF IN THE 71 YEAR HISTORY. GLOBAL NEWS POWERED BY MORE THAN 126 COUNTRIES WORTH OF JOURNALISTS. LIVE FROM NEW YORK, I AM SCARLET AND I AM JOE. >> U.S. STOCKS ARE FALLING. THE ENERGY COMPANIES ARE FAILING. JOE: THE QUESTION IS WHAT DID YOU MISS? SCARLET: RISING OIL PRICES ARE SENDING THEM HIGHER TODAY. U.S. PRESIDENT-ELECT DONALD TRUMP HAS UPPED THE ANTE WITH BEIJING SAYING HE WILL USE THE ONE CHINA POLICY AS A BARGAINING CHIP TO GET A BETTER TRADE YOU. WE WILL LOOK AT WHY THIS IS A BIG DEAL. AND WHY — UGLY EXPLAIN HOW PEOPLE MAKE CHOICES THAT SEEM TO GO AGAINST THEIR INTERESTS. WE WILL TALK ABOUT THE NEXT. JOE: LET’S LOOK AT WHERE THE MAJOR AVERAGES STAND. ABIGAIL DOOLITTLE IS STANDING BY. ABIGAIL: WE’RE LOOKING AT WHAT WE’VE HAVE BEEN LOOKING AFTER MOST OF THE DAY. THAT IS MIXED TRADING. THAT BEING SAID WE DO HAVE THE DOW ONLY OUT OF A VERY SMALL GAME. ONE THAT PUTS THE DOW ON PACE FOR A SIXTH RECORD CLOSE IN A ROW. LET’S REALLY FOCUS IN ON THIS DOW STRENGTH. HELPING THE DOW HIGHER TODAY TO ITS POTENTIAL SIX RECORD HIGH. THIS WAS AFTER JOHNSON AND JOHNSON LOOKED LIKE IT COULD CLIMB. IT IS HAVING HIS BEST THING SINCE THE ELECTION. THE COMPANY DID RAISE HIS COMPANY DIVIDENDS. FINALLY, EXXON MOBIL, TRAINING NICELY HIGHER. OIL LEVERS LASTING THROUGH JULY 2013. THEY HAVE AGREED TO CUT SUPPLIES AND REALLY HELPED THE OIL PRICE. AS FOR WHETHER OR NOT THESE RECORD HIGHS FOR THE DOW CAN CONTINUE, ARE THE MARKETS FROTHY? LET’S LOOK AT THE #BTV 3505. THE DOW IS TRADED NICELY HIGHER. IT IS UP 13% ON THE YEAR. ON PACE FOR THE BEST YEAR SINCE 2013. ON THE BOTTOM OF THE CHART, WE HAVE THE RELATIVE STRENGTH INDEX. THIS IS A MOMENTUM INDICATOR. TYPICALLY WHEN IT GOES ABOVE 70. WE SEE THAT THE DOW IS ABOVE THAT 70 MARK. IT HAS BEEN THERE FOR THE LONGEST STRETCH OF THE LAST YEAR. THEY ARE AT THE HIGHEST LEVEL SINCE 1996. BASICALLY IN 20 YEARS. BASICALLY, JONATHAN KRINSKY, HE IS SAYING THAT OVERBOUGHT DOESN’T MEAN OVER. HE HAS A POINT. IT WILL BE INTERESTING TO SEE WHETHER THIS IS A CAUTIONARY TALE OF CAUTION OR NOT. SCARLET: WE HAVE SOME BREAKING NEWS ON VIACOM. BECOME AN HE IS SAYING THAT IT HAS STOPPED THE EXPLANATION. IT HAS NAMED BOB AS PERMANENT CEO. THE PERMANENT CEO OF MTV, NICKELODEON AND COMEDY CENTRAL WAS LOOKING TO BE REUNITED WITH CBS. REDSTONE AND HER FAMILY DO HAVE A CONTROLLING STAKE IN BOTH VIACOM AND CBS. YOU CAN SEE THAT THE VIACOM SHARES HAVE BEEN TUMBLING ALL DAY, DOWN BY OVER 9%. WHAT DID YOU MISS? IN THE LATEST UNIVERSITY OF MICHIGAN SURVEY, THERE WERE SOME EXCEPTIONS TO THE OPTIMISM. MAINLY AMONG THOSE WITH A COLLEGE DEGREE AND RESIDENTS OF THE NORTHEAST. REINFORCING THE EXTENT OF THE DIVIDE IN THE COUNTRY. THANK YOU SO MUCH FOR JOINING US PROFESSOR. WE SEE IT IN THE MARKETS AND DOMESTIC ALL SEE AND FOR POLICY — FOREIGN POLICY, WHEN THERE ARE NO SPECIFICS GIVEN YET ON ANY POLICY PRESCRIPTIONS OUT THERE. >> I THINK THAT ANYONE WHO IS TRYING TO PUT LOGIC AND DO ANYTHING THAT HAS HAPPENED IN THE LAST SIX MONTHS OR SO IN ELECTIONS IS GOING TO HAVE A HARD TIME. BOTH BREXIT AND THE TRUMP ELECTION, PEOPLE SEEM TO BE VOTING AGAINST THEIR SELF-INTEREST. >> FROM A BEHAVIORAL STANDPOINT, IS THERE A REASON LIFE IN THE ABSENCE OF ANY REAL DETAILS ABOUT WHAT TRUMP IS GOING TO DO OR EVEN HAVE BREXIT IS GOING TO AFFECT THE U.S. ECONOMY, PEOPLE START TELLING A POSITIVE STORY? WE HEAR ALL KINDS OF STUFF. FISCAL STIMULUS. EVEN THOUGH TRUMP IS NOT REALLY TALK MUCH ABOUT THAT. PEOPLE HAVE REALLY GLOMMED ONTO THIS REALLY POSITIVE STORY WITHOUT ANY OF THE NEGATIVE SIDES. WHAT MAKES US DO THAT? >> PEOPLE SUFFER FROM SOMETHING CALLED THE CONFIRMATION BIAS. THEY SEEK EVIDENCE THAT IS CONSISTENT WITH THEIR BELIEFS. THEY GO OUT AND LOOK BOARD. SO IF YOU WOULD LIKE TO THINK THAT THE ECONOMY IS GOING TO BE GREAT, YOU WILL LATCH ONTO ANY BIT OF INFORMATION THAT MAY SUPPORT THAT REGARDLESS OF WHERE COMES FROM. >> GOING OFF ON THAT A LITTLE BIT, TO CONTINUE THAT IDEA, HOW DO WE TALK TO PEOPLE WHO UNDERSTAND THAT THE CHOICES ARE AGAINST THEIR BETTER ECONOMIC INTEREST BUT DO IT ANYWAY TO SEND A MESSAGE. THEY ARE COMING OFF THEIR NOSE TO SPITE THEIR FACES. HOW DO WE EXPLAIN THAT? >> ONE WAY OF THINKING ABOUT THIS IS LIKE WHEN YOU HAVE AN INCH, WHEN YOU HAVE A MOSQUITO BITE OR POISON IVY. THEY TELL YOU NOT TO SCRATCH IT. WHAT DO WE ALL DO? WE SCRATCH IT. THIS IS JUST HUMAN NATURE. THAT IS THE WAY PEOPLE ARE ACTING THESE DAYS. THEY HAVE AN ITCH AND THEY ARE GOING TO SAY NO, THEY ARE GOING TO REJECT THE STATUS QUO BECAUSE THEY ARE ANGRY. THEY WILL LOOK FOR SOMETHING ELSE. BE IT LEAVING THE EU OR VOTING FOR THE NON-STATUS QUO CANDIDATE. THE BELIEVES OF MANY OF THESE VOTERS HAS NOTHING TO DO WITH REALITY. I SAW AN INTERVIEW WITH ONE TRUMP VOTER WHO SAID SHE WAS VOTING FOR TRUMP BECAUSE OBAMA HAD RUINED THE ECONOMY. THE UNEMPLOYMENT RATE WAS VERY HIGH. INFLATION RATE WAS HIGH. THE DOLLAR WAS WEEK. NOW, IF THOSE ARE YOUR BELIEFS, I DON’T KNOW WHERE YOU’RE GETTING THEM. >> ARE THERE CERTAIN CONDITIONS THAT ARISE IN A SOCIETY IN WHICH PEOPLE MIGHT BE MORE INCLINED TO CAST A VOTE THAT IS MORE BURN IT ALL DOWN AND IT NORMALLY WE HAVE ELECTIONS AND SOMEONE REPRESENTING THE STATUS QUO AND THE EXISTING NORMS OF POLITICS. USUALLY, SOME MIGHT THAT EMERGES. THEY CLEARLY FLAUNTED THE NORMAL STUFF WE HAVE AN ELECTION. WAS THIS A FLUKE OR COULD THIS HAVE HAPPENED ANYTIME? WHETHER QUESTIONS AND CONDITIONS THAT MADE FOR THEM? >> IT HAS HAPPENED BEFORE, WE CAN HOPE IT NEVER HAPPENS AGAIN. I THINK IT IS SAFE TO SAY THAT PEOPLE ARE ACTING EMOTIONALLY. WE DO A LOT OF STUPID THINGS WHEN WE ARE EMOTIONAL. THAT IS AS DEEP AS WE NEED TO GO. IF SOMEBODY INSULTS YOU, YOU ARE LIKELY TO SAY SOMETHING THAT YOU WILL LATER REGRET. PEOPLE MAY SOMEDAY REGRET SOME OF THE BOATS THEY HAVE MADE. >> YOU HAVE BEEN SAYING THAT A LOT OF PEOPLE ARE SAYING THIS, THERE IS A SEEMING RATIONALITY. DONALD TRUMP CANTILEVER ON WHAT PEOPLE WANT TO DELIVER OR MAYBE THEY HAVE A MISCONCEPTION IN THE EXAMPLE YOU CITED ABOUT THE CURRENT STATE OF THE ECONOMY. IS IT ALSO POSSIBLE THAT ECONOMICS IS NOT EQUIPPED TO UNDERSTAND WHAT MOTIVATES THE VOTERS AND THAT MAYBE PEOPLE HAVE THE PRINT — DIFFERENT INTERESTS THAT TRADITIONAL MEASURES CAN REALLY GET AT YOU. >> ECONOMISTS ARE NOT VERY GOOD AT UNDERSTANDING THE PSYCHOLOGY OF VOTERS. VERY FEW PEOPLE ARE. WHAT IS CURIOUS IS I THINK WE HAVE SEEN A BIG DECLINE IN THE VALUE OF EXPERTISE. THE MEDIA HAD A TALKING HEAD YOU BRING ON, PEOPLE DON’T PUT MUCH STOCK IN WHAT WE ARE SAYING ANYONE. SO, I PUT SOME OF THE BLAME ON THIS, IF WE WILL CALL IT CLAIM ON THE CHATTERING CLASSES WOULD HAVE NOT GOT THROUGH. >> YOU BRING UP A VERY GOOD POINT. I WANT TO GO BACK TO THE EMOTION PART OF IT BECAUSE IT SEEMS LIKE THE EMOTION CAN BE CONTAGIOUS, INFECTIOUS EVEN. WE HAVE SEEN BRAZEN ALREADY. WE HAVE SEEN THE ITALIAN REFERENDUM. WHAT MIGHT GIVE PEOPLE PAUSE NEXT YEAR TO HOLD BACK ON THE EMOTION AND THE BOTH MORE BUT WILL TEST BOTH MORE LOGICALLY? IN THE CASE WHEN YOU HAVE A COUPLE OF HOLES THAT ARE VOTED IN FAVOR OF THE EMOTIONS OF PEOPLE CONTINUE TO RUN WITH IT? >> I THINK IT IS TRUE THAT BREXIT AND TRUMP ARE THE SAME PHENOMENON. IT IS NOT THE TRUMP VOTERS — I’M GUESSING MOST TRUMP VOTERS WITHOUT EVEN KNOW WHAT BRAZEN IT WAS. IT IS NOT THAT THEY GOT CARRIED UP IN SOME WAY THAT STARTED IN ENGLAND, AS MUCH AS THE WORKING CLASSES HAVE BEEN LOSING GROUND FOR THE LAST 30 YEARS AND THEY ARE ANGRY ABOUT IT. THAT SAME PHENOMENON IS HAPPENING IN VARIOUS PLACES AROUND THE WORLD. OF COURSE, EVERYTHING MATTERS. I THINK IT WOULD BE WRONG TO OVER INTERPRET THE SELECTION. AFTER ALL, 100,000 VOTES GOING A DIFFERENT WAY, WE WOULD ALL BE TALKING ABOUT HOW TRUMP LOST AND HOW ANYONE COULD EVER HAVE THOUGHT HE WOULD WIN. SO YES, IT IS A SHOCKING RESULT. HIS FAVORITE SINCE THE ELECTION HAS MADE A MORE SHOCKING. WE HAVE TO REMEMBER THAT MORE PEOPLE GO TO FOR HIS OPPONENT THAN HIM. SCARLET: THANK YOU SO MUCH FOR JOINING US RICHARD. HE IS THE FOUNDING FATHER OF BEHAVIORAL ECONOMICS. COMING UP, WE WILL TALK ABOUT THE SELECTION OF REX TILLERSON AS THE NEXT SECRETARY OF STATE. THIS IS BLOOMBERG. ♪ SCARLET: MR. PICKENS CAUSED THIS AND CAUSE THE SELECTION PERFECT. HE SAID ROUGHLY TWO WORLD OF THE WORLD’S ON OIL — OIL, HE SAYS HE IS WELL SKILLED FOR THE POSITION. MR. PICKENS JOINS US NOW ON THE PHONE. MR. PICKENS, THANK YOU FOR TAKING THE TIME, MY FIRST QUESTION TO YOU IS HAVE YOU BEEN IN TOUCH FOR REX TILLERSON, THE CAMPAIGN OR DO THEY HAVE THE COMPANY SAID HE WILL BE NAMED SECRETARY OF STATE? >> I KNOW WRECKS AND I AM NOT A TOUCH WITH THIS DECISION ON SECRETARY OF STATE. OTHER THAN THROUGH THE TV AND OTHER NEWS MEDIA. BUT I KNOW REX TILLERSON. A GREAT ADDITION TO THE CABINET. >> MR. PICKENS, AS YOU MENTIONED, MANY OF THE HOTTEST JAIL LITTLE — GEOPOLITICAL SPOTS ARE OIL NATIONS. FROM THAT PERSPECTIVE, REX TILLERSON WOULD HAVE GREAT INSIGHT. ON THE OTHER HAND, WRAPS THE INTEREST OF THE ENERGY INDUSTRY IS DIFFERENT THAN WHAT THE INTERESTS WOULD BE OVERALL AS A PRETENSE TO SECURITY, HUMAN RIGHTS AND OTHER THINGS LIKE THAT. I YOU CONFIDENT THAT REX TILLERSON WOULD BE ABLE TO SEPARATE THE INTERESTS OF OIL FROM THE INTEREST OF THE COUNTRY? >> YES, I WOULD. REX TILLERSON IS A MAJOR ALL COMPANY GUY. HE HAS HAD SO MUCH EXPERIENCE AND HE IS A GOOD MAN. HE HAS WORKED BOY SCOUTS AND DIFFERENT ORGANIZATIONS. NO, I WOULD HAVE NO QUESTION ABOUT TILLOTSON BEING A GOOD SECRETARY OF STATE. HE IS A GOOD MAN. HE IS A HARD-WORKING GUY AND HE KNOWS THE WORLD. EXXON OPERATES AROUND THE WORLD AND I WOULD THINK THAT HE WOULD BE AN EXCELLENT CHOICE. LIKES THAT MAY BE THE CASE BUT TO FOLLOW ON THE QUESTION, HOW DOES REX TILLERSON MAKE SURE THAT THERE IS AN CONFLATION BETWEEN THE U.S.’S INTERESTS AND THE ENERGY INDUSTRY’S BUSINESS INTERESTS? >> HOW DOES HE IS SURE OF HE WOULD NOT HAVE A CONFLICT? REX TILLERSON IS A WORLDWIDE PERSONALITY. HE IS LEAVING EXXON. HE IS OFF TO A DIFFERENT PART OF HIS LIFE. HE WOULD GO TO THE SECRETARY OF STATE AND HE WOULD PERFORM THAT FUNCTION DISLIKE HE WOULD IF HE WAS AT EXXON. HE IS GOING TO MAKE A DECISION FOR EXXON. HE WOULD BE WORKING FOR THE UNITED STATES GOVERNMENT AND DOING EVERY THING HE COULD TO BE SURE THAT OUR BUSINESS WOULD GO FORWARD AND BE WELL EXECUTED. NO, I LIKE — I THINK TILLOTSON WOULD BE GREAT FOR THIS JOB. >> THIS NAME HAS COME UNDER GREAT CRITICISM. I THINK IT IS BECAUSE HE IS IN OIL CEO. ALSO, DUE TO HIS PERCEIVED RELATIONSHIP WITH VLADIMIR PUTIN. WE HAVE A STORY OUT ON BLOOMBERG ABOUT HOW REX TILLERSON ARE CURRENTLY WENT TO THE WHITE HOUSE REGARDING THE RUSSIAN SANCTUARY. HE WANTED TO MAKE SURE THAT COMPETITORS WOULD NOT GAIN AN EDGE THROUGH IT. GIVEN THAT TRUMP IS ALREADY UNDER FIRE, IS THIS GOING TO CREATE A HEADACHE FOR TRUMP? THE IDEA OF HAVING A SECRETARY OF STATE THAT PRESENTS THE IDEA THAT THIS WHITE HOUSE WOULD BE MORE FAVORABLE TO RUSSIAN INTERESTS? >> THE HACKING, I HATE TO TELL YOU ALL THIS BUT I DON’T REALLY KNOW HOW TO HACK ANYTHING. BUT NO, REX TILLERSON, I THINK YOU WOULD BE GREAT. HE KNOWS PUTIN. HE COULD SIT DOWN AND TALK TO HIM ABOUT THINGS. HE IS NOT ABOUT TO MAKE SOME POLISH DEAL. I CAN’T EMPHASIZE THIS MORE, WHEN TILLOTSON LEAVES EXXON AND GOES WITH THE STATE DEPARTMENT, HE IS 100% STATE DEPARTMENT. EXXON HAS PLENTY OF PEOPLE TO RUN AND SON. THEY DON’T NEED ANOTHER CEO. THEY HAVE A CEO. HE WILL GO TO THE — ALL LINKS TO BE THE VERY BEST SECRETARY OF STATE THE UNITED STATES HAS EVER HAD. >> AND LEAD YOU BRING UP EXXON MOBIL BECAUSE I WONDER WHAT YOUR THOUGHTS ARE IF YOU HAVE ANY ON EXXON MOBIL’S PRESIDENT DARREN WOULD. IF THE COMPANY HAS A CEO IN WAITING, IS HE THE CEO IN WAITING? >> IS HE THE CEO IN WAITING? >> IS HE THE ONE THAT WOULD SUCCEED REX TILLERSON? >> I DON’T KNOW WHO WOULD SUCCEED REX TILLERSON. DON’T WORRY ABOUT EXXON, THEY HAVE PLENTY OF EXECUTIVES. THEY HAVE GOOD CEOS WHO ARE AVAILABLE THERE. THE DAY HE LEAVES AND GOES TO WORK FOR THE STATE DEPARTMENT, HE WILL BE 100% FOR THE GOVERNMENT. HE IS NOT WORKING FOR EXXON ANYMORE. >> I WANT TO SWITCH GEARS. JOE: THERE IS NEWS THAT THE ORGANIZATION SEEMS TO BE GETTING IT TOGETHER. THEY ARE LOOKING TO CUT MORE THAN EXPECTED. DO YOU THINK OF HAVE WILL BE ABLE TO EXECUTE WHAT THEY SAID? DO THINK IT WILL BE ABLE TO GO IT WELL WITHOUT CHEATING AND BOOSTING THE PRICE OF OIL? >> NO, I THINK IT IS LONG HAUL. THEY WANT MORE FOR THEIR OIL. THEY HAVE SAID, WHAT YOU ARE GOING TO DO? THEY WILL CUT SUPPLY. THE PRICE OF OIL WILL COME UP. THE PRODUCERS OF OIL, WHETHER THEY BE OPEC, THE RUSSIANS, WHETHER IT IS THE GUESS INDUSTRY IN THE NEXT DAYS, THEY HAVE ALL HAD ENOUGH. YOU WILL BE AT $60 A BARREL WITHIN 30 DAYS. >> $60 A BARREL IN 30 DAYS, THAT IS YOUR FORECAST? >> I THINK YOU WILL HAVE THOSE CUTS AND YOU WILL SEE IN JANUARY OF NEXT YEAR $60 A BARREL. >> WHAT ABOUT MUCH HIGHER THAN THAT? I FEEL IT WE CAN QUICKLY DISCOUNTED THE IDEA THAT WE’RE GOING TO SEE TRIPLE DIGITS. WOULD THAT BE ANYTIME SOON? IS IT PLAUSIBLE THAT WE COULD GET BACK THERE? WHAT DO YOU SEE FOR 2017 OR 2018? >> TAKING ME OUT TO 2018, YOU HAVE A CHANCE. YOU’RE NOT GOING TO HAVE $100 OIL IN 2017. BUT I DO THINK YOU’RE GOING TO HAVE $75 OIL. SCARLETT: THERE HAVE BEEN A LOT OF INSTANCES WHERE OPEC IS NOT BEEN ABLE TO COMPLY. DO THINK THAT THEY EXPECT TO BE WOBBLING ALONG THE WAY? WHERE THEY CAN’T QUITE COMMIT TO LET THAT HAVE PROMISED? WHAT MIGHT THOSE LOOK LIKE? >> USA THAT IF THEY WON’T STICK WITH IT. I BELIEVE THEY WILL STICK WITH THE DEAL. I BELIEVE IT WILL HAPPEN. OPEC NEEDS MONEY. YES, I THINK THEY WILL STICK WITH THE DEAL. THE SAUDI’S HAVE SAID THEY WILL CUT BELOW 10 MILLION A DAY. SO THEY ARE CUTTING OUT A MILLION BARRELS A DAY. THEY HAVE TO BE THE BIGGEST ONE. THEY DO IT WHEN THEY PERFORM. WHEN THEY SHOW THE LEADERSHIP. AND THEY WILL. THE OTHER COUNTRIES WILL COME ALONG. >> WE’LL QUICKLY, SOME OF THE SKEPTICS OF THE DEAL, INCLUDING GOLDMAN SACHS HAVE ARGUED THAT PRICES GO UP AND THE U.S. SUPPLY OF OIL, QUICKLY. HOW QUICKLY CAN U.S. PRODUCTION REACT TO ANY PRICE INCREASE? >> I CAN TIRE THAT I KNOW THE OIL FIELD. YOU KNOW THAT. IT WILL NOT COME ON FAST. THE CAUSE THAT THEY HAVE A NEW OILFIELD, HAVE OTHER JOBS. IT IS THAT WOMEN MONDAY OFF FIELD. THEY TELL THEIR HUSBAND, YOU LOOK, YOU GET A JOB. >> NO, I WILL GO BACK TO JOB WHEN THE RATE GOES BACK TO WORK. NO, YOU GET A JOB, YOU’RE NOT HANGING AROUND THE HOUSE. THOSE GUYS HAVE GOT JOBS AND THAT’S IT. >> THANK YOU MR. PICKENS. HE IS THE PRESIDENT OF BP CAPITAL. THIS IS BLOOMBERG. ♪ ♪ SCARLET: WHAT DID YOU MISS? ANOTHER RECORD DAY FOR THE DOUBT. — DOW. ALL OF THIS AHEAD OF WEDNESDAY’S DECISION. I AM SCARLET FU. JOE: I AM JOE WEISENTHAL. EVEN FOLLOW US ON TWITTER. SCARLET: WE BEGIN WITH OUR MARKET MINUTES. FOR THE S&P 500 WHICH IS ABOUT TWO POINTS DOWN. THIS IS THE WORST DAY SINCE DECEMBER 1. HARD TO BELIEVE. CRUDE OIL IS THE STAR IF YOU WANT TO .1 OUT. IT HAS GAINED 1.5%. >> ANOTHER DOW RECORD HIGH RETURNS TO THE NORM HERE WITH THE DOW RALLY AND THE NASDAQ SELLING OFF. >> IN TERMS OF THE ACTUAL STOCKS TO PAY ATTENTION TO, IT STARTED IN ASIA. I SEE A LOT OF RED ARROWS OVER THERE. THEY ALL FELL. CHINA TOOK A MUCH STRONGER TONE WITH DONALD TRUMP. IF YOU REMEMBER JOE, THEY CARE MORE ABOUT THE ONE CHINA POLICY. THEY ARE DOWN 2.4%. ENERGY STOCKS ARE ALSO BIG MOVERS AS OIL PRICES RISE. THEY RALLIED IN THE EARLY PART OF THE SESSION. THAT IS AT ITS HIGHEST SINCE LAST JUNE. YOU CAN SEE THEM UP BY 1%. JOE: LET’S LOOK AT GOVERNMENT BONDS. YIELD IS MARGINALLY HIGHER. BOTH THE TWO-YEAR AND THE TENURE ARE UP A LITTLE BIT. LET’S LOOK AT THE CHINESE. WE HAVE THE EVER THOUGHT ABOUT CHINESE GOVERNMENT BONDS. LET’S LOOK AT THIS. THIS IS A ONE-YEAR CHART OF 10 YEAR YIELDS IN CHINA. THEY HAVE REALLY SHOT UP A LOT LATELY. THIS REPRESENTS ANOTHER FORM OF TIGHTENING. YOU CAN SEE THE EQUITIES SELLING OFF. THERE WAS ALSO BOND DEAL. THIS MIGHT BE SOMETHING THAT YOU WANT TO KEEP YOUR EYE ON. >> WE WILL TALK ABOUT THIS A LITTLE LATER WITH DAVID WILL. I TOLD US TO CURRENCIES WHERE OIL EXPERTS AND CURRENCIES RISE. YOU CAN SEE THEY ARE ALSO THE MEXICAN PESO. EVEN WITH TODAY’S ADVANCE. A QUICK CHECK ALSO ON THE TURKISH ERA. DEPRECIATING FOR A THIRD DAY. THERE ARE A NUMBER OF CONCERNS HERE. THEY ALSO INCREASE POLITICAL RISK BECAUSE ON SATURDAY, THERE WERE MORE THAN 40 PEOPLE KILLED. OF COURSE THE BACKDROP OF OIL RISING. >> ON COMMODITIES, SPEAKING OF OIL, THAT IS THE BIG ONE. UP 1.7%. IT HAD BEEN UP QUITE A BIT HIGHER EARLIER IN THE DAY. ON THIS NEWS OF DEEPER CUTS. >> UP AS MUCH AS 5.8%. >> WE HAD A MUCH BIGGER EARLIER GOAL. THEY HAD BEEN HIGHER BUT THAT IS ALL GIVING AN EYE ON THOSE INDUSTRIAL METALS. I WOULD TO TAKE A LOOK AT A ONE-YEAR CHART TO GIVE YOU THE PERSPECTIVE HERE. WHAT A MONSTER YEAR. UP 46% IN THE LAST YEAR. IT IS REALLY REMARKABLE IS HOW THE WE WERE EARLIER IN THE YEAR. HE STARTED THE YEAR WITH A 29% PLUNGE IN THE FIRST COUPLE MONTHS OF OIL. THAT HAS REALLY COME SERVING BACK. IT HAD BEEN QUITE A YEAR FOR OIL. >> A PRETTY REMARKABLE MOVE THERE. WHAT DID YOU MISS? THOSE WERE TODAY’S MARKET MINUTES. >> WHAT DID YOU MISS? MANY STRATEGIST AND ANALYSTS SAY THAT IF HE WOULD WIN, THE MARKET WOULD TANK AND THE ECONOMY WOULD HEAD INTO RECESSION. DAVID WU JOINS US NOW. >> I THINK OF ALL THE STRATEGISTS, YOUR POSTELECTION FORECAST IN THE EVENT OF THE DONALD TRUMP VICTORY WAS THE CLOSEST TO BEING CORRECT. MOST PEOPLE SAW DO AND GLOOM — DOOM AND GLOOM. >> THERE IS A BIG BOND COMPONENT. IT REALLY UNDERPERFORMED. EVEN MORE THAN THE EQUITY RALLY. THE DEFINING ASPECT OF THIS POSTELECTION. HAS BEEN THE SELLOFF AND THE FAILURE OF DIVERSIFIED PORTFOLIOS. YOU CALLED THE POTENTIAL FOR HIGHER GROWTH, HIGHER INFLATION IF DONALD TRUMP ONE. THAT CERTAINLY SEEMS TO BE THE EXPECTATION. A MUCH FURTHER CAN WE SEE THESE BOOKS PLAY OUT? DAVID WU: THERE IS SOME ROOM FOR THESE TRACED TO CONTINUE. TRUMP WANTED 4% GDP. IF YOU LOOK AT THE CONSENSUS FORECAST, FOR 2017, TWO POINT 2%. 2018, 2 .2%. MOST PEOPLE SAY THAT THESE — MOST PEOPLE ARE WORRIED. I THINK HONESTLY THAT PEOPLE ARE FINDING EXCUSES FOR WHY THEY DON’T HAVE THE TRAITS BOND. I THINK THE BOTTOM-LINE IS THAT YOU CANNOT LOOK AT THIS AS PURE FISCAL STIMULUS. THIS HAS TO BE MEASURES TO BOOST CONFIDENCE. TO FREE UP THE ANIMAL SPIRITS. I THINK THAT THIS IS ALSO GOING TO BE ABOUT EASING ACCESS TO CREDITS. THERE IS NO QUESTION THAT THIS IS GOING TO BE A VERY IMPORTANT PART OF THE REGULATIONS. I THINK IS ABOUT SHOPPING THE U.S. ECONOMY TO DO WHAT IT DOES BEST. TAKE A RISK AND INVEST IN GROWTH. >> WHAT WITH THE NEXT AGE OF THE ROTATION LOOK LIKE IF THERE IS STILL ROOM TO GO? WHAT WOULD IT LOOK LIKE IN THE NEXT AGE? >> THAT IS AN EXCELLENT QUESTION. MOST OF THE CELEBRATE HAVE HAPPENED IN THE BACKEND. IT HAS BEEN DRIVEN BY EVERY PRICING OF EXPECTATIONS. BREAK EVENS TEND TO BREAK EVEN AT 2%. I HAVE NO QUALMS. WHERE I THINK THE MARKET HAS GET TO A PRICE FOR EXAMPLE, THE RACE MARKET IS THE BELLY OF THE CURVE. THINK ABOUT THIS, THE MARKET IS STILL OWNING A. THE MARKET IS ONLY PRICING FOR 2018. THAT IS INCONSISTENT WITH A 3% PLUS JP. I THINK AS LONG AS THE MARKET IS STILL PRICING BELOW THE FED’S ON DOCS, FORGET ABOUT ANY REVISION IN THE DOCS, I FIGURED IF MY HAVE MORE UPSIDE. EITHER THAT ANYTHING LINKED TO RATES IS MORE LIKELY TO GO. >> LISTENING TO YOU SAY THE DONALD TRUMP IS GOING TO BRING WITH HIM A WHOLE COCKTAIL OF REFORMS REMINDS ME OF ALL THE DIFFERENT FISCAL ONES. THE MONETARY DEREGULATION. A NATIONAL GREATNESS MISSING. GETTING PEOPLE EXCITED ABOUT THE JAPANESE ECONOMY. I THINK THE VERDICT IS MIXED AT BEST. DO IT AT THIS COCKTAIL AS YOU PUT IT WILL ACTUALLY TRANSLATE? WHY WILL IT TRANSLATE EFFECTIVELY? >> LOOKING BACK, THIS LOST MOMENTUM. IT DOES NOT WORK OUT WELL. BUT IN THE FIRST THREE MONTHS, SIX MONTHS, 12 MONTHS, THAT IS ALL PEOPLE TALK ABOUT. THAT IS THE ONLY OF THAT HEDGE FUNDS MADE ON THIS MONEY, 2013. TRAINING OF ECONOMICS. I THINK THE POINT THAT WE ARE ONLY ONE MONTH AFTER THE U.S. ELECTION. THIS IS A WANTED TO GO. AT LEAST UNTIL OPERATION DAY. — INAUGURATION DAY. THIS IS A BUY THE RUMOR FACE. BUT NOT UNLESS YOU REMEMBER, MOSTLY TRUMP, WHEN HE WON IN 2012, HE DID NOT A TROLL THE OPERA HOUSE. HE SAID THAT I KNEW WE COULD BOOST TO GDP GROWTH. EXHIBIT WITH THE REPUBLICANS. WITH HIM TO DO WHAT THEY SAID THEY REALLY WANT TO DO, WHICH IS REPEAL OBAMACARE, THEY HAVE NOT GOT ENOUGH SEATS IN THE SENATE TO DO IT THEY WANTED IT. THEY CAN THINK OF ANOTHER HC. THEY ARE NOT PUTTING THE POLITICAL POLICES. SCARLET: I WANT TO GO BACK TO SOME OF YOUR CLIENTS’S QUESTION. THIS IS BEEN THE LONGEST RUNNING EXPANSION IN POSTWAR HISTORY. HOW MUCH FURTHER CAN IT GO? I KNOW THAT PEOPLE SAY THAT THESE MARTYRS OF DIEBOLD AGE, IT HAS GONE ON FOR A LONG TIME. YOU COULD ARGUE THAT IT WAS STARTED TO PETER OUT. >> YOU MAY BE RIGHT BUT WHEN WE SAY THIS? THEY CANNOT BE TALKING FROM BOTH SIDES OF THEIR MOUTH. ONLY A MONTH AGO, THE DAY BEFORE THE ELECTION, THERE WAS NO WITH THAT THE FED WAS GOING TO BE ABLE TO HIRE THIS. WE HAVE ALWAYS UNDEREMPLOYMENT IN THE ECONOMY. WHAT, A MONTH LATER, PEOPLE WILL WORRY. I THINK THE HONEST TRUTH AS THE — I THINK WHAT PEOPLE ARE GETTING WRONG IS THAT PEOPLE WANT TO FOCUS ON THE INFRASTRUCTURE. EVERYONE IS SAYING THAT YOU DID — INFRASTRUCTURE SPENDING EQUALS SUCCESS. I THINK THAT THE INFRASTRUCTURE PIECE IS GOING TO BE THE LAST PIECE TO GET THROUGH. ONE THING IS TO GO TO THE TEA PARTY AS A WE WILL BLOW UP THE DEFICIT. ANOTHER THING IS TO SAY WE ARE GOING TO BLOW IT UP FOR INFRASTRUCTURE SPENDING. IF YOU WANT TO BUILD A BRIDGE, YOU ARE GOING TO HAVE A BRIDGE TO BUILD. IT IS GOING TO BE LATE 2017 AND MAYBE EARLY THOUSAND 18. I’M NOT AS WORRIED ABOUT THEM RUNNING AMOK. I AM MORE WORRIED ABOUT CHINESE HOUSES. >> YOU MENTIONED THAT I LOVE THE SKEPTICISM OF YOUR THESIS IS CAUSED BY THE FACT THAT PEOPLE JUST DON’T HAVE THE — THEY WERE CAUGHT REALLY UPSIDE. WE KNOW THAT PEOPLE WERE WILDLY BULLISH ON BONDS, EVEN WITHIN THE STOCKS, THEY LIKE THE BOND PROXIES. HOW FAR OFF SIDES ARE INVESTORS STILL, GIVEN THE MOVES WE HAVE ALREADY HAD? >> I WAS SAY THAT THE BENCH — HEDGE FUND COMMITTEE HAS WELL-POSITIONED. I THINK THAT THE MUTUAL FUNDS, I THINK THEY ARE STILL LOOKING TO TAKE IT VANTAGE OF ANY OF IT TO BE DIPPED IN BONDS. I THINK THOSE ARE THE GUYS. >> DAVID WU, GLOBAL RATES AND CURRENCY AND RESEARCH AT THE BANK OF AMERICA AND MERRILL LYNCH. YOU ARE STICKING WITH US. WE WILL TALK TRUMP’S GEOPOLITICAL AGENDA WITH CHINA. >> AND SOME BREAKING NEWS. BOEING IS PLANNING A DEEPER CUT IN PRODUCTION NEXT YEAR. THAT IS THE COMPANY’S SECOND-BIGGEST SOURCE OF PROFIT. BOEING PLANS TO SLOW OUTPUT OF ITS TWIN ENGINE MODEL. THAT STARTS IN AUGUST OF 2017. THAT IS A DROP FROM A PREVIOUSLY ANNOUNCED CUT. THAT IS WHAT YOU EXPECT EARLY NEXT YEAR. THEY ARE TRADING MARGINALLY LOWER. THIS IS BLOOMBERG. ♪ ♪ >> GOLDMAN SACHS PRESIDENT HAS ACCEPTED THE JOB AS CHIEF ECONOMIC POLICY ADVISOR FOR DON FROM. THAT’S ACCORDING TO THE TRUCK TRANSITION TEAM. HE HAS BEEN WHETHER 25 YEARS AT THE INVESTMENT BANK. TRUMP IS I’M FORMER PRESIDENTIAL RIVAL COLLEGE ARENA — CARLY FIORINA. SHE MET WITH THEM IN NEW YORK. >> WE TALKED ABOUT THE OPPORTUNITY THAT THE PRESIDENT ELECT HAS DO RESET THINGS. TO RESET THE TRAJECTORY OF THE ECONOMY, RESET THE ROLE OF GOVERNMENT, TO RESET THE ROLE OF AMERICA IN THE WORLD, HOW WE ARE PERCEIVED. I THINK THAT IS WHY HE’S GETTING SUCH FANTASTIC PEOPLE IN HIS ADMINISTRATION. >> HE IS MATED WITH ANOTHER FORMER PRESIDENTIAL RIVAL AS WELL. FORMER TEXAS GOVERNOR RICK PERRY. HE IS A CANDIDATE FOR ENERGY SECRETARY. AND ALL COLLEGE MEMBERS. THEY SENT A LETTER TO JAMES KLAPPER, A DIRECTOR OF NATIONAL INTELLIGENCE. THEY SAY THAT THEY ARE CONCERNED ABOUT HIS DISREGARD OF THE INTELLIGENCE COMMUNITIES PRIVILEGES ABOUT THE HACKING. AND DONALD TRUMP PLUS CONTINUING FRIENDSHIP WITH VLADIMIR PUTIN. I MEAN A MELENDEZ, THIS IS BLOOMBERG. JOE: DONALD TRUMP HAS UPPED THE ANTE WITH BEIJING BY SAYING THAT HE WILL USE THE ONE CHINA POLICY AS A TRADING CHIP TO GET A BETTER TRADE YOU. STILL WITH US IS DAVID WILL, GLOBAL RATES AND BANK OF AMERICA DAVID WITH. AND HE FOR STAYING WITH US. THE FIRST THING THAT DONALD TRUMP THAT HE IS TRULY DONE HIS TURNOVER THE TABLE ON CHINA, BEING VERY EXPLICIT. THE ONE CHINA POLICY IS NOT SAYING THAT HE WAS TO USE THAT AS A BARGAINING CHIP. HOW DOES THIS PLAY OUT? WHAT YOU SEE BEING SOME OF THE NEXT STEPS HERE? DAVID WILL: THIS IS MY FACE WORRIED, I THINK THAT THE U.S. AND CHINA COULD BE ON A COLLISION COURSE. TRUMP HAS TWO MAJOR POLICY PILLARS. AS THE POLICY AND TRADE POLICY. HIS GOAL IS — FISCAL STIMULUS IS GOING TO BE RATE FOR THE U.S. DOLLAR. HE ACTUALLY NEED A WEAK DOLLAR. DOES HE WANT A STRONG DOLLAR OR A WEAK DOLLAR? THOSE ARE THE BIGGEST CONTRADICTIONS. NOW, I THINK HE IS ULTIMATELY GOING TO WANT A WEAK DOLLAR. THE PROBLEM IS THAT CHINA ALSO NEEDS THE WEEK ONE. COMPANY WILL HAVE WITH CURRENCIES? THE MORE SUCCESSFUL THE TRUMP IS GOING TO BE, MANY, THE STRONGER THE U.S. ECONOMY, THE STRONGER THE DOLLAR WILL BE. THAT WILL ONLY INCREASE THE PRESSURE ON TRUMP. IT IS A MOST SELF FULFILLING. HOW IT PLAYS OUT, I THINK THIS IS GOING TO BE THE BIGGEST HEAD ACHE FOR INVESTORS IN 2017. SCARLET: BY SPEAKING WITH THE PRESIDENT OF TAIWAN ON THE PHONE, HE IS MIXING IT UP EVEN FURTHER. DOES IT DERAIL THE AREAS WITH TRUMPET WE DO HAVE? >> THREE DAYS AFTER HE HAD THIS CONVERSATION, HE APPOINTED GOVERNOR OF IOWA. HE IS STILL STANDING — 70 MIXED MESSAGES TO CHINESE. I THINK THAT IS CLEVER. IF YOU’RE SEEING REBEL WITHOUT A CAUSE? THAT THEY MISSING WHEN HE WAS PLAYING CHICKEN WITH THIS GUY WHO IS GOING TO JUMP OUT OF THE CAR. IT WAS LIKE HE IS ABOUT TO PLAY THIS GAME WITH THIS GUY WHO HAS A REPUTATION OF BEING UNPREDICTABLE AND RECKLESS AND DANGEROUS. I DO KNOW THAT THE CHINESE WILL BE SOMEBODY TO JUMP IN TO BEGIN WITH TRUMP. I THINK HIS UNPREDICTABILITY WILL HELP LOWER THE PROBABILITY OF CRISIS. BECAUSE WE ALL KNOW THAT IF THERE WERE TO BE A CRISIS, IT WOULD BE THE MOTHER OF ALL CRISIS. >> THERE MIGHT BE SOMEBODY SAY FOR THE STRATEGY. THE WHILE STRATEGY. >> I THINK SO. IT IS THE SAME STRATEGY THAT HE IS USING TOWARD CARRIER, TOWARD BOEING, SO FORTH. AND SOME SENSE, BECAUSE PEOPLE DON’T KNOW WHAT HE WILL DO. PEOPLE HAVE NO IDEA ABOUT HIS POLICY REACTIONS. PEOPLE ARE GOING TO THINK TWICE. HE MAY BE ABLE TO ACHIEVE SOMETHING WITHOUT HAVING TO TRY TO HARD. JOE: CHINA IS FACING ITS OWN ISSUES ABOUT LIMITS ON ATM WITHDRAWALS. THAT IN ITSELF IS PROBABLY NOT A HUGE THING BUT SIGNIFYING A MUCH DEEPER CONCERN FOR THE LEVEL OF CAPITAL OUTFLOWS. HOW BAD IS IT RIGHT NOW FOR THE COUNTRY AND HOW — WHAT MORE DO YOU EXPECT TO SEE ON THIS FRONT? >> WHAT IS THE DIFFERENCE BETWEEN TODAY AND A YEAR AGO? THE DOLLAR WAS GOING UP AND THE COLLAPSE BASICALLY BROUGHT ABOUT THE COLLAPSE IN MARKETS. IT CANNOT HAPPEN AGAIN THIS TIME. THE DIFFERENCE BETWEEN THIS YEAR VERSUS A YEAR AGO IS THAT A YEAR AGO, THIS IS BEFORE THE RMB WAS INCLUDED IN THE FDR. CHINA HAD TO LOOSEN CAPITAL CONTROLS. NOW THEY CAN AFFORD TO GO OUT THERE AND TIGHTEN CONTROLS THAT ANY CONSEQUENCE OF THE R&B BEING KICKED OUT OF THE SDR. I THINK THAT AS MIKE REAL ESTATE AGENT IN NEW YORK WOULD TELL YOU THAT AT THIS TIME, 20 APARTMENTS SOLD OVER $2.5 MILLION WERE SOLD TO CHINESE PEOPLE. RIGHT NOW, ZERO. IS BECOMING OR DIFFICULT TO GET MONEY OUT OF CHINA. IF CHINA IS INDEED SUCCESSFUL AND CONTAINING THIS OUTFLOW, WHICH I THINK YOU HAVE TO ASSUME THAT I’M GOING TO GIVE THEM SOME BENEFIT OF THE DOUBT IN DOING THIS, THIS IS WAS GOING TO ALLOW THE U.S. TO — FROM THAT POINT, CHINA POSSIBILITY TO CRACK DOWN ON OUTFLOWS, IT WOULD BE VERY IMPORTANT FOR DONALD TRUMP’S SUCCESS. SCARLET: IN ADDITION TO CRACKING DOWN ON CAPITAL OUTFLOWS, THEY CANNOT PREDICT WHAT TROUBLED IN NEXT. WHAT DO THEY DO TO PROCEED WHAT THEY DO TO INFORM THE ECONOMY? DAVID WILL: THAT’S OF THE TO SHOW FOUR. FROM THAT POINT OF VIEW, I THINK THAT IT IS GOING TO BE MORE LIMITED FOR THAT RESULT. THEY ARE GOING TO BE MANAGING THE ECONOMY EVEN MORE CLOSELY THAN USUAL. I THINK THE GEOPOLITICAL SPIRIT IS MORE COMPLICATED. WE HAVE BEEN RECOMMENDING SELLING THE KOREAN WON. MAYBE THE CHINESE ARE GOING TO BE NERVOUS ABOUT STICKING IT TO TRIAL. WHAT DOES CHINA REALLY HAVE? NORTH KOREA. EVEN DONALD TRUMP IS GOING TO STRUGGLE TO COME UP WITH OUT OF BOX PROMOTIONS. I THINK THAT GIVEN THE POLITICAL CRISIS IN SOUTH KOREA, THE KOREAN PLIMSOLL A 10 MINUTES — >> DAVID BLUE. HE WILL BE STICKING WITH US AS WE TALK ABOUT HIS OTHER CURRENCY CALLS. THIS IS BLOOMBERG. ♪ ♪ >> DAVID WU IS SUPER BOWL IS ABOUT THE MEXICAN PESO. TELL US WHY. DAVID: LET’S THINK ABOUT THIS. AS PRESIDENT OF THE UNITED STATES, HE DOES HAVE THE RIGHT TO THROW NOW TO OUT THE WINDOW AND RIP IT UP. HE DOESN’T HAVE THE LEGAL RIGHT TO RENEGOTIATE THE TERMS WITHOUT CONGRESSIONAL APPROVAL. I TELL YOU RIGHT NOW, FORGET ABOUT THE DEMOCRATS, EVEN REPUBLICANS HAVE NO OPPORTUNITY AND THIS PATH. REMEMBER, MEXICAN AS WAS TO THE U.S., FROM THAT POINT, MEXICO WILL BE THE BIGGEST WINDOW. JOE: ONE FACTOR THAT HAS DRIVEN THE PESO IS OIL. WHAT IS YOUR TAKE AWAY ON THE SIGNIFICANT OF THIS AGREEMENT TO CUT. >> IS UNPRECEDENTED. I THINK THERE ARE MANY DIFFERENT INTERPRETATIONS. NEVERTHELESS, WHEN YOU FIGURE IT WILL BE THE BIGGEST WINNER, I THINK IT WILL BE THE U.S.. IT IS ALMOST LIKE A WELCOME PARTY. THINK ABOUT THIS, THAT MEANS THAT OPEC IS COMING BACK ON PRODUCTION. IT MEANS THAT U.S. PRODUCERS ARE GOING TO PRODUCE HIGHER PRICES. THIS IS GOING TO BE BULLISH FOR THE U.S. GDP GROWTH. THERE IS NO QUESTION ABOUT RUSSIA IN APRIL WE SOUGHT BY TODAY. >> IS ONE OF THE BIGGEST THIS YEAR. >> I THINK THERE ARE TWO EMERGING MARKETS THAT I LIKE. MEXICO AND RUSSIA. RUSSIA ALSO HAS THE ADVANTAGE THAT I THINK UNDER A TRUMP PRESIDENCY, WE ARE MORALLY — MORE LIKELY TO GET A DEAL UNDER UKRAINE. I THINK THAT WILL BE ADDITIONAL BONUS FOR RUSSIA. >> REAL QUICKLY, I SEE YOU HAVE A CALL ON THE NEW ZEALAND DOLLAR. THE D.C. FOR THEM? I THINK IS MORE OF A TECHNICAL CALL. I THINK THAT THIS CURRENCY LOOKS PRETTY EXPENSIVE. I THINK IN GENERAL, IF YOU ARE WORRIED, THE WHOLE INFRASTRUCTURE STRENGTH — AND SPENDING IS NOT GOING TO HAPPEN UNTIL MUCH LATER THIS YEAR. BY THE TIME U.S. HAVE AND SCAM OF THE SPENDING WILL SLOW. >> DAVID WILL, AND OF GLOBAL RATE SECURITIES AT BANK OF AMERICA. DON’T GO ANYWHERE BECAUSE WE WOULD TALKING CENTRAL BANK POLICIES FROM THE FED TO THE VUE, TO THE ECB. THIS IS BLOOMBERG. ♪ >> HOUSE SPEAKER PAUL RYAN SAYS THE HOUSE INTELLIGENCE COMMITTEE WILL LOOK INTO RUSSIAN CYBER THREATS OF THE DNC BUT SAYS ANY INVESTIGATION SHOULD NOT CAST DOUBT ON THE DECISIVE OUTCOME OF THE ELECTION. WHITE HOUSE SPOKESMAN JOSH EARNEST HAD THIS TO SAY. >> YOU DID NOT NEED A SECURITY CLEARANCE TO FIGURE OUT WHO THAT A FITTED — FIGURE OUT WHO BENEFITED FROM MALICIOUS RUSSIAN CYBER ACTIVITY. THE PRESIDENT-ELECT DID NOT CALL INTO QUESTION. HE CALLED ON RUSSIA TO HACK HIS OPPONENT. HE CALLED ON RUSSIA TO HACK SECRETARY CLINTON. >> ERNEST CALLED GOVERNMENT INTELLIGENCE OFFICIALS PATRIOTS. THE MOVE CAME AFTER THE PRIME MINISTER SUBMITTED THE LINEUP OF HIS GOVERNMENT TO BE PRIME MINISTER. HE WILL REMAIN IN HIS POST AS PART OF THE COALITION GOVERNMENT. PRIME MINISTER RENZI RESIGNED AFTER VOTERS REJECTED HIS REFORMS. A MANHUNT IN FRANCE FOR THIEVES WHO STOLE $1 MILLION IN GOLD FOR THE THIEVES TOOK IT FROM A HIGHWAY AND SET THE VEHICLE ON FIRE. GLOBAL NEWS 24 HOURS A DAY IN MORE THAN 120 COUNTRIES. SCARLET: LET’S TELL YOU WHAT HAPPENED IN THE MINUTES WHILE NINA WAS SPEAKING. BOEING HAS INCREASED TO $1.42 PER SHARE. THIS IS A BIGGER THAN EXPECTED INCREASE FOR ITS QUARTERLY DIVIDEND. BOEING SETS A $14 BILLION BUYBACK OF SHARES. FINISHING AN ALL-TIME SIZE, THE DOW JONES. JOE: WHAT YOU MISS? FED OFFICIALS ARE SET TO MEET THIS WEEK. STILL WHAT DOES IS DAVID WU, BANK OF AMERICA, HEAD OF CURRENCY RESEARCH. PETER WAS THE FORMER UNDERSECRETARY OF FOR DOMESTIC FINANCE AT THE TREASURY DEPARTMENT. TAKE YOU FOR JOINING US. EVERYBODY EXPECTS A HIKE. WE DON’T NEED TO TALK ABOUT THAT. THE QUESTION IS WHAT DOES THAT INDICATE GOING FORWARD? A LOT OF FOCUS WILL BE ON THOSE. HOW DO YOU THINK THEY WILL POSITION THE ONGOING HIKING CYCLE? PETER: IT IS HARD TO SAY. MY BEST GUESS IS THEY ARE NOT GOING TO INCORPORATE ANY TRUMP FISCAL PLANS. THEY ARE GOING TO HAVE TO REFLECT THE FACT THAT THE ECONOMY IS A LITTLE FIRMER THAT WASN’T SET TIMBRE. THE LABOR MARKET IS A LITTLE TIGHTER. IT WILL BE INTERESTING TO SEE HOW MUCH THERE INFLATION EXPECTATIONS AND HOW THE FED MOVES ON THEM EVEN IF THEY ARE NOT ABLE TO INCORPORATE TRUMP FISCAL PLANS. SCARLET: WHAT DO YOU THINK? YOU THINK THERE IS UPSIDE RISK TO BOTH GROSS CONSENSUS ESTIMATES HERE. HOW MUCH DOES THE FED MOVE UP IN ITS FORECAST FOR GDP? DAVID: THE PEOPLE WHO ARE GOING TO BE CONTRIBUTING TO THE WHOLE CONSENSUS, I THINK IT WILL BE STRANGE FOR THEM NOT TO MISS THE PLIGHT. THERE WILL BE SOME VOLATILITY. AT LEAST IN THE INDIVIDUALS WHO WILL BE PASSING VOTES FOR THE DOTS. THERE IS GOING TO BE MORE UPSIDE. JOE: IT IS INTERESTING LOOKING AT THE SITUATION NOW VERSUS WHERE WE WERE AT THE END OF NEXT YEAR WHEN THEY HIKED. THIS CHART DEMONSTRATES IT NICELY. ON TOP, THE WHITE LINE IS THE U.S. ECONOMIC SURPRISE INDEX. THIS IS FOR 2015. IT WAS HEADED DOWN TOWARD THE END OF THE YEAR. YOU CAN SEE THE PURPLE LINE IS SHOOTING UP, ALONG WITH THE MARKET. A VERY DIFFERENT VIBE. DO YOU THINK THAT WE MIGHT SEE A CONTINUATION THIS TIME DUE TO STRENGTHENING ECONOMIC CYCLES? DAVID: THAT IS A POSSIBILITY BUT THE HARDEST THING FOR THE FED IS THEY DON’T KNOW WHERE THEY WILL BE IN A YEAR OR TWO FROM NOW. THEY DON’T KNOW HOW MUCH ON TOP OF THAT WILL THE TRUMP ADMINISTRATION PUT. THIS JANET YELLEN NO THAT SHE HAS TO PULL BACK FROM FORWARD GUIDANCE? SHE HAS TO PULL BACK FROM KNOWING SHE KNOWS THE FED POINT IN 12 MONTHS FROM NOW. THAT UNCERTAINTY WILL COME BACK TO THE MARKET HEARD I THINK IT IS HEALTHIER. I THINK FORWARD GUIDANCE HAS DONE ITS THING. SCARLET: WE HAVE MORE TO DISCUSS ON THE FORWARD GUIDANCE DILEMMA FOR THE FED. IT SEEMS LIKE CENTRAL BANKS FOR THE LAST COUPLE OF YEARS DROVE THE BUS. THEY HAVE DICTATED HOW ASSET PRICES MOVE. NOW WE ARE IN A SITUATION WHERE FISCAL POLICY TAKES CENTER STAGE. AS SOMEONE WHO LOOKS WHERE RAISING CURRENCY HAS COME AT THE WE NEED TO PAY MORE ATTENTION TO WHAT DONALD TRUMP TWEEPS? DAVID: I HAVE BEEN SAYING THIS FOR A LAST NUMBER OF YEARS. THEY KEPT RATES LOW BECAUSE IT FISCAL POLICY WAS TOO RESTRICTIVE. I THINK GROWTH IS GOING TO MATTER A LOT MORE THAN INTEREST RATES. THE FED CAN’T PRETEND TO BE ABLE TO SEE IN THEIR CRYSTAL BALL. GROWTH IS GOING TO SPEAK FOR THE FED AND THE MARKET. WE’RE GOING BACK TO TRADING GROWTH RATHER THAN THE INTEREST RATES GOING FORWARD. SCARLET: THAT IS THE SCENE IN THE UNITED STATES. IF YOU LOOK AT THE BANK OF JAPAN AND EUROPEAN CENTRAL BANKS, THEY ARE STILL IN AN EXTRAORDINARILY EASY MONETARY POLICY. YOU LOOK AT THE BALANCE SHEETS WHICH IS IN BLUE AND HAS BEEN PRETTY STABLE. IT IS TRENDING DOWN. THE BANK OF JAPAN IS AN PURPLE AND HAS COME OFF A LITTLE BIT. THE WHITE LINE IS THE ECB AND THEY HAVE EXTENDED THEIR QE PROGRAM. JOE: IT FEELS LIKE IN THE U.S., THERE IS A LOT ABOUT WHAT THE FISCAL PICTURE IS GOING TO LOOK LIKE. IN EUROPE, IT SEEMS LIKE NOT EVEN FISCAL AS MUCH AS POLITICAL, WHAT WILL HAPPEN WITH THE ELECTION IN ITALY, THE ELECTION IN FRANCE. HOW DO YOU SEE THE RAW POLITICAL RISK AFFECTING THE ECONOMIC SITUATION THAT ULTIMATELY WILL BE RECKONED WITH? DAVID: WHEN YOU ARE BITTEN BY A SNAKE ONCE, YOU WERE AFRAID OF IT FOR THE NEXT 30 YEARS. THE MARKET WAS SURPRISED BY TRUMP AND BREXIT, SO IT DOES NOT WANT TO MAKE THAT MISTAKE AGAIN. I AM NOT WORRIED ABOUT THE GERMAN ELECTION. ONE THING WE KNOW IS THAT THE RIGHT AND THE LEFT IN EUROPE, THEY HATE THE FAR RIGHT SO MUCH THEY WILL DO ANYTHING TO KEEP THEM FROM GETTING IN POWER. THE THREE CENTRAL CANDIDATES ARE EQUALLY POPULAR. THEY MIGHT CANNIBALIZE EACH OTHER AND NONE OF THEM GETTING TO THE NEXT ROUND. RIGHT NOW THE MARKET IS ASSUMING THAT THE PEN — LE PEN WILL WIPE THE FLOOR. I’M JUST SAYING THAT IT IS GOING TO BE DIFFICULT TO GET ANY VOTES FROM THE LEFT. IN THE SECOND ROUND, THIS WILL BE EXTREMELY CRUCIAL. SCARLET: THIS SETS UP A NEXT — UP AN INTERESTING SITUATION FOR THE ECB. THEY HAVE TO COVER ELECTION OUTCOMES IN NETHERLANDS, FRANCE. PETER: IT SEEMS TO BE THEY ARE TREADING WATER AND HOPING SOMETHING TURNS OUT. THEY ARE JUST TREADING WATER. THAT IS THE ANNOUNCEMENT THEY MADE. THEY WILL NOT LIKELY GET A FISCAL BOOST MEANINGFULLY IN EUROPE. THE POLITICS, WHATEVER THE OUTCOME OF THE ELECTION, IT WILL BE CONSTRICTING. THE PROCESS OF THE ELECTION IS NOT GOING TO BE GOOD FOR CONSUMER CONFIDENCE. I THINK THE ECB IS KEEPING ITS FINGERS CROSSED. JOE: SO YOUR INTERPRETATION OF THE LATEST ECB DECISION IS THAT IT WAS BASICALLY THE POLITICAL APPROACH TO KEEPING THE EXACT SAME POLICY? PETER: EXACTLY. SCARLET: KEEPING THE PEACE, BASICALLY. GIVING A BIT OF EVERYTHING TO THE HAWKS AND THE DOVES. PETER: THEY HAVE INTERNAL RAMIFICATIONS. IN THE U.S., THERE WILL BE SOME FISCAL POLICY THAT COMES AROUND. NOT IN JAPAN AND EUROPE. SCARLET: WHAT ABOUT JAPAN? WE TALKED ABOUT ABENOMICS. NOW THAT TRUMP WILL BE PRESIDENT, DOES THAT GIVE AUTONOMIC’S ANOTHER — ABE NOW MIX — ABENOMICS ANOTHER PUSH? DAVID: TRUMP IS THE BEST THING THAT COULD HAPPEN TO ABE AND KURODA. DOLLAR-YEN WAS GOING DOWN. NOBODY CARES ABOUT THAT ANYMORE. YOU SEE DOLLAR-AND GOING THROUGH THE ROOF. JAPANESE EQUITY MARKETS HAVE BEEN ONE OF THE BEST PERFORMANCE. THE KEY ISSUE HERE IS THAT THE BANK OF JAPAN HAS GONE A STEP BEYOND QE. THEY ESSENTIALLY BECOME THE CENTRAL BANK OF THE YEARS. — OF THE WORLD. YOU WILL SEE JAPANESE INVESTORS PILING INTO THAT MARKET. IT IS ALSO CAPPING LONG-TERM RATES GLOBALLY, INCLUDING THE U.S. JOE: IS THAT SUSTAINABLE? WILL THE BANK OF JAPAN BE ABLE TO KEEP THEIR LONG-TERM RATES LIKE THAT OR WILL THEY HAVE TO RUN AT SOME POINT? PETER: I THINK THEY WILL HAVE TO RUN. I INTERPRETED THE MOVE THEY MADE AN SEPTEMBER TO PAY THE 10 YEAR RATE AS A REALIZATION THAT OVER THE COMING YEARS, THEY WILL HAVE TO LET IT BACK UP. IT WILL NOT HAVE THE STAMINA TO KEEP IT THERE NOR DO THEY REALLY THINK THEY WANT TO BECAUSE THE NEGATIVE RATES DID NOT WORK. THE FLAT CURVE YIELD HURT INTERMEDIATION. I THINK IT IS A LESSON FOR OTHER COUNTRIES THAT TRIED EXTRAORDINARY POLICIES THAT UNWINDING THESE, YOU DON’T WANT YOUR YIELD CURVE TOO FAST. CORRODED GOT AHEAD OF IT SO HE CAN MANAGE IT OVERTIME. SCARLET: WHICH POLICY DOESN’T MOVE MORE ON? PETER: I THINK THERE IS GOING TO BE MORE CHANGES IN THE U.S.. I THINK IT IS U.S. CHANGE WILL DRIVE THAT EXCHANGE RATE BECAUSE WE KNOW WHAT IS COMING INSIDE JAPAN. IT WILL HAVE A BIG IMPACT. JOE: I LOVE THE WAY YOU PUT IT, THAT BANK OF JAPAN IS GOING TO BECOME THE WORLD CENTRAL BANKER BECAUSE EVERYTHING BECOMES THE FACT OH USING MONEY TO RUSH TO BOND MARKETS AROUND THE WORLD. HOW BIG A DAMPENING EFFECT ON LONG-TERM YIELDS IN EUROPE, THE U.S., WILL LEAD HAVE ULTIMATELY? DAVID: THIS YEAR ALONE THEY BOUGHT $300 BILLION IN BONDS. THAT IS A LOT. THEY WANTED TO ALLOW JAPANESE INVESTORS TO BUY MORE BONDS. I THINK THIS IS FOR THE MARGINAL BUYERS. THERE IS NO QUESTION THAT IF YOU LOOK AT THE PAST FEW WEEKS, YOU SEEM AGGRESSIVE BUYING FROM JAPAN. I THINK LONG-TERM RATES IN THE U.S. WOULD GO UP A LOT MORE THAN IT DID. SCARLET: DAVID WU, THANK YOU SO MUCH FOR JOINING US. PETER FISHER IS STAYING WITH US. WE ARE TO TALK ABOUT THE PROBLEM WITH THE FED WATCH FORWARD GUIDANCE NEXT. MRS. BLOOMBERG. ♪ SCARLET: FED FORWARD GUIDANCE PLAYED OUT. PETER FISHER IS STILL WITH US AND HE SAYS PERHAPS IT IS TIME TO GET RID OF THE DOT PLOT. THE FAMOUS DOT GO. THE GREEN LINE IS A MEDIUM WHERE MEMBERS HAVE PROJECTED. THE BLUE LINE IS THE MARKET PROJECTION AND THEY CONVERGE IN EARLY 2017. WHEN WE TALK ABOUT FORWARD GUIDANCE, IT IS NOT JUST DOTS, IS IT? IT IS RHETORIC. IT IS THE COMMUNICATION POLICY THEY HAVE OVERALL THAT HAS ADOPTED TO USE DOTS. PETER: BERNANKE WAS TALKING ABOUT THIS WHEN HE WAS FIRST GOVERNOR, THE FOUR HE BECAME CHAIRMAN. DURING THE CRISIS, IT WAS A POWERFUL DEVICE TO ASSURE EVERYONE MONETARY POLICY WAS STAYING EASY FOR A LONG TIME AND THE DOT PLOT WAS AN EASY WAY TO SPREAD THAT OUT. IT IS REALLY NOT CREDIBLE THAT WILL BE MAINTAINED OVER TIME. UNCERTAINTY IS GOING TO KICK UP. WE WILL HAVE STIMULUS FROM THE TRUMP ADMINISTRATION. AT SOME TIME WE WILL HAVE TO WORRY IF THERE IS A RECESSION IN THE COMING YEARS. THIS IDEA THAT WE CAN PUT DOWN EXACTLY WHAT WE THINK THE FORWARD PATH IS FOR SEVERAL YEARS AND THAT IS GOING TO BE CREDIBLE IS GOING TO BE EXPIRING. I DON’T EXPECT YELLEN TO SAY ANYTHING ABOUT THAT ITSELF, THAT I WONDER IF THERE WILL BE A HINT TOMORROW OR THE DAY AFTER THAT THEY REALIZE THERE IS WHITENING UNCERTAINTY. WE CAN LOOK IN THEIR FORECAST THIS TIME OR IN THREE MONTHS TIME THAT IF THE RANGE OF THE FORECAST IS GETTING WIDER AND WIDER FOR GNP INFLATION, WE WILL FIND LESS INFORMATION FROM THE DOT PLOT. JOE: PETER: — JOE: ALL OF THE INNOVATIONS THAT CAME ABOUT DURING THE CRISIS. THE. IS ONE OF THEM — THE DOT IS ONE OF THEM. SOME WOULD ARGUE THAT THE DOT FORCE THEM INTO A DECEMBER HIKE BECAUSE IT WAS OUT THERE. WERE THESE INNOVATIONS VALUABLE DURING THE CRISIS PERIOD AND PERHAPS OUTLIVED THEIR USEFULNESS, OR IN RETROSPECT, DID NOT FULLY SERVE EVEN IN THE CRISIS PERIOD? PETER: I THINK THE PRESS CONFERENCE IS A USEFUL DEVICE SO THE CHAIR CAN SPEAK TO THE WORLD REPRESENTING THE COMMITTEE. I THINK IT IS A SHAME THAT WE ONLY THINK WE ARE GOING TO FIND SOMETHING OUT ABOUT WHAT THEY ARE GOING TO DO WHEN THE CHAIR GIVES A SPEECH AWAY FROM THE COMMITTEE. I THINK WE WOULD LIKE TO KNOW THAT POLICY WILL CHANGE IT COMMITTEE MEETINGS, NOT JUST CAN’T STROP DURING SPEAK — HINTS DROPPED DURING SPEECHES. I THINK THE DOT PLOT IS A DIFFERENT PROBLEM BECAUSE IT ANCHORS POLICY. IT CREATES INERTIA IN POLICY THAT I DON’T THINK IS HELPFUL. THERE’S AN UNCERTAINTY ABOUT THE ECONOMY AND IT WILL BE PARTICULARLY BINDING AN AWKWARD TO PRETEND THIS IS HELPFUL TO SPELL OUT WHERE WE WILL BE. WHEN I RAN THE OPEN MARKET FOR THE FED YEARS AGO, IT WAS A BIG DEAL TO IMAGINE WE KNOW WHAT WOULD HAPPEN AT THE NEXT MEETING. NO ONE HAD ANY IDEA. NO ONE WOULD WANT TO BIND THEIR HANDS AS TO WHERE THEY THINK THEY WOULD BE TWO OR THREE MEETINGS AWAY. THAT IS A HEALTHY OUTCOME, TO REALIZE THAT UNCERTAINTY IS NATURAL IN THE ECONOMY. SCARLET: IS FORWARD GUIDANCE MORE OF A BLUNT HAMMER OR A DEVICE THAT LACKS — PETER: I THINK FORWARD GUIDANCE WAS USED TO PUMP UP ASSET PRICES. HOUSE PRICES AND EQUITY VALUES. HE WANTED TO HOLD LONG-TERM RATES DOWN FOR A LONG TIME. YOU MIGHT NOT ALWAYS WANT TO BE DOING THAT. IT IS MORE DIFFICULT WHEN YOU WANT ASSET PRICES TO GO WHERE THEY WILL AND NOT JUST WHERE THE FED IS DIRECTING THEM TO GO TO THAT IS WHAT THE FED HAS TO GET OUT OF AND THAT IS THE EXIT PROBLEM THEY ARE HAVING. JOE: WE HAVE SEEN OIL IS HAVING A MASSIVE YEAR. IN YOUR VIEW, HOW MUCH DID RISING OIL, RISING GAS PRICES PLAY INTO INFLATION EXPECTATIONS AND ULTIMATELY INTO REAL POLICY? PETER: IT IS AN IMPORTANT PART, BUT WHAT THE FED WILL LOOK FOR IS TO SEE WHETHER A RISE IN OIL PRICES GETS EMBEDDED ELSEWHERE. I THINK THE PUBLIC HAS MISUNDERSTOOD THIS AND THE FED HAS NOT IN AS ARTICULATE AS IT SHOULD BE. THE REASON TO LOOK AT CORE AND CPI WITH ENERGY IN IT IS TO SEE WHETHER BIG MOVEMENTS, VOLATILE MOVEMENTS IN COMMODITY PRICES GET EMBEDDED IN NON-ENERGY PRICES. IF YOU ARE EATING OUT ON THE HIGHWAY, DOES THE FOOD AWAY FROM HOME REFLECT HIGHER ENERGY PRICES? NOW IT IS GETTING EMBEDDED IN THE PSYCHOLOGY OF INFLATION. I THINK THAT IS THE THING THAT THE FED WILL BE LOOKING FOR. SCARLET: PETER FISHER FROM DARTMOUTH COLLEGE. REMEMBER ON WEDNESDAY, YOU WILL WANT TO WATCH OUR SPECIAL COVERAGE OF THE HIGHLY ANTICIPATED FED DECISION. THAT BEGINS AT 1:00 P.M. IN NEW YORK. ♪ JOE: EXXON MOBIL CEO REX TILLERSON IS SAID TO BE UNDER CONSIDERATION FOR SECRETARY OF STATE. >> TILLERS AND — TILLERSON, HE IS A WORLDWIDE PERSONALITY AND TO GO FROM CEO OF EXXON — HE IS LEAVING EXXON. HE IS OFF TO A DIFFERENT PART OF HIS LIFE. JOE: KEVIN CIRILLI JOINS US NOW. HOW CONFIDENT DOES IT LOOK LIKE TILLERSON IS GOING TO BE THE PICK, AND HOW HAVE THESE PEOPLE HAD A CHANCE TO DIGEST THE NEWS? KEVIN: THE OIL INDUSTRY LIKES IT. I PUT THAT QUESTION TO TWO TRUMP TRANSITION SOURCES TODAY. THEY TOLD ME TO EXPECT AN ANNOUNCEMENT SOMETIME IN THE NEXT TWO DAYS ABOUT WHO THE PICK WILL BE. IS THE PERCEIVED FRONT RUNNER — TILLERSON IS THE PERCEIVED FRONT RUNNER. SCARLET: IF HE IS CHOSEN, TILLERSON COULD HAVE TROUBLE BEING APPROVED IN CONGRESS. NOT JUST FROM DEMOCRATS, BUT FROM REPUBLICANS AS WELL. JOHN MCCAIN, MARCO RUBIO. KEVIN: YOU HAVE FOLKS LIKE SENATORS MCCAIN AND RUBIO WHO HAVE HAD A ROCKY RELATIONSHIP WITH TRUMP IN THE PAST, CRITICIZING HIM FOR HIS PERCEIVED WRANGLINGS WITH RUSSIA. I WOULD ANTICIPATE THAT RIGHT NOW, THE TRANSITION OFFICIALS ARE DOING EVERYTHING THEY CAN TO SHORE UP SUPPORT. WE DID SEE TRUMP GIVE AN INTERVIEW AND TWEET OUT. CLEARLY THIS IS SOMEONE HE THINKS HIGHLY OF, BUT WHETHER OR NOT HE WOULD BE ABLE TO GET CONFIRMED REMAINS TO BE SEEN. A LOT OF INTRIGUE AROUND THIS PICK IS JUST A LATEST DEVELOPMENT IN WHAT HAS BECOME A FASCINATING JOURNEY FOR THE SECRETARY OF STATE PICK. JOE: DO THE HEADLINES OVER THE LAST FEW DAYS OVER RUSSIA AND WIKILEAKS AND ITS REPORTED PREFERENCE OF DONALD TRUMP MAKE THE TILLERSON PICK MORE DIFFICULT GIVEN THE LACK OF DESIRE FOR MORE RUSSIA HEADLINES? KEVIN: TRUMP KNOWS HOW TO DRIVE AND MANIPULATE THE MEDIA. I WOULD ANTICIPATE MORE HEADLINES INVOLVING THE RUSSIAN INVOLVEMENT IN THE ELECTION WEDNESDAY. JOE: KEVIN CIRILLI, THANK YOU VERY MUCH. ♪ SCARLET: WHEN WE LOOK AHEAD TO TOMORROW, DON’T MISS THIS. OVERNIGHT YOU HAVE CHINA RELEASING DATA FOR NOVEMBER INDUSTRIAL PRODUCTION. JOE: TOMORROW IS THE START OF A TWO-DAVE FED MEETING THAT COULD DISCUSS THE FIRST HIKE SINCE LAST YEAR. ON WEDNESDAY, WE WILL HAVE SPECIAL COVERAGE BEGINNING AT 1:00 P.M. ON TELEVISION AND RADIO OF THE ANNOUNCEMENT. SCARLET: THANKS FOR WATCHING. JOE: HAVE A GREAT EVENING. THIS IS BLOOMBERG. ♪ NINA: GOLDMAN SACHS PRESIDENT GARY COHAN WAS THE HEIR APPARENT TO LLOYD BLANKFEIN AND HAS ACCEPTED THE JOB AS PRESIDENT TRUMP WATCH CHIEF ECONOMIC POLICY ADVISER. THE KREMLIN IS DISPUTING CLAIMS THAT IT USED TO HACKING TO INTERFERE WITH THE PRESIDENTIAL ELECTIONS. THE PRESS SECRETARY TO VLADIMIR PUTIN TOLD REPORTERS THAT THE ALLEGATIONS HAVE NOTHING TO DO WITH REALITY. TRUMP AND HIS TEAM ARE PUSHING BACK ON THE CLAIM. A BRAZILIAN SOCCER PLAYER WHO SURVIVED THE DEADLY PLANE CRASH IN COLOMBIA HAS WOKEN UP FROM A COMA. THE PLAYER HAD NO MEMORY OF THE CRASH. HE WANTED TO KNOW THE OUTCOME OF THE GAME. 71 PEOPLE DIED. GERMAN CHANCELLOR ANGELA MERKEL THIS A PRIEST WITH PRESIDENT-ELECT TRUMP ON CHINA. MERKEL SAYS SHE IS STANDING BY THE ONE CHINA POLICY. TRUMP SAYS THAT UPHOLDING THE ONE CHINA POLICY WILL DEPEND ON TRADE. THIS IS BLOOMBERG. ♪ EMILY: I AM EMILY CHANG AND THIS IS “BLOOMBERG TECHNOLOGY.” PRESIDENT-ELECT TRUMP INVITES TECH METERS TO MEET THIS WEEK. MY EXCLUSIVE INTERVIEW WITH INVESTOR, ENTREPRENEUR, AND FORMER GOOGLE VENTURE CEO BILL GARRETT. WE FIND OUT WHAT HIS NEXT FOR THE MEDIA GIANT. FIRST TO THE LEAD. A TECH-FOCUSED MEETING OF THE MINDS AT TRUMP TOWER. THE PRESIDENT-ELECT SITS DOWN WITH TOP EXECUTIVES WHO LARGELY BACKED HILLARY CLINTON AND SPOKE OUT AGAINST HIM. AMONG THOSE ATTENDING, JEFF BEZOS, SHERYL SANDBERG, ELON MUSK, AND CHUCK ROBIN, LARRY PAGE, AND TIM COOK. THE MEETING IS A CHANCE FOR SILICON VALLEY TO FIND COMMON GROUND WITH THE NEW ADMINISTRATION. AFTER CLASHING ON KEY ISSUES LIKE INTEGRATION, TRADE, IMMIGRATION, AND — JOINING US IS BILL MERITS. I WOULD LOVE TO BE A FLY ON THE WALL AT THIS MEETING. WHAT DO YOU THINK IS GOING TO HAPPEN? DO YOU THINK THERE WILL BE A RECONCILIATION OF SORTS? BILL: I DON’T KNOW. I KNOW ALMOST ALL OF THE INDIVIDUALS WHO WERE REPORTEDLY ATTENDING AND THEY ARE ALL GOOD PEOPLE. TIM COOK IN PARTICULAR. A VALUE-DRIVEN PERSON. I THINK IT IS GOOD FOR PEOPLE TO TALK RATHER THAN TALK ABOUT EACH OTHER. EMILY: DO YOU HAVE CONCERNS ABOUT TRUMP IN THE OVAL OFFICE? BILL: I THINK IT IS A WAKE-UP CALL FOR A LOT OF PEOPLE, ESPECIALLY IN SILICON VALLEY WHO FOR ONCE DID NOT GET WHAT THEY WANTED AND STOP REFERRING TO THE REST OF THE COUNTRY AS FLYOVER COUNTRY. THERE ARE A LOT OF THINGS GOING ON THAT SILICON VALLEY HAS BEEN OUT OF TOUCH WITH. EMILY: YOU HAVE ANY CONCERNS ABOUT THE FUTURE OF SILICON VALLEY UNDER DONALD TRUMP? BILL: I HAVE CONCERNS THAT ARE DIFFERENT FROM THOSE. WE WERE TALKING EARLIER. I LEARNED THAT 62 PEOPLE IN THE WORLD CONTROL AS MUCH WEALTH AS THE POOREST 4 BILLION. THAT IS STUNNING. THEY COULD FIT IN THIS ROOM AND I PROBABLY KNOW HALF OF THEM. THAT IS DOWN FROM ALMOST 400 PEOPLE SIX YEARS AGO. I THINK THERE ARE REAL PROBLEMS TO TALK ABOUT THAT ARE DIFFERENT WEATHER THAN SILICON VALLEY WILL GET ALONG WITH THE PRESIDENT. EMILY: YOU ARE A CLOSE FRIEND WITH PETER THIEL, WHO WAS THE LOAN SILICON VALLEY TRUMP SUPPORTER. HOW DO YOU FEEL ABOUT HIS VIEWS HAVING A GREAT INFLUENCE ON THE PRESIDENT? BILL: PETER IS A FRIEND. HE CALLED IT. HE SAID THE ELECTION WOULD GO THIS WAY AND HE SAID FOR A COUPLE OF YEARS THAT PEOPLE WERE UNHAPPY AND PESSIMISTIC AND I THINK WE HAVE A NEW PRESIDENT WHO WAS ELECTED FAIR AND SQUARE. AS AN AMERICAN, I THINK WE SHOULD ALL WANT HIM TO BE SUCCESSFUL. I HAVE GREAT RESPECT FOR PETER. EMILY: HAS PETER ASKED YOU TO HELP IN ANY WAY? BILL: PETER ASKED, I WOULD HELP YOU. — IF PETER ASKED, I WOULD HELP HIM. I WILL LEAVE IT AT THAT. EMILY: YOU MOVE YOUR FAMILY DOWN TO SAN DIEGO, IN PART OF A DISILLUSIONMENT WITH SILICON VALLEY CULTURE. CAN YOU EXPLAIN THAT? BILL: THERE IS A BUBBLE HERE. A CONCENTRATION OF WEALTH, AND ON THE FLIPSIDE, A PURSUIT OF INNOVATION AND DISRUPTION, WHICH IS ADMIRABLE, BUT IT IS EASY TO BE PULLED INTO A VORTEX OF BELLYBUTTON GAZING AND SELF INTEREST. I DELIVER MEALS ON WHEELS. WHEN YOU GO OUT AND SEE REAL PEOPLE WHO WERE NOT BUILDING APPS, BUT WHO ARE HUNGRY OR ALONE, IT PUTS YOU A LITTLE MORE IN TOUCH WITH THE REST OF THE WORLD. EMILY: OUTSIDE THE VORTEX, THERE ARE STILL A LARGE AMOUNT OF PEOPLE WITH GREAT CONCERN ABOUT A TRUMP PRESIDENCY. THE CIA HAS TOLD CONGRESS THAT RUSSIA NOT ONLY TRIED TO HACK THE ELECTION, NOT ONLY HACKED THE ELECTION, BUT ALSO HACKED IT TO HELP DONALD TRUMP. TRUMP HAS ATTACKED THE CIA FOR THIS REVELATION, IF YOU WILL. WHAT IS YOUR REACTION TO THAT? BILL: I HAVE NOT SEEN ANY EVIDENCE MYSELF THAT THE OUTCOME WOULD HAVE BEEN DIFFERENT. EMILY: WE DON’T KNOW. BILL: NOR FOREIGN — NO FOREIGN POWER SHOULD INTERFERE IN OUR ELECTIONS. BUT AT THE END OF THE DAY, I THINK WE SHOULD JUDGE TRUMP ON WHAT HE DOES RATHER THAN WHAT HE SAYS OR WHAT OTHER PEOPLE SAY ABOUT HIM. I THINK THAT IS A GOOD RULE IN LIFE FOR ALL OF US TO FOLLOW. I THINK THIS NEWS ABOUT THE ELECTION IS JUST BREAKING. IT IS HARD TO KNOW WHAT HAPPENED AND WHAT DID NOT. EMILY: WHAT ABOUT THE IDEA THAT REX TILLERSON COULD BE THE SECRETARY OF STATE? A CEO OF EXXON AND SOMEONE WAS STRONG AND FRIENDLY TIES TO RUSSIA AND PUTIN. BILL: HE IS NOT SECRETARY OF STATE. TRUMP IS NOT PRESIDENT YET. EXXON MOBIL IS A GIANT CORPORATION AND INVOLVES A LOT OF RESPONSIBILITY TO RUN A COMPANY LIKE THAT. I WOULD NOT JUDGE — I TRY NOT TO CORRAL PEOPLE INTO WHAT THEY CAN BE AS TO WHAT THEY HAVE BEEN. I WOULD RATHER WAIT AND SEE. THE PROOF IS IN THE PUDDING. EMILY: TRUMP HAS SAID THAT CLIMATE CHANGE IS A HOAX AND YOU ARE SOMEONE WHO I KNOW IS VERY PASSIONATE ABOUT CLEAN ENERGY. YOU HAVE ANY CONCERNS ABOUT THE FUTURE OF CLEAN ENERGY? BILL: YEAH, I HAVE CONCERNS. THEY GO BEYOND THAT. I THINK RICK PERRY, WHO I DON’T KNOW PERSONALLY, BUT THE GOVERNOR OF A VERY LARGE STATE, AND ENERGY PRODUCING STATE. HE IS NOT IN THE POSITION YET. I DON’T KNOW IF HE HAS BEEN OFFICIALLY PICKED. EMILY: IT IS NOT OFFICIAL. BILL: IT IS PROBABLY NOT WORTH SPECULATING TOO MUCH BECAUSE PART OF THE PROBLEM FOR ME HAS BEEN TURNING EVERYTHING INTO FANTASY FOR ALL — FANTASY FOOTBALL. MAKING JUDGMENTS WHEN NOTHING HAPPENED YET. I HAVE CONCERNS AND WOULD LIKE TO SEE CLEAN ENERGY ADVANCE BUT I THINK BILL GATES HAD A GREAT ANNOUNCEMENT 24 HOURS AGO ABOUT THIS. EMILY: SOME OF THIS STUFF HAS NOT HAPPENED BUT THERE HAS BEEN A LOT OF TWEETING GOING ON. BILL: I AM NOT A TWEETER. I THINK WE WOULD ALL BE HEALTHIER THAT WITH THE CASE. EMILY: JACK MA, JEFF BEZOS ARE NOW IN THIS CLEAN ENERGY FUND. THE YOU THINK THIS FUND WILL MOVE THE NEEDLE IN AN AREA THAT HAS BEEN SLOW TO HAVE A BIG EXIT? BILL: I HOPE SO. I KNOW ALL OF THEM AND I ADMIRE THEM AND I THINK BILL GATES IN PARTICULAR HAS AN AMAZING TRACK RECORD, ESPECIALLY IN HEALTH CARE, HELPING TO RID THE WORLD OF POLIO, ON THE WAY TO DOING THE SAME WITH MALARIA. IF HE CAN DO IN ENERGY WHAT HE HAS DONE IN HEALTH CARE, IT WOULD BE FANTASTIC. EMILY: BILLMARIS. WE WILL BE RIGHT BACK WITH YOU. APPLE IS SAID TO HAVE HELD TALKS ABOUT INVESTING IN ITS $100 BILLION TECH FUND. APPLE MAY CONTRIBUTE UP TO $1 BILLION TO THE FUND, WHICH WILL GIVE THE COMPANY INSIGHT INTO UP AND COMING TECHNOLOGY. APPLE ALSO INVESTED $1 BILLION IN THE RIGHT HAILING — RIDE HAILING CAP DD. HALF OF THE $1 BILLION FUND WOULD BE INVESTED IN THE UNITED STATES. ALL EPISODES OF BLOOMBERG TECHNOLOGY ARE LIVE STREAMING ON TWITTER. CHECK US OUT ON WEEKDAYS. 5:00 P.M. IN NEW YORK. ♪ EMILY: ONLINE RETAIL SITE IS BANKING ON ITS RECENT SUCCESS WITH PLANS FOR EXPANSION. IT IS GOING TO DOUBLE ITS YOU TO — ITS U.K. MANUFACTURING. UNLIKE MANY RIVALS, THEY HAVE BENEFITED FROM THE DROP IN THE POUND AFTER THE BREXIT VOTE BECAUSE ABOUT 57% OF ITS SALES ARE OUTSIDE THE U.K.. TURNING BACK TO OUR EXCLUSIVE CONVERSATION WITH VENTURE CAUSED THE LIST — VENTURE CAPITALIST BILL MARIS. HE OVERSAW GOOGLE TECH AND LIFE SCIENCES. HE LEFT EARLIER THIS YEAR. LAST WEEK, HE PULLED THE PLUG. HE JOINS US WHY TO DISCUSS. WHY? YOU ARE ON TRACK TO CLOSE THIS WEEK AND SAID ACTUALLY, I’M NOT GOING TO DO THIS. BILL: I DID THIS CRAZY THING CALLED CHANGING MY MIND. WILD, I KNOW. I DID IT. I LEFT HUNDREDS OF MILLIONS OF DOLLARS BEHIND. I DID IT BECAUSE I FEEL LIKE THERE ARE A LOT OF VENTURE FUNDS RIGHT NOW IN THE VALLEY. EVERY COUPLE OF DAYS, I SEE NEW ANNOUNCEMENTS OF NEW FUNDS. I FELT LIKE AFTER 10 YEARS IN THE BUSINESS OR CLOSE TO IT, THERE MIGHT BE BETTER WAYS TO HAVE A BIGGER IMPACT ON PROBLEMS I THINK ARE WORTH TACKLING. EMILY: THERE WAS A REPORT OF $230 MILLION. DID YOU HAVE TROUBLE RAISING THE FUNDS THAT YOU WANTED? BILL: NO. THIS IS A TIME WHERE THERE IS TREMENDOUS CAPITAL AVAILABLE, ESPECIALLY IF YOU HAVE A TRACK RECORD THAT DOES NOT MEAN THAT IT IS THE RIGHT THING TO DO. INTEREST RATES ARE LOW. INSTITUTIONS ARE LOOKING FOR PLACES TO DEPLOY MONEY. VENTURE IS ONE OF THOSE PLACES. IT IS ALMOST OVERFUNDED. EMILY: YOU ARE PLANNING TO DO THIS ON YOUR OWN. I’M CURIOUS WHY. IF THERE ARE SO MANY OTHER FUNDS OUT THERE, WHY COULD YOU DO IT DIFFERENTLY? BILL: I DID THAT ONCE AT A PLACE CALLED GOOGLE VENTURE. VIRTUALLY EVERYTHING I HAVE DONE IN MY LIFE, APART FROM HAVING A CHILD, I HAVE STARTED IT ALONE. I WAS FORTUNATE TO BUILD AN AMAZING TEAM AT GOOGLE. THEY ARE DOING AN OUTSTANDING JOB. THERE ARE REAL PROBLEMS AS WELL. THERE ARE FUNDS OUT THERE I CAN HELP. I DON’T KNOW THAT BEING A PROFESSIONAL VC THAT THE WORLD NEEDS ANOTHER VENTURE FUND RIGHT NOW. EMILY: THE YOU THINK WE ARE IN A BUBBLE? BILL: I THINK WE ARE IN A HUGE BUBBLE. I THINK THE ELECTION IS A TESTAMENT TO THAT. I THINK THAT THERE IS ALMOST TOO MUCH CAPITAL AVAILABLE TO INVESTORS, WHICH RAISES PRICES, WHICH RAISES EXPECTATIONS, AND THERE ARE A LOT OF PEOPLE WORKING ON WHAT I WOULD THINK OF AS TRIVIAL PROBLEMS AS OPPOSED TO THE REAL PROBLEMS THAT THE COUNTRY FACES. EMILY: WHAT ARE THE TRIVIAL PROBLEMS? BILL: DO WE NEED ANOTHER MORE OPTIMIZED ADVERTISING SYSTEM TO FURTHER CONSUMER CULTURE BASED ON THE CONSUMPTION OF GOODS AND SERVICES? THERE NEEDS TO BE SOME BALANCE. EMILY: HOW DOES THIS PLAY OUT? IS THERE SOME SORT OF CATASTROPHE? BILL: DEPENDS ON HOW YOU DEFINE IT. MAYBE THOSE ARE GOOD THINGS TO HAPPEN. WHAT HAPPENS IS ULTIMATELY INTEREST RATES GO UP SOMETIME SOON. AS A RESULT, THE STOCK MARKET CORRECTS ANYWHERE TO 1000 OR MORE POINTS. THE PENDULUM WILL SWING THE OVERWEIGHT. — THE OTHER WAY. IT WILL SEEM LIKE ARMAGEDDON, BUT IT IS NOT THAT. WE ARE OVERDUE FOR A CORRECTION. EMILY: WHO IS HEADED FOR A WAKE-UP CALL? BILL: A LOT OF US GOT A WAKE-UP CALL IN NOVEMBER, YOU WILL SEE A LOT OF STARTUPS THAT WERE OVERLY OPTIMISTIC NOT BEING ABLE TO RAISE FUTURE ROUNDS. EMILY: I’M CURIOUS ABOUT WHY YOU LEFT GOOGLE AND I WONDER, DO YOU THINK THAT VC CAN’T BE DONE FROM INSIDE A BIG COMPANY VERY WELL? BILL: HOPEFULLY, MY LAST 10 YEARS PROVES THAT IT CAN BE. EMILY: YOU THINK THAT MODEL WORKS? BILL: I THINK IT WORKED. MY LAST DAY WAS AUGUST 12. BEYOND THAT, IT IS VERY DIFFICULT. RUNNING A VENTURE FUND IS VERY DIFFICULT. DOING IT INSIDE A MASIMO CORPORATION IS ALSO DIFFICULT. IT WAS SUCCESSFUL — A MASSIVE CORPORATION IS ALSO DIFFICULT. IT WAS SUCCESSFUL. CREATING THE SAME MODEL OUTSIDE OF GOOGLE, I DID NOT FEEL THAT INSPIRING AT THE END OF THE DAY, WHICH IS WHY I PULLED THE PLUG. EMILY: WHAT YOU MAKE — WHAT DO YOU MAKE OF THE TRANSITION WE HAVE SEEN INSIDE ALPHABET? YOU ARE NOT THE ONLY ONE TO LEAVE. BILL: EVERY BIG COMPANY HAS TURNOVER. I HAD A FANTASTIC TEAM OF PEOPLE WHO ARE ALL STILL THERE AND I WISH THEM HUGE SUCCESS BECAUSE I’M AN INVESTOR WITH THEM IN A LOT OF COMPANIES. EMILY: IS THIS JUST THE USUAL TURNOVER, OR IS IT SPAWNED BY THE CLEANING OF HOUSE? BILL: I THINK IT IS INTERESTING TO GO ON IT WHICH — A WITCHHUNT. AS FAR AS I’M CONCERNED, GOOGLE IS FILLED WITH FANTASTIC PEOPLE WHO WANT TO DO IMPORTANT THINGS. MY TEAM FEELS THAT WAY. I CANNOT SPEAK FOR THE COMPANY AT LARGE OTHER THAN I HAD AN AMAZING EXPERIENCE. LIKE ANYONE WHO WAS HIRED TO DO A JOB, YOU NEED TO KNOW WHEN THAT JOB IS DONE. I FELT LIKE MY JOB WAS DONE. EMILY: WHAT WILL YOU DO NEXT? WILL YOU BE ANGEL INVESTING? BILL: I DON’T KNOW. I WILL ANGEL INVESTOR I WILL HELP FUNDS AND COLLEAGUES AND COMPANIES LIKE I ALWAYS HAVE. THE NEXT FEW MONTHS ARE ABOUT TAKING A LOT OF CALLS AND TALKING TO PEOPLE AND SEEING HOW I CAN HELP. EMILY: YOU ARE VERY VOCAL ABOUT FAIR NOTE AND FORESAW SOME OF THE PROBLEMS. BILL: THAT IS STILL OF A THING. EMILY: WHAT IS THE APPETITE FOR FUNDING OF HEALTH CARE RELATED STARTUPS IN THE WAKE OF FAIR NOTE? BILL: I HAVE SEEN A HUGE INCREASE IN THE INTEREST OF LIFE SCIENCE, ESPECIALLY WHERE MACHINE LEARNING AND ARTIFICIAL INTELLIGENCE CAN BE APPLIED TO IMPROVE OUTCOMES FOR PATIENTS. FAIRNOTE IS AN UNFORTUNATE STORY BECAUSE IT ENDED UP HURTING PATIENTS. IT HAS NOT PUT A DAMPER ON INVESTORS’ APPETITE FOR INNOVATION. EMILY: BILL MARIS. WE WILL BE WATCHING TO SEE WHAT YOU DO NEXT FROM SAN DIEGO. THANK YOU FOR STOPPING BY. ADVANCED MICRO DEVICES IS TRYING TO MAKE UP GROUND ON RIVAL NVIDIA. ♪ EMILY: SKYPE IS WORKING TO MAKE LANGUAGE BARRIERS A THING OF THE PAST. THEY ARE WORKING ON MAKING A CONVERSATION IN TWO LANGUAGES SEAMLESS. YOU WILL NEED TO PAY CREDITS TO USE THE TOOL. TRANSLATION RUNS IN NINE LANGUAGES, INCLUDING ENGLISH, SPANISH, GERMAN, AND ARABIC. AMD IS TAKING AIM AT NVIDIA. AMD WILL BE OFFERING GRAPHICS CHIPS TAILORED FOR ARTIFICIAL INTELLIGENCE USE IN ITS DATA CENTER. IT WILL SPEED UP THE ABILITY FOR COMPUTERS TO TRAIN THEMSELVES AND GET BETTER AT IMAGE RECOGNITION. IN PLAIN ENGLISH, YOU SAY THAT AMD IS TRYING TO GET INTO THE BUSINESS OF RECOGNIZING YOUR VOICE, SORTING THROUGH PICTURES, AND OTHER TASKS THAT COMPANIES ARE TRYING TO TURN OVER TO AI WITH THESE JETS. IAN: THE TASK THAT YOU SAID, TRANSLATING THINGS IN SKYPE, RECOGNIZING WHETHER IT IS A DOG OR A PIG OR WHATEVER IN THOSE PICTURES. DOING THOSE IN PARALLEL. A GPU IS GOOD AT THAT. EMILY: THIS IS A CHIP THAT NORMALLY GAINS ARE BUILT ON. IAN: THAT IS EXACTLY IT. ALL OF THESE TEENAGERS LIVING IN THEIR PARENTS’ BASEMENT THAT HAVE GAMING SYSTEMS, THEY WILL PAY $1000 FOR A GRAPHICS CARD HAS A GIVES THEM THE MOST VIVID IMAGE. THOSE ARE THE CHIPS WE ARE TALKING ABOUT. EMILY: DOESN’T INTEL DOMINATE IN SERVICE? IAN: THEY HAVE A 99.4% MARKET SHARE IN SERVICE. THAT IS A $15 BILLION A YEAR BUSINESS. CHIPS ARE GOOD AT MULTITASKING, GOOD AT COMPLEX THINGS VERY QUICKLY, BUT NOT IN PARALLEL. EMILY: WHY HAS IT TAKEN THIS LONG FOR AMD TO BRING THIS KIND OF A PRODUCT TO MARKET? IAN: YOU WIND THE CLOCK BACK AND PEOPLE THOUGHT AMD WAS GOING OUT OF BUSINESS, THEY WERE RUNNING IN THE MARKET — THEY WERE RUNNING OUT OF MONEY. THEY LOST A LOT OF MARKET SHARE. IT HAS TAKEN THEM A LONG TIME TO GET TO THE POINT WHERE THEY ARE ABLE TO INVEST IN TECHNOLOGY AGAIN. EMILY: HOW BIG IS THE MARKET LIKELY TO GET? IAN: THAT IS THE QUESTION. RIGHT NOW, NVIDIA IS BRING IN A FEW HUNDRED MILLION A QUARTER. IT IS STILL A GOOD BUSINESS. COMPARED TO WHAT INTEL IS BRINGING IN, $15 BILLION A YEAR, NOT VERY MUCH. EMILY: YOU COVER THE ENTIRE CHIP INDUSTRY. THERE HAS BEEN SO MUCH AND MANDATE, SO MUCH ACTION, COMPANIES FALLING BEHIND, BETTING ON TECHNOLOGY. ASSESS THE LAY OF THE LAND IN TERMS OF WHO IS IN POSITION TO CAPITALIZE ON THE RISE OF AI IF IT IS AS BIG AS PEOPLE THINK IT WILL BE. IAN: INVESTORS HAVE BEEN GOING AFTER VIDEO. STOCK HAS MORE THAN DOUBLED. IT IS NOW A $40 MILLION COMPANY AND JUST ON THE PROMISE OF WHAT AI MIGHT MEAN. EMILY: WHO WILL BE LEFT TO SIGN? IAN: RECENTLY, INTEL MADE IT A LOT OF ANNOUNCEMENTS ABOUT HOW THEY WILL TRY TO BRING THEIR OUTSIDE TECHNOLOGY INTO THEIR LINEUP. THEY ARE TRYING TO RESPOND. IT IS THEIRS TO LOSE. EMILY: IN 2017, DO YOU THINK WE WILL SEE MORE AND MANDATE? A LOT OF PEOPLE SAY UNDER TRUMP, WE WILL SEE A LOT MORE M AND A. IAN: PRETTY MUCH EVERYBODY HAS BEEN BOUGHT OR FOLDED AT THIS POINT. ONE THING UNDER TRUMP IS FREEDOM FROM THE REGULATIONS THAT SOME OF THE BANKERS ARE BETTING ON, THAT THERE WILL BE LESS RESTRICTION ON M AND A. EMILY: IAN KING, THANK YOU SO MUCH FOR THAT UPDATE. HOW VENTURE CAPITALISTS ARE PREPARING FOR A TRUMP PRESIDENCY AND WHERE THEY ARE PLACING THEIR BETS IN 2017. MEGAN KING JOINS US NEXT. MAKE SURE TO WATCH “BLOOMBERG TECHNOLOGY” TUESDAY. MICHAEL WILL BE GOING TO THAT HIGHLY ANTICIPATED MEETING OF TECH LEADERS WITH PRESIDENT-ELECT TRUMP ON WEDNESDAY. ♪ NINA: “BLOOMBERG TECHNOLOGY.” YOU’RE WATCHING “BLOOMBERG TECHNOLOGY.” LET’S BEGIN WITH THE FIRST WORD NEWS. THE EUROPEAN UNION SETUP HOW IT WILL CONDUCT BREXIT NEGOTIATIONS WITH THE U.K.. ACCORDING TO A STATEMENT, YOU GOVERNMENTS WILL BE ASKED TO COMPLY SWIFTLY WITH THE TALKS. PRIME MINISTER THERESA MAY SAYS ARTICLE 50 WILL FORMALLY START WITHDRAWAL. THIEVES SET A TRUCK ON FIRE AND POLICE SAID THE TWO DRIVERS ARE RESCUED. SENATE MAJORITY LEADER MITCH MCCONNELL SAYS HE HAS THE HIGHEST CONFIDENCE IN THE INTELLIGENCE COMMUNITY, AFTER PRESIDENT-ELECT DONALD TRUMP ATTACKED THE CIA OVER ITS CONCLUSION THAT RUSSIA USE CYBER MEDDLING TO HELP INFLUENCE THE — TO HELP THEM WIN THE PRESIDENCY. PRESIDENT OBAMA WILL LEAVE — LEASE OFFICE SPACE AT WORLD WILDLIFE FUND HEADQUARTERS IN WASHINGTON, ACCORDING TO THE WASHINGTON POST. IT’S LOCATED IN THE AREA OF WASHINGTON DC CALLED FOGGY BOTTOM. GLOBAL NEWS 24 HOURS A DAY AND MORE THAN 120 COUNTRIES. THIS IS BLOOMBERG. IT’S JUST AFTER 5:30 P.M. MONDAY IN NEW YORK, 9:30 IN SYDNEY. PAUL, GOOD MORNING. PAUL: NEW ZEALAND HAS BEEN TRADING FOR 90 MINUTES NOW, THE ONLY MARKET OPEN AND IT’S LOOKING FLAT AT THE MOMENT. IT’S BETTER THAN CAN BE SAID FOR THE FUTURES MARKET AT THE MOMENT. NIKKEI FUTURES POINTING LOWER AND FUTURES ON THE AFX EXPECTING A DECLINE OF .4% WHEN TRADING GETS UNDERWAY IN AUSTRALIA IN THE NEXT 30 MINUTES. WE WILL KEEP AN EYE OUT ENERGY STOCKS ON THE AFX, THEY LED THE WAY ON MONDAY AND A FURTHER 2% BOOST TO THE OIL PRICE OVERNIGHT COULD MEAN ANOTHER GOOD DAY FOR ENERGY STOCKS. SAUDI ARABIA IS INTENDING TO CUT PRODUCTION FURTHER THAN ORIGINALLY PROMISED. OIL PRICES THE HIGHEST IN MORE THAN TWO YEARS WITH STOCKPILES AT CHINESE PORTS REACHING THE HIGHEST IN TWO YEARS. SHIPMENTS WERE UP 10% IN NOVEMBER OUT OF NOVEMBER SO THE IRON ORE REALLY PILING UP IN CHINA, WARNING OF PRICE FALLS FOR IRON ORE IN 26 — IN 2017. HERE IN AUSTRALIA WE HAVE THIRD QUARTER HOUSE PRICES AND THE BUSINESS CONFIDENCE SURVEY FOR NOVEMBER, AND CHINA CAP RETAIL SALES FOR NOVEMBER ESTIMATED AT 10.2% ON YEAR GROWTH THERE AND CHINA’S INDUSTRIAL PRODUCTION FOR NOVEMBER IS EXPECTED TO HOLD STEADY AT 6.1%. PAUL ALLEN IN SYDNEY, MORE NEXT ON “BLOOMBERG TECHNOLOGY.” EMILY: THIS IS “BLOOMBERG TECHNOLOGY.” I’M EMILY CHANG. SILICON VALLEY LEADERS HAD TO NEW YORK TO MEET WITH PRESIDENT ELECT TRUMP MANY BACKED HILLARY CLINTON DID NOT HOLD BACK THEIR DISDAIN FOR THEM. THE MEETING WILL BE A CHANCE FOR THEM TO FIND COMMON GROUND WITH THE NEW ADMINISTRATION AFTER CLASHING ON KEY ISSUES. ONE KEY QUESTION IS WHAT IT WILL MEAN FOR MOBILE TECH INVESTMENT AND HOW VENTURE CAPITALISTS SHOULD BE PREPARING FOR THE COMING YEAR. THERE IS MEGAN QUINN WHO KNOWS THE INVESTMENT LANDSCAPE ALL TOO WELL. SPARK HAS INVESTED IN COMPANIES LIKE TWITTER AND OCULUS. GOOD TO HAVE YOU HERE ON THE PROGRAM. WHAT DO YOU THINK THE TRUMP PRESIDENCY MEANS FOR SILICON VALLEY, AND HOW ARE YOU GUYS TALKING ABOUT THIS INTERNALLY? MEGAN: THERE IS A LOT OF UNCERTAINTY THAT FOLLOWS DONALD TRUMP. THERE HAS BEEN A LOT OF DISCUSSION AROUND THIS MEETING TOMORROW THAT WILL TAKE PLACE WITH VARIOUS TECHNOLOGY LEADERS. MY VIEW IS THAT THESE PEOPLE ARE VERY ACCOMPLISHED AND HELD AN EXTREMELY HIGH REGARD, AND WE NEED TO IS A PROUD — SURROUND THE PRESIDENCY AND THE CABINET WITH MORE SMART, INNOVATIVE THINKERS. I HOPE THEY ARE ABLE TO FIND SOME COMMON GROUND AROUND INNOVATION. I DON’T KNOW THERE WILL BE SPECIFIC TOPICS THEY GET TO THE BOTTOM OF IN AN HOUR-LONG MEETING, BUT I HOPE THEY OPEN UP A DIALOGUE BETWEEN THE PRESIDENT AND SILICON VALLEY. EMILY: HOW ARE YOU DIGESTING THIS AT SPARK? THERE’S A LOT OF UNCERTAINTY, THE MARKETS HAVE REACTED POSITIVELY IN SOME WAYS, BUT NOT OTHERS. THERE WAS A LOT OF WEIGHT IN C. MEGAN: — THERE IS A LOT OF WEIGHT AND SEE — WAIT AND SEE. WE ADVISE TO KEEP ON KEEPING ON. REALLY FOCUS ON YOUR BUSINESS. EMILY: YOU USED TO WORK AT KLEINER HOGANS — KLEINER PERKINS. I’M CURIOUS WHAT IS THE DIFFERENCE WHEN YOU LOOK AT GROWTH STAGE COMPANIES VERSUS EARLY-STAGE COMPANIES AND HOW HAS YOUR OWN STRATEGY SHIFTED? MEGAN: WHAT YOU ARE LOOKING FOR COMPANIES THAT HAVE ARTIE FOUND RODDICK MARKET FITS — WE ARE LOOKING FOR COMPANIES THAT HAVE ALREADY FOUND PRODUCT MARKET HITS. WE ARE LOOKING FOR METRICS WE CAN POINT TO WITHOUT HAVING TO SQUINT TOO HARD TO INDICATE THE INFLECTION POINT HAS ALREADY TAKEN PLACE. EMILY: DO YOU THINK THERE WILL BE MORE COMPETITION AT THE GROWTH STAGE NOW THAT THE BELT HAS BEEN TIGHTENING AT THE EARLIER STAGE? IT SEEMS LIKE FEWER COMPANIES ARE GETTING A LARGER POOL OF CAPITAL. MEGAN: THERE IS CERTAINLY A TREMENDOUS AMOUNT OF CAPITAL AVAILABLE. WE THINK THERE IS A DEARTH OF WONDERFUL INVESTORS WHO CAN ADD VALUE TO PORTFOLIO COMPANIES AT THAT GROWTH STAGE. EMILY: OUR GUEST WHO WAS JUST ON THINKS WE ARE IN A HUGE BUBBLE. WHAT IS YOUR REACTION TO THAT? MEGAN: WE THINK IF YOU’RE BUILDING AN INCREDIBLE COMPANY, THERE WILL BE PLENTY OF CAPITAL FOR YOU BUT IT’S FINDING A PARTNER THAT WILL BE GOOD FOR YOUR BUSINESS, NOT JUST A BLANK CHECK FOR YOU CAN GET IT. EMILY: YOU INVESTED $20 MILLION IN A COMPANY. THIS IS AN ENTERPRISE SOFTWARE STARTUP. WHAT DO WE MAKE OF THAT DECISION? MEGAN: SPARK HAS A LONG HISTORY OF INVESTING IN THESE COMPANIES. THERE IS A TREND WE ARE EXTREMELY EXCITED ABOUT. IT’S TICKLING CALL CONSUMERIZATION OF THE ENTERPRISE. WE EXPECT AS INDIVIDUALS FOR THE PRODUCTS AND SERVICES WE USE AT WORK TO LOOK AND FEEL LIKE THE PRODUCTS AND SERVICES WE USE AT HOME. IT DOESN’T MATTER IF WE ARE BEHIND A DESK OR BEHIND A BAR. WE WANT IN GAUGING PRODUCTS IN THE WORKFORCE. THIS OFFERS A FULLY INTEGRATED PLATFORM FOR ENTERPRISE COMPANIES TO BUILD BETTER PRODUCTS FOR THE END CONSUMER. EMILY: THEY ARE BASED IN RALEIGH, NORTH CAROLINA, OF ALL PLACES. TALK ABOUT GETTING OUTSIDE THE VORTEX. ARE YOU LOOKING BEYOND SILICON VALLEY MORE OFTEN NOW TO FIND THOSE DIAMONDS IN THE ROUGH? MEGAN: WE ARE ALWAYS HAPPY TO GET ON A PLANE. MY VIEW IS BUILDING A COMPANY OUTSIDE THE BAY AREA BUBBLE IS A COMPETITIVE ADVANTAGE. THEY SIT AT THE INTERSECTION OF THREE VERY WELL-KNOWN UNIVERSITIES AND HAVE INCREDIBLE ACTS US TO TALENT AT MUCH CHEAPER COSTS, SO WE CONSIDER THAT A POSITIVE WHEN IT COMES TO INVESTING IN A PLACE LIKE RALEIGH. EMILY: WHERE ARE YOU LOOKING IN 2017, GIVEN THE UNCERTAINTY AND THE CLIMATE RIGHT NOW? MEGAN: WE WILL RIDE OUT THE MACRO SHIFT TOWARD MORE CONSUMER FEELING PRODUCTS IN THE MARKETPLACE. WE THINK THERE IS TREMENDOUS OPPORTUNITY WITH COMPELLING, ENGAGING, DELIGHTFUL PRODUCTS IN THE WORK WASTE. IN ADDITION, WE TEND TO BE FOUNDER DRIVEN BY TREND. WE ARE EXCITED ABOUT APPLIED AI. HISTORICALLY BEEN RELEGATED TO R AND D DEPARTMENTS AND WERE STARTING TO SEE PRODUCTS AND SERVICES THAT CONSUMERS USE. NOW WITH VAST AMOUNTS OF DATA, THE ALGORITHMS CAN LEARN OVER TIME. WE ARE ALSO EXCITED PERSONALLY ABOUT THE R AND AR IN THE ENTERPRISE. THERE MIGHT BE MORE ADOPTION OF THE ENTERPRISE IN THESE SERVICES THAN IN CONSUMER LIFE. IT MIGHT FOLLOW THE PATH OF THE PC. EMILY: YOU ARE SPARK’S FIRST FEMALE PARTNER AND I KNOW YOU’RE VERY PASSIONATE ABOUT THIS ISSUE OF DIVERSITY. I’M CURIOUS, WHAT DO YOU THINK IT IS GOING TO TAKE TO SEE ACTUAL CHANGE? WHERE DO YOU THINK THE CHALLENGE IS STILL LIE? MEGAN: MY VIEW IS YOU CANNOT SEE WHAT YOU CAN’T SEE. I AM A GENERAL PARTNER AT A VENTURE FIRM BECAUSE I HAD A WOMAN GENERAL PARTNER ON MY BOARD IN MY PREVIOUS ROLE AT SQUARE. THAT WAS MARY MEEKER. SHE STOOD OUT AS SOMEONE I COULD BE LIKE. WE NEED TO HAVE MORE WOMEN IN SENIOR POSITIONS SO THE NEXT GENERATIONS UNDERSTANDS THERE ARE MORE OPPORTUNITIES FOR THEM IN THEIR CAREER PATH. EMILY: THANK YOU SO MUCH FOR JOINING US. ONE DISCLOSURE, MEGAN IS A BOARD MEMBER AT THE COMPANY HANDSHAKE WHERE MY HUSBAND CURRENTLY WORKS. TWO TOP REPUBLICAN LAWMAKERS OFFERED STRONG SUPPORT FOR U.S. INTELLIGENCE MONDAY. IN SHARP CONTRAST TO RESIDENT ELECT TRUMP WHO TO STARTED — DISPUTED REPORTS THAT THE RUSSIAN GOVERNMENT HELPED HIM WIN. SENATE MAJORITY LEADER MITCH MCCONNELL AND HOUSE SPEAKER PAUL RYAN PRAISE THEM FOR TAKING ON CYBER THREATS TO THE GOVERNMENT. THE PRESS SECRETARY TO VLADIMIR PUTIN TOLD REPORTERS TODAY THAT THE ALLEGATIONS HAVE NOTHING TO DO WITH REALITY. TRUMP AND HIS TEAM ARE PUSHING BACK ON THE CLAIMS AS WELL. COMING UP, VIACOM AND CBS WALK AWAY FROM A POTENTIAL DEAL. MEANTIME, $.10 IS LOOKING TO COVER THE BLOCKBUSTER BOOM. THIS IS BLOOMBERG. ♪ EMILY: THE GOLDEN GLOBE NOMINATIONS WERE ANNOUNCED TODAY, BUT STREAMING NETWORKS APPEAR TO BE LOSING THEIR LUSTER. NETS — NETFLIX SCORED FIVE NOMINATIONS, THE LOWEST NUMBER SINCE ENTERING THE AWARDS RACE THREE YEARS AGO. AMAZON STUDIOS GOT FIVE NOMINATIONS, DESPITE THE DRAMATIC INCREASE IN THE NUMBER OF ORIGINAL SERIES ON THE PLATFORM. TURNING TO THE MEGADEAL THAT WASN’T. MERGER TALKS BETWEEN VIACOM AND CBS BROKE DOWN WITH SHERRY REDSTONE PULLING THE PLUG ON THE DEAL. LEAVING HIM IN CHARGE OF THE COMPANY’S TURNAROUND. LUCAS SHAW HAS BEEN COVERING THIS AND JOINS US FROM L.A. WITH MORE. THE COMPANY HAS BEEN THROUGH WHIPLASH OVER THE LAST SEVERAL MONTHS. WHAT DOES HE BRING TO THE TABLE? LUCAS: HE BRING SOME MEASURE OF STABILITY. HE HAS BEEN IT VIACOM FOR A LONG TIME BUT WAS NOT PART OF THE CABAL LEADERSHIP. HE RAN THE INTERNATIONAL BUSINESS FOR ABOUT THE LAST DECADE SO HE HAS A BIG PRIORITY THERE AND HE THINKS HE CAN APPLY SOME OF WHAT HE LEARNED THERE TO ENERGIZE THE U.S. BUSINESS. I THINK MOST PEOPLE IT VIACOM HAVE JUST BEEN SUFFERING THROUGHOUT THE YEAR AS THEY SEEM TO BE READING NEW NEWS ABOUT THEIR COMPANY AND THE PRESS EVERY WEEK OR SO WILL BE HAPPY A COUSIN MEANS ALL THE TURMOIL IS OVER. IT’S NOT GUARANTEED, BUT IT SEEMS LIKE FOR NOW WE HAVE REACHED A STATUS QUO. EMILY: IT SEEMS LIKE THE DEAL FELLOW — FELL APART BETWEEN — BECAUSE OF A POWER STRUGGLE BETWEEN SHERRY REDSTONE AND LES MOONVES. >> I WOULD SAY THERE’S DEFINITELY NEGOTIATION AND HAPPEN BETWEEN THE TWO OF THEM. HOW MUCH OF IT WAS A POWER STRUGGLE IS UNCLEAR. MOST PEOPLE I SPOKE TO SAID IT BROKE DOWN MORE OVERPRICED AND GOVERNANCE. LES MOONVES WANTED ASSURANCES THAT HE WOULD HAVE A GREAT DEAL MORE CONTROL THAN EVEN HAS AT CBS. PEOPLE SAID HE WAS GOING TO GET THAT, BUT AS TIME WENT BY, SHERRY REDSTONE BECAME INCREASINGLY COMFORTABLE AND BOB BACK-ISH CONVINCED HER HE COULD MAKE IT MORE VALUABLE — BACK CONVINCED HER HE COULDISH MAKE IT MORE VALUABLE. THEY COULD NEVER COME TO TERMS THAT EITHER SIDE WAS COMFORTABLE WITH. EMILY: THERE ARE REPORTS OF INTEREST FROM OTHER COMPANIES FOR CBS, INCLUDING VERIZON. WHAT DO YOU KNOW? >> NOT MUCH ON THAT FRONT. SOURCES ARE SAYING THAT VERIZON PROBABLY DOES NOT WANT TO BUY CBS, AND I DON’T KNOW THAT CBS IS A WILLING SELLER RIGHT NOW. CBS IS A VERY STREAMLINED COUNTRY. DOWN THE ROAD IT COULD BE MERGED OR SOLD TO SOMEONE. LES MOONVES MAY WANT TO SELL TO SOMEONE, BUT THERE ARE NO TALKS HAPPENING RIGHT NOW. THERE WERE PEOPLE THIS MORNING WHO WERE SURPRISED BY HER MOVE. THAT LETTER CAME SORT OF FROM OUT OF NOWHERE. EMILY: LET’S TALK MORE ABOUT BACKISH’S STRATEGY. WHAT DO WE KNOW ABOUT HIS PLANS TO TURN THE COMPANY AROUND? >> YOU HAVE SEEN A BUNCH OF LEADERSHIP CHANGES AT THE DIFFERENT NETWORKS ALREADY. MTV GOT A NEW BOSS A COUPLE OF MONTHS AGO. THE PARAMOUNT MOVIE STUDIO JUST GOT A NEW COO. COMEDY CENTRAL HAD AN LEADERSHIP — HAD A LEADERSHIP CHANGE RELATIVELY RECENTLY. HE’S GOING TO MAKE SURE THAT ALL THOSE DIVISIONS HAVE A STRATEGY FOR HOW THEY WILL TURN THEMSELVES AROUND. SINCE TAKING OVER, HE HAS ASSEMBLED DIFFERENT LEADERSHIP COMMITTEES TO TRY TO DISCUSS WHAT IS THE PLAN FOR MTV AND COMEDY CENTRAL. EVERYBODY INVOLVED KNOWS WHAT THE PRESSURE POINTS ARE. THEY’RE JUST HASN’T BEEN AN EFFECTIVE MEANS OF TURNING THEM AROUND. WHAT THE SPECIFICS ARE ON THOSE PLANS WILL PROBABLY COME OUT OVER THE NEXT WEEKS AND MONTHS. EMILY: LUCAS SHAW IN L.A., THANKS FOR BRINGING US THAT UPDATE. STAYING WITH MEDIA, ASIA’S LARGEST MEDIA COMPANY IS GEARING UP FOR A MAJOR PUSH INTO HOLLYWOOD. THEY WILL MAKE THEIR OWN BLOCKBUSTERS INSTEAD OF JUST WRITING CHECKS FOR THEM. THEY WILL BE WORKING WITH SOME OF THE INDUSTRY’S TOP TALENT ON THE BIG SCREEN. OUR REPORTER COVERS 10 SENT. WHY ARE THEY HUNTING FOR ACQUISITION IN HOLLYWOOD? >> LIKE YOU SAID, TENCENT NOT ONLY WANTS TO WRITE THE CHECK, THEY WANT TO WRITE THE SCRIPT FOR HOLLYWOOD MOVIES. ACQUISITION IS JUST ONE WAY TO EXPEDITE THEIR EXPANSION PLANS. THEY’RE COMPLETING WITH — COMPETING WITH ALIBABA FOR A $10 BILLION MARKET. BY THESE ACQUISITIONS, ANYTHING FROM STUDIOS TO CREATIVE PRODUCTION HOUSES, THEY CAN EXPEDITE THOSE PLANS. TENCENT SAID THEY ARE VERY OPEN TO ALL KIND OF POSSIBILITIES, PROVIDED THOSE COMPANIES COMPLEMENT THEIR OWN RESOURCES AND THE PRICING IS RIGHT. EMILY: IN LIGHT OF RECENT POLITICAL DEVELOPMENTS, DONALD SELECTION, POTENTIALLY INCREASING TENSION WITH THE CHINESE GOVERNMENT? >> THE U.S. AND CHINA’S RELATIONS OR AT A VERY TENSE TIME RIGHT NOW. WE ARE SEEING A LOT OF RHETORIC AND CRITICISM SAYING THE U.S. NEEDS TO BE MORE CRITICAL OF THESE CHINESE TAKEOVERS, ESPECIALLY WITH TRUMP CRITICIZING CHINESE TRADING CURRENCY POLICIES. TENCENT AS PART OF A GROUP OF COMPANIES THAT ARE LOOKING TO INVEST OR HAVE ALREADY INVESTED IN U.S. STUDIOS. FOR EXAMPLE, ALIBABA INVESTING IN STEVENS THE WORKS — STEVENS — STEVEN SPIELBERG CROSS COMPANY. MOVIES ARE VERY POWERFUL AND INFLUENCE PUBLIC OPINION. GOING FORWARD, THESE COMPANIES COULD FACE SOME HEADWINDS. EMILY: WHAT KIND OF GENRE WILL TENCENT FOCUS ON? >> THEIR STRONGHOLD IS IN GAMES. WE SEE THAT THEY OPERATE LEAGUE OF LEGENDS. ALREADY THEY HAVE INVESTED INTO WAR CRAFT AND SKULL ISLAND. FAN BOYS IS THE GENRE THEY ARE TARGETING MOST. GOING FORWARD WE WILL SEE A LOT OF FANTASY ADVENTURE NOVELS BEING ADAPTED INTO MOVIES. THAT SAID, THEY ARE NOT CLOSE TO ONLY INVESTING IN ONE TYPE OF MOVIE. EMILY: FASCINATING, THE RACE FOR HOLLYWOOD OF CHINESE TECH TITANS. THANKS SO MUCH, LULU. COMING UP, MICROSOFT IS TAKING A SECOND SHOT AT CHAT BOX. WE WILL SEE IF IT IS NEWER THAN ITS PREDECESSOR. WATCH OUR SPECIAL COVERAGE OF THE HIGHLY ANTICIPATED FED DECISION THAT STARTS AT 10:00 A.M. IN SAN FRANCISCO, RIGHT HERE ON BLOOMBERG TELEVISION, BLOOMBERG RADIO, AND BLOOMBERG.COM. THIS IS BLOOMBERG. ♪ EMILY: INSTAGRAM’S LIFE FEATURE IS COMING TO THE U.S. IN THE COMING DAYS. THE LIVE FEATURES WILL BE IN THE STORY SECTION OF THE APP AND LIVE VIDEOS WON’T BE STORED ON INSTAGRAM MEANING THEY CAN ONLY BE SEEN WHILE YOU ARE BROADCASTING. THAT DIFFERENTIATES IT FROM FACEBOOK WHICH ARCHIVES LIVESTREAM ON ITS PLATFORM. INSTAGRAM FIRST ANNOUNCES PLANS FOR LIVE CONTENT IN NOVEMBER. WE WILL BE WATCHING. MICROSOFT IS TESTING A NEW CHAT BOX ON THE APP KIK. OUR BLOOMBERG TECH REPORTER TIED OUT THE NEW — TRIED OUT THE NEW BOT. >> A LOT OF PEOPLE EXPECT THE WAY YOU WILL INTERACT WITH ELECTRONIC DEVICES IN THE FUTURE WILL BE IN CONVERSATION WITH ARTIFICIAL INTELLIGENCE BOTS. IT’S LIGHTLY BACKFIRED WHEN THEY CREATED THIS EXPLETIVE SPEWING BOT NINE MONTHS AGO. THEY ARE QUIETLY TRYING AGAIN. THEY HAVE A BOT ON THE APP KIK, AND WE ARE GOING TO TRY IT OUT. LET’S START WITH, WHO IS BARACK OBAMA? >> NO, I’M NOT TALKING ABOUT THIS WITH YOU. IT SOUNDS LIKE MY PARENTS AT THE DINNER TABLE WHEN POLITICS COMES UP. MAYBE MORE INTRICATE ONE. SHOULD WE GET RID OF THE ELECTORAL COLLEGE? >> I’M OUT, WITH A LITTLE WAVY HAND. ONE THAT IS CLOSE TO MY HEART. SHOULD BRITAIN LEAVE THE EU? I’VE NEVER BEEN THERE, IS HER RESPONSE TO THAT. SHE IS MISSING OUT, QUITE CLEARLY. EVERYONE SHOULD GO THERE WITH THE POUND SO CHEAP. WHO IS CEO OF MICROSOFT? >> WE HAVE NOT MET YET. FINAL ONE FOR HER, THE FORMER MICROSOFT CEO STEVE BALLMER, DO YOU LIKE STEVE BALLMER? >> I KNOW THEY ARE ASSOCIATED WITH THE COMPANY SO I AM EXCITED TO MEET THEM. I THINK IT IS QUITE AN INTERESTING TAKE AWAY. HER COMMENTS WERE NOT GROSSLY OFFENSIVE. EMILY: THAT’S ALEX WEBB THERE. THAT DOES IT FOR THIS EDITION OF “BLOOMBERG TECHNOLOGY.” BE SURE TO WATCH TUESDAY’S SHOW, WE WILL DISCUSS THE SOUTH CHINA MORNING POST AND MICHAEL BECKERMAN, CEO OF THE INTERNET ASSOCIATION. TECH LEADERS ATTEND A HIGHLY ANTICIPATED MEETING WITH PRESIDENT ELECT TRUMP AND BECKERMAN WILL BE ADVISING THEM. WEEKDAYS 5:00 P.M. IN NEW YORK, 2:00 P.M. IN SAN FRANCISCO. THAT IS ALL FOR TODAY. WE WILL SEE YOU TOMORROW. THIS IS BLOOMBERG. ♪ ♪ >> FROM OUR STUDIOS IN NEW YORK CITY, THIS IS “CHARLIE ROSE.” CHARLIE: WE BEGIN WITH CYBER SECURITY AND THE OBAMA ADMINISTRATION. THE PRESIDENT ORDERED A FULL REVIEW OF RUSSIA’S ELECTION RELATED HACKING. THE HOMELAND SECURITY VISOR TOLD REPORTERS ABOUT THE INVESTIGATION ON FRIDAY MORNING. SHE SAID THE ORDER WILL BE DELIVERED BEFORE PRESIDENT OBAMA LEAVES OFFICE ON JANUARY 20. ANNOUNCING THAT CYBER SECURITY ISSUES WOULD BE A SIGNIFICANT FOCUS OF THE SENATE ARMED FORCES COMMUNITY THAT HE WOULD CHAIR. JOINING ME IS SENATOR JOHN MCCAIN. WHY ARE YOU MAKING THAT ANNOUNCEMENT TODAY? JOHN: WELL, OBVIOUSLY, ONE OF THE ISSUES, THE SITUATIONS THAT BROUGHT THIS TO A BOIL IS THE ALLEGATIONS OF RUSSIAN IN — RUSSIA INTERFERE NOT ONLY IN OUR ELECTIONS, BUT IN OTHER ELECTIONS AROUND THE WORLD. THAT UNDERMINES, OBVIOUSLY, THE FUNDAMENTALS OF DEMOCRACY, IF THEY ARE ABLE TO SUCCEED. BUT MORE IMPORTANTLY, CHARLIE, TESTIMONY BEFORE THE COMMITTEE BY OUR MILITARY AND CIVILIAN LEADERS IN DEFENSE HAVE ALL STATED THAT CYBER IS ONE OF THE AREAS WHERE WE DO NOT HAVE AN ADVANTAGE OVER OUR POTENTIAL ADVERSARIES. WE NOT ONLY DON’T HAVE AN ADVANTAGE, IN SOME INSTANCES, THEY HAVE AN ADVANTAGE. THESE HEARINGS WILL BE FOCUSED ON THE OVERALL ISSUE OF CYBER SECURITY, AND OBVIOUSLY, THEIR ABILITY OR INABILITY TO EFFECT THE OUTCOME OF ELECTIONS IN DEMOCRATIC COUNTRIES WOULD CERTAINLY BE ONE OF THE ISSUES, BUT ONLY ONE. CHARLIE: BUT YOU ARE SAYING YOU’LL HAVE YOUR OWN INVESTIGATION AT THE ARMED SERVICES COMMITTEE. JOHN: MY UNDERSTANDING AMONG OTHER THINGS IS ITS NOT WHETHER THEY ARE JUST HACKING INTO THE LAST ELECTION. BY THE WAY, THE CHINESE HACKED INTO MY ELECTION IN 1980. THIS HAS TO BE BROUGHT AND ENCOMPASSING. WE HAVE ALREADY HAD HEARINGS IN THE ARMED SERVICES COMMITTEE ON THIS. WE’VE ASKED ALL OUR MILITARY WITNESSES. NOW WE HAVE TO FOCUS ON THE INCOMPETENT ASPECTS OF A CHALLENGE, WHETHER IT BE THEIR ABILITY TO SHUT DOWN OUR SATELLITES OR STEAL OUR MOST IMPORTANT SECRETS, SUCH AS OUR NEW WEAPONS SYSTEMS, OR WHETHER IT IS TO BE ABLE TO LISTEN IN ON COMMUNICATIONS, OR WHETHER EVEN TO DISRUPT OR DESTROY COMMUNICATIONS. THERE ARE SOME SCENARIOS, MY FRIEND, AND I’M ONLY EMPHASIZING SCENARIOS, WHERE THEY COULD SHUT DOWN EVERY SATELLITE IN BASE. SO THIS IS IT — IN SPACE. SO THIS IS A HUGE CHALLENGE, AND FRANKLY THIS ADMINISTRATION HAS NO POLICY AS TO HOW TO PREVENT IT, WHAT TO DO IN CASE OF AN ATTACK, AND HOW TO PREPARE FOR ONE. CHARLIE: DO YOU HAVE ANY DOUBT THAT THE RUSSIANS TRIED TO INTERFERE IN THE U.S. ELECTIONS? JOHN: I DON’T KNOW IF IT WAS INTENTIONAL INTERFERENCE, BUT I DO KNOW THAT SOME OF THE LEAKS THAT CAME OUT CANNOT BE HELPFUL TO THE POLITICAL PROCESS. I WILL LEAVE IT TO OTHERS, AND I DON’T HAVE SUFFICIENT INFORMATION TO MAKE A JUDGMENT ABOUT THE PAST ELECTION, BUT I CAN MAKE A JUDGMENT THAT IF THEY ARE ABLE TO DISRUPT COMMUNICATIONS AND TO PERVERT COMMUNICATIONS TO THE DEGREE WHERE THE PEOPLE WHO ARE MAKING A DETERMINATION AS TO HOW TO VOTE IS DISTORTED OR DISRUPTED OR DESTROYED, THEN, OBVIOUSLY, IT’S A BIG CHALLENGE TO DEMOCRACY, WHETHER IT BE IN THE UNITED STATES OR ANY PLACE ELSE. CHARLIE: DO YOU BELIEVE YOU HAVE A DIFFERENT POINT OF VIEW THAN PRESIDENT-ELECT TRUMP ON THIS, WHO HAS TENDED TO DOWNPLAY THE IDEA THAT IT MIGHT HAVE BEEN THE RUSSIANS? JOHN: EVERY EXPERT I HAVE TALKED TO SAYS IT IS THE RUSSIANS, THEY HAVE PLAYED A VERY MAJOR ROLE, BUT NOT JUST IN ELECTIONS, CHARLIE. THEY ARE EVERY DAY BOMBARDING SOME OF OUR INDUSTRIAL BASIS, PARTICULARLY THE MILITARY-INDUSTRIAL COMPLEX. THEY ARE BOMBARDING OUR COMMUNICATION SYSTEMS. IT’S JUST A FACT, IT’S WHAT THEY ARE DOING. THEY ARE THE BEST AT IT, THE CHINESE ARE NEXT, AND THEN YOU HAVE THE EVERYDAY HACKER WHO IS ALSO A SIGNIFICANT CHALLENGE. CHARLIE: BUT WE ALSO HAVE CYBER SECURITY AND CYBER SB NICE CAPABILITY. I ASSUME WE ARE USING IT AS WELL. — CYBER ESPIONAGE CAPABILITY. JOHN: UNTIL THE PRESIDENT OF THE UNITED STATES SETS A POLICY AS TO WHAT YOU DO AND HOW YOU ACHIEVE IT, FOR EXAMPLE, RIGHT NOW IF WE THINK THERE IS AN IMPENDING ATTACK, THERE IS NO POLICY AS TO WHAT TO DO. ONCE THERE IS AN ATTACK, THERE IS NO POLICY AS TO WHAT WE DO IN RESPONSE. SO THERE IS REALLY A LACK OF COHERENCE FROM THE EXECUTIVE RANCH. OUR JOB IS TO LAY-UP — FROM THE EXECUTIVE BRANCH. OUR JOB IS TO ENACT LEGISLATION IF NECESSARY, AND I AM SURE SOME LEGISLATION WILL BE NECESSARY. CHARLIE: YOU ARE SAYING MIKE ROGERS DOES NOT HAVE A POLICY TO RESPOND TO A CYBER SECURITY INVASION. JOHN: HE HAS TESTIFIED THAT THERE IS NO POLICY. CHARLIE: COMING OUT OF THE ARMED SERVICES COMMITTEE WILL BE A RECOMMENDATION FOR LEGISLATION. JOHN: NOT JUST A RECOMMENDATION, WE WILL ENACT LEGISLATION THROUGH THE SENATE ARMED SERVICES COMMITTEE. I HAVE RECEIVED ENCOURAGEMENT TO ADDRESS THE SITUATION BY OUR REPUBLICAN LEADERSHIP. CHARLIE: HAVE YOU HAD ANY CONVERSATIONS WITH PRESIDENT-ELECT TRUMP ABOUT THIS? JOHN: I HAVE NOT. CHARLIE: SHOULD YOU? JOHN: I WOULD WELCOME A DISCUSSION ON THIS OR ANYTHING ELSE WITH HIM. I KNOW HIM VERY WELL AND I HAVE HAD CONVERSATIONS WITH GENERAL MATTIS, A MAN I HAVE KNOWN FOR THE LAST 12 OR 15 YEARS. CHARLIE: YOUR COLLEAGUE AND MUTUAL FRIEND, LINDSEY GRAHAM, AN ADMIRER, SAID I’M GOING AFTER RUSH IN EVERY WAY YOU CAN GO AFTER RUSSIA. I THINK THEY ARE ONE OF THE MOST HE INFLUENCES ON THE WORLD STAGE. I THINK THEY DID INTERFERE IN OUR ELECTIONS — IN OUR ELECTIONS AND I WANT PUTIN PERSONALLY TO PAY THE PRICE. JOHN: MY FRIEND LINDSEY GRAHAM IS ALWAYS SHY AND RETIRING. CHARLIE: NO, HE’S NOT. JOHN: I THINK WE NEED TO HAVE THAT AS PART OF OUR OVERALL PROCESSING OF THE SITUATION, AND NOT ONLY WHAT THE SITUATION IS, BUT WHAT WE NEED TO DO IN ORDER TO COUNTER THIS THREAT TO OUR NATIONAL SECURITY. THAT IS A PART OF IT. ACCORDING TO MOST EXPERTS I TALKED TO, THE RUSSIANS ARE THE LEADING OFFENDERS, BUT THERE ARE PLENTY OF OTHERS. THE CHINESE, SOME SAY THE LATEST CHINESE AIRCRAFT HAS SOME ALARMINGLY SIMILAR FEATURES OF THE F-35. SO THERE IS NO DOUBT THAT A GREAT DEAL OF INDUSTRIAL ESPIONAGE IS TAKING PLACE, NOT JUST BY THE RUSSIANS AS WELL. SO WE KNEW TO DEVELOP AN OVERALL POLICY THAT NOT ONLY APPLIES TO THE RUSSIANS BUT TO EVERY OTHER NATION AND EVERY OTHER INDIVIDUAL THAT MIGHT SEEK TO HARM THIS NATION. CHARLIE: EVEN THOUGH THEY DON’T HAVE A POLICY, YOU UNDERLINED THE FACT THAT YOU DO NOT BELIEVE THE ADMINISTRATION HAS A POLICY, LISA MONACO SAID SINGLING OUT INTERNET RELATED DANGERS IS AMONG THE MOST SIGNIFICANT NATIONAL SECURITY ISSUES FACING THE ADMINISTRATION. JOHN: SOMEONE SHOULD ASK LISA MONACO WHAT IS OUR POLICY IF WE DETECT AN ATTACK THAT IS COMING TO THE UNITED STATES, WHAT IS OUR RESPONSE IF THERE IS AN ATTACK, AND LOOK AT THE WHOLE SCENARIO OF HOW THE UNITED STATES OF AMERICA RESPONDS TO THIS THREAT. THERE IS NONE. CHARLIE: BUT WHY WOULDN’T YOU AS CHAIRMAN OF THE SENATE ARMED FORCES COMMUNITY, REQUEST A MEETING WITH THE PRESIDENT ELECT TO TALK ABOUT THIS? JOHN: I PROMISE YOU, THE BEST WAY TO HAVE THAT DIALOGUE IS TO DECLARE THAT THERE WILL BE HEARINGS AND POLICY MAKING AND LEGISLATION COMING OUT OF THE SENATE ARMED SERVICES COMMITTEE. I PROMISE YOU THAT WILL PROMPT A DIALOGUE, AND IT’S GOING TO TAKE SOME TIME, CHARLIE. IT’S NOT SOMETHING WE ARE GOING TO BE ABLE TO DO OVERNIGHT. CHARLIE: DO YOU BELIEVE YOU HAVE TO TURN THE PRESIDENT ELECT’S UNDERSTANDING AROUND ON THIS? HE SAID TO TIME MAGAZINE, I DON’T BELIEVE THE RUSSIANS INTERFERED WITH THE ELECTION. IT COULD BE RUSSIA, AND IT COULD BE CHINA, AND IT COULD BE SOME GUY AT HIS HOME IN NEW JERSEY. I BELIEVE IT COULD’VE HAVE BEEN RUSSIA AND IT COULD HAVE BEEN ANYONE OF A NUMBER OF OTHER PEOPLE, SOURCES OR INDIVIDUALS. JOHN: IN SOME RESPECTS, HE IS RIGHT. ALL OF THESE ARE PLAYERS THAT HE MENTIONED. THE PROBLEM IS THAT HE MAY NOT QUITE UNDERSTAND THAT THE BEST AT IT IN THE MOST HOSTILE, AND THE ONES WHO ARE PROBABLY HAD THE MOST SIGNIFICANT IMPACT OVER A NUMBER OF YEARS ARE THE RUSSIANS. THEY ARE THE BEST AT THEIR JOB. ADMIRAL RODGERS HAS BASICALLY SAID THE SAME THING. ALL THESE EXPERTS HAVE SAID OUR DIRECTOR OF NATIONAL INTELLIGENCE HAS SAID THAT IT’S THE RUSSIANS WHO ARE, BY FAR, THE MOST ACTIVE IN THIS KIND OF BEHAVIOR, BUT IT IS NOT CONFINED TO RUSSIA. CHARLIE: SENATOR MCCAIN, I LOOK FORWARD TO TALKING MORE ABOUT THIS. THANK YOU FOR JOINING US. SEE YOU SOON. ♪ ♪ CHARLIE: WE CONTINUE WITH MICHAEL AND DAVID, BOTH FROM WASHINGTON. DAVID, I BEGIN WITH YOU. WHY DID THE PRESIDENT TAKE THIS ACTION TODAY AND ORDER THIS INVESTIGATION? DAVID: I THINK THERE IS A SUBSTANTIAL REGION AND FOR — REASON AND FROM EVERYTHING WE CAN TELL, POLITICAL REASON. THE SUBSTANTIVE REASON IS IT HAS TAKEN THE INTELLIGENCE COMMUNITY ALONG TIME TO COME TO ALL THE CONCLUSIONS ON THE RUSSIAN EFFORT TO INFLUENCE THE ELECTION. THAT’S EVERYTHING FROM THE HACKING OF THE DNC, THE DEMOCRATIC NATIONAL COMMITTEE AND THE RELEASE OF THOSE EMAILS TO THE SCANNING OF REGISTRATION DATA, THOUGH IT LOOKS LIKE IN THE END THEY DID NOT TRY TO AFFECT THE ACTUAL VOTING PROCESS AND MACHINES, AND THEN ALL THE OTHER SURROUNDINGS OF THIS BECAUSE OBVIOUSLY THE RUSSIANS HAVE BEEN HACKING INTO MANY OTHER AMERICAN INSTITUTIONS FOR YEARS. THERE IS A SERIOUS QUESTION ABOUT WHY THE UNITED STATES WAS CAUGHT BY SUCH SURPRISE HERE. I THINK SUBSTANTIVELY, HE WANTED TO INFLUENCE FUTURE ELECTIONS. I THINK THE POLITICAL REASON IS EVEN MORE FASCINATING, BECAUSE PRESIDENT-ELECT TRUMP HAS BEEN DENYING THERE WAS MUCH EFFORT TO INFLUENCE THE ELECTION AT ALL, AND SECONDLY HE SAID THERE IS NO EVIDENCE THAT IT WAS THE RUSSIANS, WHILE THERE IS THIS FLOOD OF INTELLIGENCE REPORTS FLOATING AROUND THE CITY SUGGESTING IT WAS THE RUSSIANS, AND WHO WITHIN RUSSIA DID IT? I THINK WHAT THE PRESIDENT IS TRYING TO DO IS FORCE THE INTELLIGENCE COMMUNITY TO PUT ALL THIS DOWN ON PAPER, GIVE IT TO CONGRESSIONAL COMMITTEES, PERHAPS MAKE PART OF IT PUBLIC, BEFORE PRESIDENT-ELECT TRUMP GETS SWORN IN AND IS ABLE TO COME IN AND SAY NOTHING HAPPENED HERE. CHARLIE: MICHAEL, WHAT WOULD YOU ADD TO THAT? MICHAEL: I THINK DAVID HAS IT EXACTLY RIGHT. IF NOTHING ELSE, IT SORT OF BOXES IN PRESIDENT-ELECT TRUMP. I SHOULD POINT OUT THAT EVEN TODAY, THE ADMINISTRATION RATCHETED UP WHAT IT HAS SAID ABOUT THE RUSSIAN ROLE. ERIC SHULTZ IN BRIEFING REPORTERS AT THE WHITE HOUSE PRESS BRIEFING SAID THAT IT WAS HIGH CONFIDENCE THAT THE CYBER ATTACKS ON THE DNC AND OTHER POLITICAL ORGANIZATIONS AND POLITICAL LEADERS WERE DIRECTED AT THE HIGHEST LEVEL OF THE RUSSIAN GOVERNMENT. THAT IS ABOUT AS STRONG AS YOU CAN GET. THE PREVIOUS STATEMENT FROM THE INTELLIGENCE COMMUNITY WAS THAT IT WAS — HIGH CONFIDENCE WAS A TERM OF ART. IN SOME WAYS, THE ADMINISTRATION IS THROWING DOWN THE GAUNTLET, SAYING HERE IT IS, AND WERE GOING TO COMPILE ALL THIS EVIDENCE AND PRESENT IT TO YOU IN THE NEW ADMINISTRATION, AND THIS IS COMING THE SAME WEEK THAT DOLL TRUMP SAID IN THAT TIME MAGAZINE INTERVIEW HE DOESN’T KNOW IF IT WAS THE RUSSIANS — THE SAME WEEKEND THAT DONALD TRUMP SAID MAYBE IT WAS SOME GUY AT HIS HOUSE. CHARLIE: MIKE PENCE HAS BEEN GETTING THE INTELLIGENCE BRIEFINGS. NUMBER TWO, THE PRESIDENT-ELECT HAS BEEN TALKING TO THE PRESIDENT WITH SOME FREQUENCY, IF WE UNDERSTAND WHAT HE IS SAYING, THAT HE’S CONSULTED WITH THE PRESIDENT ABOUT THE TRANSITION AND A RANGE OF OTHER THINGS. HE’S TAKEN SOME PRIDE THAT HE LIKES THE PRESIDENT SO MUCH IN HOPES THE PRESIDENT LIKES HIM, BUT IT’S BEEN A VERY PRODUCTIVE SESSION. YOU WOULD’VE THOUGHT PRESIDENT WOULD HAVE REMINDED HIM WHAT THIS ADMINISTRATION BELIEVES ABOUT THE RUSSIANS HACKING. >> YOU WOULD THINK, AND SHULTZ WAS PRESSED ON THAT AT THE WHITE HOUSE PRESS BRIEFING TODAY AND SAID HE’S NOT GOING TO GIVE A READOUT ON THE CONVERSATIONS BETWEEN THE PRESIDENT AND THE PRESIDENT-ELECT. BUT IT’S HARD TO SEPARATE OUT THOSE COMMENTS THAT DONALD TRUMP MADE SORT OF DISMISSING WHAT THE INTELLIGENCE COMMUNITY IS SAYING FROM THE PRESIDENT’S DECISION TO MAKE PUBLIC THIS REVIEW TODAY AND AS I SAID BEFORE, RATCHET UP THE LEVEL OF CONFIDENCE THEY HAVE THAT THEY ARE RIGHT ABOUT THIS. CHARLIE: DAVID, WHAT WOULD YOU SAY ABOUT THAT? DAVID: WHAT ADDS TO THE ODDITY, IN ADDITION TO WHATEVER BRIEFINGS THEY’VE GIVEN TO VICE PRESIDENT ELECT PENCE, YOU’VE NOW SEEN A RAFT OF MORE TRADITIONAL REPUBLICAN STEP OUT IN SAY WE NEED TO HOLD HEARINGS, WE NEED INDEPENDENT COMMISSIONS, WE NEED TO HAVE MORE OF THESE DETAILS COME OUT IN PUBLIC. JOHN MCCAIN SAID THE OTHER DAY THAT HE WOULD HOLD HEARINGS WITH THE ARMED SERVICES COMMITTEE, NOT ONLY OF THE HACKS RELATED TO THE ELECTION, BUT PERHAPS THE EFFORTS OF RUSSIAN INTELLIGENCE TO GET INSIDE U.S. MILITARY OPERATIONS. WE KNOW, OF COURSE, THAT THE HACKING THAT TOOK PLACE AT THE DNC AND ELSEWHERE WAS NOT THE FIRST EFFORT BY THE RUSSIANS IN RECENT TIMES. THERE WERE HACKS ON THE STATE DEPARTMENT AND WHITE HOUSE, THE PENTAGON, SO THIS FITS INTO A BROADER CONTEXT. MY GUESS IS THAT IF THE CONVERSATION HAS TAKEN PLACE BETWEEN PRESIDENT OBAMA AND PRESIDENT-ELECT TRUMP, IT’S BEEN IN THE CONTEXT OF, THERE IS A BIGGER RUSSIAN CAMPAIGN OUT HERE AND IGNORE IT AT YOUR PERIL. CHARLIE: MY IMPRESSION IS THAT THE INVESTIGATORY EFFORT IS BEING YOUR HEADED BY THE FBI, AM I CORRECT? MICHAEL: THAT’S RIGHT, FOR THE IMMEDIATE DNC JOHN PODESTA AND SO FORTH, BUT THERE HAS ALSO BEEN OTHER MEMBERS OF THE INTELLIGENCE COMMUNITY BEING BROUGHT IN. MICHAEL: THE FBI TOOK THE LEAD ON THIS THROUGHOUT, BUT THIS CLEARLY WILL ENCOMPASS THE ENTIRE INTELLIGENCE COMMUNITY. I SHOULD POINT OUT THAT PROBABLY THE STRONGEST PUBLIC STATEMENT HAS, FROM ADMIRAL MIKE ROGERS AT THE NATIONAL SECURITY AGENCY, WHO, ALTHOUGH HE DIDN’T SAY RUSSIA, MADE IT ALL THAT CLEAR THAT HE WAS REFERRING TO A NATIONSTATE THAT TRIED TO INFLUENCE OUR ELECTION. HE SAID SOMETHING EVEN FURTHER, INTENDING TO AFFECT THE ELECTION. THAT IS OPERABLY THE BIGGEST OPEN QUESTION HERE. IF INDEED IT WAS THE RUSSIANS, WHAT WORKS THERE MOTIVE? — WHAT WAS THERE MOTIVE? WAS IT TO CREATE CONFUSION IN THE AMERICAN POLITICS, AS THEY HAVE DONE IN MANY OTHER COUNTRIES? OR WAS IT A CONCERTED EFFORT TO INFLUENCE THE RESULTS OF THE ELECTION? TO HELP ELECT DONALD TRUMP AND DEFEAT HILLARY CLINTON. THAT IS PROBABLY THE BIGGEST MYSTERY ABOUT THIS. WE DON’T KNOW THE ANSWER. CHARLIE: IS THERE ANY DOUBT THAT THIS WOULD BE TAKING PLACE HIM IF IT’S TAKING PLACE TO THE DEGREE THAT THE VARIOUS INTELLIGENCE AGENCIES BELIEVE IT IS, THAT IT WOULD BE CARRIED OUT WITH OUT — WITHOUT PUTIN’S KNOWLEDGE? >> EVERYONE I’VE RUN INTO WHO WAS IN SENIOR LEVELS OF INTELLIGENCE SAY IT IS INCONCEIVABLE TO THEM THAT SOMEONE WOULD TAKE THE RISK OF DOING SOMETHING THIS HIGH PROFILE THAT COULD DRAW A MAJOR RESPONSE FROM THE UNITED STATES WITHOUT CLEARING IT FIRST WITH THE BOSS. MICHAEL: IT’S ALSO TRUE THAT THE RUSSIAN INTENTIONS AND GOALS HERE MAY HAVE CHANGED OVER TIME, THAT PERHAPS THERE WAS SOME INITIAL, WHEN THIS BEGAN, IT MAY HAVE BEEN AN EFFORT TO HELP TRUMP. IT MAY HAVE BEEN AN EFFORT, THERE ARE CERTAINLY INDICATIONS THAT PUTIN AND HIS TOP AIDES WERE NOT ENTHRALLED WITH HILLARY CLINTON. AT SOME POINT, THOUGH, THEY MAY HAVE READ THE POLLS THE WAY EVERYBODY ELSE DID AND ASSUMED THAT HILLARY CLINTON WAS GOING TO WIN, AND THEY MAY HAVE SCALED BACK SOME OF THEIR ACTIVITY. ALTHOUGH THAT IS NOT ENTIRELY CLEAR, EITHER. WE KNOW THEY WERE IN THE DNC, THEY WERE HACKING EMAILS AT LEAST THROUGH THE SUMMER OF 2016. IT IS STILL NOT CLEAR HOW LONG IT WENT ON. THERE ARE SOME INDICATIONS IT MAY HAVE CONTINUED FOR A LITTLE BIT OF TIME AFTER THAT. AND ALSO I SHOULD POINT OUT THAT THERE WAS A LOT OF CONCERN OVER THE SUMMER AND FALL ABOUT THOSE PROBES OF STATE ELECTION SYSTEMS. THAT REALLY RANG ALARM BELLS, SUGGESTING THEY MAY HAVE BEEN TRYING TO HACK THE ELECTIONS THEMSELVES, AND I THINK THE ADMINISTRATION HAS MADE CLEAR THAT THAT DIDN’T HAPPEN. CHARLIE: A COUPLE OF FINAL QUESTIONS. AS SOON AS WE HAD SOME EVIDENCE THAT HACKING HAD TAKEN PLACE AND THE FBI JUMPED ON THIS, MY UNDERSTANDING IS THAT THE PRESIDENT OF THE UNITED STATES, PRESIDENT OBAMA SAID THERE WOULD BE A PROPORTIONATE RESPONSE, THAT INTELLIGENCE AGENCIES HAD IMMEDIATELY DUG INTO THIS, FROM THE FBI, THE CIA, DEFENSE AND OTHER PEOPLE, AND THAT THERE WAS GOING TO BE A PROPORTIONATE RESPONSE. HAS THERE BEEN A RESPONSE, AS FAR AS WE KNOW? >> THE MAIN RESPONSE WE’VE SEEN SO FAR HAS BEEN SOME WARNINGS TO THE RUSSIANS THAT PRESIDENT OBAMA GAVE DIRECTLY WHEN HE LAST MET PRESIDENT PUTIN IN CHINA. A WARNING SENT THROUGH A SYSTEM THAT IS USED FOR BOTH CYBER AND NUCLEAR WARNINGS, BUT IF THERE HAS BEEN A PUNISHMENT TO, OF COST TO PRESIDENT PUTIN FOR THIS, WE HAVEN’T SEEN IT. MAYBE THERE HAS BEEN SOME KIND OF COVERT EFFORT, BUT IT HAS BEEN PRETTY SUBTLE. IT WAS JOE BIDEN WHO SAID ON ONE OF THE SUNDAY SHOWS BEFORE THE ELECTION, WE WILL COME AFTER PUTIN, AND HE WILL KNOW IT EVEN IF NOBODY ELSE DOES. BUT SO FAR, EVIDENCE OF THAT IS PRETTY SCARCE. MICHAEL: THIS BECAME PUBLIC TODAY BECAUSE LISA MONACO HAD BREAKFAST WITH THE REPORTERS. SHE STARTED WITH AN OVERVIEW ABOUT THREATS TO THE COUNTRY, THREATS TO THE HOMELAND, AND TALKED ABOUT THE CYBER THREAT. SHE SAID WHEN THERE ARE CYBER ATTACKS THAT THREATEN AMERICAN INTERESTS, WE WILL ACT TO PROTECT OUR INTERESTS. I ASKED HER LATER IF THE U.S. GOVERNMENT HAS TAKEN OR WILL BE TAKING STEPS TO IMPOSE COSTS ON THE RUSSIANS AS A RESULT OF THESE CYBER ATTACKS, AND SHE DID NOT ANSWER THAT QUESTION. CHARLIE: SOMEONE ONCE SAID TO ME AFTER THE RUSSIANS WERE ACCUSED OF DOING THIS THAT THE RESPONSE, THE PROPORTIONATE RESPONSE WOULD BE SOMETHING THAT WOULD BE DONE SO THAT PUTIN KNEW WHAT IT WAS ABOUT, BUT IT WOULD LOOK FOR CREDIBILITY WITHIN RUSSIA, SO IT WOULD NOT BE DONE WITH A LOT OF BELLS AND SOUNDINGS. >> THAT’S RIGHT, CHARLIE, BUT THERE IS A RISK TO THAT AS WELL. THERE’S ALWAYS A TEMPTATION, LET’S KEEP IT QUIET AND IN THE FAMILY, BUT ONE OF THE BIGGEST PROBLEMS IN CIBER, AS WE’VE DISCUSSED ON PAST SHOWS, IS ESTABLISHING SOME SENSE OF DETERRENCE. IT DOES NOT EXIST IN THE CYBER REALM THE WAY IT DOES IN NUCLEAR. IF YOU’RE GOING TO ESTABLISH DETERRENCE, YOU HAVE TO HAVE A PRETTY PUBLIC RESPONSE SO THAT THE NEXT TIME, IS NOT THE RUSSIANS, BUT INSTEAD THE NORTH KOREANS ARE THE IRANIANS ARE THE CHINESE OR SOMEONE ELSE WE ARE NOT INKING UP, THEY UNDERSTAND THIS IS NOT A FREE FIRE ZONE. CHARLIE: DAVID, MICHAEL, THANK YOU SO MUCH. BACK IN A MOMENT. STAY WITH US. WE NOW TURN TO THE LATEST NEWS FROM THE TRUMP TRANSITION. JOINED BY MAJOR GARRETT OF CBS NEWS, WHO’S BEEN COVERING NOT ONLY THE TRUMP CAMPAIGN BUT THE TRUMP TRANSITION. MAYOR RUDY GIULIANI WITHDREW HIS NAME FROM CONSIDERATION. GIVE US SOME SENSE OF WHAT WAS GOING ON THERE? >> RUDY GIULIANI APPRECIATES OPERA. HE ENDORSED DONALD TRUMP RIGHT BEFORE THE NEW YORK PRIMARY IN APRIL AND BECAME HIS MOST AGGRESSIVE AND MOST DEEPLY LOVED — BECAUSE I THOUGHT THIS SO MANY TIMES ON THE CAMPAIGN TRAIL — SURROGATE FOR DONALD TRUMP, AND HE IS THE ODD MAN OUT. SPECTACULARLY THE ODD MAN OUT IN THE TRUMP TRANSITION. IT’S ALMOST INCONCEIVABLE TO SOME IN THE TRUMP TRANSITION THAT RUDY GIULIANI WOULD NOT FIND A PLACE WITHIN THE TRUMP CABINET. THAT’S RELATED TO TRUMP’S ON INSTINCTS, BUT IT’S ALSO RELATED TO GIULIANI’S MISSTEPS. TRUMP OFFERED HIM THE POSITION OF ATTORNEY GENERAL AND DIRECTOR OF HOMELAND SECURITY AND HE TURNED THEM DOWN. FOCUSING ENTIRELY ON SECRETARY OF STATE, THE POSITION HE WANTED AND COVETED, BUT IN THE END, TRUMP WOULD NOT GIVE HIM. GIULIANI SINCE THAT, AND PULLED HIMSELF OUT BEFORE SUFFERING THE INDIGNITY OF SOMEONE ELSE GETTING THAT SLOT. SO IN EVERY WAY, THIS DEEPLY IMPORTANT AMERICAN POLITICAL FIGURE, WHO REVOLUTIONIZED NEW YORK CITY, AND WHO WAS THE BIGGEST, IF NOT MOST CONSPICUOUS EXPONENT OF THE TRUMP APPROACH TO THE PRESIDENCY, WILL BE LEFT ON THE SIDELINES. IT’S AN AMAZING STORY. CHARLIE: SOCIALIST LEFT IN THE RUNNING FOR SECRETARY OF STATE? >> I’VE BEEN TOLD THAT THERE ARE ONLY TWO REALLY LEGITIMATE FIGURES WHO MAKE IT THE POSITION OF SECRETARY OF STATE. MITT ROMNEY AND THE CHAIRMAN OF THE BOARD OF EXXON MOBIL, REX TILLERSON. HE BRINGS FOR DONALD TRUMP A COUPLE OF THINGS YOU MAY NOT ASSOCIATE WITH THE POSITION OF SECRETARY OF STATE. HE HAS NO GOVERNMENT EXPERIENCE. HE’S NOT A TRAINED FOREIGN SERVICE DIPLOMAT BY ANY STRETCH OF THE IMAGINATION, BUT HE IS A BIG AMERICAN BUSINESSMAN, A CORPORATE CHIEFTAIN WHO HAS DONE DEALS. BECAUSE EXXON MOBIL OPERATES IN MORE THAN 50 COUNTRIES, IT EXPLORES FOR OIL AND NATURAL GAS ON SIX OF THE SEVEN CONTINENTS ON EARTH, HE HAS, IF YOU WILL, OH CORPORATE WORLDVIEW. HE HAS EXPERIENCE WITH LOTS OF DIFFERENT GOVERNMENTS, AND POSSIBLY MOST IMPORTANT, HE HAS LONG EXPERIENCE IN RUSSIA AND WITH VLADIMIR PUTIN. THEY KNEW EACH OTHER BACK IN THE 1990’S, WHEN PUTIN WAS A KGB FUNCTIONARY IN THE GOVERNMENT. IF YOU’RE LOOKING FOR AN ANALOGY, LOOK FOR THE CHINESE AMBASSADOR FOR DONALD TRUMP, CURRENTLY THE GOVERNOR OF IOWA, WHO GOT TO KNOW THE CURRENT HEAD OF CHINA WHEN HE WAS A FUNCTIONARY IN THE CHINESE BUREAUCRACY. IF YOU LOOK AT THAT AS A TEMPLATE, YOU MIGHT SEE REX TILLERSON AS SOMEONE PARTICULARLY AMENABLE TO PRESIDENT-ELECT TRUMP’S WORLDVIEW. CHARLIE: IT’S CLEAR THAT THE PRESIDENT HAS WHATEVER DIFFERENCES THERE WERE WITH MITT ROMNEY, WHATEVER WAS SAID ABOUT BOTH MEN IN THE CAMPAIGN, THAT THEY WORK THEIR WAY THROUGH THAT AND THIS NOW IS A CONVERSATION WHICH IS A POSITIVE CONVERSATION ABOUT THE DIFFICULT PROCESS OF SELECTING A SECRETARY OF STATE. ON THE ONE HAND, THE MENU HAS TO MAKE THE DECISION FOR THE BENEFIT OF THE COUNTRY, AND ON THE OTHER HAND A MAN WHO HAS HIS OWN INTEGRITY AND IS PREPARED TO GO TO WORK, OR A MAN THAT HE WAS DEEPLY CRITICAL OF DURING THE CAMPAIGN. >> WHEREVER THIS LANDS, IF MITT ROMNEY BECOMES OR DOES NOT BECOME SECRETARY OF STATE, WHEN HE LEAVES THE PROCESS WITH IS A DIFFERENT APPRECIATION OF DONALD TRUMP, AND IMPORTANTLY TO MITT ROMNEY, A DIFFERENT APPRECIATION OF DONALD TRUMP TO MITT ROMNEY, JUST AS DONALD TRUMP HAS A DIFFERENT APPRECIATION OF THE CURRENT PRESIDENT, BARACK OBAMA. I ATTENDED MORE THAN 70 MITT ROMNEY RALLIES AND THERE WAS NOT ONE SCINTILLA THE — NOT ONE SCINTILLA OF APPRECIATION FOR DONALD TRUMP. DONALD TRUMP HAS A DEEPER APPRECIATION OF BARACK OBAMA AS PRESIDENT, AS A MAN, AND A FIGURE IN HISTORY. SO THERE IS EVOLUTION WITH DONALD TRUMP. MITT ROMNEY IS IN THE FINAL TWO OF AN EXHAUSTING, EVER-EXPANDING LIST OF POTENTIAL SECRETARIES OF STATE. CHARLIE: WITH RESPECT TO OBAMA, THE PRESIDENT-ELECT IS REFLECTING A VERY ADULT BEHAVIOR. >> IT IS AND A DOG BEHAVIOR, BUT A BEHAVIOR I WOULD CAUTIOUSLY, CHARLIE, SUGGEST — ADULT BEHAVIOR, BUT A BEHAVIOR I WOULD CAUTIOUSLY SUGGEST IN AWE. I READ A LOT ABOUT THOSE BEFORE THE THREE HOURS PRIVILEGED ENOUGH TO COVER. IT IS, IN ITS OWN SENSE, AN SWE- INSPIRING — AN AWE-INSPIRING INSTITUTION. THE AMERICAN CULTURE NEEDS TO APPRECIATE ABOUT DONALD TRUMP THAT IN SOME AREAS, HE IS AWED BY THE INSTITUTION AND SOME WHO HAVE ACHIEVED IT. IN WAYS PERHAPS SURPRISING TO HIMSELF, DONALD TRUMP HAS COME TO APPRECIATE THAT. CHARLIE: HE IS A MAN WHO WOULD MYERS SUCCESS — WHO ADMIRES SUCCESS. LET US TALK ABOUT THIS IDEA OF HOW HE DOES IT, FAR MORE THAN BA3 HAS THROWN HIMSELF INTO THIS PROCESS, INTERVIEWED PEOPLE, IS ON THE PHONE CONSTANTLY. THE IMPRESSION I HAVE IS THAT BY SELECTION OF OTHER PRESIDENTS WAS MUCH MORE A PRODUCT OF A TRANSITION TEAM AND INVOLVEMENT BY THE PRESIDENT-ELECT, MUCH MORE INVOLVEMENT OF A TEAM. THIS PRESIDENT WANTS TO TOUCH AND TALK TO AND GET A PERSONAL SENSE OF THE MEN AND WOMEN HE WANTS TO SERVE. >> EXACTLY. I THINK IT’S FAR TOO EARLY, CHARLIE, TO OFFER AN APPRAISAL OF THIS APPROACH THAT IS EITHER POSITIVE OR NEGATIVE. I THINK THE COUNTRY AND THOSE OF US OBLIGATED TO COVER THIS PROCESS AS IT UNFOLDS BEFORE US NEED TO TAKE IT STEP BY STEP AND JUDGE IT AS THE RESULTS SPEAK FOR THEMSELVES. REMEMBER, JIMMY CARTER WAS THE PRESIDENT WHO WAS DEEPLY INVOLVED IN THE DAY-TO-DAY AND HOUR-BY-HOUR DETAILS OF HIS PRESIDENCY. IT BOGGED HIM DOWN AND SEPARATED HIM FROM THE LARGER VISION. THERE IS A DANGER INVOLVED IN A KIND OF INVOLVEMENT AND GET, WE TEND TO APPRECIATE SOMEONE WHO HAS AN APPRECIATION FOR DETAILS AND EVALUATING SOMEONE AT THE PERSONAL GUT LEVEL. IF I HAVE LEARNED ANYTHING ABOUT PRESIDENT-ELECT TRUMP IN MY 18 OR SO MONTHS COVERING HIM IT IS THAT HE MAKES VERY IMPORTANT AND CRUCIAL SNAP JUDGMENTS ABOUT PEOPLE BY APPRAISING THEM HIMSELF, AND NOT GETTING IT FILTERED BY THOSE AROUND HIM. THAT IS AN IMPORTANT CHARACTERISTIC OF AN EMERGING TRUMP PRESIDENCY. IT JUST IS A REALITY. CHARLIE: THANK YOU SO MUCH FOR JOINING US. IT IS A PLEASURE. WE’LL BE RIGHT BACK. STAY WITH US. ♪ CHARLIE: MORE ON THIS WEEKEND. THE ANNOUNCEMENT, I HAD HEARD BEFORE THAT GIULIANI WAS OUT OF THE RUNNING. IS THAT SIMPLY TODAY’S ANNOUNCEMENT TO MAKE THAT CLEAR THAT THIS POSSIBLE NOMINEE WITH A JEW HIMSELF BECAUSE OF — WITH JEW HIMSELF — WITHDREW HIMSELF? >> HE NOT ONLY MADE THE OFFICIAL WORD THAT GIULIANI WAS WITHDRAWING HIMSELF FROM ANY ADMINISTRATION JOB, BUT REINCE PRIEBUS STATED IN A QUOTE ON THIS ANNOUNCEMENT THAT GIULIANI WAS VETTED THOROUGHLY BY THE TRUMP TEAM AND PASSED WITH FLYING COLORS. IT CLEARS RUDY GIULIANI OF ANY RUMORS OF WHETHER HE WAS PASSED OVER FOR SECRETARY OF STATE. YOUR REPORTING IS CORRECT. IT MATCHES WITH MY REPORTING WHICH IS THAT RUDY GIULIANI IS FADING IN THE VIEW OF DONALD TRUMP. CHARLIE: DO WE KNOW WHETHER HE COULD HAVE BEEN ATTORNEY GENERAL WHETHER HE HAD NOT INSISTED ON BEING SECRETARY OF STATE? PHILIP: I DON’T KNOW FOR SURE. THERE WOULD HAVE BEEN SOME DISCUSSION ABOUT WHETHER JEFF SESSIONS SHOULD GET IT OR RUDY GIULIANI, SO YOU KNOW, POTENTIALLY, HE COULD HAVE GOTTEN HIMSELF A JOB. HE IMAGINED GIULIANI — BUT GIULIANI WAS INSISTENT FROM THE BEGINNING THAT STATE WAS ALL HE WANTED. CHARLIE: HE COULD HAVE PROMISED SESSIONS A SUPREME COURT APPOINTMENT OR SOMETHING LIKE THAT. PHILIP: EXACTLY. CHARLIE: WHICH WOULD HAVE BEEN ENTIRELY WITHIN THE SORT OF THING HE MIGHT WANT BECAUSE OF HIS LIFE WITHIN, YOU KNOW, THE JUDICIAL PROCESS OF BOTH IN TERMS OF LAW ENFORCEMENT ALSO IN TERMS OF JUDGING. LET ME TURN TO THE SECRETARY OF STATE. WHAT DO WE KNOW? PHILIP: WELL, WE KNOW THAT THERE ARE TWO PEOPLE CONSIDERED LEADING CANDIDATES. MITT ROMNEY WHO HAS BEEN A CANDIDATE FOR SOME TIME AND A NEW FIGURE, REX TILLERSON, THE CEO OF EXXON MOBIL, AND INTERNATIONAL BUSINESS EXECUTIVE WHO HAS DONE WORK AROUND THE WORLD BECAUSE OF HIS ROLE IN THE OIL INDUSTRY AND INCLUDING WITH RUSSIA. HE HAS RELATIONSHIPS WITH THE PUTIN GOVERNMENT AND HAS BEEN AROUND THE WORLD. HE DID — MITT ROMNEY MIGHT BE A MORE TRADITIONAL POLITICAL FIGURE IN THAT DIPLOMATIC POST. BOTH ARE LIKED BY DONALD TRUMP. THERE ARE POLITICAL CONSIDERATIONS. TRUMP SUPPORTERS ARE HOSTILE TO THE IDEA OF MITT ROMNEY, OF REWARDING A FORMER ANTAGONIST WHO WAS NOT LOYAL ON THE CAMPAIGN AND WAS TO LISTEN — WITH TILLERSON, HE IS MORE OF AN UNKNOWN. I DON’T KNOW OF LINDSEY GRAHAM WOULD SCRUTINIZE HIS TIES WITH RUSSIA. CHARLIE: TAKE US INSIDE THE TRUNK TRANSITION TEAM. WHAT OTHER CONFLICTS BETWEEN DIFFERENT GROUPS? PHILIP: THERE ARE DIFFERENT PERSPECTIVES ON SECTORS OF STATE. THIS HAS BEEN GOING ON FOR SOMETIME NOW, REALLY FOR ABOUT A MONTH, THIS DISCUSSION ABOUT WHO THE DIPLOMATS SHOULD BE. MIKE PENCE IS SAID TO BE IN COURAGE AND REINCE PRIEBUS. BOTH HAVE RELATIONSHIPS WITH ROMNEY AND SIT IN WITH THE PARTY ESTABLISHMENT AND THERE ARE OTHER ADVISORS INSIDE THE CIRCLE, ESPECIALLY KELLYANNE CONWAY, WHO HAVE BEEN HOSTILE TO THE IDEA OF ROMNEY. THAT IS WHY TILLERSON HAS EMERGED. HE MATCHES THE QUALITIES FROM TRUMP LIKES IN ROMNEY. HE HAS A CERTAIN STATURE AND GRAVITAS AND CAN TRAVEL THE WORLD WITH THE AUTHORITY OF A PRESIDENT. AND THEN TILLERSON IS SEEN AS SOMEONE WHO CARRIES HIMSELF IN A SIMILAR WAY AND I THINK WHEN HE CAME TO MEET WITH TRUMP THIS WEEK AT TRUMP TOWER, HE WAS VERY IMPRESSIVE AND THEY HAD A GOOD CONVERSATION. THAT IS WHAT PEOPLE ARE SAYING. THOSE ARE THE QUALITIES TRUMP IS LOOKING FOR IN A DIPLOMAT. IT IS AT THIS POINT A POLITICAL CALCULATION OF WHETHER HE GOES WITH ROMNEY, WHO IS MORE OF THE PARTY INSIDER, AT THE RISK OF ALIENATING HIS LOYAL BASE AND ADVISORS, OR GOING WITH SOMEONE NEW LIGHT TO LISTEN. — LIKE TILLERSON. CHARLIE: IS THERE PUSHED BACK BECAUSE HE PRAISES THE PRESIDENT? PHILIP: NOT WITHIN THE TRANSITION TEAM THAT I HAVE HEARD OF. I THINK A LOT OF HIS VOTERS ARE TRYING TO GIVE HIM THE BENEFIT OF THE DOUBT HERE. IT IS ONE THING TO HAVE A MEETING WITH AL GORE BECAUSE YOUR DAUGHTER TRIED TO SET UP A MEETING AND HE LISTENED TO WHAT THE GUY HAS TO SAY. IT IS ANOTHER THING TO CHANGE HER VIEW ON THE POLICIES. TRUMP IS AS FAR TO THE RIGHT ON THE CLIMATE ENVIRONMENTAL ISSUES AS HE CAN BE. HE JUST APPOINTED PREWITT, — PRUITT TO BE THE HEAD OF THE EPA. IT IS PRETTY CLEAR, WHATEVER AL GORE TOLD TRUMP IN THAT MEETING, HE’S NOT REALLY HEATING THAT COUNSEL. CHARLIE: WHAT MIGHT WE LEARN ABOUT HOW PRESIDENT-ELECT TRUMP WILL GOVERN BASED ON HOW HE IS RUNNING THE TRANSITION? PHILIP: HE’S VERY HANDS-ON AS YOU GUYS WERE TALKING ABOUT IN THE EARLIER SEGMENT. HE IS INTERVIEWING ALL OF THESE PEOPLE PERSONALLY. HE’S WEIGHING IN ON THEM PERSONALLY AND MAKING ASSESSMENTS ABOUT WHETHER THEY WOULD BE A GOOD FIT AND HIS CABINET, WHETHER THEY HAVE THE LEADERSHIP STRENGTH HE IS LOOKING FOR. HE HAS BEEN REALLY DRAWN TO ALPHAS, TO LEADERS, TO PEOPLE WHO ARE CEO’S IN THE CORPORATE WORLD OR MILITARY GENERALS. HE’S NOT LOOKING AT ACADEMICS, POLICY MINDS, FOLKS WHO SPENT YEARS READING BOOKS ABOUT THINGS. HE WANTS PEOPLE WHO HAVE BEEN IN THE REAL WORLD, MAKING DECISIONS THAT HAVE IMPACTS ON MARKETS AND GLOBAL AFFAIRS. THAT IS THE APPROACH IS TAKING TOO GOVERNING. THE BIG QUESTION MARK I HAVE IS WITH THE POLICIES WILL LOOK LIKE. WE HAVE NO IDEA WHAT KIND OF POLICIES THEY WILL MOVE FORWARD WITHOUT THE THE INAUGURATION. THERE IS A POLICY TEAM IN WASHINGTON DEVELOPING AN AGENDA FOR THE FIRST HUNDRED DAYS, BUT THOSE DETAILS HAVE NOT BEEN RELEASED PUBLICLY. CHARLIE: THE PRESIDENT-ELECT HAS TALKED ABOUT SOME OF HIS PRIMARY PRIORITIES IN TERMS OF — PHILIP: OF COURSE. CHARLIE: IN TERMS OF IMMIGRATION, TRADE, AND TAX REFORM. PHILIP: OF COURSE. WE HAVE TO LOOK AT WHAT SOME OF THOSE DEALS WITH CONGRESS MIGHT LOOK LIKE. THERE ARE A LOT OF DETAILS TO FILL IN. CHARLIE: WHAT ROLE IS STEVE BANNON PLAYING? PHILIP: A VERY INFLUENTIAL ROLE. HE IS WITH THE PRESIDENT-ELECT ALMOST EVERY DAY, WEIGHING IN ON A LOT OF THESE APPOINTMENTS. HE IS MAKING HIS VIEWS HEARD ON SOME OF THESE BIG JOBS, CERTAINLY SECRETARY OF STATE EIGHT AND SOME OF THE OTHERS. THEY — SECRETARY OF STATE AND SOME OF THE OTHERS. THE ASSISTANT SECRETARY AT THE AGENCY, THEY HAVE ALSO NOT YET ANNOUNCED SENIOR WHITE HOUSE STAFF POSITIONS BEYOND REINCE PRIEBUS AND STEVE BANNON AND THE WHITE HOUSE COUNSEL. THERE IS GOING TO BE SOME GIVE AND PULL ABOUT WHO FEEL THEM AS JOBS. WHO IS THE WHITE HOUSE, WHO IS GOING TO BE THE DEPUTY CHIEF OF STAFF, LEE IS ON THE CONGRESS, VICE PRESIDENT-ELECT PENCE’S OFFICE. THE REPUBLICAN NATIONAL COMMITTEE CHAIRMANSHIP IS A JOB THAT REINCE PRIEBUS IS VACATING. IT WILL BE THE POLITICAL ARM. IT STARTS TO TAKE SHAPE EARLY ON AND THERE IS A LOT OF DIFFERENT CANDIDATES IN THE MIX FOR THAT. WE ARE HEARING THE LEADING CONTENDER SEEMS TO BE RONA ROBBIE MCDANIEL. CHARLIE: IS IT AN ACCURATE STATEMENT OF WHICH SEEMS TO BE THE IMPRESSION THAT WHILE DONALD TRUMP IS URGED NOT TO TWEET AS MUCH AS HE DOES, IT IS IRRESISTIBLE FOR HIM? PHILIP: THAT IS A GREAT QUESTION. HE HAS INDICATED HE WILL CONTINUE MAKING HIS VIEWS KNOWN ON TWITTER. HE HAS BEEN DOING IT EVERY DAY. HE PLANS TO CONTINUE INTO THE WHITE HOUSE. THERE HAS BEEN SOME SUGGESTION THAT PERHAPS HE WOULD BACK OFF OF TWITTER AND ONE PERSON MENTIONED SECRET SERVICE WOULD HAVE SOMETHING TO SAY ABOUT THAT, BUT IF HE IS ABLE TO TWEET, HE WILL TWEET. HE WANTS TO COMMUNICATE DIRECTLY WITH THE AMERICAN PEOPLE AND THAT IS WHAT WE HAVE BEEN SEEING THROUGHOUT THE CAMPAIGN AND DURING THIS TRANSITION. HE REALLY WANTS TO DO EVERYTHING HE CAN TO BREAK THROUGH WHAT HE SEES AS A PRESS FILTER AND SPEAK DIRECTLY TO PEOPLE. THAT IS TWITTER, RALLIES, DOING COLLINS ON RADIO, AND — CALL -INS ON RADIO. CHARLIE: WE WILL BE RIGHT BACK. STAY WITH US. ♪ CHARLIE: AS IT HAS, SINCE 1927, TIME MAGAZINE ANNOUNCED ITS PERSON OF THE YEAR THIS WEEK. THIS TIME IT IS THE INDIVIDUAL WHO FOR BETTER OR WORSE HAD THE MOST INFLUENCE ON THE EVENTS OF THE YEAR. PRESIDENT-ELECT DONALD TRUMP MIGHT BE THE OBVIOUS CHOICE BUT THE NATION REMAINS DIVIDED OVER WIDE. WITH ME AS NANCY GIBBS, THE MANAGING EDITOR OF TIME. I’M PLEASED TO HAVE HER BACK AT THIS TABLE. YOU HAS ALWAYS FRAMED THIS AS THE PERSON WHO HAS THE MOST INFLUENCE, NOT THE MOST POPULAR. THIS IS A SLAMDUNK, ISN’T IT? NANCY: WHAT IS INTERESTING TO ME IS, WHO HAS HAD THE MOST INFLUENCE ON THE YEAR FOR BETTER OR WORSE? IT SEEMS LIKE UNIVERSAL AGREEMENT THAT HE HAS THE MOST INFLUENCE AND HIS AGREEMENT OVER WHETHER IT WAS FOR BETTER OR FOR WORSE. THIS IS ONE OF THE THINGS THAT WE REALLY LOOKED AT IS THAT EVERY PRESIDENTIAL ELECTION, WE NAMED BARACK OBAMA FOUR YEARS AGO AND EIGHT YEARS AGO. WE NAMED GEORGE W. BUSH 12 YEARS AGO AND 16 YEARS AGO. IN PRESIDENTIAL ELECTION YEARS, IT WOULD BE UNUSUAL FOR SOMEONE OTHER THAN THE NEWLY ELECTED PRESIDENT TO BE THE DOMINANT FIGURE THAT YEAR. IN ANY PRESIDENTIAL YEAR, THE COUNTRY IS DIVIDED. ROUGHLY HALF THE COUNTRY VOTES FOR ONE OR THE OTHER. THERE IS SOMETHING THAT FEELS DIFFERENT THIS YEAR, AT LEAST FROM WHERE I SIT, OF THE LEVEL OF SURPRISE AT THE OUTCOME, WHICH SPEAKS TO HOW MANY PEOPLE WHO WERE MEANT TO BE THE EXPERTS AND THE DATA ANALYSTS AND POLLSTERS DID NOT SEE HIS VICTORY COMING, AND THE REACTION SINCE THEN THAT EVEN WHEN YOU THINK ABOUT BUSH AND GORE IN 2000 WITH THE EXTRAORDINARY FIVE-WEEK LONG DRAMA, EVEN THAT ONE DID NOT FEEL AS DRAMATIC AND FRAUGHT AS THIS ONE, AND THAT IS A LOT OF THE CHALLENGE THAT THE PRESIDENT-ELECT I THINK FACES. HE TALKS ABOUT WANTING TO BRING THE COUNTRY TOGETHER AND HE APOLOGIES THAT THAT REPRESENTS A SIGNIFICANT — RECOGNIZES THAT THAT REPRESENTS A SIGNIFICANT CHALLENGE. HE TALKS ABOUT IT AS AN HONOR. WE HAVE RUN INTO THAT FOR YEARS. IT SOUNDS LIKE THE KINDS OF THINGS PEOPLE ON WITH PEOPLE WITHOUT THE END OF THE GEAR AND BE A NOISE HAS — THE YEAR, AND WE HAVE ALWAYS SAID THAT IT IS A MEASURE OF INFLUENCE. LAST YEAR, WE PICKED ANGELA MERKEL. THE POSITION SHE TOOK ON THE REFUGEE CRISIS AND THE EUROZONE AND ON THE ECONOMIC POLICY IN EUROPE MADE HER PRETTY DIVISIVE FIGURE AS WELL. SHE WAS BY NO MEANS UNIVERSALLY ADMIRED. CHARLIE: AND SHE SUFFERED POLITICALLY EVEN THOUGH SHE WILL RUN FOR REELECTION. SHE IS UP FOR REELECTION. WE WILL HAVE SOME CHANGE GOING ON IN ITALY. THE NETHERLANDS I THINK HAS AN ELECTION. WE SAW AN ELECTION IN AUSTRIA. THE WHOLE IDEA — IF I THOUGHT OF ANYTHING OTHER THAN TRUMP, TO BE OBVIOUS, AT THIS PARTICULAR YEAR, BECAUSE YOU HAVE FRAMED THE QUESTION, IT WOULD BE POPULISM AS AN IDEA. NANCY: WE HAVE A STORY ABOUT THE RISE OF THE POPULISTS AROUND THE WORLD. NIGEL FARAGE, THE PERSON IN THE PHILIPPINES. ONE OF THE REASONS WE WERE NOT TEMPTED TO DO A GROUP IS WHAT IS REMARKABLE ABOUT ON TIME THAT WE HAVE NOT SEEN BEFORE IS SOMEBODY WHO COMES IN AND DEFIES ALL EXPECTATIONS, BREAKS ALL THE RULES, SHATTERS EVERY SORT OF NORM AND CONVENTION OF HOW YOU RUN FOR PRESIDENT, DEFEATED NOT ONE BUT BOTH MAJOR POLITICAL PARTIES ON HIS WAY TO WINNING, IT — CHARLIE: AND DEFEATED TWO DYNASTIES. NANCY: AND DID IT WITH LARGELY BASED ON HIS OWN INSTINCTS, NOT A HUGE CADRE OF ADVISORS AND POLLSTERS, THE HELP OF THE REPUBLICAN PARTY INFRASTRUCTURE OR DONOR CLASS. THE ALARM IS ARMY OF PEOPLE WHO ARE USUALLY A MOUND OPENING PRESIDENTIAL CANDIDATE AND TAKING SOME RESPONSIBILITY FOR THE VICTORY, — HE HAS A SMALL COTERIE OF ADVISORS AND HIS KIDS. CHARLIE: THIS WAS A TRANSFORMATIVE ELECTION IN TERMS OF THE WAY PEOPLE WHEN THE PRESIDENCY? NANCY: THERE ARE QUESTIONS FOR JOURNALISTS COMING OUT OF THIS, ONE OF WHICH WILL BE, DO WE SEE OTHER POLITICIANS TRYING TO COPY HIS MODEL AND CAN THEY? IT’S POSSIBLE THAT HE WAS UNIQUE IN THE ABILITY TO ACCOMPLISH WHAT HE DID. I THINK OF THE MANY THINGS ABOUT THE 2016 RACE THAT WAS UNPRECEDENTED, WE HAD TO BEEN CANDIDATES WHO WENT INTO IT WITH 100% NAME RECOGNITION. IT IS EASY TO FORGET THAT DONALD TRUMP HAS BEEN A VERY FAMILIAR FIGURE IN MILLIONS OF PEOPLE’S LIVING ROOMS FROM HIS TELEVISION CAREER QUITE APART FROM HIS LIFE AS A REAL ESTATE BARON AND CASINO OWNER. SELF-PROMOTION WAS CENTRAL TO HIS BRAND. PEOPLE FELT THEY KNEW HIM. YOU KNOW, THE LIFETIME THEM, THEY HATED HIM, THEY FELT THAT THEY KNEW WHAT HE WAS ABOUT FROM THE BEGINNING. THAT IS HARD FOR SOMEONE ELSE TO REPLICATE. CHARLIE: I THINK ALSO, AND I THOUGHT ABOUT THIS MORE RECENTLY THAN I DID BEFORE THE ELECTION, IS THAT, AND HE MAY HAVE UNDERSTOOD THIS, IN TERMS OF THE WINNING OF THE PRESIDENCY, THE DISRUPTIVE THIS OF THE WAY HE RAN HIS — DISRUPTIVENESS OF THE WAY HE RAN HIS CAMPAIGN, THE ATTACKS ON OTHER PEOPLE MADE HIM BE PERCEIVED BY HIS PEOPLE WHO WERE ENTHUSIASTIC ABOUT HIM AS A LEADER, A STRONG LEADER. THAT WAS PART OF HOW HE VIEWED THE DISRUPTION, THAT IT WAS NECESSARY TO OVERCOME THE CHALLENGE HE HAD ACHIEVED. CHARLIE: THE — NANCY: THE SUBTEXT OF IT, WHATEVER OUTRAGEOUS THING HE WAS SAYING, THIS IS SOMEONE WILLING TO SAY CONTROVERSIAL THINGS AND SO, EVEN ON ELECTION DAY, AS HE INJURED UP WINNING — ENDED UP WINNING THE ELECTORAL COLLEGE ROAD, SIX OUT OF 10 VOTERS DON’T THINK HE HAS THE JUDGMENT OR TEMPERAMENT TO BE PRESIDENT. CHARLIE: AND ONLY 40% OF PEOPLE DO? NANCY: YEAH, AND PEOPLE FOR WHOM JUDGMENT AND TEMPERAMENT WERE THE MOST IMPORTANT ISSUES, HILLARY CLINTON WON BY MILES, BUT BY A FACTOR OF TWO TO ONE, MOST PEOPLE CARED MOST ABOUT WHO COULD BRING CHANGE TO WASHINGTON AND HE WON THAT GROUP BY 60 POINTS. THAT DESIRE FOR CHANGE AND THE BELIEF THAT HE WAS MORE LIKELY TO BRING IT, I MEAN, THE IRONY THERE IS THAT HILLARY CLINTON, WHAT SHE PUNISHED FOR THE VERY EXPERIENCE AND LONG TRACK RECORD THAT SHE HAD? CHARLIE: YOUR INSTINCT WOULD BE THAT SHE WAS, PUNISHED BY THE FACT THAT HE WAS ABLE TO GRAB THE CHANGE MANTLE? NANCY: EVERYONE KNEW THIS WAS MEANT TO BE A CHANGE ELECTION. AMERICANS TYPICALLY DON’T RANT THIRD TERMS. AGAIN, — GRANT THIRD TERMS. ONE OF THE REASONS THAT THE POLITICAL EXPERTS ALL ALONG THOUGHT THIS COULD NOT POSSIBLY SUCCEED WAS THAT HE KEPT DOING THINGS THAT NO ONE HAD DONE BEFORE OR TO THE EXTENT THAT PEOPLE HAD, IT PROVED FATAL. CHARLIE: LOOKING BACK, IT IS THE CAPACITY TO STAND IN FRONT OF A HUGE AUDIENCE AND HAVE A CONVERSATION WITH THEM IS TO ME ONE OF HIS, ONE OF THE QUALITIES THAT MADE HIS RALLIES DIFFERENT. IT WAS NOT A SPEECH. IF IT WAS A SPEECH, IT WAS A REGURGITATION OF WHAT HE WAS SAYING BEFORE, BUT MUCH MORE OF IT WAS REACTING, IMPRESSIONS, TALKING ABOUT — HE ALMOST WAS HAVING A CONVERSATION WITH THEM ABOUT WHAT HE READ IN THE PAPER OR HAD SEEN ON TELEVISION, AND WHAT DO YOU THINK OF THIS, OR DID YOU AGREE WITH ME? IT WAS MUCH MORE THAT KIND OF DIALOGUE. NANCY: THAT IS WHY, ON THE OCCASIONS HE WAS BACK ON THE TELEPROMPTER, IT FELT SO ODD BECAUSE THAT WAS NOT THE VERNACULAR OF HIS CAMPAIGN. CHARLIE: AND THE SPONTANEITY. YOU HAVE INTERVIEWED BEFORE, YOU INTERVIEWED HIM LAST TIME WITH THE EVIL AND ALL THAT. YOU GO BACK A WEEK AGO, HOW WAS HE? WAS HE DIFFERENT ANYWAY? NANCY: I WOULD BE THE FIRST TO SAY THAT THERE IS EVERY CHANCE THAT BECAUSE I EXPECTED HE WOULD BE DIFFERENT THAT I SAW A DIFFERENCE. BUT I DID SEE A DIFFERENCE, THE MAIN ONE BEING, THE THING THAT STRUCK ME SO MUCH, I’M INTERESTED IN THE RELATIONSHIP THE BETWEEN PRESIDENT BECAUSE OF WHAT THAT JOB DOES TO YOU. THE NIGHT BEFORE, HE HAD BEEN ON THE PHONE FOR 45 MINUTES WITH PRESIDENT OBAMA, TALKING WITH HIM ABOUT IDEAS FOR HIS CABINET CHOICES, AND OTHER TOPICS THAT WERE ON HIS MIND, AND HE SPOKE WITH EXTRAORDINARY WARMTH AND RESPECT. HE TALKED ABOUT THE CHEMISTRY HE FELT BETWEEN THEM. HE FELT THAT HE EXPECTED THAT DAY HE WENT TO THE WHITE HOUSE AND THEY SAT TOGETHER, HE HE SAID, EVERYONE WOULD HAVE THOUGHT THAT WOULD HAVE BEEN AN AWKWARD MOMENT. WE STARTED TALKING, WE TALKED FOR A LONG TIME, I FOUND IT VERY GRACIOUS AND HELPFUL, AND WE TALKED SINCE THEN, AND, YOU KNOW, IN LISTENING TO HIM TALK, PARTICULARLY ABOUT HIS CONVERSATIONS OF PRESIDENT OBAMA, YOU START TO SEE A GLIMPSE THAT HE IS HAVING TO GET HIS HEAD AROUND WHAT HAS JUST HAPPENED, AND I SOMETIMES WONDERED, DID HE EXPECT — OF COURSE THEY WILL SAY, WE ALWAYS KNEW WE WERE GOING TO WIN — CHARLIE: EARLY IN THE EVENING, THEY DID NOT THINK THEY WERE GOING TO WIN. IT WAS ONLY AFTER 8:00 THAT THEY BEGAN TO SEE WHAT THE POSITIVES WERE IN PENNSYLVANIA AND WISCONSIN AND MICHIGAN THAT THEY REALIZED VICTORY MIGHT BE POSSIBLE. NANCY: SO THEN, YOU WIN AND YOU WAKE UP. IS IT LIKE THE DOG THAT CATCHES THE CAR? NOW, I AM ASKED TO GOING TO HAVE TO BE PRESIDENT, AND WHAT DOES THAT MEAN, AND HOW IS THAT GOING TO WORK? THE CONVERSATIONS HE IS HAVING WITH EVERYONE, THIS IS THE NEXT SEASON OF THE REALITY SHOW THAT HE HAS BEEN STAGING. CHARLIE: IT IS INTERESTING IN TERMS OF THE PEOPLE HE IS TALKING TO, NOT ONLY MITT ROMNEY SAYING THE THINGS HE SAID ABOUT HIM, BUT AL GORE SHOWS UP. NANCY: IT IS A PECULIAR — HOW IS THIS BETWEEN BUSINESS LEADERS AND POLITICIANS AND PRIVATE SECTOR ACTIVISTS? THAT THIS PART OF HIS OWN PERSONAL TRANSITION, YES, THERE IS THE ADMINISTRATIVE INSTITUTIONAL TRANSITION, BUT A PERSONAL TRANSITION, TOO. THAT IS WHAT I WAS STRUCK WITH, TALKING TO HIM THIS TIME IS THAT HE IS VERY MUCH IN THE THROES OF THAT PROCESS. CHARLIE: THANK YOU FOR JOINING US. SEE YOU NEXT TIME. ♪ >> WORKING WITH HIS HANDS GAVE HIM THE FREEDOM THAT HE CRAVED. >> I FEEL LIKE A BUTTERFLY. I FEEL LIKE I AM FLATTERED AROUND. I WORK 12 HOURS A DAY, 13 HOURS A DAY. I WAS THE HAPPIEST I HAD EVER BEEN. AND YOU KNOW, HE SPENT SIX WEEKS MAKING ONE SCULPTURE, OBVIOUSLY THAT IS A BEAUTIFUL KIND OF FREEDOM. ANCHOR: ASIA-PACIFIC MARKETS ARE POISED TO FALL FOLLOWING THE WORST DAY FOR CHINESE STOCKS IN JUNE. OPEC MOVES PRODUCTION NEXT MONTH DESPITE AGREEING TO HISTORIC CUTS. NO ONE WANTS TO LOSE THEIR MARKET SHARE. DONALD TRUMP NAMES AND OTHER GOLDMAN EXEC TO HIS TEAM BUT POSTPONES NEWS OF HOW HE HANDLES HIS EMPIRE AS PRESIDENT. CONSIDERING JOINING SOFT THINGS FUND — SOFTBANK’S FUND. THIS IS THE SECOND HOUR OF “BLOOMBERG DAYBREAK: ASIA.” I AM YVONNE MAN IN HONG KONG. >> IT IS JUST AFTER 7:00 P.M. IN NEW YORK. I AM A BETTY LIU. WE ARE WATCHING THE FED MOVE AND WHAT THAT MEANS FOR THE MARKETS AFTERWARDS. LET US JOIN — JOINING US IS SU KEENAN. BEFORE WE TALK ABOUT THE FED, WHAT CAUSED THE STOCK SLIDE TODAY? NERVOUSNESS IN THE MARKET? >> HE SAW THE OIL UP AND AWAY. YOU SAW FINANCIALS MOVE LOWER. THEY HAVE BEEN A BIG LEADER IF YOU LOOK AT THE BOARD. SU: WE HIT A RECORD FOR THE DOW. THERE IS A PAUSE IN THE CAUSE. BIG MOVERS AND YOU CAN SEE THE DIVIDE OF FINANCIALS ON THE DOWNSIDE. PFIZER HAD A DIVIDEND ANNOUNCEMENT AND EXXON AMONG THE WINNERS. AS GO IN THE BLOOMBERG BECAUSE IF YOU WANT TO LOOK AT THE BIG PICTURE OF HOW THE MARKET WAS DOING LAST YEAR WITH THE ECONOMIC SURPRISES IN THE WHITE AT THE TOP, YOU WILL SEE TOWARD THE END OF THE YEAR ECONOMIC SURPRISES WERE NEGATIVE. BAD NEWS. THE MARKET WAS IN TOP SHAPE. THE ECONOMIC SURPRISES MOVING HIGHER AS WELL AS THE MARKET AND THAT IS RISING ALMOST TO KISS THE FED AT ITS MEETING ON WEDNESDAY. THEY ARE EXPECTING AND EMBRACING THIS RATE HIKE THAT IS PLANNED. ANCHOR: APPARENTLY, THEY ARE. LET US TALK ABOUT THIS OIL RALLY. IT LOOKS LIKE THE MARKETS BELIEVE THESE OUTPUT CUTS ARE REAL. SU: YES, YOU ARE SEEING THAT NOT ONLY IN THE HIGHEST FOR THE OIL PRICE, BUT VOLATILITY DROPPING IN A VERY BIG WAY. VOLATILITY DROPPING, THE LOWEST SINCE JUNE 2015. WHAT YOU ARE SEEING HERE IS A WHITE LINE THAT IS THE VOLATILITY GAUGE FOR OIL. SEE HOW THAT HAS DROPPED PARTICULARLY TOWARD THE RIGHT-HAND SIDE OF THE SCREEN AS THE PRICE HAS GONE HIGHER. WHAT THAT TELLS US IS THAT THE PATH IS CLEAR FOR PRICES TO GO HIGHER. GO QUICKLY TO THE CHART OF OIL FOR THE LAST FEW WEEKS AND YOU WILL SEE IT HAS BEEN ON A TEAR. IN FACT, IT GOES MUCH HIGHER FROM HERE, AND WHAT IS UNIQUE ABOUT THE NEWS THAT CAME OUT FROM MANY TRADERS THAT EXPECTED THE AGREEMENT BETWEEN THE NON-OPEC MEMBERS, IT IS THE SAUDI MEMBERS THAT JUICED THE GAINS. >> THE PRODUCERS OF OIL, WHETHER THEY BE OPEC, THE RUSSIANS, WHETHER IT IS THE OIL AND GAS INDUSTRY AND THE UNITED STATES, HAVE ALL HAD ENOUGH, AND SO, YOU WILL PAY $60 A BARREL WITHIN 30 DAYS. SU: HE BELIEVES WE WILL SEE $75 OIL NEXT YEAR. HERE IS WHAT IS KEY FROM TRADERS ON THE NEW YORK TRADING FLOOR FOR OIL. THEY BELIEVE THE FACT THE SAUDIS RULED IN WITH A STATEMENT SHOWS THEY ARE SERIOUS, UNLIKELY TO BAIL, AND THAT IS WHAT GIVES THIS DECREE OR ACCORD TO CUT REAL POWER. ANCHOR: TRADERS NOW TALKING ABOUT TRUMP’S TWITTER RISK, WHICH IS SOMETHING WE HAVE TO LOOK INTO AS WELL. THIS TIME, HIS POST WAS TARGETING LOCKHEED MARTIN. SU: THE ARGUMENT HERE FROM TWITTER POSTS BY TRUMP IS THAT THE FIGHTER JETS ARE WAY TOO EXPENSIVE. TAKE A LOOK AT WHAT IT DID TO THE STOCKS. KABOOM. THIS IS EXACTLY WHAT HAPPENED WITH BOEING, TOOK A HIT WHEN TRUMP STARTED TWEETING ABOUT COSTS OF AIR FORCE ONE. HIS CONCERN ABOUT BOEING JETS IS THAT THE COSTS ARE IN THE BILLIONS AND THEY HAVE JETS AT 35 PROGRAMS THAT IS AT THE CENTER OF EVENTS. HE SAYS THE COSTS ARE OUT OF CONTROL. WHAT IS THAT LOOK LIKE IN TERMS OF THE DEFENSE GROUP? TAKE A LOOK AT THE STALKS. THEY WERE ALL LOWER IN A BIG WAY. TRUMP IS PROMISING THAT WE ARE GOING TO — THE STOCKS. THEY WERE ALL LOWER IN A BIG WAY. ANCHOR: TAKE A LOOK AT HOW THINGS ARE LOOKING AT THE MARKET OPENED IN ASIA. >> WE SAW YESTERDAY, THE WIND GET KNOCKED OUT OF THAT OPEC OIL DRIVEN RALLY. WE HAVE DOWNWARD PRESSURE COMING THROUGH FROM A LOWER OPEN ON WALL STREET. HAIDI: THAT IS THE PRESSURE WE ARE SEEING PLAYING THROUGH IN THE EARLY MARKET OPEN. WE ALREADY HAVE THAT LOWER START. JAPAN NOW JOINING IN. THE NIKKEI 225 FIVE DOWN. IT REALLY IS DOWN TO THAT STRONGER YEN. WE HAVE THE DOLLAR INDEX FALLING ITS MOST IN G 10 AS WELL AS EMERGING MARKET CURRENCY. THE JAPANESE CURRENCY IS WEIGHING ON EXPORTERS IN PARTICULAR. TAKE A LOOK AT THE TOP LOSERS. WE ARE SEEING CURRENCY SENSITIVE STOCKS MOVING. ELSEWHERE AROUND THE REGION, THE KOSPI LOOKING FLAT AT THE MOMENT. SOME DECLINED YESTERDAY, BUT THIS HAS BEEN ONE OF THE BETTER PERFORMING MARKETS IN THIS REGION OVER THE PAST COUPLE OF WEEKS, SO ON THESE EXPECTATIONS, THE POLITICAL TURMOIL, IMPEACHMENT PROCESS WILL ACTUALLY PRODUCE SOME REJUVENATION WHEN IT COMES TO THE GOVERNMENT IN SOUTH KOREA. QUICK LOOK AT SOME OF THE MOVERS. THAT HUGE RAMP UP WHEN IT COMES TO OIL PRODUCERS AND REFINERS. SAME, THOSE STOCKS GIVE BACK TODAY. ORIGIN DOWN. WE ARE SEEING SOME OF THE MINERS CONTINUING TO EXTEND THOSE DECLINES DESPITE A FLAT RECOVERY IN OIL. FINALLY, QANTAS COMING UNDER PRESSURE DESPITE LAUNCHING THE SUPERLONG FLIGHT TO LONDON. DOWN BY 2.9%. YVONNE: FIRST WORD NEWS WITH PAUL ALLEN, JOINING US FROM SYDNEY. PAUL: CHINA HAS FILED OIL TRADED ORGANIZATION COMPLAINT AGAINST THE UNITED STATES AND THE EUROPEAN UNION. BEIJING WANTS ITS TWO BIGGEST TRADING — ANTIDUMPING PROBES ON CHINESE UNIONS. THEY SHOULD BE USING DOMESTIC PRICES IN THE DISPUTE, SAYING THIRD COUNTRY MODEL TESTING DUTIES ON CHINESE IMPORTS ARTIFICIALLY INFLATED. THE EUROPEAN UNION WILL FIGURE OUT HOW IT WILL CONDUCT BREXIT NEGOTIATIONS WITH THE U.K. LEADERS WILL MEET ON THURSDAY WITHOUT BRITISH PRIME MINISTER THERESA MAY TO DISCUSS THE STRATEGY ONCE SHE TRIGGERS ARTICLE 50 OF THE LISBON TREATY. THE DRAFT STATEMENT SEEN BY BLOOMBERG SAY THE DRAFT STATEMENT WILL BE EXCLUDED. HONG KONG’S OUTGOING FINANCIAL CHIEF AT JOHN SAYING SAYS HE WILL MAKE — TSENG. HE NEEDS BEIJING TO FORMALLY ACCEPT HIS RESIGNATION. CURRENT CHIEF EXECUTIVE SAYS HE WILL NOT SEEK A SECOND TERM, CITING FAMILY REASONS. >> THE PRINCIPLES OF ONE COUNTRY , HONG KONG PEOPLE ADMINISTERING HONG KONG, AUTONOMY HAS BEEN SUSCEPTIBLE AND THAT HONG KONG CONTINUES TO BE PROSPEROUS AND STABLE. I THINK ALL OF YOU ARE CONCERNED ABOUT WHETHER I WOULD RUN FOR CHIEF EXECUTIVE OR NOT. AS I HAVE SAID BEFORE, WHETHER I WOULD RUN WERE NOT RUN IS A SERIOUS AND SOLEMN MATTER. I SHALL THINK THROUGH THIS IN THE COMING DAYS AND MAKE AN ANNOUNCEMENT WAS READY. PAUL: DONALD TRUMP HAS NOMINATED ANOTHER GOLDMAN SACHS EXECUTIVE TO HIS ADMINISTRATION. HE IS THE 25 YEAR VETERAN, GARY COHN. AN OFFICE THAT IN RECENT RECENT DECADES — IT WILL HELP COORDINATE TRUMP’S PROGRAM. POWERED BY MORE THAN 2600 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIESG. I AMA PAUL ALLEN. THIS IS BLOOMBERG. — COUNTRIES. I AM PAUL ALLEN. THIS IS BLOOMBERG. >> LET US GO STRAIGHT TO WASHINGTON AND BLOOMBERG POLITICS REPORTER KEVIN. HIS AIDES SAID HE WAS BUSY WITH THE TRANSITION AND THAT IS WHY HE IS DELAYING THIS. IS THERE ANYTHING MORE TO THIS? >> UP WITH A QUESTION TO THE SENIOR TOM TRANSITION SOURCES THAT I SPOKE WITH EARLIER TODAY AND WHAT THEY TOLD ME IS THAT THIS ANNOUNCEMENT WOULD BE COMING SOMETIME IN JANUARY OF AHEAD OF THE INAUGURATION ON JANUARY 20, HOWEVER, IT DOES, AT A TIME WHEN HE IS FACING MOUNTING CRITICISM, BIPARTISAN CRITICISM ON CAPITOL HILL TO RELEASE SOME SORT OF ARRANGEMENT FOR HOW HE WILL COORDINATE OR NOT COORDINATE WITH HIS BUSINESS WHILE HE IS IN THE WHITE HOUSE, SO CLEARLY, TODAY, HIS TEAM SAYING HE NEEDS A BIT MORE TIME, THAT HE WANTS TO REALLY THINK THIS THROUGH, BEFORE RELEASING THAT PLAN, BUT A DELAY IS A DELAY AND HE IS POSTPONING. >> HE HAS BEEN VERY QUICK TO TAKE CERTAIN ACTIONS AHEAD OF HIS OFFICIAL ASCENSION TO BECOMING THE PRESIDENT, OFFICIAL PRESIDENT OF THE UNITED THEY. HIS — THE UNITED STATES. IS IT SURPRISING HE IS DELAYING THIS? >> I THINK WHAT WE ARE GOING TO HAVE TO WAIT AND SEE IS WHETHER OR NOT HE FOLLOWS THROUGH. I THINK IF HE DOES RELEASE THE PLAN, HE WILL RECEIVE CRITICISM REGARDLESS, BUT IF HE DOES RELEASE THE PLAN, HE NEEDS TO DO IT BEFORE AND ON DURATION, AND SHOULD HE FOLLOW THROUGH WITH THAT, I DO THINK ANYBODY WILL DELETE THEM — REALLY REMEMBER THAT HE DELAYED FOR TWO WEEKS. EVERYBODY AS WELL AS OUTSIDE COUNSEL, HE IS TAKING A LOT OF ADVICE ON THIS ONE. ANCHOR: KEVIN CIRILLI JOINING US ON BLOOMBERG POLITICS. THANK YOU FOR YOUR PERSPECTIVE ON THIS WITH DONALD TRUMP DELAYING HIS PLANS TO ANNOUNCE HOW HE’S GOING TO HANDLE HIS EMPIRE ONCE HE TAKES OFFICE. TUESDAY WILL BRING US ANOTHER GAUGE ON THE HEALTH OF THE CHINESE ECONOMY AS WE HEAD TOWARDS THE END OF THE YEAR WITH A TRIPLE DOSE OF DATA. HE WILL BE BREAKING THAT DATA DOWN FOR US IN JUST ABOUT TWO HOURS TIME. WHAT CAN WE EXPECT HERE? >> A STUDY STABLE PICTURE IS WHAT WE ARE — A STEADY, STABLE PICTURE IS WHAT WE ARE EXPECTING. WE ARE TALKING ABOUT INDUSTRIAL PRODUCTION, RETAIL SALES, AND FIXED ASSET PRODUCTION. WE HAVE SEEN WERE THEY COME FROM FROM 2013. THIS IS A FAIRLY STEADY DECLINE IN THE DATA POINTS. IT HAD LEVELED OFF IN THE LAST FEW MONTHS AND WE ARE TAKING THAT TO CONTINUE. TOM: RETAIL SALES A KEY GAUGE. INDUSTRIAL PRODUCTION IS EXPECTED TO COME IN AT 6.1%, THE THIRD MONTH. FACTORING INTO THAT OF COURSE, THE COMMODITY PRICES AND DEMAND FOR THOSE PRICES. FIXED ASSET INVESTMENT EXPECTED TO COME UP A .3% SECOND MONTH IN A ROW. THOSE WILL BE INTERESTING WHEN YOU LOOK — 8.3% SECOND MONTH IN A ROW. THOSE WILL BE INTERESTING. THE MORE POSITIVE MANUFACTURING PICTURE, THE INFLATIONARY IMPROVEMENTS WE HAVE SEEN BEATING CONSUMER PRICES THE FIRST TIME IN FIVE YEARS. SOMETHING OF A POSITIVE FOR CHINA’S FACTORY SECTOR. ALL OF THIS IS LAYING A FOUNDATION. GOLDMAN SACHS ECONOMISTS THING THAT THIS GIVES THE PBOC GROUNDING ON FINANCIAL RISKS THEY EXPECT THEM TO FOCUS, AND BECOME MORE HAWKISH. THAT SEEMS TO BE THE CONSENSUS THAT THERE WILL BE STABLE ECONOMIC DATA THAT GIVES POLICYMAKERS MORE OF A PLATFORM TO TACKLE THOSE RISKS IN THE PROPERTY SECTOR. YVONNE: TOM, THANK YOU SO MUCH. TOM MACKENZIE IN BEIJING. STILL AHEAD, ESCALATING HIS FIGHT AND SEEKING MORE THAN $5 BILLION IN DAMAGES. BETTY: PLUS, KEVIN ANDERSON OF STATE STREET GLOBAL TELLS US WHY HE FINDS EMERGING-MARKET DEBTS STILL ATTRACTIVE. THIS IS BLOOMBERG. ♪ ANCHOR: THIS IS PARK GEUN-HYE — THIS IS THEY MAKE ASIA. I’M BETTY LIU. YVONNE: I AM YVONNE MAN. A COMPANY WANTS TO BUY 50 MILLION SHARES OF A MOTOR COMPANY. THIS COMES AS THE CONSULTANCY REPAIRS TO HOLD ITS AGM ON TUESDAY. IT IS THE FIRST OF SUCH MEETINGS. SHAREHOLDERS WILL CHOOSE BETWEEN TATA AND — BETTY: KOREA’S BUSINESS NEWSPAPERS AS HANJIN SHIPPING IS LIKELY TO BE LIQUIDATED. THE ACCOUNTING FIRM IN CHARGE OF DUE DILIGENCE WILL RECOMMEND THAT OPTION TO A SEOUL COURT. THE VALUE OF THE COMPANY IS ESTIMATED AT $1.5 BILLION. HANJIN SHARES TRADING DOWN ALMOST 7%. HONG KONG HAS ARRESTED 29 CURRENT AND FORMER STAFF OF FIVE FINANCIAL INSTITUTIONS FOR OBTAINING CUSTOMER CETACEAN TO MARKET PERSONAL LOANS. THE AGENCY SAYS THE OPERATION BEGAN LAST WEEK AND IT LED TO THE ARREST. IT DOES NOT NAME THE INSTITUTIONS INVOLVED, BUT FOR THEM ARE BANKS — FOUR OF THEM ARE BANKS. THE INVESTIGATION CONTINUES. >> MARKETS HERE. ASIAN STOCKS LOOK TO FOLLOW WALL STREET AND RETREAT AS THE OIL RALLY LOSES STEAM. CHINESE STOCKS SINKING THE MOST. OLD REBOUND AT A 10 MONTH LOW. KEVIN ANDERSON, HEAD OF ASIAN PACIFIC INVESTMENT. GOOD TO SEE YOU. TELL US THE RECENT MOVES WE HAVE SEEN OVERNIGHT. IT IS JUST MOSTLY ON FED AND REALLY STARTED TO FINALIZE THESE POSITIONING THE HEAD OF THE FOMC DECISION? WHAT DO YOU MAKE OF IT? KEVIN: WE HAVE THE FED COMING UP THIS WEEK. WE THINK WE WILL SEE A HIKE AND IT WOULD BE A HUGE SURPRISE IF WE DID NOT. AN ADDITIONAL SURPRISE OVER THE WEEKEND WAS THE NON-OPEC OIL PRODUCING COMPANIES SIGNING THAT ACCORD. AN ADDITIONAL PIECE OF VOLATILITY AND NEWS INTO THE MACRO PICTURE. ANCHOR: CHINA, WE HAVE SEEN QUITE A BRUTAL DAY ON MONDAY. DOLLAR RENMINBI ONE MONTH IMPLIED VOLATILITY. I DATED BACK TO 2011 WHEN WE SAW THE DIFFERENT CIRCLES HERE. FIRST CIRCLE, FIVE YEARS AGO AND THEN AUGUST OF 2015 DURING THE U.N. EVALUATION AND MARKET TURMOIL IN JANUARY THAT FOLLOWED. THERE WE ARE IN A VERY FAR RIGHT CIRCLE. WE ARE NOT CLOSE TO THE PANIC WE SAW, BUT WHAT DOES THIS SIGNAL TO YOU, KEVIN? KEVIN: A COUPLE OF THINGS GOING ON. FIRSTLY, THERE IS A SLOW IN THE OVERALL INTERNATIONALIZE ASIAN OF THE INTERNATIONALIZE — INTERNATIONALIZATION OF THE RMB. WE ARE GETTING TO THE END OF THE EURO PERIOD AND GETTING INTO A PERIOD WHERE THERE MAY BE LOWER LIQUIDITY. IT MAY BE NOT WITHOUT THOSE ENVIRONMENTS, WE WOULD SEE AN INCREASE INVOLVED, CERTAINLY. ANCHOR: THOSE HAVE LED TO DROPS IN STOCKS WHEN YOU TAKE A LOOK AT NOT JUST CHINA, BUT THE U.S. AS WELL. SO FAR, WALL STREET SEEMS UNHINGED AT THIS, NOT AFFECTED. WE SAW STRESS IN SHANGHAI, BUT WHAT DOES THIS MEAN? WILL THIS CHANGE QUICKLY AS WE SEE MORE RHETORIC FROM DONALD TRUMP AND BEIJING HITTING BACK? KEVIN: THERE ARE TWO BIG PLAYERS IN THIS. POLICY CHANGES IN THE U.S. MAY TAKE PLACE, AND DURING A PERIOD OF TRANSITION, WE MIGHT SEE THE LARGEST RISK OF THE POLICY AND HENCE GREATER VOLATILITY. THE CHINESE POLICYMAKERS EARLIER THIS YEAR GAINED A CERTAIN AMOUNT OF CREDIBILITY THROUGH THEIR GENTLE MOVEMENTS IN THE CURRENCY, SO THAT IS PERHAPS WHY WE ARE NOT SEEING THE SAME REACTION IN THE GLOBAL MARKETS AT THE MOMENT. ANCHOR: SPEAKING ABOUT THE MARKETS, KEVIN, I WANTED TO PULL UP A CHART WE HAD ON THE BLOOMBERG ABOUT GLOBAL MARKETS OVERALL, AND YOU SEE SUCH A BIG CONVERGENCE NOW IN TERMS OF STOCKS AND PEOPLE TAKING THEIR MONEY ESSENTIALLY OUT OF BONDS AND PUTTING IT STRAIGHT INTO THE EQUITY MARKETS. YOU CAN SEE JUST HOW MUCH THE BLOOMBERG WORLD STOCKMARKET HAS JUST SKYROCKETED SINCE NOVEMBER, AND I WONDER, IS THAT MOMENTUM GOING TO CONTINUE TO 2017, OR ARE WE GOING TO GET SOME REPRIEVE IN THE BOND MARKET? KEVIN: WELL, WE ARE STILL UNDER WAY TO THE U.S. TREASURY MARKET. WE HAD BEEN FOR SOME TIME. IF WE LOOK AT A SNAPSHOT A YEAR AGO FROM NOW, U.S. TREASURIES ARE NOT THAT FAR AWAY FROM 12 MONTHS AGO. WE THINK THE FED IS ON A HIKING CYCLE NEXT WEEK AND ALSO TWICE NEXT YEAR. THERE IS ROOM FOR TREASURIES TO SELLOFF, BUT I THINK SOME OF THIS IMMEDIATE MOMENTUM MAY DISSIPATE. ANCHOR: KEVIN, IF YOU WERE TO GIVE US ONE CONTRARY AND THOUGHT FOR 2017, WHAT WOULD THAT BE — CONTRARIAN THOUGHT FOR 2017, WHAT WOULD THAT BE? KEVIN: WE MIGHT SEE RETURN INFLATION IN 2017 AND INFLATION THAT IS UNANTICIPATED. ANCHOR: ALL RIGHT, SO PERHAPS THAT WILL REAR ITS HEAD FINALLY. KEVIN ANDERSON, HEAD OF INVESTMENT TRADE ASIA-PACIFIC AT STATE STREET ADVISORS. WE’LL TELL YOU WHAT IT STANDS TO GAIN FROM THAT INVESTMENT. THIS IS BLOOMBERG. ♪ ANCHOR: THIS IS “DAYBREAK ASIA” I AM YVONNE MAN IN HONG KONG. BETTY: I AM BETTY LIU IN NEW YORK. YVONNE: APPLE MAY CONTRIBUTE AS MUCH AS ONE BILLION DOLLARS. BUT I LIKE A LOT, BUT IT IS ONLY 1%, HOPING TO GAIN INSIGHT INTO NEW TECHNOLOGY. LET US GET MORE FROM RAMY INOCENCIO. >> I’M SEEING IT AS A SEARCH FOR INNOVATION FOR APPLE. A LOT OF CRITICS HAVE SAID THAT MAYBE THEY HAVE RUN OUT OF IDEAS. ON THE OTHER HAND, THERE IS A SEARCH FOR ABILITY IN TERMS OF REVENUE AND PROFIT. PROBABLY, A MIX OF BOTH OF THOSE THINGS. RAMY: LET US GO I INTO THE PROFIT STABILIT FIRST. WE HAVE TO LOOK AT APPLE’S RELIANCE ON THE IPHONE BECAUSE TWO OUT OF EVERY THREE DOLLARS IT MAKES IS FROM THE IPHONE. 66% THERE, FOLLOWED BY MATT LAPTOPS AND IPADS. THAT IS OUR FOUNDATION — MAC LAPTOPS AND IPODS. THAT IS OUR FOUNDATION. REVENUE IS FALLING QUARTER ON QUARTER. TAKE A LOOK AT THE THIRD QUARTER OF 2016. YOU SEE THE ORANGE BAR GOING DOWN, THAT IS THE REVENUE. A 23% REVENUE DROP ON A SHIPMENT DROP GOING DOWN 15%. APPLE LOOKING FOR THE NEXT BIG TECH THING AND ITS LINEUP. IT MIGHT PUSH THE APPLE WATCH, OF COURSE, THAT HAS BEEN OUT FOR A COUPLE YEARS OR SO. IT GOT A REBOOT EARLIER THIS YEAR. APPLE IS THE MARKET LEADER WITH A 40% MARKET SHARE, BUT GET THIS, LAST YEAR, YEAR ON YEAR, IT HAD A 70% MARKET SHARE SO WE ARE LOOKING AT A 30 POINT DROP THEIR ACCORDING TO IDC. GARMAN’S NUMBER TWO. SAMSUNG IS A NUMBER THREE. NUMBERS COULD, FROM APPLE — COME UP FROM APPLE. THIS CONTACT LIST BUYING MODE, BUT IT IS STILL A FEW YEARS AWAY. THERE IS THE APPLE CORE, BUT BLOOMBERG OURSELVES HAS BEEN REPORTING THAT WE PUT THE BOSCH ON THAT — THE KABOSH. ON THAT. THEY ARE LOOKING FOR THE NEXT BEST THING. A LOT OF PEOPLE ARE SAYING THAT IS NOT IT. >> $1 BILLION WOULD BE THE FRONT. WE DID SEE APPLE PUTTING IN MORE INVESTMENTS EARLIER THIS YEAR. SOFTBANK, ARE WE LIKELY TO SEE MORE? RAMY: IF THEY WANTED TO, THEY DEFINITELY COULD DOLE MORE MONEY OUT. LOOK AT HOW MUCH THEY HAVE HERE. THAT IS $237 BILLION, SO THEY COULD MAKE THEIR OWN TECHNOLOGY FUND IF THEY WANTED TO. $1 BILLION, CLEARLY A DROP IN THE BUCKET. IN MAY, THEY DID INVEST AND THROUGHOUT $1 BILLION. IN 2013, THE LAST TIME THEY DID SOMETHING EVEN MORE THAN THAT, WAS $3 BILLION FOR THE HEDGE FUND MAKER. APPLE, IF IT DECIDES TO ANTE UP COULD GET SOME OF ITS MONEY BACK BECAUSE THE CEO SAID $50 BILLION OF THAT 100 BILLION WOULD GO INTO U.S. INVESTMENT. >> THANK YOU SO MUCH, RAMY. SO MUCH MORE AHEAD. HONG KONG’S MONEY MARKET SQUEEZE IS SENDING A — SQUEEZE. >> TAKE A LOOK AT MARKETS TRADING IN THE ASIA-PACIFIC. YOU LOOK AFTER HALF AN HOUR OF TRADE, THE NIKKEI 225 LEADING SOME LOSSES THIS MORNING, DOWN A LITTLE MORE THAN .25%. WE DO SEE THE DOLLAR AT A BIT OF A HALT HERE. WE ARE COMING OUT OF THE OPEN IN SINGAPORE. THIS IS BLOOMBERG. ♪ CRAIG’S IT IS A 11:30 A.M. IN SYDNEY. WE HAVE BREAKING NEWS ABOUT THE MONTHLY BUSINESS SURVEY, A SLIGHT IMPROVEMENT IN CONFIDENCE DESPITE UNDERLYING STRIFE IN THE AUSTRALIAN ECONOMY. THIS IS GOOD NEWS. CONFIDENCE GOT TO FIVE IN NOVEMBER, HAVING DIPPED TO FOUR IN PREVIOUS MONTHS. WE ARE IN HONG KONG. A LITTLE BIT OF A PERK THERE FOR SYDNEY. BETTY: IM BETTY LIU IN NEW YORK. YOU ARE WATCHING “DAYBREAK ASIA.” >> OH PEG BOOSTED PRODUCTION IN NOVEMBER AHEAD OF NEXT MONTH’S COLLECT OF — OPEC BOOSTED PRODUCTION IN NOVEMBER AHEAD OF NEXT MONTH’S CUTS. TOTAL OUTPUT IS 38 MILLION BARRELS PER DAY. ANALYSTS EXPECT OPEC AND INDEPENDENT PRODUCERS TO INCREASE OUTPUT. DONALD TRUMP IS SAID TO BE POSTPONING UNTIL NEXT MONTH DETAILS OF HOW HE WILL HANDLE BUSINESS OPERATIONS WHILE AT THE WHITE HOUSE. A NEWS CONFERENCE SCHEDULED FOR THURSDAY WILL BE DELAYED BECAUSE THE PRESIDENT-ELECT’S BUSY FILLING HIS ADMINISTRATION FIRST. TRUMP HAS ABOUT 3.6 BILLION DOLLARS IN ASSETS IN OVER 500 COMPANIES. CHRISTINE LAGARDE HAS TOLD AN IMF — HAS TOLD THE TRIBUNAL THAT SHE ACTED IN THE PUBLIC INTEREST AS FRENCH FINANCE MINISTER IN 2007 WHEN SHE DID NOT TRY TO BLOCK A PUBLIC PAYOUT TO A BUSINESSMAN. SHE WILL RETURN TO COURT ON TUESDAY. SEARCHING — THE LAST VESSEL SEARCHING FOR THE MISSING MALAYSIA AIRLINE HAS HEADED OUT. THE AREA MIGHT HOLD THE REMAINS OF THE AIRPLANE AND THE PEOPLE ON BOARD. LOCAL MEDIA SAY IF THE PLANE IS NOT FOUND IN ONE OF THE TRENCHES, THE SEARCH WILL BE CALLED OFF IN JANUARY OR FEBRUARY. GLOBAL NEWS 24 HOURS A DAY POWERED BY MORE THAN 2600 JOURNALISTS AND ANALYSTS. THIS IS BLOOMBERG. >> LET’S LOOK AT HOW THE ASIAN MARKETS ARE SHAPING UP THIS MORNING. >> WE HAVE HEADWINDS COMING THROUGH FROM THE U.S. WHICH CLOSE LOWER OVERNIGHT. THIS IS WHAT WE ARE SEEING. INTEREST IN AUSTRALIA HAS MANAGED TO TURN POSITIVE. NEW ZEALAND FALLING DEEPER INTO NEGATIVE TERRITORY. STILL, THEY HAVE PRETTY MUCH ERASED THEIR LOSSES FOR 2016 AS WE GO INTO THE WIDELY ANTICIPATED FED MEETING WHERE ESSENTIALLY, WE ARE LOOKING AT UNCERTAINTY WITH THE TIGHTENING OF THE RATE HIKE. JUST TAKING A LOOK AT SOME OF THE MOVERS, WE ARE SEEING SOME INTERESTING MOVES WHEN IT COMES TO THE JAPANESE SESSION. NINTENDO IS DOWN 2%. UNIVERSAL STUDIOS AND NINTENDO WILL BE LAUNCHING A THEME PARK THAT WILL OPEN IN TIME FOR THE JAPAN 2020 GAMES. THE COMPANY PLANS TO SPEND ABOUT $24 MILLION TO DEVELOP A THEME PARK. TOSHIBA OH IS A COMPANY THAT HAS GONE THROUGH INTERNAL SCANDALS. THE NIKKEI SAYING TODAY THAT THE TOKYO STOCK EXCHANGE IS CONSIDERING KEEPING TOSHIBA ON THEIR WATCH LIST. THIS IS WHERE CONTROLS ARE BEING REVIEWED. THEY ARE EXPECTED TO MAKE A DECISION BY 2017. THERE ARE REPORTS IT MAY STAY ON THEIR ALONE LONGER OVER CONCERNS THAT INTERNAL CONTROLS HAVE NOT BEEN ADEQUATELY IMPROVED. THE BIGGEST DECLINE WHEN IT COMES TO THE AUSTRALIAN SESSION, WE HAVE THIS STORY ABOUT CHINESE CARRIERS PUTTING QUITE A BIT OF PRESSURE ON FARES FROM MAJOR AIRLINES LIKE WANT US, DOWN ABOUT 2.5% TODAY. BETTY: THANK YOU. WE HAVE BREAKING NEWS RIGHT NOW, MORE ON PRESIDENT-ELECT DONALD TRUMP, MONITORING HIS TWITTER FEED. TRUMP TWEETING, “I WILL BE MAKING MY ANNOUNCEMENT OF THE NEXT SECRETARY OF STATE TOMORROW MORNING. HE WILL BE MAKING THE ANNOUNCEMENT OF WHO WILL TAKE THAT SPOT. THERE IS LOTS OF SPECULATION THAT IT IS EXXON CEO RICK STILLER, EVEN THOUGH HIS APPOINTMENT HAS COME UNDER SCRUTINY AND CRITICISM — REX TILLER, EVEN THOUGH HIS APPOINTMENT HAS COME UNDER SCRUTINY AND CRITICISM BY SOME. BOND TRADERS ARE WAITING UNTIL WEDNESDAY — NOT WAITING UNTIL WEDNESDAY. THEY ARE PUSHING UP YIELDS IN ANTICIPATION. SO, NOW THEY ARE PUSHING UP YIELDS? LIKES THIS STARTED MONTHS AGO. IN FACT, AS WE GET INTO THE ASIAN TRADING SESSION, WE ARE SEEING A LITTLE BIT OF A BOUNCE BACK. AFTER MONDAY IN THE U.S., IT WAS FUELED A LOT BY THE RISE IN OIL PRICES. 17 MONTH HIGHS, YOU CAN SEE ON THE FAR RIGHT HAND OF YOUR SCREEN, THE 10 YEAR NOTE TOUCHED THAT LEVEL. THAT LITTLE RED CIRCLE SHOWS YOU THIS YEAR, 1.3 2%, A RECORD LOW. LOOK AT THAT MOVE IN BONDS. SEE THE YELLOW LINE GOING OVER TO THE LEFT-HAND SIDE OF YOUR SCREEN. OF COURSE, DONALD TRUMP’S VICTORY, THE PROMISED STIMULUS AND TAX CUTS, POSSIBILITY OF MORE GROWTH HAS HELPED FUELED A SELLOFF. AND NOW ASSUMING THAT WE HAVE THE 25 BASE POINT HIKE ON WEDNESDAY, WHAT DOES THAT INDICATE FOR 2017 AND 2018? THAT IS WHAT PEOPLE ARE WAITING TO SEE. BETTY: WHY ARE INVESTORS FINALLY BELIEVING THE FED FORECAST FOR THE ECONOMY? >> IT LOOKS LIKE FISCAL POLICY IS GOING TO PUSH THE ECONOMY FORWARD. AND INSTEAD OF SELLING OFF, WE ARE SEEING BOND TRADERS FALLING IN LINE. LET’S JUMP BACK INTO THE BLOOMBERG. GO TO YOUR BLOOMBERG. THE YELLOW DOT, THOSE ARE THE 2016, 2017, 2018 NUMBERS. REDLINE, AT THE SEPTEMBER MEETING, THAT IS WHAT BOND TRADERS THOUGHT THE FED WOULD DO. IT’S A LONG WAY FROM THE GREEN MEDIAN LINE. TRADERS ARE GETTING MUCH MORE IN LINE WITH THE FEDS. THE UNDERSECRETARY WAS ON BLOOMBERG TELEVISION EARLIER. HE SAID IT MIGHT BE TIME FOR THE FED TO RETIRE THOSE DOTS. >> THE HARDEST THING FOR THE FED’S THEY REALLY DON’T KNOW WHERE THEY ARE GOING TO BE A YEAR OR TWO FROM NOW. THEY DON’T KNOW HOW MUCH THE RECOVERY IS GOING TO GROW. THEY DON’T KNOW HOW MUCH THE TRUMP ADMINISTRATION IS GOING TO PUSH. JANET YELLEN HAS TO PULL BACK FROM GUIDANCE. SHE HAS TO PULL BACK FROM PRETENDING SHE KNOWS. SHE REALLY DOESN’T KNOW. >> HE SAID FORWARD GUIDANCE HAS DONE WHAT IT CAN DO. WE WILL SEE IF JANET YELLEN SIGNALS ANYTHING LIKE THAT. HER OPPORTUNITY WILL BE THE PRESS CONFERENCE ON WEDNESDAY. BETTY: WE MIGHT BE TALKING ABOUT WHO THE NEXT SECRETARY OF STATE IS THIS TIME TOMORROW, BUT RIGHT NOW, WE ARE TALKING ABOUT GARY COHEN. DOES HE HAVE ANY APPLICATIONS TO THE FED QUESTION MARK >> NOT. THE FEDERAL RESERVE CONTROLS MONETARY POLICY. IT WAS CREATED BY CONGRESS TO DO JUST THAT. THE NEC WAS CREATED BY EXECUTIVE ORDER BY BILL CLINTON IN 1993. HE WANTED TO BRING BOB RUBEN, THEN IT GOLDMAN, INTO HIS ADMINISTRATION, BUT LLOYD BENTSEN WAS ALREADY SECRETARY OF STATE. SO HE WANTED TO GIVE HIM A ROLE IN SETTING ECONOMIC POLICY. HE BROUGHT TOGETHER ALL THE DEPARTMENT CHIEFS TO FIGURE OUT NEW BANKING POLICIES, NEW TAX POLICIES. IT’S THE KIND OF THING THAT GARY COHEN PROBABLY HAS A LOT OF BACKGROUND IN. IT’S MORE LIKE AN ECONOMIC THINK TANK. FROM THE WHITE HOUSE PERSPECTIVE, TRUMP PERSPECTIVE, GARY IS THE GUY WHO HAS STARTED SPEARHEADING THINGS TO DO ALL KINDS OF THINGS FOR THE ECONOMY. >> WHAT IS GOING TO HAPPEN TO GOLDMAN IF HE GOES TO THE WHITE HOUSE? THANK YOU SO MUCH. AS THE FED PREPARES TO TIGHTEN FUNDING COST, SHARES IN HONG KONG ARE SURGING. KEEPING PRESSURE ON EQUITIES. WE ARE JUST ABOUT AN HOUR AWAY FROM THE OPEN. WHAT IS THE RISK HERE? >> WE ARE SEEING INCREASING FUNDING COSTS. IT COULD BECOME MORE EXPENSIVE FOR PEOPLE TO BORROW. WE ARE TALKING ABOUT THE THREE-MONTH INTERBANK RATE IN HONG KONG. THE CREDIT CRUNCH SIGNALS CONCERN ABOUT A CASH EXIT US. — EXIT. IN PREVIOUS BOUTS OF CASH FLOWS, WE HAVE SEEN CURRENCY DEPRECIATING ALONG WITH THE RATE. IN JANUARY, THE HONG KONG DOLLAR PLUNGING TO A 28 YEAR LOW. THAT IS THE BLUE LINE. HIGHER U.S. INTEREST RATES CAUSED OUTFLOWS FROM EMERGING MARKETS IN HONG KONG. >> IS IT HERE WE GO AGAIN? SHOULD WE START WORRYING ABOUT CAPITAL OUTFLOWS? >> SO FAR, WE SHOULDN’T BE TOO WORRIED. WE ARE TALKING ABOUT IMPLIED VOLATILITY. THE HONG KONG EXCHANGE RATE ISN’T APPRECIATING THAT MUCH. NOT TO MENTION THAT ECONOMIES SAY OK, IF THE U.S. GOES AHEAD, THE RATE CAP WITH HONG KONG — GAP WITH HONG KONG WILL STILL NOT BE AS HUGE OR AS WIDE. KEEP IN MIND WE ARE GETTING MORE MAINLAND INVESTORS COMING INTO HONG KONG TO HEDGE WEAKNESS IN THEIR CURRENCY AND BY EQUITY IN HONG KONG HOMES. >> MORE BREAKING NEWS. MUDDY WATERS COMING OUT WITH THEIR LATEST REPORT SAYING THEY ARE TARGETING THEIR FIRST SHORT ON A JAPANESE COMPANY, UNITED SHARES, SAYING THE COMPANY CONSTANTLY MISSES SALES TARGETS AND IS A HIGHLY AGGRESSIVE ACCOUNTING BOOST. THEY ARE IN FREE FLOW AS OF DECEMBER NIGHT AND SHARES ARE FALLING AT THIS POINT AS MUCH AS 5.5 PERCENT. THEY HAVE NO IMMEDIATE CONTENT FROM MUDDY WATERS. MUCH MORE AHEAD. CHINA TAKING A STANCE AGAINST THE U.S. AND THE EU. WHY THEY THINK THEY ARE BEING RIPPED OFF. THIS IS BLOOMBERG. ♪ BETTY: THIS IS DAYBREAK ASIA. I AM BETTY LIU IN NEW YORK. >> BOEING SHARES RISING IN EXTENDED TRADING TO $1.42 PER SHARE. THEY ALSO SET A NEW $14 BILLION BUYBACK PLAN. THERE IS DEMAND FOR LONG — THERE IS WINNOWING DEMAND FOR LONG-HAUL JETS. THE COMPANY SAID THE CHANGES WANT A FACT THE 2016 FINANCIAL GUIDANCE. VIACOM HAS NAMED A NEW CEO. HE IS A 20 YEAR VETERAN OF THE COMPANY AND HAS BEEN ACTING CHIEF EXECUTIVE SINCE LAST MONTH. VIACOM SHARES TUMBLED IN NEW YORK AFTER THE RED STONES WITHDREW THEIR PROPOSED DEAL WITH CBS. >> INVESTING IN A NEW AIRLINE VENTURE IN MYANMAR, THE NEW CARRIER PLANS TO START FLIGHTS IN 2018. THEY HAVE A 49% STAKE IN A LOCAL COMPANY. THE JAPANESE CARRIER IS EXPANDING ABROAD AS MORE PEOPLE TAKE TO THE SKIES IN DEVELOPING ECONOMIES. >> SPENDING POWER AMONG PEOPLE IN MYANMAR, ESPECIALLY IN THE NEW MIDDLE CLASS, IS GROWING. WE WANT TO SERVICE THESE CUSTOMERS. WE WANT TO CONTRIBUTE TO MYANMAR’S ECONOMIC DEVELOPMENT. >> TENSION BETWEEN BEIJING AND WASHINGTON IS BEING RATCHETED UP ANOTHER NOTCH. >> STEPHEN ENGLE JOINS US NOW WITH MORE. THIS IS SUCH A LONG-STANDING ISSUE. AS WE ARE ALREADY SEEING, THERE IS RETALIATION OVER TRUMP ONE CHINA COMMENT. — TRUMP’S ONE CHINA COMMENT. >> GIVEN THE TIMING, OF COURSE, AFTER THE ONE CHINA COMMENT, THERE IS FRICTION THAT THIS MIGHT BE A BIT OF A TIT FOR TAT. KEEP IN MIND THE COMPLAINT FROM CHINA CAME A DAY AFTER THE 50TH ANNIVERSARY OF CHINA’S EVAN INTO THE WORLD TRADE ORGANIZATION. THEIR CAMP — ADD INTO THE WORLD TRADE ORGANIZATION. CHINA SAYS THAT PRICES OF SANCTIONS ARE BEING UNFAIRLY OR ARTIFICIALLY LIFTED AGAINST THEM. CHINA WANTS ALL WTO MEMBERS TO USE TO MASTIC PRICING, NOT THIRD COUNTRY PRICING IN REFLECTION OF CHINA’S EXPORTS — DOMESTIC PRICING, NOT THIRD COUNTRY PRICING, IN REFLECTION OF CHINA’S EXPORTS. BETTY: THE STATEMENTS COMING OUT OF THE PRESIDENT-ELECT ABOUT THE ONE CHILD POLICY ARE THE BEDROCK. WHEN DO THESE TIT FOR TAT JABS BETWEEN CHINA AND THE U.S. START TO BE A SERIOUS CONCERN? >> WE HAVE BEEN THINKING ABOUT THE ONE CHINA POLICY FOR SO LONG. AND OF COURSE, TAIWAN’S VIEW ON IT. THE 1992 CONSENSUS, THEY AGREED THERE IS ONLY ONE CHINA, EVEN THOUGH THEY DISAGREE ON THE DEFINITION OF WHAT THAT IS. EITHER TRUMP KNEW EXACTLY WHAT HE WAS DOING OR HAD NO IDEA WHAT HE WAS DOING, BECAUSE CHINA WILL NOT GIVE ON THIS ISSUE. THIS IS A CORE PART OF THEIR RELATIONSHIP WITH THE UNITED STATES. THE GLOBAL TIMES IS OUT WITH MORE CRITICISM OF DONALD TRUMP, SAYING HE IS ACTING LIKE A CHILD IN HIS IGNORANCE OF FOREIGN POLICY. THE ONE CHINA POLICY CANNOT BE BOUGHT AND SOLD. DAVID WU OF BANKAMERICA MERRILL LYNCH SAID IT’S THE NUMBER ONE WILD CARD FOR 2017. >> THIS IS MY SINGLE BIGGEST WORRY. I FEAR THE U.S. AND CHINA COULD BE ON A COLLISION COURSE. >> AGAIN, IT COMES BACK TO CHILDLIKE INNOCENCE COMING FROM DONALD TRUMP. >> BILLIONAIRE BENNY STEIN IS HAS ESCALATED A DECADE OLD ISSUE WITH RIO TINTO OVER THE RIGHTS TO A MINE. HE CLAIMS RIO TINTO MAY HAVE AUTHORIZED A PAYMENT TO A CONSULTANT WHO IS ALSO A FRIEND OF GINNY’S PRESIDENT — NEW GUINEA’S PRESIDENT. DAVID, TELL US MORE ABOUT THIS NEW DEVELOPMENT. >> GOOD MORNING. LAWYERS FOR ISRAELI BILLIONAIRE BENNY STEIN SENT A LETTER TO THE CHAIRMAN OF RIO TINTO SEEKING BILLIONS IN DAMAGES FOR WHAT THEY SAY WAS A BREACH IN THEIR RIGHTS. LOOK, IN FACT, A DIRECTOR TOLD BLOOMBERG NEWS YESTERDAY THAT THE COMPANY COULD SEEK AS MUCH AS $5 BILLION IN DAMAGES. IF THE COMPANY DOES NOT RECEIVE A RESPONSE WHICH INCLUDES ENOUGH COMPENSATION BY THE THIRD OF JANUARY, IT INTENDS TO FILE A LAWSUIT. ALL OF THIS RELATES TO THE ONGOING ISSUE FOR RIO. JUST LAST MONTH, RIO ALERTED AUTHORITIES IN THE U.S., U.K., AND AUSTRALIA AFTER HE CARRIED OUT AN INTERNAL INQUIRY INTO THE 10.5 MILLION DOLLAR PAYMENT TO A CONSULTANT ACTING FOR THE COMPANY ON THAT PROJECT. THIS IS YET ANOTHER ISSUE RELATED TO WHAT IS PROVING TO BE QUITE UP PROBLEMATIC PROSPECT — QUITE A PROBLEMATIC PROSPECT FOR RIO. >> THEY HAVE BEEN FAIRLY MEASURED IN WHAT THEY ARE SAYING PUBLICLY ABOUT THESE INVESTIGATIONS. HAVE THEY RESPONDED TO THIS LETTER? >> YES, THEY HAVE. AND THEY SAID IF THE RESOURCES — IF THEY DO HAVE A LAWSUIT, THE COMPANY WILL ROBUSTLY DEFEND ITSELF. UP TO THIS POINT, THEY HAVE BEEN INCREDIBLY GUARDED ABOUT WHAT HAS BEEN SAID. OBVIOUSLY, THE ONGOING INVESTIGATIONS THE AUTHORITIES ARE CARRYING OUT — THE CEO WAS ON BLOOMBERG AND STICKING TO HIS SCRIPT. HE SAID THE WHOLE SITUATION IS CHALLENGING, BUT UNDER HIS WATCH, THE COMPANY WILL DO THE RIGHT THING IN EVERY TERRITORY IT OPERATES IN. THE CABIN HE HAS BEEN PRETTY GUARDED UP UNTIL NOW, BUT WE ARE EXPECTING — COMPANY HAS BEEN PRE-GUARDED UP UNTIL NOW, BUT WE ARE EXPECTING A RESPONSE. >> MUCH MORE AHEAD. THE FLOOD OF CHEAP LONG-HAUL AIR FARES OUT OF CHINA. WE WILL ASSESS THE IMPACT ON OTHER GLOBAL CARRIERS, NEXT. THIS IS BLOOMBERG. ♪ >> CHINESE AIRLINES FLOODING THE WORLD WITH SOME OF THE LOWEST FARES WE HAVE SEEN. WHAT IS BEHIND ALL OF THESE LOW AIRFARES? >> GOOD MORNING FROM SYDNEY. I THINK IT’S FAIR TO SAY WE HAVE SEEN A NEW ORDER, NOT JUST IN CHINA’S AIRLINES, AND KOREAN AIRLINES, BUT SPREADING ACROSS EUROPE AND INTO NORTH AMERICA AS WELL. BRITISH AIRWAYS, DELTA AIRLINES, AMERICAN AIRLINES ALL AFFECTED BY THIS FLOOD OF CAPACITY, PARTICULARLY ACROSS THE PACIFIC. GREAT NEWS IF YOU ARE A PASSENGER. PERHAPS UP TO 50% OF FARES, IF YOU’RE COMPARING CHINA AIR, CHINA SOUTHERN, CHINA EASTERN, LEGACY CARRIERS, IT DOES RAISE OTHER QUESTIONS ABOUT THE LONGEVITY. >> I AM SURE EVERYONE WATCHING THE REPORT IS CHECKING THOSE FLIGHTS RIGHT NOW FOR THE HOLIDAYS. WHO ESSENTIALLY GETS HURT THEN? >> WE HAVE HAD DELTA AIRLINES AND AMERICAN ALREADY POINT TO EXCESS CAPACITY ACROSS THE PACIFIC. FROM LAS VEGAS INTO HONG KONG INTO OTHER ASIAN AIRPORTS INTO TOKYO, WE HAVE SEEN US. THE QUESTION IS, CAN THEY KEEP THIS UP? WE ARE NOT SURE IF CHINESE AIRLINES CAN SUSTAIN THIS WITH PRESSURE ON YIELDS ALREADY BEGINNING TO TAKE IT BACK. >> I CAN IMAGINE THEY HAVE TO WATCH THE OIL PRICES PER DAY CLOSELY. ANGUS, THANK YOU SO MUCH. THAT IS IT FOR US. PLENTY MORE STILL TO COME ON BLOOMBERG MARKETS ON BLOOMBERG. ♪ >> 9 A.M. IN SINGAPORE, MIDDAY IN SYDNEY. >> FROM BLOOMBERG’S ASIA HEADQUARTERS IN HONG KONG, THIS IS BLOOMBERG MARKETS ASIA. >> RETAIL SALES IN CHINA AND SUGGEST MORE STABILITY. >> PRESSURE ON CURRENCY AND EQUITIES. >> DONALD TRUMP DELAYING HIS PRESIDENTIAL BUSINESS CONFERENCE. >> AND BEIJING HAS LAUNCHED A TRADE COMPLAINT AND HAS CONCERNS ABOUT HIS ONE CHINA REMARKS. WE ARE 30 MINUTES AWAY FROM THE OPEN IN HONG KONG. SINGAPORE JUST COMING ON LINE. HOW ARE THE MARKETS LOOKING? >> WE ARE LOOKING AT A PRETTY MIXED PICTURE, TRENDING OUT A BIT LOWER. WE REALLY HAD THE WIND TAKEN OUT OF THE SAILS OF THE OIL DRIVEN RALLY YESTERDAY. OIL PULLING BACK A BIT. STILL SEEING GAINS IN THE SESSION. WE ARE SEEING THAT COME OUT OF THE EQUITIES MARKET AS WELL. SO FAR, LITTLE BIT OF A MODEST BY WHEN IT COMES TO SYDNEY UP. WE ARE SEEING WEAKNESS COMING THROUGH FROM THE NIKKEI 225. WE HAVE ACTUALLY MANAGED TO COME BACK FROM STEEPER LOSSES WE SAW A EARLIER ON. WE DO HAVE THE YEN WHICH IS STARTING TO WEAKEN. THAT IS GIVING A LITTLE HEADWIND TO THE JAPANESE EXPORTERS. STILL, JAPANESE STOCKS HAVE COME BACK FROM THEIR LOSSES AS WE GO INTO THAT FED MEETING. THINGS ARE LOOKING PRETTY GOOD WHEN IT COMES TO JAPANESE EQUITIES. NEW ZEALAND UP. WE’RE STRENGTH COMING THROUGH FROM MALAYSIA. BIG DATA WEEK IN SINGAPORE. OIL EXPORTS OUT OF THE END OF THE WEEK. TAIWAN OPENING UP. LOTS TO DO WITH SOME GEOPOLITICAL CONCERNS GIVEN THE WAR OF WORDS BETWEEN CHINA AND PRESIDENT-ELECT DONALD TRUMP. THE IMPEACHMENT VOTE IN SOUTH KOREA GOING TO THE CONSTITUTIONAL COURT FOR CONSIDERATION. WE ARE ABOUT IT OUR AWAY FROM THE CHINA NUMBERS. WATCHING THE AUSSIE DOLLAR, REACTION TO ANY CHINA MACRO NUMBERS, WE HAVE SEEN RESISTANCE AT AROUND THE 75 LEVEL. IF HE GETS TO 76, WE CAN SEE IT BUILDING — IF IT GETS TO 76, WE CAN SEE IT BUILDING. THERE IS ALSO A SPACE THAT CAN REACT POORLY, PARTICULARLY ON FIXED ASSET INVESTMENTS AS WELL AS INDUSTRIAL PRODUCTION. COPPER FALLING FOR A SECOND SESSION. GOLD STAGING A LITTLE BIT OF A RECOVERY. MONEY GOING INTO SAFE HAVENS AS OIL REBOUNDS. FINALLY, WEAKNESS IN THE DOLLAR INDEX. A LOT OF EMERGING-MARKET CURRENCIES, INCLUDING THE YEN AND THE YUAN, AND WE ARE HEADING TO THE 115 HANDLE FOR THE N. — YEN. >> WE WILL HAVE ANOTHER GAUGE OF HEALTH OF THE CHINESE ECONOMY AS WE COME TO THE END OF THE YEAR. TOM, WHAT ARE WE LOOKING AT? >> WE ARE NOT EXPECTING ANYTHING IS GOING TO DERAIL CHINA’S ECONOMIC STABILIZATION. INDUSTRIAL PRODUCTION, RETAIL SALES AND FIXED ASSETS ARE WHAT WE ARE FOCUSED ON. WE HAVE A CHART THAT SHOWS THEIR PROGRESS AND DATA POINTS SINCE 2013. THE ECONOMY OVERALL HAS SLOWED IN THOSE OF ALL DROPPED DOWN. IN THE LAST FEW MONTHS, THEY HAVE STABILIZED, AND WE CAN EXPECT A CONTINUATION OF THAT THEME. PRODUCTION IS EXPECTED TO CALM IN AT 6.1% FOR THE THIRD MONTH IN A ROW. RETAIL SALES ARE EXPECTED TO COME IN AT 6.2 PERCENT. FIXED ASSET INVESTMENT EXPECTED TO COME IN AT 8.3% FOR THE SECOND MONTH IN A ROW. IT WILL BE INTERESTING TO SEE HOW MUCH PUBLIC SPENDING ON FIXED ASSETS THERE IS VERSUS PRIVATE SPENDING. WE GOT BETTER THAN EXPECTED MANUFACTURING DATA. AND AN IMPROVEMENT IN THE INFLATIONARY PICTURE. IN FACT, WE ARE OUTSTRIPPING CONSUMER PRICES FOR THE FIRST TIME IN FIVE YEARS. MORE DETAILS AROUND WHAT IS TURNING OUT TO BE A STABILIZING CHINA HEADING INTO 2017. >> GIVEN THIS POTENTIALLY MORE POSITIVE PICTURE, WHAT CAN WE ANTICIPATE FROM BEIJING IN 2017? >> WE SPOKE TO AN ECONOMIST AT GOLDMAN SACHS BASED IN HONG KONG. SHE EXPECTS A MORE HAWKISH STANCE NOW THAT THIS MORE SOLID ECONOMIC BASE AND FOUNDATION IS BEING WEIGHED. THAT SEEMS TO BE THE CONSENSUS NOW, THAT WITH A STRONGER ECONOMY AND THAT GROWTH TARGET LIKELY TO BE MET EXPECTS BY THEF THE YEAR, THE POLICY MAKERS WILL START TO TACKLE THE FINANCIAL RISKS WE TALK ABOUT ALL THE TIME IN THE CORPORATE SECTOR, THE HOUSING MARKET, WHERE WE ARE ALREADY SEEING CURBS PUT IN PLACE. THAT SEEMS TO BE THE EMPHASIS NOW. THE ECONOMISTS WE HAVE SPOKEN TO, INTERESTINGLY, BLOOMBERG ALSO SPOKE TO A STRATEGIST IN CAPITAL MANAGEMENT WHO SPENT TWO DECADES IN CHINA. HE SAID THE RISKS OF CHINA’S ECONOMY ARE BEING OVERPLAYED. THERE IS NO MORE CHANCE OF FINANCIAL CRISIS IN THE NEXT DECADE THEN THERE WAS IN THE LAST DECADE. HE THINKS THE HOUSING MARKET DOES NOT FACE A BUBBLE PROBLEM BUT IS ON STRONG FOUNDATION BECAUSE OF LEVERAGE HERE. HE ALSO THINKS THERE IS A BIG PROBLEM WITH THE BANKS AND THAT GOES AGAINST THE VIEWS OF MANY ECONOMISTS WHO THINK THE CHINESE BANKS WILL NEED TO BE BAILED OUT IN THE NEXT FEW YEARS. SO, HE PAINTS A MORE POSITIVE PICTURE OF WHERE CHINA’S ECONOMY LIES. WE WILL GET MORE DETAILS AND A COUPLE OF HOURS. >> ABOUT 53 MINUTES AWAY, TO BE PRECISE. OUR CHINA CORRESPONDENT. >> FROM CHINA TO THE FED, WHICH IS EXPECTED TO ANNOUNCE A RATE HIKE ON WEDNESDAY, BUT BOND TRADERS ARE ALREADY PUSHING UP YIELDS. WHAT IS DRIVING THE ROUTE WE ARE SEEING IN THE BOND MARKET? >> IT CERTAINLY HAS BEEN DRAMATIC. WE ARE SEEING A LITTLE BOUNCE AS ASIAN TRADING GETS UNDERWAY. THE LATEST FACTOR IS THE RISING OIL PRICES. IT’S THE HIGHEST LEVEL IN 17 MONTHS. THAT IS THE ENEMY OF BONDS AND THE LATEST THING THAT HELPS DRIVE BONDS DRAMATICALLY LOWER. THE 10 YEAR YIELD GOT UP ON AN INTRADAY BASIS JUST OVER 2.5 PERCENT ON MONDAY. THAT IS A RUN UP FROM THE RED CIRCLE IN THE LOWER RIGHT-HAND CORNER. 1.3 2% ON THE 10 YEAR IN JULY, A RECORD LOW. A DOUBLING OF YIELDS IN SIX MONTHS. NOW LET’S GO BACK TO THE LEFT SIDE OF THE SCREEN. THE YELLOW LINE WILL TAKE YOU IN THAT DIRECTION. THAT WAS THE HIGH-END JULY OF 2007 GOING INTO THE RECESSION. JUST PUTTING THAT IN PERSPECTIVE, WE ARE A LONG WAY AWAY FROM THERE. NOW, OF COURSE, TRUMP’S PLANS TO BOOST THE ECONOMY ARE ALSO WEIGHING ON THE BOND MARKET. THE QUESTION NOW IS IF THE ECONOMY IS GOING TO PICK UP MORE, IF IT IS CHANGING, WILL THAT CAUSE THE FEDS TO CHANGE. RATE HIKES ARE EXPECTED IN 2017. WHAT ABOUT 2018? WHAT WILL THE FED SIGNAL ABOUT RATE HIKES THEN? >> WHEN IT COMES TO THE ECONOMY, WHEN IT COMES TO RATE HIKES, THEY WERE SKEPTICAL, TO BE DIPLOMATIC. >> SKEPTICAL TO SAY THE LEAST. IN FACT, A YEAR AGO, THE FORECAST FOR RATE HIKES DID NOT CAUSE THE BOND MARKET TO SELL OFF. THEY HAD A RALLY. NOW IT LOOKS LIKE THEY’RE GOING TO GET THAT. THE BOND TRADERS ARE STARTING TO FALL IN LINE. DERIVATIVES TRADERS ARE LOOKING FOR MORE RATE HIKES THAN THEY WERE BEFORE. ON THE TERMINAL, YOU CAN SEE THE CLUSTERS OF YELLOW DOTS. THEY DEPICT THE 2017 RATE HIKE. BY 2018, 3 HIKES. THE GREEN MEDIAN LINE SHOWS YOU THAT. THE BOTTOM REDLINE IS WHAT TRADERS WERE LOOKING FOR. THEY DID NOT BELIEVE THE GREEN LINE. THEY SAID YOU ARE BARELY GOING TO HIKE RATES AT ALL FOR THE NEXT TWO YEARS. THE PURPLE LINE IS VERY CLOSE NOW TO WEAR THE GREEN LINE IS. THAT’S WHAT TRADERS ARE LOOKING FOR. THEY HAVE DEFINITELY COME AROUND. PETER FISHER WAS ON BLOOMBERG EARLIER. HE WAS THE EXECUTIVE VICE PRESIDENT OF THE NEW YORK FED AND A FORMER TREASURY SECRETARY — UNDER SECRETARY. HE THINKS IT MIGHT BE TIME FOR JANET YELLEN TO SEND A SIGNAL. >> WE REALLY DON’T KNOW WHERE WE ARE GOING TO BE A YEAR OR TWO FROM NOW. WE DON’T KNOW HOW MUCH OF THIS RECOVERY IS GOING TO COME THROUGH. WE DON’T KNOW HOW MUCH ON TOP OF THAT THE ADMINISTRATION WILL PUT, CONGRESS WILL PUT. DOES JANET YELLEN KNOW SHE HAS TO PULL BACK FROM FORWARD GUIDANCE? SHE HAS TO PULL BACK FROM PRETENDING SHE KNOWS WHAT WILL HAPPEN 12 MONTHS FROM NOW WHEN SHE REALLY DOESN’T KNOW. >> PETER FISHER KNOWS ALL ABOUT THIS. HE SAYS FOREIGN GUIDANCE — FORWARD GUIDANCE HAS DONE WHAT IT CAN DO FOR NOW. IT IS PAST ITS EXPIRING DATE AND TIME FOR THE FED TO STEP BACK. THE FED CANNOT TELL US WITH ANY CERTAINTY WHERE IT IS GOING TO BE IN 2017 OR 2018. >> BANKS, KATHLEEN. — THANKS, KATHLEEN. >> LET’S GET OVER TO SYDNEY FOR THE FIRST WORD NEWS. >> CHINA HAS FILED A WTO COMPLAINT AGAINST THE UNITED STATES AND EUROPEAN UNION. BEIJING WANTS ITS TO TRADING PARTNERS TO STOP USING EXAMPLE PRICES FROM OTHER NATIONS. BEIJING BELIEVES AUTHORITIES SHOULD BE USING DOMESTIC PRICES. THEY SAY DUTIES ON CHINESE IMPORTS ARE ARTIFICIALLY INFLATED. THE EUROPEAN UNION HAS NOT SAID HOW IT WILL CONDUCT BREXIT NEGOTIATIONS WITH THE U.K. THEY WILL MEET ON THURSDAY WITHOUT THERESA MAY TO DISCUSS STRATEGY. A DRAFT STATEMENT FROM BLOOMBERG SAYS THE U.K. WILL BE EXCLUDED FROM OFF FUTURE — ALL FUTURE EU MEETINGS. DONALD TRUMP HAS POSTPONED BY A NEWS CONFERENCE SCHEDULED FOR THURSDAY ABOUT HOW HE WILL HANDLE HIS NEST TRANSITIONS WHILE IN THE WHITE HOUSE. TRUMP HAS ABOUT $3.6 BILLION OF ASSETS AND $630 MILLION IN DEBT. DONALD TRUMP HAS NOMINATED ANOTHER GOLDMAN SACHS EXECUTIVE TO HIS ADMINISTRATION. HE HAS PICKED GERRY COHEN TO BE HIS TOP ECONOMIC POLICY AND VISOR. — ADVISOR. COH WAS A GOLDMAN — COHN WAS A GOLDMAN SACHS EXECUTIVE. GLOBAL NEWS 24 HOURS A DAY POWERED BY MORE THAN 2600 JOURNALISTS AND ANALYSTS. THIS IS BLOOMBERG. >> NICE WORK, PAUL ALLEN. >> STILL AHEAD, GETTING INTO JAPAN’S TOP RESTAURANT CAN BE A CHALLENGE FOR FOREIGNERS. THE CEO OF THE COMPANY IS PROMISING TO GET YOUR RESERVATION — FOR A PRICE. >> AND A WEALTH MANAGER IS WITH US NEXT. ♪ >> WE ARE 15 MINUTES INTO TRADING IN SINGAPORE. TAKE A LOOK AT HOW SOME OF THE MARKETS IN THE REGION ARE TRACKING. TAKE A LOOK AT WHAT’S GOING ON IN AUSTRALIA. THE NIKKEI LOSING ABOUT .2%. >> BOEING SHARES UP, WAY AHEAD OF WHAT THE THINKING WAS BY ANALYSTS WHO EXPECTED A $14 BILLION BUYBACK PLAN. BOEING SAYS IT EXPECTS TO PRODUCE FEWER AIRCRAFTS. THEY HAVE SLOWED ALPA 25 PLANES A MONTH. THE COMPANY — SLOWED OUTPUT TO FIVE PLANES A MONTH. THE YIELD ON BOEING AT 3.5%. >> CHINA LIFE WILL PAY $2.9 BILLION FOR 44% OF THE PIPELINE STICK. THE STAKE. — STAKE. >> THE CHIEF EXECUTIVE IS SCRAPPING MERGER TALKS WITH CBS AFTER 30 YEARS WITH THE COMPANY. SUMNER REDSTONE AND HIS DAUGHTER HAVE SCRAPPED A PROPOSED DEAL WITH CBS. >> LET’S CHECK BACK IN ON THE MARKETS. WE ARE JOINED BY THE DIRECTOR OF A WEALTH MANAGEMENT COMPANY. WE SAW A REVERSAL IN THE FORTUNE OF ASIAN MARKETS YESTERDAY FOLLOWING THE RALLY BY OIL. WHAT DO YOU MAKE OF THE FED DECISION? — WHAT YOU MAKE OF THE MARKETS MOVING AHEAD OF THE FED DECISION? >> THERE IS CLEARLY QUITE A BIT OF MOMENTUM. I THINK THE MARKETS IN THE SHORT-TERM ARE AHEAD OF THEMSELVES. WE CERTAINLY EXPECT TO SEE MARKETS DOWN QUITE A BIT. AS YOU KNOW, WE HAVE CHINA DATA COMING UP LATER TODAY. IT WILL CONTINUE TO REINFORCE A FAIRLY STABLE OUTLOOK FOR CHINA. CHINA IS HOLDING AT ABOUT A 6.7 PERCENT-7% GROWTH RANGE. — 6.5%-7% GROWTH RANGE. WE ARE SEEING OIL GOING HIGHER. IT IS PROBABLY GOING TO KEY CAP IN THE MIDTERM AS THE U.S. STARTS TO RAMP UP PRODUCTION. THE COMMENTARY OUT OF SAUDI ARABIA HAS PROBABLY SURPRISED MOST OF THE MARKETPLACE. I THINK THAT IS WHERE WE WILL SEE SOME MORE MOMENTUM ON THE OIL PRICE. >> LET’S TALK ABOUT THE FOMC. WE ARE ESSENTIALLY LOOKING FOR WHAT HAPPENS NEXT. IT’S A DONE DEAL PRETTY MUCH. PEOPLE ARE GOING TO GET INTO A TIZZY ABOUT THE NEXT RATE HIKE. HOW MANY RATE HIKES ARE THEY’RE GOING TO BE IN 2017? >> WELL, ECONOMISTS IN THE U.S. HAVE BEEN FORECASTING FOR SOME TIME A RATE RISE IN DECEMBER. THAT’S PROBABLY COMING UP IN A COUPLE DAYS TIME. THAT’S A HIGH PROBABILITY. THEY HAVE ALSO BEEN FORECASTING TO FURTHER — TO GO FURTHER RATE RISES IN 2000. IF WE START SEEING INFLATION PICKUP AS A RESULT OF HIGHER OIL PRICES, TO BECOME’S. I DON’T THINK THAT IS YET PRICED IN — TWO BECOMES THREE. I DON’T THINK THAT IS YET PRICED IN BY THE MARKETS. RIGHT NOW, THEY CAP OUT ABOUT 2%. THERE MIGHT BE POTENTIAL UPSIDE FROM THERE. AGAIN, THAT IS WHAT WE HAVE SEEN IN THIS PARTICULAR CYCLE. THERE HAS BEEN A LOT OF DISCUSSION AROUND THE 10 YEAR BOND MARKET SELLOFF. AGAIN, FROM ANOTHER PERSPECTIVE, THE TENURED — 10 YEAR BOND YIELD WAS 2.2% AT THE BEGINNING OF THE YEAR. SO, JUST SEEING A REAL JUMP BACK TO WHERE WE WERE AT THE BEGINNING OF THE YEAR. SHOULD NOT BE SUCH A SURPRISE. >> LET’S LOOK AT A PERSPECTIVE WITH CHINA. WE ARE EXPECTING SIGNS OF A STABILIZATION STORY, BUT YOU ARE SAYING IT IS NOT ENOUGH TO OFFSET THE WEAKNESS IN THE BROADER ECONOMY. >> THERE ARE SOME CONCERNS IN ELEMENTS OF THE CHINESE ECONOMY. THERE ARE CONCERNS IN THE BANKING SECTOR, ON THE POSSIBILITY OF A PROPERTY BUBBLE. WE DON’T SEE THOSE AS MUCH AS CONCERNS, BUT THEY ARE CLEARLY IN THE BACKGROUND FOR US. WE THINK THE ECONOMY HAS BEEN WELL-MANAGED FOR THE LAST YEAR OR SO. WE HAVE SEEN 6.5%-7% GROWTH. BUT THE RISKS HAVE THE POTENTIAL TO BE THERE. THE AUTHORITIES WILL CREATE POLICIES THAT STEM THOSE POTENTIAL RISKS. WE THINK IT IS A STEADY AS SHE GOES TYPE OF STRATEGY BY THE AUTHORITIES, NOT SO MUCH — THAT IS WHAT WE ARE FORECASTING GOING INTO THE COMING YEAR. AND WE ARE PRETTY COMFORTABLE WITH THAT. >> THANK YOU SO MUCH. >> COMING UP, GROWING PRESSURE IN HONG KONG’S MONEY MARKET. DETAILS ON THE WAY. ♪ >> LET’S RETURN FOR A MOMENT TO THE RATE HIKE EVERYONE IS EXPECTING THIS WEEK. THERE IS PRESSURE ON HONG KONG’S CURRENCY AND EQUITIES. WHAT ARE THE RISKS HERE? >> THERE ARE COUPLE ON THE EQUITY MARKETS. IT IS BECOMING MORE EXPENSIVE TO BORROW IN ORDER TO BUY STOCK. WHAT THIS MEANS IS THAT THE THREE-MONTH INTERBANK RATE IN HONG KONG HAS BEEN SURGING FOR THE PAST 10 DAYS AND IS NOW ON A 2009 HI. IT IS BECOMING MORE EXPENSIVE FOR PEOPLE TO FUND THEIR PURCHASES. THIS CREDIT CRUNCH COULD BE SIGNALING CONCERNS OF CASH OUTFLOWS. IN ADSENSE, IF YOU — IN ESSENCE , IF YOU LOOK IN ISOLATION, HIGHER RATES SHOULD SUPPORT THE U.S. DOLLAR. WHAT WE HAVE SEEN IN THE PAST IS CASH OUTFLOWS THAT COME WITH HIGHER U.S. INTEREST RATES AND CASH OUTFLOWS FROM EMERGING MARKETS LIKE HONG KONG. THAT HAS LED TO THE CURRENT DEPRECIATION, ALONG WITH THE JUMP IN RATES. YOU CAN SEE IN JANUARY, THE BLUE LINE RIGHT THERE, THE HONG KONG DOLLAR PLUNGING ALONG WITH A SURGE IN THE HIBOR RATE. THIS ON FEARS OF THE YUAN ON THE GLOBAL MARKET. >> TELL ME HERE, WHAT ABOUT THE CAPITAL OUTFLOW STORY? HOW DOES IT PLAY TO THAT NARRATIVE? >> RIGHT NOW, WE ARE SEEING THAT THESE INVESTORS DON’T SEEM TOO CONCERNED ABOUT IT. YOU SAID IT. THE EXCHANGE RATE IS NOT HUGE IN ITSELF. WE ARE SEEING THAT THE EXCHANGE RATE IS HOLDING AGAINST THE GREENBACK, NOT TO MENTION THAT ECONOMIST’S ARE SAYING OK, FINE, IF THE FED HIKES RATES TWICE NEXT YEAR, STILL THE GAP WANT BE AS BIG, SO CASH OUTFLOWS WON’T BE AS HUGE. INVESTORS ARE HEDGING FOR CURRENCY WEAKNESS. LIKE SO NOT MUCH TO BE CONCERNED ABOUT. THANK YOU FOR THAT. >> CHINA FILING A COMPLAINT WITH THE WTO ABOUT HOW THE UNITED STATES AND YEAR UP HE AND UNION APPLY TARIFFS. WE WILL LOOK AT THAT STORY ON THE WAY UP — AND EUROPEAN UNION APPLY TARIFFS. WE WILL LOOK AT THAT STORY. ♪ >> THIS IS BLOOMBERG MARKETS ASIA. >> LOOKING AT OIL PRICES, EVER SINCE SAUDI ARABIA MADE THEIR VERSION OF THE STORY, THERE HAS BEEN AN ABSOLUTE BINGE. >> TEAMS LIKE WE ARE LEAVING BEHIND THE FOUR NUMBER. >> — SEEMS LIKE WE ARE LEAVING BEHIND THE FOUR NUMBER. >> HE SAID HE COULD SEE IT GOING UP TO 60, BUT IT MIGHT TOUGH OUT THERE. >> AND AUDACIOUS CALL THAT ONE. I THINK YOU HAVE BEEN HIGHLIGHTING THIS, THAT THIS IS OVERBOUGHT TERRAIN. THIS IS THE RELATIVE STRENGTH INDEX, RIGHT? >> AND WE ARE SEEING IT HEAD TOWARD THE 70 MARK. >> REDLINE THERE. GREEN LINE IS OVERSELLING. THAT IS CURRENTLY WHAT WE HAVE. LET’S GET TO THE MARKET OPEN HERE IN HONG KONG. HEIDI? HAIDI: YESTERDAY WAS A HORRIBLE DAY FOR THE MAIL AND MARKETS. THERE WAS THE WORST ACCLAIM WE HAVE SEEN IN SIX MONTHS AND BROUGHT BACK SOME OF THOSE CONCERNS WE HAD A YEAR AND A HALF AGO, THE GREAT RISE AND FALL OF THE CHINESE STOCK MARKET, THE SUMMER OF 2016. THOSE EMERY’S ARE STILL PRETTY FRESH. IT IS NOT A GREAT START. — MEMORIES ARE STILL PRETTY FRESH. RETAIL SALES AND INDUSTRIAL PRODUCTION, THE DOMESTIC ACTIVITY INDICATORS NEEDING A BETTER PICTURE OF THIS STABILIZATION. WE HAVE SEEN GAINS COMING OUT OF AUSTRALIA, .1 OF 1%. IT IS TURNING TO MORE OF A MIXED PICTURE. AS WE SPEAK THE NIKKEI 225 HAS MANAGED TO GET ITS HAVE A — HEAD ABOVE WATER COMING OFF THOSE EARLIER LOSSES. WE WERE LOOKING AT SOME HIGHS WHEN IT COMES TO TOKYO EARLIER ON. HOW ABOUT YOU TWO OF 1%. THE — OPTIMISM THAT THIS IMPEACHMENT PROCESS IS GOING TO GIVE THE GOVERNMENT A SHOT IN THE ARM AND GET FISCAL POLICY IN PARTICULAR BACK ON THE AGENDA. WE CAN THROUGH FROM THE STRAITS TIMES. OIL IS STARTING TO RETREAT A LITTLE BIT. PULLING BACK FROM THE 17 MONTH HIGHS THAT WE SAW LAST — IN THE LAST SESSION. WE ARE STARTING TO SEE QUITE A BIT OF MODE — MOVE IN TERMS OF THAT DOLLAR INDEX. WE HAVE TWO DAYS OF LOSSES WE ARE STARTING TO SEE A LITTLE BIT MORE WEAKNESS. OIL IS TRACKING LIKE THIS, THAT EXUBERANCE THAT WE SAW THE TOP OF THAT OIL RALLY. THIS IS TO PENDING ON WHETHER WE GET UNEXPECTED WEAKNESS FROM THIS CHINA NUMBERS. THE AUSSIE DOLLAR IS POSITIONED LIKE THIS AHEAD OF THE CHINA NUMBERS. 75 HAS BEEN THAT RESISTANCE LEVEL SO IT IS SAFE THAT WE COULD GET A GOOD NUMBER PUSHING TOWARD 76. >> LET’S GET YOU TO SYDNEY AND GET YOU THE FIRST WORD NEWS. HERE’S PAUL ALLEN. PAUL: PROMINENT — THEY TARGETED A JAPANESE FIRM WITH NEGATIVE REPORTS. THE FIRM MUDDY WATERS SEES THE TOKYO-BASED COMPANY FALLING. SHARES HAVE PER LOSSES AFTER A SHORT PLEDGE. AND DISCUSSING INVESTING IN THE $100 BILLION BANK. APPLE INVESTED A BILLION IN MAY. THE BIGGEST OUTLAY SINCE BUYING THE MUSIC STREAM MAKER BEATS. SHE TOLD THE TRIBUNAL SHE ACTED IN THE PUBLIC INTEREST. SHE DID NOT TRY TO BLOCK THE $300 MILLION PUBLIC PAYOUT. JUDGES REJECTED HER REQUEST FOR A DELAY IN THE TRIAL AND SHE WILL RETURN TO COURT ON TUESDAY. THE MISSION WILL BE A FINAL SWEEP OF DEEP OCEAN BEANS THAT MIGHT HOLD THE REMAINS OF IMAGE 370 AND THE 239 PEOPLE ON BOARD THAT DISAPPEARED ON MARCH 8, 2014. LOCAL MEDIA SAY IF THE PLANE IS NOT FOUND IN THE TRENCHES THE SEARCH WILL BE CALLED OFF IN JANUARY OR FEBRUARY. GLOBAL NEWS 24 HOURS A DAY, POWERED BY MORE THAN 2600 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I AM PAUL ALLEN. THIS IS BLOOMBERG. RISHAAD: LET’S HAVE A LOOK AT BENNY STEINMETZ, ESCALATING A DISPUTE OVER THE RIGHTS TO A MINE IN GUINEA. >> CLAIMS THAT RIO TINTO MAY HAVE AUTHORIZED THE PAYMENT. TELL US MORE ABOUT THIS NEW DEVELOPMENT. IT IS THE LATEST TWIST IN WHAT HAS BEEN A RUNNING DISPUTE. THE COMPANY CONTROLLED BY MR. STEINMETZ, A BILLIONAIRE. SAYING THIS IS A BREACH OF THE RIGHTS TO MIND AND IRON ORE DEPOSIT. THE CORRESPONDENT WHICH WAS BEFORE ACTION SETS OUT THE — THEY DO NOT RECEIVE A RESPONSE THAT INCLUDES AN OFFER OF COMPENSATION FROM RIO BY JANUARY 3. IT INTENDS TO FILE A LAWSUIT. THE COMPANY COULD SEEK MORE THAN $5 BILLION IN DAMAGES. ALL THIS RELATES TO THE ONGOING ISSUE. RAO SAID IT WAS — ALERTED AUTHORITIES IN U.S. AND AUSTRALIA AND THE U.K.. IT CARRIED OUT AN INQUIRY BY CONSULTANT ACTING FOR RIO TINTO ON THE PROJECT. IT IS FACING THE THREAT OF LEGAL ACTION. RISHAAD: RIO HAS BEEN MEASURED ON WHAT IT HAS TO SAY ON THE INVESTIGATION TAKING PLACE. HAS THE GOVERNMENT UNDERSTOOD — HOW HAS THE GOVERNMENT RESPONDED TO THIS? >> THEY CERTAINLY HAD. THEY SAID THAT SHOULD IT FILED A LAWSUIT THEN IT PLANS TO DEFEND ITSELF ROBUSTLY. WE ARE EXPECTING THE COMPANY TO RESPOND MORE FORMALLY TO THE DSU RESOURCES. RIO HAS BEEN MEASURED ON WHAT IT SAID PUBLICLY ON ALERTING THOSE AUTHORITIES. THERE ARE ISSUES WITH RELATED TO THE PAYMENT AND GUINEA THAT ARE CHALLENGING. THEY ARE INSISTING THAT COME THEY WILL DO THE RIGHT THING WHEREVER IT OPERATES BUT NOT REALLY COMMENTING MUCH ON THE SUBSTANCE OF THE INQUIRY OR SPECULATING ON WHEN THEY WILL SEE RESULTS. >> IS THERE A RESPECT — IS THERE A ROLE FOR RIO TINTO IN THE PROJECT IN THE FUTURE? >> THE COUNTRY — COMPANY DOES NOT LOOK LIKE THEY WILL [INDISCERNIBLE] RIO TOOK THE DECISION TO EXIT IN OCTOBER. IT AGREED TO SELL ITS HOLDING IN THE PROJECT TO ITS PARTNER. IT WAS STRIPPED OF ITS RIGHTS BY GINNY AND 2014. IT HAS FOUND EVIDENCE OF CORRUPTION IN A PROCESS TO AWARD RIGHTS, BSG HAS ALWAYS TONIGHT ANY WRONGDOING. BOTH OF THESE COMPANIES EMBROILED IN LEGAL DISPUTES AND NOT WITHOUT ANY PROSPECT. >> DAVID STRINGER OUT OF MELBOURNE. RISHAAD: BEIJING FILING A COMPLAINT TO THE WORLD TRADE ORGANIZATION. >> STEPHEN ENGLE JOINS US FOR MORE. WE ARE SEEING RETALIATION OVER HIS ONE CHINA COMMENT. >> YOU NEED TO PUT EVERYTHING IN PERSPECTIVE. YOU’RE GOING TO HAVE US THERE HAVE BEEN A NUMBER OF CASES BETWEEN THE U.S. AND CHINA AND THE EU TO THE WTO AND — ON ANTI-DUMPING METHODOLOGIES. COINCIDENTALLY ON THE ONE DAY AFTER THE 50TH ANNIVERSARY OF CHINA’S ACCEPTANCE THEY MADE THE COMPLAINT ABOUT THE PRACTICES OF USING WHAT IS CALLED SURROGATE COUNTRY PRICING FOR ANTI-DUMPING BASICALLY CHINA WANTS THE DOMESTIC PRICES TO BE USED FOR ALL THE RETAIL MEMBERS ON THE ANTI-DUMPING. THEY SAY USING THIRD-PARTY COUNTRY PRICING ARTIFICIALLY RAISES TARIFFS ON CHINESE PRODUCTS. WE HAVE TALKED TO A NUMBER OF PEOPLE THAT SAY THIS IS THE CONCERN. HOW GENERALLY THE OVERALL RELATIONSHIP IS GOING TO GO FORWARD. DAVID WU HAD THIS TO SAY. >> I AM PRETTY BULLISH ABOUT THE WORLD OUTLOOK EXCEPT I THINK, I FEAR THE U.S. AND CHINA COULD BE ON A COLLISION COURSE. >> AND WANTED TO REDO THIS — I WANTED TO READ YOU THIS QUOTE. THEY ARE TWO IMPORTANT POLICIES. SAYING TRUMP IS LIKE A CHILD IN HIS IGNORANCE OF FOREIGN POLICY. >> THANK YOU, GIVING US SOME HINT OF WHAT U.S.-CHINA RELATIONS MAY LOOK LIKE. RISHAAD: WHAT COULD BE DRIVING BANKS TO INVEST IN THE $100 MILLION INVESTMENT FUND. THIS IS BLOOMBERG. ♪ >> A QUICK CHECK OF THE BUSINESS FLASH HEADLINES. THE ACCOUNTING FIRM IN CHARGE OF DUE DILIGENCE OVER THE BANK [INDISCERNIBLE] THE MAIL SAID VALUE IS ESTIMATED AT $1.5 BILLION. SHARES TOUCHED A RECORD LOW ON MONDAY. NOW DOWN 11.25% IN SEOUL. RISHAAD: JEFF BEZOS HAS BEEN A VOCAL CRITIC OF DONALD TRUMP. HE IS ATTENDING WEDNESDAY’S GATHERING OF TECH LEADERS CALLED BY THE PRESIDENT-ELECT. ELON MUSK AND SHERRY SANDBERG AND LARRY PAGE WILL BE THERE. THEY MAY HOPE TO FIND SOME COMMON GROUND. >> THERE IS A COUPLE OF THINGS THAT ARE PRETTY IMPORTANT POTENTIAL CHANGES THAT WE COULD SEE IN THE CORPORATE FINANCE ARENA FOR US. THE FIRST IS A SHIFT ON REPATRIATION OF FOREIGN EARNINGS AND THAT IS GOVERNMENT PERMANENT SOLUTION, NOT A TAX HOLIDAY. WE WOULD BE HIT — VERY HAPPY WITH IT. THAT WOULD GIVE US MORE FLEXIBILITY AND WE TALK ABOUT, IT GIVES US FLEXIBILITY ACROSS M&A AND DIVIDENDS, ACROSS BUYBACKS. AND THEN THERE IS ALSO TAX REFORM. >> APPLE HAS HAD TO HELP — CAP TALKS — TO HAVE TALKS AND APPLE MAY CONTRIBUTE AS MUCH AS $1 BILLION TO THE FUND. WE EXPLAIN WHY APPLE MIGHT BE INTERESTED. GREXIT COULD BE THE SEARCH FOR INFORMATION AND THE OTHER IT COULD BE THE SEARCH FOR PROFIT STABILITY. LIKELY IT IS BOTH. ACCORDING TO ONE PERSON FAMILIAR WHO WANTED TO BE ANONYMOUS IT WOULD GIVE APPLE AND TIM COOK INSIGHT INTO UP-AND-COMING TECHNOLOGIES. WE HAVE TO START WITH APPLES HUGE RELIANCE ON THE IPHONE FIRST. 66% OF ITS REVENUE COMES FROM THE DEVICE. THAT IS TWO OUT OF EVERY THREE DOLLARS THAT IT MAKES. WE HAVE TO LOOK AT IPHONE REVENUE. IN THE THIRD QUARTER, THAT FELL 23%. THAT AS SHIPMENTS FELL 15%. APPLE DOES NEED TO FIND THE NEXT BIG THING. THAT COULD BE IN PART WITH THE APPLE WATCH. IT IS A MARKET LEADER WITH A 40% MARKET SHARE AT LEAST IN THE THIRD QUARTER OF 2016. THE LAST YEAR, YEAR ON YEAR, IT HAD A 70% MARKET SHARE. WE ARE LOOKING AT A DROP OF 30 POINTS ACCORDING TO IDC. SAMSUNG IS THE NUMBER THREE. THEY ARE — THERE IS ALSO APPLE PAY EXPECTED TO HIT $200 BILLION IN TRANSACTIONS BY 2019 BUT THAT IS STILL A FEW YEARS A — AWAY. THERE IS THE APPLE CAR. WE REPORTED THE COMPANY DECIDED TO SCALE BACK PLANS FOR THAT WITH HUNDREDS OF JOB CUTS. AS FOR THE POSSIBLE INVESTMENT OF $1 BILLION, THAT WOULD BE A DROP IN THE BUCKET OF ITS CASH ON HAND. LOOK AT THE BLOOMBERG TERMINAL. APPLE HAS A HUGE CASH PILE. ABOUT 237 BILLION DOLLARS. YOU REMEMBER IN MAY, APPLE INVESTED $1 BILLION IN CHINESE — A CHINESE RIGHT HAILING COMPANY. THE LAST IT INVESTED WAS IN 2013 WHEN IT BOUGHT HEADPHONE MAKER BEATS. IT DOES HAVE A LOT OF MONEY IF IT WANTED TO INVEST EVEN MORE. AS FOR THE SOFTBANK VISION FUND, THAT IS SUPPOSED TO BE UP AND RUNNING IN 2017. THE CEO SAID $50 BILLION OR HALF OF THE FUND WOULD GO BACK INTO U.S. INVESTMENT. IF APPLE DECIDED TO INVEST THE MONEY COULD GO BACK INTO THE COUNTRY AS IT LOOKS TO CONTINUE TO INNOVATE AND TO PROFIT. RISHAAD: OUR NEXT GUEST WAS A TRADER AT GOLDMAN SACHS. HE SET UP TABLE WHICH ALLOWS MEMBERS TO GET RESERVATIONS IN SOME OF THE MOST SOUGHT AFTER RESTAURANTS IN TOKYO. THANK YOU FOR JOINING US TODAY. TELL US HOW IT WORKS AND HOW YOU FOUND THIS IDEA AND HOW YOU CAME UP WITH THE IDEA. GUEST: GOOD MORNING, THANKS FOR YOUR TIME. IT IS A SERVICE FOR HIGH-END AND THE BEST RESTAURANTS IN JAPAN. YOU CAN BOOK THE BEST RESTAURANTS WITH A FEW CLICKS AND THE IDEA CAME BECAUSE I LIVE IN SINGAPORE FOR FIVE YEARS AND I HAVE SOME — I WAS ASKED BY FRIENDS ABOUT A JAPANESE RESTAURANT. SOMETIMES IT TAKES TIME OR THEY CANNOT BOOK. [INDISCERNIBLE] I KNEW LOTS OF THE CHEFS AND I HAD LOTS OF ENTERTAINMENT AND I LOVE EATING. I — THEY WANT TO WELCOME FOREIGNERS. >> YOU HAVE ABOUT 500 REGISTERED DINERS. WHAT KIND OF PLANTS DO YOU HAVE TO EXPAND AS A MARKET — FOR THE MARKET YOU ARE EYEING? GUEST: WE HAVE [INDISCERNIBLE] BUT WE WILL EXPAND TO KYODO AND WE WILL TRY TO EXPAND TO SINGAPORE OR MAYBE SYDNEY OR HAWAII IN 2017. RISHAAD: I WANT TO GET A TABLE IN A PARTICULAR RESTAURANT AND I HAVE NO WAY OF GETTING IT. YOU HAVE ALREADY PRE-BOOKED TABLES AND THEN YOU CHARGE A $26 RESERVATION FEE, RIGHT? GUEST: THAT IS CORRECT. WE PREPARE — TAKE IT AND LIST IT ON THE WEBSITE. YOU CAN PAY 26 BUCKS AND YOUR BOOKING IS CONFIRMED. >> THE COST MANAGEMENT IS VERTICAL HERE IT WOULD SEEM. GUEST: — CRITICAL HERE, IT WOULD SEEM. GUEST: [INDISCERNIBLE] RISHAAD: THE THING IS, THE SCALABILITY IS BASED ON YOU, YOU ARE SURELY GOING TO HAVE MORE THAN YOU IF YOU’RE GOING TO SCALE THIS BUSINESS UP. GUEST: THAT IS CORRECT. FOR NOW [INDISCERNIBLE] AND TALKING TO THEM BY MYSELF. IF I EXPAND TO IN ASIA I NEED MORE PEOPLE. I WILL NOT EXPAND ONLY IN TOKYO OR SOMETHING. I WILL MAKE SURE WE HAVE THE BEST SPOTS IN EACH COUNTRY AND EACH CITY. AND WE DO WANT PEOPLE TO EXPAND. >> GOOD LUCK GETTING DINERS THROUGH THE DOOR. RISHAAD: IT IS ONE OF INDIA’S BIGGEST BOARDROOM BATTLES HEATING UP. VOTING ON THE MOVE TO DUMP ITS CHAIRMAN. THE LATEST COMING UP. ♪ >> THEME BATTLE BETWEEN — THE BATTLE BETWEEN TATA GROUP AND ITS CHAIRMAN TODAY. RISHAAD: THIS IS AN INCREASINGLY BITTER FIGHT. WHY NOT JUST GET ON WITH MAKING MONEY? I GUESS IT GETS MUCH DEEPER THAN THAT. >> IT CERTAINLY DOES. THAT IS WHAT THEY WOULD LIKE TO DO IS GET ON WITH MAKING MONEY. HE IS HOLDING ON TO POWER WITH EVERYTHING HE CAN AND THAT HAS UNLEASHED THIS WIDENING BATTLE THAT STRETCHES ACROSS THE ENTIRE INDIAN BUSINESS ESTABLISHMENT. WE ARE TALKING ABOUT A COMPANY THAT IS DIVERSIFIED INTO A NUMBER OF KEY INDUSTRIES. IT IS A GLOBAL COMPANY AND YOU HAVE GOT INVESTORS INVOLVED NOW. WE HAVE LEARNED FROM OUR REPORTERS, WE HAVE A NUMBER OF SCOOPS ON THIS THAT CITIGROUP AND JPMORGAN HAVE BOTH BEEN RECRUITED TO COME IN ON THE SIDE TO OUST CYRUS MISTRY ON THE POSITIONS HE IS HOLDING ONTO. YOU HAVE INVESTORS WHO ARE INVOLVED AS WELL. THEY’RE GOING TO BE HAVING BIG BLOCKS OF VOTES AT THESE UPCOMING SHAREHOLDERS’ MEETINGS LIKE THE ONE THAT IS AGILE DO, THIS EVENING, IS IT TIME FOR — ASIA TIME FOR TATA CONSULTANCY BUSINESS. THE OUSTER OF MISTRY IS FROM ALLIES THERE, THAT WILL BE A GOOD SIGN THAT HE IS ON THE WAY OUT. >> DOES THIS HAVE THE POTENTIAL TO SPILL OUTSIDE INDIA? >> IT DOES. THIS IS A GLOBAL COMPANY AND SOME OF THE CONFLICTS THAT LED TO THIS IN THE FIRST PLACE ARE SOMEWHAT GLOBAL IN NATURE. FOR EXAMPLE, TATA TELESERVICES, THE WIRELESS UNIT OF THE CONGLOMERATE HAS A DISPUTE GOING ON WITH THE BIGGEST WIRELESS SERVICE PROVIDER IN TOKYO. IT IS A DISPUTE OVER A PAYMENT ON A JOINT VENTURE. THAT IS COMING TO A HEAD PARTLY AS A RESULT OF THIS. RISHAAD: GREAT TALKING TO YOU. JOINING US FROM TOKYO. >> COMING UP, A TRIPLE DOSE OF DATA. THAT IS NEXT. ♪ RISHAAD: IT IS ALMOST 10:00 A.M. IN BEIJING. SOPHIE: THIS IS “BLOOMBERG MARKETS ASIA.” ♪ RISHAAD: SECOND AWAY FROM THE LATEST SNAPSHOT OF CHINA. SOPHIE: FUNNY CASA SURGING IN HONG KONG. — FUNDING IS SURGING IN HONG KONG. RISHAAD: GARY CURRAN IS BEING ANNOUNCED AS DONALD TRUMP’S ECONOMIC ADVISOR. RISHAAD: WE ARE GETTING DATA COME WE ARE LOOKING FOR RETAIL SALES — >> 6.2% ON YEAR FOR NOVEMBER, THE FORECAST WAS FOR 6.1%. RISHAAD: TOM? TOM: THE STANDOUT NUMBER WAS THE RETAIL SALES COMING IN AT 6.2% — WE SAW 10% RISE IN RETAIL FIRE — SALES IN OCTOBER. THIS 10.8% A SHOWING THAT THE CHINESE CONSUMER REMAINS RELATIVELY CONFIDENT. WE HAVE THAT NUMBER COMING IN AT 6.2% MARGINALLY ABOVE THE ESTIMATES OF 6.1%. IT WAS ALSO 6.1% IN OCTOBER, AND THE FIXED ASSETS INVESTMENT CAN IN LINE WITH INVESTMENTS, A .3% FOR JANUARY — 8.3% IN JANUARY THROUGH FEBRUARY. THERE HAS BEEN SOME DISCUSSION AMONGST ECONOMISTS AS HOW MUCH CURBS AND HOUSE PRICES WOULD HAVE ON PEOPLE’S SPENDING POWER. WE HAVE IN INFLATION DATA SHOWING A PICKUP IN CONSUMER INFLATION BUT LIKELY THAT WILL SEE THROUGH THE MONTH AHEAD. THAT 1.8% IS A POSITIVE IN TERMS OF WHAT COLOR — POLICYMAKERS ARE TRYING TO DO. IT IS MARGINALLY ABOVE ESTIMATES. WHEN WE ARE TALKING INDUSTRIAL PRODUCTION, WE TALKING CEMENT, GLASS, AUTOS. WE’RE GOING TO GET A BREAKDOWN OF EACH OF THOSE COMPONENTS PLAN TO THAT NUMBER. WHAT COMES TO ASSET INVESTMENT, WE’RE GOING TO HAVE TO BREAK IT DOWN AND SEE HOW MUCH THE PUBLIC STATE WILL HAVE TO STEP UP ITS SPENDING, BECAUSE WE HAVE SEEN THE STATE HAVING TO TAKE THE PLACE OF THE DRIVE IT SECTOR, WHICH HAS PULLED BACK ON SOME OF ITS FIXED ASSET INVESTMENTS. WE WILL GET SOME OF THOSE DETAILS IN THE NEXT HOUR. IN TERMS OF POLICY MAKERS, THIS PAINTS A PICTURE OF ECONOMIC STABILIZATION AT THE END OF THE YEAR. IT DOES HAVE A BASIC POLICYMAKERS CAN USE TO REIGN IN SOME RISKS. EXPECT TO SEE IT CONTINUE TO PULL BACK OF CREDIT, AND WHEN WE GET MONEY SUPPLY DATA, WE ARE EXPECTING TO GET THAT SOMETIME THIS WEEK, THAT WILL GIVE YOU AN IDEA OF THE LOWS IN CREDIT, AS WELL, WHICH HAD EASED BACK. GOLDMAN SACHS THINKS THERE WILL BE A MORE HAWKISH LINE, BECAUSE IT HAS SPACE NOW TO ACT. THE BIG UNKNOWNS GOING FORWARD INTO TOY 17 ARE DONALD TRUMP — INTO 2017 ARE DONALD TRUMP AND HOW HE WILL HANDLE CHINESE IMPORTS. THAT WILL BE AFFECTED TO WATCH, AS IS THE RATING — RAINING CREDIT AND SET TO — STEPS TO CHANGE THE CREDIT MARKET. WHEN THEY START TO PULL BACK AND YOU THROW CROP INTO THE MIX, THERE IS SOME UNCERTAINTY ON CHINA. SOPHIE: THANK YOU SO MUCH. RISHAAD: THE AUSSIE DOLLAR IS OFTEN ONE OF THE FIRST TWO REACTS. >> WE HAVE SEEN A SPIKE IN THE AUSSIE DOLLAR, IT WAS TRADING WEAKER AGAINST THE U.S. DOLLAR DESPITE THE FACT THAT WE HAVE SEEN A BIT OF DOLLAR WEAKNESS ACROSS THE BOARD. YOU’RE NOW SEEING THAT PULLBACK. FAIRLY UNCHANGED, THE AUSSIE DOLLAR. A LITTLE BIT OF A SPIKE INITIALLY WHEN THE NUMBERS HIT THE WIRES. BETTER THAN EXPECTED, SO FAR NO REAL REACTION IN THE CASH MARKET. WE’RE SEEING THE SHANGHAI MARKETS DOWN 4/10 OF 1%. IT WAS DOWN AROUND 2.7%. STILL SEEING SOME WEAKNESS COMING THROUGH. A LOT OF ANALYSTS ARE SAYING IT IS LIKELY MARKETS WILL REMAIN LISTLESS HEAD OF THE FED MEETING, EVEN THOUGH WE HAVE SEEN A POSITIVE UPSIDE IN CHINA. IT IS STILL FLAT AND SLIGHTLY IN THE RED FROM SOME OF THE METALS PLAYERS IN AUSTRALIA. AND IN HONG KONG, IT CONTINUE TO DECLINE BY 2/10 OF 1%. SOME WEAKNESS COMING THROUGH FROM FINANCIALS AND SOME OF THOSE REAL ESTATE PROPERTY TRUST, ALTHOUGH YOU ARE SEEING SOME UPSIDE FROM A LOT OF THE ENERGY PLAYERS, AND PETROCHINA IS THE FRONT RUNNER ON THE HONG KONG EXCHANGE. FLAT IN THE NK AND TROPIC TRADING AT LEVELS WE HAVE NOT SEEN SINCE LAST YEAR. THE OTHER ACTION WE ARE SEEING TODAY IS IN THE BOND MARKET, AND IF YOU HAVE A LOOK AT THE AUSTRALIAN 10 YEAR, YOU ARE SEEING BILLS BEING SOLD ALL DAY, A DIFFERENT PICTURE THAN YESTERDAY. BONDS ARE GETTING MORE TRACTION ON THE TENURE BASIS, DOWN BY THREE BASIS POINTS. AT THIS STAGE, NO REAL POSITIVE UPSIDE IN TERMS OF CURRENCIES OR CASH MARKETS FROM CHINA. BUT IT WAS A BIT BETTER THAN WHAT THE MARKET WAS LOOKING FOR. RISHAAD: THANK YOU. GETTING INTO ASSETS NOW. SOPHIE: THE NUMBERS ARE PRETTY MUCH COMING IN LINE WITH ESTIMATES GIVEN WHAT WE SAW IN NOVEMBER. WHAT IS YOUR ASSESSMENT OF THE LATEST ACTIVITY? >> I THINK WE SEE STABILIZATION, STABILIZING OF INDUSTRIAL PRODUCTION AND ROBUST CONSUMER SENTIMENT. WE ALSO SAW DECENT INVESTMENT DATA, SO I THINK OVERALL THE DATA CONFIRMS THAT INTO THE FOURTH QUARTER, THE ECONOMY REMAIN QUITE SOLID IN GROWTH. THE GLOBALIZATION STORY AND JUST HANGING ON. RISHAAD: MOVING 6.7 OVER THE QUARTER, THAT HAS BEEN STABLE ALL YEAR. THAT COULD TRANSLATE INTO SOMETHING EVEN STRONGER THAN THAT LOOKING AHEAD — WELL, LOOKING AT THE PRESENT QUARTER. >> THERE COULD BE SOME MODEST UPSIZE RISK, BUT I THINK THE ECONOMY IS SEEING SOME HEADWINDS DOWN THE ROAD. NUMBER ONE, WE HAVE UNCERTAIN TRADE POLICIES COMING FROM THE — TRUMP PRESIDENCY, AND NUMBER TWO IS THE CHINA HAS BEEN TIGHTENING THE MARKET. DESPITE THE NEAR TERM STABILIZATION, I THINK — WHICH ALSO OFFERS SOME ROOM FOR THE POLICY TO STAY NEUTRAL TO TIGHTENING. SOPHIE: WHAT DOES THIS MEAN FOR POLICYMAKERS, ESPECIALLY WHEN IT COMES TO THE BALANCING ACT? >> WE ARE SEEING THE SHIFT OF POLICY PRIORITIES OF THE PBOC SINCE AUGUST, WHEN IT RESUMED THE 14 DAY LOOPHOLE. WE SEE THE POLICY BROKERS HAVE SHIFTED FROM STABILIZING GROWTH, SUPPORTING GROUP INTO CONTINUED FINANCIAL RISK, AS WELL AS MANAGING THE IMPOSSIBLE TRINITY, THE CURRENCY PRESSURES. RISHAAD: UNDERLINING THAT, THE WHOLE CABINET OUTFLOW STORY, AS WELL. IT LOOKS LIKE CAPITAL CONTROL IS BEING TAKEN DOWN. A CONVERSATION ALONG WAY OFF FOR NOW. >> I THINK INTENSIFYING CAPITAL CONTROLS IS ONLY NECESSARY, ESPECIALLY WITH VERY STRONG DOLLAR MOVEMENT AFTER DONALD TRUMP’S VICTORY, AND GOING FORWARD, OUR BEST CASE IS THREE FED RATE HIKES BY THE END OF 2017, AND WE CONTINUE TO HAVE A VERY STRONG DOLLAR THAT WILL FURTHER ADD TO THE CURRENCY DEPRECIATION PRESSURE. WE KNOW THAT THE — ALSO HOUSEHOLD, AND HAS CONTINUED INCENTIVE TO CONTINUE THEIR ASSETS. SOPHIE: THERE ARE SOME ASSESSMENTS THAT THE CHINA PICTURE IS NOT AS WORRISOME AS SOME CONTENT. THAT DESPITE WHAT IS GOING ON, HOUSING MARKET IS RELATIVELY STRONG. RISHAAD: AND MANAGEABLE. >> I THINK THERE IS CLEARLY A SENSE OF COMPLACENCY FROM THE MARKETS, WHICH IS ALSO TRUE. CYCLICALLY WITHIN THE OLD ECONOMY WITH A STRONG REBOUND SINCE THE BEGINNING OF THE YEAR WITH A VERY STRONG CREDIT. BUT WE KNOW THIS IS ANOTHER ROUND OF DEBT FUELED INVESTMENT GROWTH AND STABILIZATION, WHICH ONLY BRINGS MORE RISKS DOWN THE ROAD IN THE MEDIUM TERM. IN THE NEAR TERM, I THINK IT IS FAIR TO SAY THAT CHINA NEEDS A STABILIZING FACTOR FOR THE GLOBAL ECONOMY. RISHAAD: THAT IS JUST IT. THERE IS A BIT OF — THE CAPITAL OUTFLOW AND HOUSING. WHERE DOES THAT ALL LEAVE YOU WAS LOOKING AT THE YUAN? PEOPLE OF SAID, OH 7.2, 7.3 MAYBE BEFORE THE SUMMER. >> OUR VIEW IS THE CURRENCY WILL CONTINUE TO DEPRECIATE TO 7.35 IN A YEARS TIME. THERE’S ALSO A RISK IF WE SEE A RECENT FAST DEPRECIATION OF A CURRENCY ADDED TO THE OUTFLOW PRESSURES. THERE IS SOME INCREASING PROBABILITY THAT THE GOVERNMENT MAY SHIFT TOWARD MORE RAPID SHIFT OF FLOATING CURRENCY. SOPHIE: ARE CAPITAL CONTROLS ANTICIPATED? >> THEY WILL BE NECESSARY TO FACILITATE THIS SHIFT TO A MORE FLEXIBLE EXCHANGE RATE, WHERE WE SEE MORE VOLATILITY AND REDUCING OF INTERVENTION. SOME OF THE TIMING, WITH PRESIDENT TRUMP CONTINUING TO HIGHLIGHT SOME OF THE POTENTIAL TARGETING OF CHINA SOPHIE:. LOOKING AT THE WAY THAT CHINA’S ETHICS RESERVES HAVE BEEN DRIVING DOWN. WHAT YOU MAKE OF THE LABELING BY PRESIDENT FROM? — PRESIDENT-ELECT TRUMP? >> THERE IS CONSTANT INTERVENTION IN THE MARKET. IT IS NOT REALLY CONSTITUTE A STRONG ARGUMENT THAT WE ALL KNOW, THE PRESIDENT’S YOU MAY BE HAS THE POWER OF MAKING SOME TECHNICAL ADJUSTMENTS, BUT OUR BASE CASE IS THAT THE KEY IS NOT NECESSARILY JUST THE CURRENCY MANIPULATOR COME UP A KIND OF TRADE POLICIES HE WOULD HAVE IMPOSED WITH TRADING PARTNERS, INCLUDING CHINA. RISHAAD: WE JUST OF NO. THAT IS A BIG PROBLEM. HE HAS SAID HE WOULD YOU SOME THINGS ON HIS FIRST DAY THAT I DON’T THINK HE WILL HAVE TIME TO DO. >> OTHER THAN THE POLITICAL COMMENTS HE HAS MADE IN THE REGION, HE IS NOT YET MOVED ON THE TRADE FRONT ON CHINA. BARELY THERE IS A RISK THAT WE SHOULD NOT BE UNDERESTIMATING. RISHAAD: THANK YOU SO MUCH. LOOKING INTO ALL OF THIS DATA. BROADLY SPEAKING, WE WERE PRETTY MUCH — EXACTLY. >> THE EUROPEAN UNION WILL SET UP HOW TO CONDUCT BREXIT NEGOTIATIONS WITH U.K.. LEADERS WILL MEET ON THURSDAY WITHOUT PRIOR MINISTER THERESA MAY TO DISCUSS THE STRATEGY. THE U.K. WILL BE EXCLUDED FROM ALL MEETINGS WERE THE 27 REMAINING EU MEMBERS DISCUSS BREXIT. CHRISTINE LAGARDE HAS TOLD A PARIS COURT THAT AN IMAGINARY PLOT HAS LED TO HER IRAN TRIAL ON NEGLIGENT CHARGES. SHE SAID SHE DID — JUDGES REJECTED HER REQUEST FOR A DELAY IN THE TRIAL AND SHE WILL RETURN TO COURT ON TUESDAY. DONALD TRUMP IS SET TO — SAID TO BE POSTPONING UNTIL NEXT MONTH THE DETAILS OF HOW HE WILL HANDLE HIS BUSINESS OPERATIONS IN THE WHITE HOUSE. TRANSITION OFFICIALS SAY A NEWS CONFERENCE SCHEDULED FOR THURSDAY WILL BE DELAYED BECAUSE THE PRESIDENT-ELECT IS BUSY FILLING HIS ADMINISTRATION POST. THAT ON TOP HAS ABOUT $3.6 BILLION IN ASSETS AND $630 MILLION IN DEBT AND HOLDS MORE THAN 500 COMPANIES. DONALD TRUMP HAS NOMINATED ANOTHER GOLDMAN SACHS EXECUTIVE TO HIS ADMINISTRATION. HE HAS PICKED 25 YEAR VETERAN GARY COHEN TO BE HIS ADVISOR. — ECONOMIC ADVISOR. HIS ROLE ON THE NATIONAL ECONOMIC COUNCIL WILL SEE HIM HELP COORDINATE COMES ECONOMIC PROGRAM. GLOBAL NEWS 24 HOURS A DAY, POWERED BY MORE THAN 2600 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. THIS IS BLOOMBERG. SOPHIE: STILL AHEAD, TRADE AND TREASURY. CHINA LAUNCHES A WTO COMPLAINT AGAINST THE U.S. AND EU. RISHAAD: THE GLOBAL BOND ROUT. YOU ARE WATCHING BLOOMBERG. SOPHIE: THE FED IS WIDELY EXPECTED TO ANNOUNCE A LATE HIKE ON WEDNESDAY AND A BUNCH — BOND TRADERS ARE WAITING — >> WE CAN SAY TO A CERTAIN EXTENT IT STARTED WITH SOME SURPRISES ON THE U.S. ECONOMY. THE U.S. ECONOMY WILL GET MORE STIMULUS, THAT REALLY GAVE IT SOME SPEED. WITH AN THE LAST FEW DAYS, WITH OPEC AND OIL PRICES SURGING TO A 17 YEAR HIGH, IT IS PUTTING MORE FUEL ON THIS BOND MARKET SELLING FIRE. LET’S LOOK AT BLOOMBERG. AT END OF DAY BASIS, IT TRADED AT 2.5%, THE HIGHEST IN TWO YEARS, THE LITTLE RED CIRCLE BENEFIT LOWER LEFT-HAND CORNER OF YOUR SCREEN. YIELDS DOUBLING IN SIX MONTHS. GO TO THE LEFT-HAND CORNER, JUST BEFORE WENT INTO RECESSION. YOU CAN GET A SENSE OF HOW MUCH FURTHER THIS WOULD HAVE TO GO. THE QUESTION NOW, WHERE IS THE FED? DONALD TRUMP SAYS HE IS GOING TO BOOST THE ECONOMY. THIS IS WHAT IS REALLY ON TRADERS MIND NOW. SOPHIE: WHY ARE BOND TRADERS AND INVESTORS FINALLY BE LEAVING THE FED FORECAST FOR THE ECONOMY AND RATE HIKES? >> THEY ARE SEEING MORE EVIDENCE THAT THE FED IS RIGHT AND THE ECONOMY IS GOING TO PICK UP. A YEAR AGO, THE FED WAS FORECASTING FOR INTEREST RATE INCREASES, THE BOND MARKET DID NOT SELLOFF AND A KEPT RALLYING. ALL OF THE THINGS I JUST MENTION, IF THEY BUILD UP, THEY ARE CHANGING THEIR VIEW. LET’S GO TO THE TERMINAL. THE MEDIUM GREEN LINE IS CONNECTING THOSE YELLOW CLUSTERS. 2017, 2 RATE HIKES, 2018 IN THE MIDDLE. THAT IS THE FORECAST, THE MEDIUM FORECAST FOR THREE RATE HIKES. THE RED LINE AT THE BOTTOM IS WHAT THE TRADERS WERE BETTING ON IN SEPTEMBER. HARDLY ANY RATE HIKES IN THE NEXT FEW YEARS. THE PURPLE LINE IS WHAT THOSE TRADERS ARE BETTING ON NOW. NOW, WILL THE FED CHANGE THOSE DOTS AT THE MEETING? IT HAS SAID PUBLICLY IT CANNOT CHANGE HIS VIEW ON THE ECONOMY AND MONETARY POLICIES, AND THAT IS WHAT DONALD TRUMP SAYS HE’S GOING TO DO. PETER FISHER AT THE NEW YORK FED SAID MAYBE IT IS TIME FOR THE FED TO STEP AWAY FROM THOSE DOTS. >> THE HARDEST THING FOR THE FED IS THEY DON’T KNOW WHERE THEY WILL BE A YEAR OR TWO FROM NOW, THEY DON’T KNOW HOW MUCH OF THIS RECOVERY IS GOING TO COME THROUGH, THEY DON’T KNOW HOW ON TOP OF THAT THE CHILDREN MINISTRATION AND CONGRESS WILL PUT. WHAT I’M LOOKING FOR IS, DOES JANET YELLEN KNOW HE HAS — SHE HAS TO PULL BACK FROM PRETENDING SHE KNOWS AN ESTIMATE ON THE FED FUNDS RATE FOR 12 MONTHS FROM NOW, WHAT SHE DOESN’T REALLY KNOW. >> HE BASICALLY SAYS FORWARD GUIDANCE IS PAST ITS PRIME. EARLIER THIS YEAR, JIM FULLER, ONE OF THE GUYS OUT FRONT ON MONETARY POLICY IN THE LAST 4-5 YEARS, HE PULLED AWAY FROM THE. FORECAST AND DOES NOT THINK THEY WORK FOR A WELL. IT WILL BE INTERESTING TO SEE IF JANET YELLEN WOULD SIGNAL ANYTHING LIKE THAT AT THE MEETING ON WEDNESDAY. SOPHIE: WE ARE NEARING THE END OF A COUNT ON TO THAT FED DECISION ON WEDNESDAY. RISHAAD: A LONG TIME COMING. SHARES OF SMC CORPORATION ARE TUMBLING AFTER INVESTMENT RELEASED A NEGATIVE REPORT ON THE COMPANY. THERE ARE QUESTIONING OF THE ACCOUNTING. SELLERS HAVE BEEN TARGETING JAPANESE FIRMS THIS YEAR. SMC’S SPOKESMAN SAID HE HAD NO IMMEDIATE COMMENT. WE WILL BE TALKING TO THE WELLS INVESTMENT SECURITY SEO ABOUT THIS CALL. SOPHIE: A PROMINENT SHORT SELLER HAS TARGETED A JAPANESE FIRM FOR THE FIRST TIME FOR THE NEGATIVE REPORT ON MOTOR MAKER NIGHT AT. — NIDEC. HE SAYS THEY CONSISTENTLY MISS SALES AND PROFIT TARGETS AND HE USES — AND USE AGGRESSIVE ACCOUNTING. RISHAAD: APPLE IS SAID TO BE DISCUSSING INVESTING IN THE $1 BILLION TECH FUND BY SOFTBANK. APPLE INVESTED A BILLION IN A RIDESHARING COMPANY. THEY PAID $3 BILLION FOR BEATS IN 2014. SOPHIE: UP NEXT, WE WILL LOOK AT WHY HONG KONG MONEY MARKETS ARE ALREADY FEELING THE STRAIN FROM THE FED MEETING THIS WEEK. THIS IS BLOOMBERG. ♪ ♪ RISHAAD: WE HAVE A RATE HIKE FROM THE FEDERAL RESERVE THIS WEEK. SOPHIE: PRESSURE IN HONG KONG ON THE CITY’S CURRENCY. >> IT IS BECOMING MORE EXPENSIVE TO BORROW IN ORDER TO BUY STOCKS. WE ARE SEEING THE INTERBANK RATE, THE THREE-MONTH INTERBANK RATE SURGING FOR THE PAST 10 DAYS. THEY ARE SAYING THIS CREDIT CRUNCH SIGNALS CONCERNS OF CASH, CAPITAL OUTFLOWS FROM HONG KONG. HIGHER U.S. INTEREST RATES COME WITH CASH OUTFLOWS FROM EMERGING MARKETS AND HONG KONG. THE FACT IS THAT IN ISOLATION, HIGHER RATES WOULD BOOST OR SUPPORT THE HONG KONG DOLLAR, GIVEN THE COME — COMPARISON TO THE U.S. DOLLAR. BUT YOU CAN SEE A PREVIOUS BOUT OF CASH OUTFLOWS HAS LED TO CURRENCY DEPRECIATION ALONG WITH A JUMP IN RATES. THAT SPIKE YOU SEE IN JANUARY, THE BLUE LINE, THAT WOULD BE THE HONG KONG DOLLAR PLUNGING TO AN EIGHT YEAR LOW. RISHAAD: WE DID SEE THE YUAN STEADILY WE CAN, AND THIS IS THE HIGHBALL LINE, THE WHITE LINE. THIS IS A TENTHS OF 1% OR THEREABOUTS — 8/10 OF 1% OR THEREABOUTS. >> YES. WHAT ECONOMISTS ARE SAYING RIGHT NOW, WE’RE SEEING THAT THE FED WILL HIKE RATES TWICE NEXT YEAR, THE RATE IN HONG KONG WILL NOT BE SO BIG SO WE WERE NOT SEE SUCH YOU GET OUTFLOWS. NOT TO MENTION WE HAVE SEEN MAINLAND INVESTORS POUR MONEY INTO HONG KONG EQUITIES AND TO HEDGE THE DEVALUATION OF ZERO CURRENCY. THE RISK SO THERE, BUT STILL THE EXCHANGE RATE PEGGED TO THE U.S. DOLLAR IS TRADING AT A STRONGER LEVEL OF THAT BANK AGAINST THE GREENBACK. SOPHIE: THANK YOU SO MUCH. RISHAAD: UP NEXT, DONALD TRUMP HAS MADE A FRIEND OF TAIWAN. SOPHIE: WE’LL SEE WHY SOME THINK HIS OBSESSION COULD BE MISLED. RISHAAD: PLUS, A FULL MARKET UPDATE AND THE TOKYO CLOSE AFTER THE LUNCH BREAK. WE HAVE THAT 60 MINUTE LOW, DOWN AT THE MOMENT BY 28 POINTS. WE’RE BACK IN OF IT. ♪ >> IT IS 10:29 IN HONG KONG. CHINA’S ECONOMIC STABILIZATION HELD IN NOVEMBER, WITH INDUSTRIAL TRACTION CLIMBING FROM A YEAR EARLIER. SLIGHTLY ABOVE ESTIMATES. RETAIL SALES ADVANCED TEMPLATE PRESENT LAST MONTH — 10.8% LAST MONTH. POLICYMAKERS HAVE MORE ROOM TO SWITCH FOCUS FROM STIMULUS TOWARD CURBING FINANCIAL RISKS THIRD IN BOOST TO PRODUCTION IN NOVEMBER AND NIGERIA, LIBYA AND ANGOLA ALL PUMPED MORE OIL, RATING TOTAL OUTPUT TO 28 MILLION BARRELS A DAY. ANALYSTS EXPECT OPEC MEMBERS AND INDEPENDENT PRODUCERS TO INCREASE OUTPUT AHEAD OF THE CUTS TO ENSURE NO LOSS OF MARKET SHARES. CHINESE GROUPS PURSUING A FOOTBALL CLUB HAS FAILED TO MEET THE DEADLINE FOR A DOWN PAYMENT. THEY WILL — THEY AGREE LAST WEEK THAT THE MONEY WOULD BE TRANSFERRED ON MONDAY, WITH MARCH 3 THE DATE FOR COMPLETING THE SALE. THE AGENCY SAID THE MONEY WAS NOT PAID SIGN OH EUROPE DID NOT HAVE IT IN PLACE WHEN THE BIG MILAN. THE MISSION WILL BE A FINAL SWEEP OF DEEP OCEAN ROAD MEANS THAT MY CALLED THE REMAINS OF MH 370 AND THE 200 ON BOARD. LOCAL MEDIA SAY THAT IF THE PLANE IS NOT FOUND IN ONE OF THE TRENCHES, THE SEARCH WILL BE CALLED OFF IN JANUARY OR FEBRUARY. GLOBAL NEWS 24 HOURS A DAY POWERED BY MORE THAN 2600 JOURNALISTS IN MORE THAN 120: — COUNTRIES, THIS IS BLOOMBERG. RISHAAD: LET’S HAVE A LOOK AT WHAT IS GOING ON MARKET WISE. WHAT IS THE FLAVOR OF THE DAY? >> NOT A LOT OF CONVICTION AND MARKETS TODAY. WE ARE SEEING THE REGIONAL INDEX FLAT THERE. WE THOUGHT WAS BETTER THAN EXPECTED CHINA, YOU’D SEE SOME UPSIDE. THIS IS MOSTLY AHEAD OF THE FED MEETING THIS WEEK. ALSO INDUSTRIAL PLAYERS. HEALTH CARE VERY MUCH THE FRONT RUNNER TODAY. THAT SHOWS YOU HOW MUCH A DEFENSIVE PLAY TODAY’S TRADE IS. DOWN BY CLOSE TO 5%. THIS IS AS ITS TRADING VOLUME ALSO DOUBLES. THE BIGGEST FALL THE SCENE IN THE STEELMAKER SINCE JUNE 24. QUITE A LOT OF MOVEMENT GOING THROUGH IN THAT STOCK. THIS IS A HEALTH CARE STOCK IN JAPAN. REALLY SHOWING YOU THAT LINE WE ARE SEEING AN HEALTH CARE. THIS IS ONE TO WATCH. IT IS RESUMING TRADE FOR THE FIRST TIME SINCE JUNE. ALSO 1.1 7 BILLION — 1.1 7 BILLION YUAN. WE KNOW A LOT OF THESE PROPERTY STOCKS HAVE BEEN COMING UNDER PRESSURE. A LOOK AT HOW THE OVERALL SHANGHAI HONG KONG MARKETS ARE GOING, STILL A LOT OF WEAKNESS. YESTERDAY HAVING THAT BIGGEST FALL IN SIX MONTHS, STILL THINK A LOT OF DOWNSIDE COMING THROUGH. ALSO, HOME APPLIANCE COMPANIES. AND IN HONG KONG, YOUR SING THE HANG SENG UP. THAT IS LIMITING THE LOSSES SOMEWHAT ON THE HANG SENG. PETROCHINA LOOKING GOOD THERE. FLAT FINISH YESTERDAY AS WELL DESPITE THE RALLY WE SAW IN ENERGY PLAYERS. A LITTLE WEAKNESS COMING THROUGH IN SOME OF THOSE OTHER COMMODITY PLAYERS. A LOOK AT THE REMEDY — RENMINBI. PRETTY FLAT. THE FIXING TODAY CAME THROUGH A LITTLE STRONGER THAN WHAT IT HAS BEEN. NO REAL REACTION THERE IN CURRENCIES. SOPHIE: THANK YOU SO MUCH. RISHAAD: DONALD TRUMP ACCUSING CHINA OF RIPPING OFF THE U.S. ON TRADE AND THREATENING TO BRAND THEM AS A CURRENCY MANIPULATOR. SOPHIE: THERE ARE SOME ECONOMISTS WHO SAY THAT HIS NEW FRIEND, TAIWAN, IS MORE FITTING OF THAT LABEL. >> THAT IS IMAGED IN QUESTION. TAIWAN IS A FALSE MULLAH ECONOMY — A FAR SMALLER ECONOMY, HAS A FAR SMALLER STAKE IN GLOBAL OPTICS — POLITICS. CHINA IS THE SECOND LARGEST ECONOMY IN THE WORLD. I THINK WHAT TRUMP IS TRYING TO DO IS HE IS TRYING TO USE HIS RELATIONSHIP OR THE SO-CALLED BEGINNING OF THIS RELATIONSHIP WITH TAIWAN AS A BARGAINING CHIP AGAINST CHINA. CHINA IS EXTREMELY SENSITIVE ABOUT THE ONE CHINA POLICY. RISHAAD: TRYING TO BRAND ANY COUNTRY AS A CURRENCY AMID LATER, MOVING BEYOND THAT, IF WE LOOK BEYOND THE RHETORIC, WHAT ABOUT ANY REAL IMPACT? >> I’M NOT SURE ABOUT REAL IMPACT. TRUMP IS WALKING A VERY DANGEROUS LINE. AT SOME POINT IN TIME, YOU WANT TO PUSH, BUT BEYOND A CERTAIN POINT, YOU DON’T WANT TO TAKE A CERTAIN CHANCE. ON THE OTHER HAND, IF YOU LOOK AT THE EVIDENCE OVER THE PAST YEARS, THE TAIWAN DOLLAR HAS RISEN AGAINST THE GREENBACK, BUT THE CHINESE CURRENCY HAS DROPPED ALMOST 6%. THAT IS A HUGE ALMOST DEVALUATION, DEPRECIATION IN ANY. OF TIME. — IN ANY PERIOD OF TIME. I’M SURE HE HAS HIS REASONS. THE REAL IMPACT IS HE GOOD PUSH THINGS BEYOND A CERTAIN POINT WHERE IT COULD AFFECT THE ENTIRE ASIAN ECONOMY. A GOOD HAVE A KNOCK ON EFFECT AND CURRENCY STOCKS AND ALL OF THAT. SOPHIE: LEADING INTO PERSPECTIVE HERE, CHINA IS A BEHEMOTH. BUT WITH TAIWAN, BUT WE ARE SEEING WITH THE U.S. RELATIONSHIP IN THIS REGION, WHAT ELSE CAN WE ANTICIPATE HERE? TAKE A LOOK AT THE ECONOMICS OF TAIWAN. >> THEY HAVE BEEN PLANNING. ON THE OTHER HAND, YOU SEE CHINA IS DECLINING. YOU SEE THE TWO OPPOSITE. THEY HAVE BEEN DEFENDING THEIR CURRENCY AS WIDESPREAD SPECULATION. NOBODY BELIEVES THEY HAVE LEFT THEIR CURRENCY DROP. THEY HAVE BEEN TRYING TO CONTROL IT. THERE IS A LOT OF MEDDLING IN THE CURRENCY. HOWEVER, TAIWAN, WE HAVE SEEN FOR SEVERAL YEARS, WE HAVE SEEN THEM OF ALLOWING THE CURRENCY TO APPRECIATE, AND TOWARD THE END OF TRADING, THEY TRY TO STEP IN AND WEAKEN THE CURRENCY. THAT IS SOMETHING THAT CREATES A PROBLEM IN THE CURRENCY MARKET, THAT CREATES THESE ARTIFICIAL MOVES. I THINK THAT IS A PROBLEM. IF TRUMP PUSHES, HE HAS TO KNOW WHEN TO STOP. SOPHIE: THANK YOU SO MUCH FOR THAT. RISHAAD: YEAR TO DATE, 3.8%, TO PUT THAT INTO CONTEXT. LET’S TALK ABOUT THESE TENSIONS BETWEEN BEIJING AND WASHINGTON. A BIT MORE HEAT HERE. BEIJING FILING A COMPLAINT TO THE WORLD TRADE ORGANIZATION. SOPHIE: WE ARE JOINED FOR MORE. ARE WE ALREADY SEEING RETALIATION FOR TRUMP’S COMMENTS ON THE ONE CHINA POLICY? >> I JUST MORPHED FROM ROBIN TO MYSELF. IT IS INTERESTING WHAT HE HAD TO SAY ABOUT TRUMP AND HIS ADMINISTRATION NEEDING TO TREAD CAREFULLY. CHINA NEEDS TO TREAD CAREFULLY AS WELL. LISTEN, SO MUCH IS AT STAKE IN THIS CHINA U.S. RELATIONSHIP. CHINA DOES NOT LIKE THIS KIND OF UNCERTAINTY. IT DOES NOT NECESSARILY KNOW HOW TO REACT TO IT. DO YOU PUSH BACK STRONGLY? DO YOU HAVE A MEASURED APPROACH? SO FAR THEY HAVE BEEN FAIRLY MEASURED, AS I FROM A FEW INFLAMMATORY COMMENTS COMING FROM STATE MEDIA. THIS LATEST DEVELOPMENT IS PERHAPS NOT RELATED DIRECTLY TO WHAT TRUMP HAS SAID ABOUT THE ONE CHINA POLICY. IT COINCIDES AS WELL WITH ONE DAY AFTER THE 15TH ANNIVERSARY OF CHINA’S ASCENSION TO THE WORLD TRADE ORGANIZATION. THIS IS SOMETHING THEY HAVE BEEN PUSHING FOR. THEY WANT THE U.S. AND THE EU AND OTHERS TO USE FAIR IN THEIR ESTIMATION PRICING FOR ANTI-DUMPING COMPLACENT — COMPLAINTS AND TARIFFS. THESE USE WHAT IS CALLED SURROGATE COUNTRY PRICING, WHICH TAKES THIRD COUNTRY PRICING APPLIED TO DOMESTIC COMPLAINT. IT IS KIND OF WONKY. VERY COMPLICATED. BASICALLY, CHINA SAYS IT ARTIFICIALLY RAISES THE LEVELS OF TARIFFS AGAINST CHINA IN A CASE AGAINST CHINESE EXPORTS. WE HAVE A U.S. TRADE OFFICIAL SAYING THAT THE UNITED STATES HAS NO PLANS TO MODIFY THE WAY THEY CALCULATE ANTI-DUMPING MEASURES, AND THE QUOTE FROM THAT OPEN HILLSIDE CHINA HAS NOT MADE THE REFORMS NECESSARY TO OPEN UP ON MARKET PRINCIPLES. RISHAAD: THE DANGER HERE — WE WERE TALKING ABOUT THIS EARLIER — YOU GET A SERIES OF TIT-FOR-TAT MOVES. BEFORE YOU KNOW IT, YOU GET INTO A TRADE WAR. >> THAT IS THE BIG CONCERN FOR A LOT OF PEOPLE. WE ARE IN UNCHARTED TERRITORY. DONALD TRUMP SO FAR TALKING AND ACTING OR TWEETING UNLIKE ANY OTHER PRESIDENT SITTING IN THE WHITE HOUSE. THAT IS WHAT IS THE CONCERN. I MENTIONED THE STATE MEDIA, THEY SORT OF GINGERLY CRITICIZING TRUMP. HE IS NOT PRESIDENT YES. WE DON’T — HE IS NOT THE PRESIDENT YET. HE IS ACTING LIKE A CHILD WHO IS IGNORANT OF FOREIGN POLICY. THE ONE CHINA POLICY CANNOT BE BOUGHT AND SOLD. THIS IS WHAT THE BANK OF AMERICA HAD TO SAY ABOUT 2017. >> THIS IS MY SINGLE BIGGEST WORRY. I FEAR THE U.S. AND CHINA COULD BE ON A COLLISION COURSE. >> SO WE LIVE IN INTERESTING TIMES. TRUMP’S HORSETRADING TACTIC A BIG TRADE FOR CHINA. RISHAAD: I’VE NEVER SAID BIGGER TIPS AND BIGGER TAX ON TELEVISION BEFORE — BIGGER TIT AND BIGGER TAT ON TELEVISION BEFORE. SOPHIE: COMING UP, THE ACTIVIST WHO IS FAST BECOMING JAPAN’S MOST INFLUENTIAL BEAR. RISHAAD: WE’LL BE JOINED LIVE FROM TOKYO. ♪ SOPHIE: A QUICK CHECK OF THE LATEST BUSINESS FLASH HEADLINES. EXTENDED TRADE AFTER BOOSTED DIVIDENDS OF 30%. ALSO A $13 BILLION BUYBACK PLAN TO. THERE IS YOUR AIRCRAFT BEING BUILT DUE TO DEMAND. CHANGES WILL NOT AFFECT ITS 2016 FINANCIAL. RISHAAD: A 50% STAKE IN THE PIPE BY DIVISION II A $3.3 BILLION. IT IS SEEKING FUNDS TO THE — — TO EXPAND. THE DIVISION OF STATE ABOUT THE CORPORATION WILL TAKE THEIR — SOPHIE: HANJIN SHIPPING IS LIKELY TO BE LIQUIDATED. IT’S AS THE ACCOUNTING FIRM IN CHARGE OF DUE DILIGENCE PRICEWATERHOUSECOOPERS, WILL RECOMMEND AUCTION. LIQUIDATION IS RECOMMENDED AT $1.5 BILLION. RISHAAD: A LOOK AT JAPANESE PNEUMATIC EQUIPMENT MAKER. IT WAS A SHORT RESEARCH AND WELL INVESTMENT ISSUING. SOPHIE: THIS IS A GROUP OF ACTIVIST SHORT-SELLERS THAT HAVE BEEN TARGETING JAPANESE FIRMS OVER THE PAST YEAR. JOINING US FROM TOKYO IS THE HEAD OF RESEARCH. WE’RE SEEING IT FALL AT 11%. YOUR PSYCHIC COULD FOLLOWS MUCH IS 85% THAT YOU ARE SAYING IT COULD FALL AS MUCH AS 85%? >> THANK YOU FOR HAVING ME TODAY. SOPHIE: WHAT IS DRIVING YOUR VIEW? >> OUR ACTIVITY JUST STARTED LAST YEAR. MY POINT IS TO PROVIDE PROSPECTIVE TO THE JAPANESE MARKET. THIS TIME [INDISCERNIBLE] SOPHIE: THERE IS A QUESTION ABOUT THE ACCOUNTING MEASURES TAKEN. YOU’RE SAYING IT IS BEING AUDITED. WHAT OTHER FACTORS ARE SENDING OF RED FLAGS — UP RED FLAGS? >> WE GOT AN EVAL — AND EMAIL THAT INDICATES THEIR PRACTICES A DUBIOUS ONE. WE LOOK AT THE COMPANY, AND WE SAW THAT THE AUDITING FIRM IS QUITE TIDY — TINY. IT IS VERY UNREASONABLE FOR THIS SIZE COMPANY. SO WE ACTUALLY DOUBT THE CREDIBILITY OF THEIR FINANCIAL STATEMENT. RISHAAD: WHY ARE YOU TOUTING IT — DOUBTING IT? YOU ARE SAYING ESSENTIALLY THAT THIS COMPANY IS BROKE HERE. WHY IS IN THE STOCK EXCHANGE INVESTIGATING IT? >> THERE ARE SEVERAL POINTS I WANT TO MAKE. FIRST OF ALL, THE FIRMS FOR THE OVERSEAS SUBSIDIARIES HAS BEEN CHANGED FREQUENTLY. EACH DIFFERENT SUBSIDIARY USES A DIFFERENT ACCOUNTING FIRM. I DON’T KNOW WHY THEY HAVE TO APPOINT ALL THESE FIRMS. ALSO, WHEN WE LOOK INTO FINANCIAL STATEMENTS HA — OF SMC, WE FIND IT IS QUITE DUBIOUS WHEN COMPARED TO THEIR COMPETITORS. THOSE ARE THE MAIN POINTS I MADE IN THE REPORTS. SOPHIE: THE CALLS ARE EIGHT BUYS, SEVEN HOLES. CLEARLY YOU’RE SAYING THIS IS A STRONG SELL. WHAT OTHER MARKET ARE YOU LOOKING FOR TO INDICATE THE TYPE OF WEAKNESS THAT YOU HAVE OBSERVED? >> AN ACCOUNTING ISSUE I FOUND THAT THE HOLDING COMPANY BY THE CHAIRMAN, WHICH HAS MORE THAN 5% SHARES IN THIS COMPANY, PLEDGED ALL OF THE SHARES TO A BANK, WHICH IS THE MAIN BANK FOR FNC — SMC. RIGHT AFTER THE FAILURE, I COULDN’T FIND WHERE THE FINANCED MONEY WENT TO. THIS KIND OF FACT IS A STRONG SMOKING GUN. RISHAAD: THAT’S JUST IT, ISN’T IT? YOU SAY YOU HAVE ALL HIS DESPAIR ACCOUNTING FIRMS — DISPARATE ACCOUNTING FIRMS. THEY WOULD HAVE LOOKED AT THAT AND THEY DID NOT SEE ANY FLAGS HERE. WHY ARE YOU SEEING THEM AND NOT THEM? >> FOR EXAMPLE, IN SINGAPORE SUBSIDIARY OF SMC HAS A VERY TINY FIRM, WHICH HAS A TRACK RECORD OF ACCOUNTING SCANDALS IN AGENT REGION — ASIAN REGION. THIS HAS A LOT OF CASH AMONG THE GROUP. THE ACCOUNT AUDITING APPEARED THEY CONDUCTED IT QUITE SHORT. THAT IS WHAT WE HAVE A DOUBTFUL VIEW ON THIS COMPANY. SOPHIE: TAKING INTO THE BIGGER PICTURE, THIS IS THE FOURTH STOCK YOU HAVE MADE THIS REPORT ON. LOOKING WHAT IS GOING ON THE PAST YEAR, ARE YOU SAYING THERE ARE OVERALL CONCERNS OVER PUBLIC GOVERNANCE, OTHER TYPES OF ACCOUNTING MEASURES? WILL BE SEE MORE OF THIS TYPE OF ACTIVITY? >> YES, I HOPE SO. ACTUALLY AS YOU MENTIONED, SEE PIF AND BOJ IS NOW INVESTING A LOT OF MONEY IN CAPITAL MARKETS IN JAPAN. IF THIS KIND OF ACCOUNTING PRACTICE IS ALLOWED, THAT MEANS THAT HURTS OUR NATIONAL ASSETS. I HOPE THEY’RE GOING TO TAKE A STRONG ACTION AGAINST THESE KIND OF ACCOUNTING PRACTICES. RISHAAD: DO YOU HAVE ANYBODY ELSE IN YOUR SITES — SIGHTS WITH ACCOUNTING IRREGULARITIES AS YOU WOULD SAY THAT ARE ENDEMIC WHEN IT COMES TO CORPORATE JAPAN? >> I THINK A LOT OF PEOPLE ARE NOW SUPPORTING MY ACTIVITIES, ESPECIALLY SINCE SEPTEMBER, WHEN [INDISCERNIBLE] A LOT OF PEOPLE ARE CONNECTING ME. I THINK THERE ARE A LOT MORE COMING IN THE COMING MONTHS. RISHAAD: THANK YOU FOR THAT. HE IS THE CHIEF EXECUTIVE OF SORT CHILLING RESEARCH — SHORT SELLING RESEARCH. SOPHIE: MORE TO COME. WE’LL SEE HOW SOME OF HONG KONG’S WEALTHIEST PEOPLE HAVE TRIMMED THEIR TAX BILLS. THIS IS BLOOMBERG. ♪ SOPHIE: THIS IS BLOOMBERG MARKETS ASIA. RISHAAD: SOME OF HONG KONG’S WEALTHIEST INDIVIDUALS HAD TO FIND LEGAL WAYS TO SIDESTEP THE REAL ESTATE CURVES THAT HAVE BEEN INSTITUTED. IN THE PROTEST, THAT IN THE PROCESS, SAVING A SMALL FORTUNE IN TAXES. SOPHIE: IS A SAVED $70 MILLION HE — $17 MILLION IN PROPERTY TAXES. >> HE MANAGED TO QUALIFY AS A FIRST-TIME HOMEBUYER. THIS IS SOMEBODY WHO OWNS HUNDREDS OF PROPERTIES THROUGH HIS COMPANY. BECAUSE HE NEVER REGISTERED ANY OF THEM IN HIS NAME, HE QUALIFY FOR A PROGRAM THAT IS MEANT TO ENCOURAGE PEOPLE IN THE BOTTOM OF THE INCOME BRACKET TO GET THEIR FOOT ON THE PROPERTY LADDER. GUESS WHAT, IT WASN’T JUST ONE PROPERTY. HE AND HIS FAMILY BOUGHT THREE PROPERTIES. TWO OF THEM, HE PLANS TO COMBINE INTO MORE THAN 8000 SQUARE FEET. THAT IS NOT 10 TIMES THE AVERAGE APARTMENT HERE. ANOTHER FAMILY MEMBER GOT A THIRD. BECAUSE IT IS ALL CONSIDERED ONE TRANSACTION, THEY ARE ALL CONSIDERED FIRST-TIME PURCHASES. SOPHIE: ALL THREE ARE $155 MILLION U.S. U.S. HOW WIDESPREAD IS THIS PRACTICE? >> IT IS HARD TO SAY EXACTLY. A LOT OF IT HAPPENS SORT OF BEHIND THE SCENES. THEY BUY PROPERTIES THROUGH COMPANIES. IF THOSE COMPANIES ARE REGISTERED OFFSHORE, GUESS WHAT? ZERO TAX PAID IF HE RESELL THE PROPERTY, OR IF YOU BUY A PROPERTY THROUGH A REGISTERED COMPANY. THIS IS. POPULAR AMONG MAINLAND CHINESE. IT IS ONLY WORTHWHILE IF YOU ARE VERY WEALTHY. LEGAL EXPENSES CAN BE HIGH. RISHAAD: WHAT DOES IT MEAN? DOES IT MEAN ANYMORE IN TERMS OF THESE GOVERNMENT ATTEMPTS TO CURB THESE PRICES? WHAT DOES IT DO TO THAT? >> GOVERNMENT MEASURES ARE MEANT TO TRY AND CURTAIL THE DEMAND BY INVESTORS AND SECOND TIME BUYERS. WHAT THIS DOES IS IT BASICALLY UNDERMINES THE GOVERNMENT’S EFFORTS. A VERY WEALTHY PERSON CAN SAY THERE IS A NEW DEVELOPMENT, I THINK I WILL BUY 15 UNITS. I HAVE NEVER BOUGHT ANYTHING IN MY NAME, AND I CAN QUALIFY FOR THE CONCESSIONARY RATE. IT IS A GOES AGAINST, ALL IN ONE TRANSACTION. SOPHIE: THANK YOU SO MUCH. TAKING A LOOK AT HOW THE WEALTHY AND HONG KONG ARE SIDESTEPPING REAL ESTATE TAXES. RISHAAD: COMING UP AHEAD, WE WILL BE UPDATED ON THE BIG STORIES OF THE DAY. WHAT IS IN STORE? >> CHINA’S ECONOMIC STABILIZATION CONTINUES, AND IT MEANS THAT CHINA IS FEELING LESS PRESSURE ON FISCAL STIMULUS, AND PERHAPS IT CAN CONTROL ITS MARKET LITTLE MORE WITH TIGHTENING. IS THAT WHAT IT IS GOING TO DO? WE WILL ASK THAT. BUT IT IS UP TO KYOTO WE GO. RETURNING TO A JAPANESE FORM — FIRM FOR A VERY FIRST TIME. WHAT IS THAT MEAN FOR CORPUS — CORPORATE GOVERNMENT? THE MYSTERY SAGA CONTINUES. ALL THAT IN THE NEXT HOUR OF BLOOMBERG MARKETS ASIA. ♪ >> FROM OUR STUDIOS IN NEW YORK CITY, THIS IS “CHARLIE ROSE.” CHARLIE: WE BEGIN WITH CYBER SECURITY AND THE OBAMA ADMINISTRATION. THE PRESIDENT ORDERED A FULL REVIEW OF RUSSIA’S ELECTION RELATED HACKING. THE HOMELAND SECURITY ADVISOR TOLD REPORTERS ABOUT THE INVESTIGATION ON FRIDAY MORNING. SHE SAID THE ORDER WILL BE DELIVERED BEFORE PRESIDENT OBAMA LEAVES OFFICE ON JANUARY 20. SENATOR JOHN MCCAIN ALSO ANNOUNCED TODAY THAT CYBER SECURITY ISSUES WOULD BE A SIGNIFICANT FOCUS OF THE SENATE ARMED SERVICES COMMUNITY THAT HE WOULD CHAIR. JOINING ME IS SENATOR JOHN MCCAIN. THANK YOU JOINING US. WHY ARE YOU MAKING THAT ANNOUNCEMENT TODAY? SEN. MCCAIN: WELL, OBVIOUSLY, ONE OF THE ISSUES, THE SITUATIONS THAT BROUGHT THIS TO A BOIL IS THE ALLEGATIONS OF RUSSIA INTERFERING NOT ONLY IN OUR ELECTIONS, BUT IN OTHER ELECTIONS AROUND THE WORLD. THAT UNDERMINES, OBVIOUSLY, THE FUNDAMENTALS OF DEMOCRACY, IF THEY ARE ABLE TO SUCCEED. BUT MORE IMPORTANTLY, CHARLIE, TESTIMONY BEFORE THE COMMITTEE BY OUR MILITARY AND CIVILIAN LEADERS IN DEFENSE HAVE ALL STATED THAT CYBER IS ONE OF THE AREAS WHERE WE DO NOT HAVE AN ADVANTAGE OVER OUR POTENTIAL ADVERSARIES. WE NOT ONLY DON’T HAVE AN ADVANTAGE, IN SOME INSTANCES, THEY HAVE AN ADVANTAGE. THESE HEARINGS WILL BE FOCUSED ON THE OVERALL ISSUE OF CYBER SECURITY, AND OBVIOUSLY, THEIR ABILITY OR INABILITY TO EFFECT THE OUTCOME OF ELECTIONS IN DEMOCRATIC COUNTRIES WOULD CERTAINLY BE ONE OF THE ISSUES, BUT ONLY ONE. CHARLIE: BUT YOU ARE SAYING YOU’LL HAVE YOUR OWN INVESTIGATION AT THE ARMED SERVICES COMMITTEE. SEN. MCCAIN: MY UNDERSTANDING AMONG OTHER THINGS IS ITS NOT — IT IS NOT WHETHER THEY ARE JUST HACKING INTO THE LAST ELECTION. BY THE WAY, THE CHINESE HACKED INTO MY ELECTION IN 1980. THIS HAS TO BE DRAWN AND ENCOMPASSING. WE HAVE ALREADY HAD HEARINGS IN — BROAD AND ENCOMPASSING. WE HAVE ALREADY HAD HEARINGS IN THE ARMED SERVICES COMMITTEE ON THIS. WE’VE ASKED ALL OUR MILITARY WITNESSES. NOW WE HAVE TO FOCUS ON THE ENCOMPASSING ASPECTS OF A CHALLENGE, WHETHER IT BE THEIR ABILITY TO SHUT DOWN OUR SATELLITES OR STEAL OUR MOST IMPORTANT SECRETS, SUCH AS OUR NEW WEAPONS SYSTEMS, OR WHETHER IT IS TO BE ABLE TO LISTEN IN ON COMMUNICATIONS, OR WHETHER EVEN TO DISRUPT OR DESTROY COMMUNICATIONS. THERE ARE SOME SCENARIOS, MY FRIEND, AND I’M ONLY EMPHASIZING SCENARIOS, WHERE THEY COULD SHUT DOWN EVERY SATELLITE IN BASE. — IN SPACE. SO THIS IS A HUGE CHALLENGE, AND FRANKLY THIS ADMINISTRATION HAS NO POLICY AS TO HOW TO PREVENT IT, WHAT TO DO IN CASE OF AN ATTACK, AND HOW TO PREPARE FOR ONE. CHARLIE: DO YOU HAVE ANY DOUBT THAT THE RUSSIANS TRIED TO INTERFERE IN THE U.S. ELECTIONS? SEN. MCCAIN: I DON’T KNOW IF IT WAS INTENTIONAL INTERFERENCE, BUT I DO KNOW THAT SOME OF THE LEAKS THAT CAME OUT CANNOT BE HELPFUL TO THE POLITICAL PROCESS. I WILL LEAVE IT TO OTHERS, AND I DON’T HAVE SUFFICIENT INFORMATION TO MAKE A JUDGMENT ABOUT THE PAST ELECTION, BUT I CAN MAKE A JUDGMENT THAT IF THEY ARE ABLE TO DISRUPT COMMUNICATIONS AND TO PERVERT COMMUNICATIONS TO THE DEGREE WHERE THE PEOPLE WHO ARE MAKING A DETERMINATION AS TO HOW TO VOTE IS DISTORTED OR DISRUPTED OR DESTROYED, THEN, OBVIOUSLY, IT’S A BIG CHALLENGE TO DEMOCRACY, WHETHER IT BE IN THE UNITED STATES OR ANY PLACE ELSE. CHARLIE: DO YOU BELIEVE YOU HAVE A DIFFERENT POINT OF VIEW THAN PRESIDENT-ELECT TRUMP ON THIS, WHO HAS TENDED TO DOWNPLAY THE IDEA THAT IT MIGHT HAVE BEEN THE RUSSIANS? SEN. MCCAIN: EVERY EXPERT I HAVE TALKED TO SAYS IT IS THE RUSSIANS, THEY HAVE PLAYED A VERY MAJOR ROLE, BUT NOT JUST IN ELECTIONS, CHARLIE. THEY ARE EVERY DAY BOMBARDING SOME OF OUR INDUSTRIAL BASIS, PARTICULARLY THE MILITARY-INDUSTRIAL COMPLEX. THEY ARE BOMBARDING OUR COMMUNICATION SYSTEMS. IT’S JUST A FACT, IT’S WHAT THEY ARE DOING. THEY ARE THE BEST AT IT, THE CHINESE ARE NEXT, AND THEN YOU HAVE THE EVERYDAY HACKER WHO IS ALSO A SIGNIFICANT CHALLENGE. CHARLIE: BUT WE ALSO HAVE CYBER SECURITY AND CYBER ESPIONAGE CAPABILITY. I ASSUME WE ARE USING IT AS WELL. SEN. MCCAIN: I’M SURE WE ARE TO SOME DEGREE, BUT WE DO NOT HAVE A POLICY. UNTIL THE PRESIDENT OF THE UNITED STATES SETS A POLICY AS TO WHAT YOU DO AND HOW YOU ACHIEVE IT, FOR EXAMPLE, RIGHT NOW IF WE THINK THERE IS AN IMPENDING ATTACK, THERE IS NO POLICY AS TO WHAT TO DO. ONCE THERE IS AN ATTACK, THERE IS NO POLICY AS TO WHAT WE DO IN RESPONSE. SO THERE IS REALLY A LACK OF COHERENCE FROM THE EXECUTIVE BRANCH. OUR JOB IS TO LAY OUT THE SCENARIO AND ENACT LEGISLATION IF NECESSARY, AND I AM SURE SOME LEGISLATION WILL BE NECESSARY. CHARLIE: YOU ARE SAYING MIKE ROGERS DOES NOT HAVE A POLICY TO RESPOND TO A CYBER SECURITY INVASION. SEN. MCCAIN: HE HAS TESTIFIED THAT THERE IS NO POLICY. CHARLIE: COMING OUT OF THE ARMED SERVICES COMMITTEE WILL BE A RECOMMENDATION FOR LEGISLATION. SEN. MCCAIN: NOT JUST A RECOMMENDATION, WE WILL ENACT LEGISLATION THROUGH THE SENATE ARMED SERVICES COMMITTEE. I HAVE RECEIVED ENCOURAGEMENT TO ADDRESS THE SITUATION BY OUR REPUBLICAN LEADERSHIP. CHARLIE: HAVE YOU HAD ANY CONVERSATIONS WITH PRESIDENT-ELECT TRUMP ABOUT THIS? SEN. MCCAIN: I HAVE NOT. CHARLIE: SHOULD YOU? SEN. MCCAIN: I WOULD WELCOME A CONVERSATION WITH HIM ON THIS OR ANY OTHER ISSUE. CHARLIE: YOU KNEW VERY WELL THE NOMINEE TO BE SECRETARY OF DEFENSE. SEN. MCCAIN: I KNOW HIM VERY WELL AND I HAVE HAD CONVERSATIONS WITH GENERAL MATTIS, A MAN I HAVE KNOWN FOR THE LAST 12 OR 15 YEARS. CHARLIE: YOUR COLLEAGUE AND MUTUAL FRIEND, LINDSEY GRAHAM, AN ADMIRER, SAID I’M GOING AFTER RUSSIA IN EVERY WAY YOU CAN GO AFTER RUSSIA. I THINK THEY ARE ONE OF THE MOST DESTABILIZING INFLUENCES ON THE WORLD STAGE. I THINK THEY DID INTERFERE IN OUR ELECTIONS AND I WANT PUTIN PERSONALLY TO PAY THE PRICE. SEN. MCCAIN: MY FRIEND LINDSEY GRAHAM IS ALWAYS SHY AND RETIRING. CHARLIE: NO, HE’S NOT. SEN. MCCAIN: I THINK THE POINT IS WE NEED TO HAVE THAT AS PART OF OUR OVERALL PROCESSING OF THE SITUATION, AND NOT ONLY WHAT THE SITUATION IS, BUT WHAT WE NEED TO DO IN ORDER TO COUNTER THIS THREAT TO OUR NATIONAL SECURITY. THAT IS A PART OF IT. ACCORDING TO MOST EXPERTS I TALKED TO, THE RUSSIANS ARE THE LEADING OFFENDERS, BUT THERE ARE PLENTY OF OTHERS. THE CHINESE, SOME SAY THE LATEST CHINESE AIRCRAFT HAS SOME ALARMINGLY SIMILAR FEATURES OF THE F-35. SO THERE IS NO DOUBT THAT A GREAT DEAL OF INDUSTRIAL ESPIONAGE IS TAKING PLACE, NOT JUST BY THE RUSSIANS AS WELL. SO WE NEED TO DEVELOP AN OVERALL POLICY THAT NOT ONLY APPLIES TO THE RUSSIANS BUT TO EVERY OTHER NATION AND EVERY OTHER INDIVIDUAL THAT MIGHT SEEK TO HARM THIS NATION. CHARLIE: EVEN THOUGH THEY DON’T HAVE A POLICY, YOU UNDERLINED THE FACT THAT YOU DO NOT BELIEVE THE ADMINISTRATION HAS A POLICY, LISA MONACO SAID SINGLING OUT INTERNET RELATED DANGERS IS AMONG THE MOST SIGNIFICANT NATIONAL SECURITY ISSUES FACING THE ADMINISTRATION. SEN. MCCAIN: SOMEONE SHOULD ASK LISA MONACO WHAT IS OUR POLICY IF WE DETECT AN ATTACK THAT IS COMING TO THE UNITED STATES, WHAT IS OUR RESPONSE IF THERE IS AN ATTACK, AND LOOK AT THE WHOLE SCENARIO OF HOW THE UNITED STATES OF AMERICA RESPONDS TO THIS THREAT. THERE IS NONE. CHARLIE: BUT WHY WOULDN’T YOU AS CHAIRMAN OF THE SENATE ARMED FORCES COMMUNITY, REQUEST A MEETING WITH THE PRESIDENT ELECT TO TALK ABOUT THIS? SEN. MCCAIN: I PROMISE YOU, THE BEST WAY TO HAVE THAT DIALOGUE IS TO DECLARE THAT THERE WILL BE HEARINGS AND POLICY MAKING AND LEGISLATION COMING OUT OF THE SENATE ARMED SERVICES COMMITTEE. I PROMISE YOU THAT WILL PROMPT A DIALOGUE, AND IT’S GOING TO TAKE SOME TIME, CHARLIE. IT’S NOT SOMETHING WE ARE GOING TO BE ABLE TO DO OVERNIGHT. CHARLIE: DO YOU BELIEVE YOU HAVE TO TURN THE PRESIDENT ELECT’S UNDERSTANDING AROUND ON THIS? HE SAID TO TIME MAGAZINE, I DON’T BELIEVE THE RUSSIANS INTERFERED WITH THE ELECTION. IT COULD BE RUSSIA, AND IT COULD BE CHINA, AND IT COULD BE SOME GUY AT HIS HOME IN NEW JERSEY. I BELIEVE IT COULD’VE HAVE BEEN RUSSIA AND IT COULD HAVE BEEN ANYONE OF A NUMBER OF OTHER PEOPLE, SOURCES OR INDIVIDUALS. THAT IS WHAT THE PRESIDENT-ELECT SAID TO TIME MAGAZINE. SEN. MCCAIN: IN SOME RESPECTS, HE IS RIGHT. ALL OF THESE ARE PLAYERS THAT HE MENTIONED. THE PROBLEM IS THAT HE MAY NOT QUITE UNDERSTAND THAT THE BEST AT IT AND THE MOST HOSTILE, AND THE ONES WHO ARE PROBABLY HAD THE MOST SIGNIFICANT IMPACT OVER A NUMBER OF YEARS ARE THE RUSSIANS. THEY ARE THE BEST AT THEIR JOB. ADMIRAL RODGERS HAS BASICALLY SAID THE SAME THING. ALL THESE EXPERTS HAVE SAID OUR DIRECTOR OF NATIONAL INTELLIGENCE HAS SAID THAT IT’S THE RUSSIANS WHO ARE, BY FAR, THE MOST ACTIVE IN THIS KIND OF BEHAVIOR, BUT IT IS NOT CONFINED TO RUSSIA. CHARLIE: SENATOR MCCAIN, I LOOK FORWARD TO TALKING MORE ABOUT THIS. THANK YOU FOR JOINING US. SEE YOU SOON. ♪ CHARLIE: WE CONTINUE WITH MICHAEL AND DAVID, BOTH FROM WASHINGTON. DAVID, I BEGIN WITH YOU. WHY DID THE PRESIDENT TAKE THIS ACTION TODAY AND ORDER THIS INVESTIGATION? DAVID: I THINK THERE IS A SUBSTANTIVE REASON AND FROM EVERYTHING WE CAN TELL, POLITICAL REASON. THE SUBSTANTIVE REASON IS IT HAS TAKEN THE INTELLIGENCE COMMUNITY A LONG TIME TO COME TO ALL THE MAJOR CONCLUSIONS ON THE RUSSIAN EFFORT TO INFLUENCE THE ELECTION. THAT’S EVERYTHING FROM THE HACKING OF THE DNC, THE DEMOCRATIC NATIONAL COMMITTEE AND THE RELEASE OF THOSE EMAILS TO THE SCANNING OF REGISTRATION DATA, THOUGH IT LOOKS LIKE IN THE END THEY DID NOT TRY TO AFFECT THE ACTUAL VOTING PROCESS AND MACHINES, AND THEN ALL THE OTHER SURROUNDINGS OF THIS BECAUSE OBVIOUSLY THE RUSSIANS HAVE BEEN HACKING INTO MANY OTHER AMERICAN INSTITUTIONS FOR YEARS. THERE IS A SERIOUS QUESTION ABOUT WHY THE UNITED STATES WAS CAUGHT BY SUCH SURPRISE HERE. I THINK SUBSTANTIVELY, HE WANTED TO INFLUENCE FUTURE ELECTIONS. I THINK THE POLITICAL REASON IS EVEN MORE FASCINATING, BECAUSE PRESIDENT-ELECT TRUMP HAS BEEN DENYING THERE WAS MUCH EFFORT TO INFLUENCE THE ELECTION AT ALL, AND SECONDLY HE SAID THERE IS NO EVIDENCE THAT IT WAS THE RUSSIANS, WHILE THERE IS THIS FLOOD OF INTELLIGENCE REPORTS FLOATING AROUND THE CITY SUGGESTING IT WAS THE RUSSIANS, AND WHO WITHIN RUSSIA DID IT? I THINK WHAT THE PRESIDENT IS TRYING TO DO IS FORCE THE INTELLIGENCE COMMUNITY TO PUT ALL THIS DOWN ON PAPER, GIVE IT TO CONGRESSIONAL COMMITTEES, PERHAPS MAKE PART OF IT PUBLIC, BEFORE PRESIDENT-ELECT TRUMP GETS SWORN IN AND IS ABLE TO COME IN AND SAY NOTHING HAPPENED HERE. CHARLIE: MICHAEL, WHAT WOULD YOU ADD TO THAT? MICHAEL: I THINK DAVID HAS IT EXACTLY RIGHT. IF NOTHING ELSE, IT SORT OF BOXES IN PRESIDENT-ELECT TRUMP. I SHOULD POINT OUT THAT EVEN TODAY, THE ADMINISTRATION RATCHETED UP WHAT IT HAS SAID ABOUT THE RUSSIAN ROLE. ERIC SHULTZ IN BRIEFING REPORTERS AT THE WHITE HOUSE PRESS BRIEFING SAID THAT IT WAS HIGH CONFIDENCE THAT THE CYBER ATTACKS ON THE DNC AND OTHER POLITICAL ORGANIZATIONS AND POLITICAL LEADERS WERE DIRECTED AT THE HIGHEST LEVEL OF THE RUSSIAN GOVERNMENT. THAT IS ABOUT AS STRONG AS YOU CAN GET. THE PREVIOUS STATEMENT FROM THE INTELLIGENCE COMMUNITY WAS THAT IT WAS — HIGH CONFIDENCE WAS A TERM OF ART. IN SOME WAYS, THE ADMINISTRATION IS THROWING DOWN THE GAUNTLET, SAYING HERE IT IS, AND WERE — AND WE ARE GOING TO COMPILE ALL THIS EVIDENCE AND PRESENT IT TO YOU IN THE NEW ADMINISTRATION, AND THIS IS COMING THE SAME WEEK THAT TRUMP SAID IN THAT TIME MAGAZINE INTERVIEW HE DOESN’T KNOW IF IT WAS THE RUSSIANS, MAYBE IT WAS SOME GUY AT HIS HOUSE IN NEW JERSEY. CHARLIE: MIKE PENCE HAS BEEN GETTING THE INTELLIGENCE BRIEFINGS. NUMBER TWO, THE PRESIDENT-ELECT HAS BEEN TALKING TO THE PRESIDENT WITH SOME FREQUENCY, IF WE UNDERSTAND WHAT HE IS SAYING, THAT HE’S CONSULTED WITH THE PRESIDENT ABOUT THE TRANSITION AND A RANGE OF OTHER THINGS. HE’S TAKEN SOME PRIDE THAT HE LIKES THE PRESIDENT SO MUCH IN HOPES THE PRESIDENT LIKES HIM, BUT IT’S BEEN A VERY PRODUCTIVE SESSION. YOU WOULD’VE THOUGHT PRESIDENT WOULD HAVE REMINDED HIM WHAT THIS ADMINISTRATION BELIEVES ABOUT THE RUSSIANS HACKING. >> YOU WOULD THINK, AND SHULTZ WAS PRESSED ON THAT AT THE WHITE HOUSE PRESS BRIEFING TODAY AND SAID HE’S NOT GOING TO GIVE A READOUT ON THE CONVERSATIONS BETWEEN THE PRESIDENT AND THE PRESIDENT-ELECT. BUT IT’S HARD TO SEPARATE OUT THOSE COMMENTS THAT DONALD TRUMP MADE SORT OF DISMISSING WHAT THE INTELLIGENCE COMMUNITY IS SAYING FROM THE PRESIDENT’S DECISION TO MAKE PUBLIC THIS REVIEW TODAY AND AS I SAID BEFORE, RATCHET UP THE LEVEL OF CONFIDENCE THEY HAVE THAT THEY ARE RIGHT ABOUT THIS. CHARLIE: DAVID, WHAT WOULD YOU SAY ABOUT THAT? DAVID: WHAT ADDS TO THE ODDITY, IN ADDITION TO WHATEVER BRIEFINGS THEY’VE GIVEN TO VICE PRESIDENT ELECT PENCE, YOU’VE NOW SEEN A RAFT OF MORE TRADITIONAL REPUBLICAN STEP OUT AND SAY WE NEED TO HOLD HEARINGS, WE NEED INDEPENDENT COMMISSIONS, WE NEED TO HAVE MORE OF THESE DETAILS COME OUT IN PUBLIC. JOHN MCCAIN SAID THE OTHER DAY THAT HE WOULD HOLD HEARINGS WITH THE ARMED SERVICES COMMITTEE, NOT ONLY OF THE HACKS RELATED TO THE ELECTION, BUT PERHAPS THE EFFORTS OF RUSSIAN INTELLIGENCE TO GET INSIDE U.S. MILITARY OPERATIONS. WE KNOW, OF COURSE, THAT THE HACKING THAT TOOK PLACE AT THE DNC AND ELSEWHERE WAS NOT THE FIRST EFFORT BY THE RUSSIANS IN RECENT TIMES. THERE WERE HACKS ON THE STATE DEPARTMENT AND WHITE HOUSE, THE PENTAGON, SO THIS FITS INTO A BROADER CONTEXT. MY GUESS IS THAT IF THE CONVERSATION HAS TAKEN PLACE BETWEEN PRESIDENT OBAMA AND PRESIDENT-ELECT TRUMP, IT’S BEEN IN THE CONTEXT OF, THERE IS A BIGGER RUSSIAN CAMPAIGN OUT HERE AND IGNORE IT AT YOUR PERIL. CHARLIE: MY IMPRESSION IS THAT THE INVESTIGATORY EFFORT IS BEING SPEARHEADED BY THE FBI, AM I CORRECT? MICHAEL: THAT’S RIGHT, FOR THE IMMEDIATE DNC JOHN PODESTA AND SO FORTH, BUT THERE HAS ALSO BEEN OTHER MEMBERS OF THE INTELLIGENCE COMMUNITY BEING BROUGHT IN. MICHAEL: THE FBI TOOK THE LEAD ON THIS THROUGHOUT, BUT THIS CLEARLY WILL ENCOMPASS THE ENTIRE INTELLIGENCE COMMUNITY. I SHOULD POINT OUT THAT PROBABLY THE STRONGEST PUBLIC STATEMENT HAS COME FROM ADMIRAL MIKE ROGERS AT THE NATIONAL SECURITY AGENCY, WHO, ALTHOUGH HE DIDN’T SAY RUSSIA, MADE IT ALL THAT — BUT CLEAR THAT HE WAS REFERRING TO A NATIONSTATE THAT TRIED TO INFLUENCE OUR ELECTION. HE SAID SOMETHING EVEN FURTHER, INTENDING TO AFFECT THE ELECTION. THAT IS PROBABLY THE BIGGEST OPEN QUESTION HERE. IF INDEED IT WAS THE RUSSIANS, WHAT WAS THE MOTIVE? WAS IT SIMPLY TO DESTABILIZE AND CREATE CONFUSION IN THE AMERICAN POLITIC, AS THEY HAVE DONE IN MANY OTHER COUNTRIES? OR WAS IT A CONCERTED EFFORT TO INFLUENCE THE RESULTS OF THE ELECTION? TO HELP ELECT DONALD TRUMP AND DEFEAT HILLARY CLINTON. THAT IS PROBABLY THE BIGGEST MYSTERY ABOUT THIS. WE DON’T KNOW THE ANSWER. CHARLIE: IS THERE ANY DOUBT THAT THIS WOULD BE TAKING PLACE HIM THAT’S TAKING PLACE IF IT’S TAKING PLACE TO THE DEGREE THAT THE VARIOUS INTELLIGENCE AGENCIES BELIEVE IT IS, THAT IT WOULD BE CARRIED OUT WITHOUT PUTIN’S KNOWLEDGE? >> EVERYONE I’VE RUN INTO WHO WAS IN SENIOR LEVELS OF INTELLIGENCE SAY IT IS INCONCEIVABLE TO THEM THAT SOMEONE WOULD TAKE THE RISK OF DOING SOMETHING THIS HIGH PROFILE THAT COULD DRAW A MAJOR RESPONSE FROM THE UNITED STATES WITHOUT CLEARING IT FIRST WITH THE BOSS. MICHAEL: IT’S ALSO TRUE THAT THE RUSSIAN INTENTIONS AND GOALS HERE MAY HAVE CHANGED OVER TIME, THAT PERHAPS THERE WAS SOME INITIAL, WHEN THIS BEGAN, IT MAY HAVE BEEN AN EFFORT TO HELP TRUMP. IT MAY HAVE BEEN AN EFFORT, THERE ARE CERTAINLY INDICATIONS THAT PUTIN AND HIS TOP AIDES WERE NOT ENTHRALLED WITH HILLARY CLINTON. AT SOME POINT, THOUGH, THEY MAY HAVE READ THE POLLS THE WAY EVERYBODY ELSE DID AND ASSUMED THAT HILLARY CLINTON WAS GOING TO WIN, AND THEY MAY HAVE SCALED BACK SOME OF THEIR ACTIVITY. ALTHOUGH THAT IS NOT ENTIRELY CLEAR, EITHER. WE KNOW THEY WERE IN THE DNC, THEY WERE HACKING EMAILS AT LEAST THROUGH THE SUMMER OF 2016. IT IS STILL NOT CLEAR HOW LONG IT WENT ON. THERE ARE SOME INDICATIONS IT MAY HAVE CONTINUED FOR A LITTLE BIT OF TIME AFTER THAT. AND ALSO I SHOULD POINT OUT THAT THERE WAS A LOT OF CONCERN OVER THE SUMMER AND FALL ABOUT THOSE PROBES OF STATE ELECTION SYSTEMS. THAT REALLY RANG ALARM BELLS, SUGGESTING THEY MAY HAVE BEEN TRYING TO HACK THE ELECTIONS THEMSELVES, AND I THINK THE ADMINISTRATION HAS MADE CLEAR THAT THAT DIDN’T HAPPEN. CHARLIE: A COUPLE OF FINAL QUESTIONS. AS SOON AS WE HAD SOME EVIDENCE THAT HACKING HAD TAKEN PLACE AND THE FBI JUMPED ON THIS, MY UNDERSTANDING IS THAT THE PRESIDENT OF THE UNITED STATES, PRESIDENT OBAMA SAID THERE WOULD BE A PROPORTIONATE RESPONSE, THAT INTELLIGENCE AGENCIES HAD IMMEDIATELY DUG INTO THIS, FROM THE FBI, THE CIA, DEFENSE AND OTHER PEOPLE, AND THAT THERE WAS GOING TO BE A PROPORTIONATE RESPONSE. HAS THERE BEEN A RESPONSE, AS FAR AS WE KNOW? >> THE MAIN RESPONSE WE’VE SEEN SO FAR HAS BEEN SOME WARNINGS TO THE RUSSIANS THAT PRESIDENT OBAMA GAVE DIRECTLY WHEN HE LAST MET PRESIDENT PUTIN IN CHINA. THAT WAS BACK IN SEPTEMBER. THERE HAVE BEEN CHANNELS OF COMMUNICATION ELSEWHERE TO SECRETARY OF DEFENSE, SECRETARY OF STATE, A WARNING SENT THROUGH A SYSTEM THAT IS USED FOR BOTH CYBER AND NUCLEAR WARNINGS, BUT IF THERE HAS BEEN A PUNISHMENT TO, A COST TO PRESIDENT PUTIN FOR THIS, WE HAVEN’T SEEN IT. THERE HAS NOT BEEN SANCTIONS. MAYBE THERE HAS BEEN SOME KIND OF COVERT EFFORT, BUT IT HAS BEEN PRETTY SUBTLE. IT WAS JOE BIDEN WHO SAID ON ONE OF THE SUNDAY SHOWS BEFORE THE ELECTION, WE WILL COME AFTER PUTIN, AND HE WILL KNOW IT EVEN IF NOBODY ELSE DOES. BUT SO FAR, EVIDENCE OF THAT IS PRETTY SCARCE. MICHAEL: THIS BECAME PUBLIC TODAY BECAUSE LISA MONACO HAD BREAKFAST WITH THE REPORTERS. SHE STARTED WITH AN OVERVIEW ABOUT THREATS TO THE COUNTRY, THREATS TO THE HOMELAND, AND TALKED ABOUT THE CYBER THREAT. SHE SAID WHEN THERE ARE CYBER ATTACKS THAT THREATEN AMERICAN INTERESTS, WE WILL ACT TO PROTECT OUR INTERESTS. I ASKED HER LATER IF THE U.S. GOVERNMENT HAS TAKEN OR WILL BE TAKING STEPS TO IMPOSE COSTS ON THE RUSSIANS AS A RESULT OF THESE CYBER ATTACKS, AND SHE DID NOT ANSWER THAT QUESTION. CHARLIE: SOMEONE ONCE SAID TO ME AFTER THE RUSSIANS WERE ACCUSED OF DOING THIS THAT THE RESPONSE, THE PROPORTIONATE RESPONSE WOULD BE SOMETHING THAT WOULD BE DONE SO THAT PUTIN KNEW WHAT IT WAS ABOUT, BUT IT WOULD LOOK FOR CREDIBILITY WITHIN RUSSIA, SO IT WOULD NOT BE DONE WITH A LOT OF BELLS AND SOUNDINGS. >> THAT’S RIGHT, CHARLIE, BUT THERE IS A RISK TO THAT AS WELL. THERE’S ALWAYS A TEMPTATION, LET’S KEEP IT QUIET AND IN THE FAMILY, BUT ONE OF THE BIGGEST PROBLEMS IN CYBER, AS WE’VE DISCUSSED ON PAST SHOWS, IS ESTABLISHING SOME SENSE OF DETERRENCE. IT DOES NOT EXIST IN THE CYBER REALM THE WAY IT DOES IN NUCLEAR. IF YOU’RE GOING TO ESTABLISH DETERRENCE, YOU HAVE TO HAVE A PRETTY PUBLIC RESPONSE SO THAT THE NEXT TIME, IS NOT THE RUSSIANS, BUT INSTEAD THE NORTH KOREANS OR THE IRANIANS OR THE CHINESE OR SOMEONE ELSE WE ARE NOT THINKING OF THEY UNDERSTAND , THIS IS NOT A FREE FIRE ZONE. CHARLIE: DAVID, MICHAEL, THANK YOU SO MUCH. BACK IN A MOMENT. STAY WITH US. ♪ CHARLIE: WE NOW TURN TO THE LATEST NEWS FROM THE TRUMP TRANSITION. JOINED BY MAJOR GARRETT OF CBS NEWS, WHO’S BEEN COVERING NOT ONLY THE TRUMP CAMPAIGN BUT THE TRUMP TRANSITION. MAYOR RUDY GIULIANI WITHDREW HIS NAME FROM CONSIDERATION. GIVE US SOME SENSE OF WHAT WAS GOING ON THERE? >> RUDY GIULIANI APPRECIATES OPERA. HE IS AN OPERATIC CHARACTER IN THE TRUMP TRANSITION. HE ENDORSED DONALD TRUMP RIGHT BEFORE THE NEW YORK PRIMARY IN APRIL AND BECAME HIS MOST AGGRESSIVE AND MOST DEEPLY LOVED — BECAUSE I THOUGHT THIS SO MANY TIMES ON THE CAMPAIGN TRAIL — SURROGATE FOR DONALD TRUMP, AND HE IS THE ODD MAN OUT. SPECTACULARLY THE ODD MAN OUT IN THE TRUMP TRANSITION. IT’S ALMOST INCONCEIVABLE TO SOME IN THE TRUMP TRANSITION THAT RUDY GIULIANI WOULD NOT FIND A PLACE WITHIN THE TRUMP CABINET. THAT’S RELATED TO TRUMP’S ON — OWN INSTINCTS, BUT IT’S ALSO RELATED TO GIULIANI’S MISSTEPS. TRUMP OFFERED HIM THE POSITION OF ATTORNEY GENERAL AND DIRECTOR OF HOMELAND SECURITY AND HE TURNED THEM DOWN. FOCUSING ENTIRELY ON SECRETARY OF STATE, THE POSITION HE WANTED AND COVETED, BUT IN THE END, TRUMP WOULD NOT GIVE HIM. GIULIANI SENSED THAT, AND PULLED HIMSELF OUT BEFORE SUFFERING THE INDIGNITY OF SOMEONE ELSE GETTING THAT SLOT. SO IN EVERY WAY, THIS DEEPLY IMPORTANT AMERICAN POLITICAL FIGURE, WHO REVOLUTIONIZED NEW YORK CITY, AND WHO WAS THE BIGGEST, IF NOT MOST CONSPICUOUS EXPONENT OF THE TRUMP APPROACH TO THE PRESIDENCY, WILL BE LEFT ON THE SIDELINES. IT’S AN AMAZING STORY. CHARLIE: SO WHO IS LEFT IN THE RUNNING FOR SECRETARY OF STATE? >> I’VE BEEN TOLD THAT THERE ARE ONLY TWO REALLY LEGITIMATE FIGURES WHO MAY GET THE POSITION OF SECRETARY OF STATE. MITT ROMNEY AND THE CHAIRMAN OF THE BOARD OF EXXON MOBIL, REX TILLERSON. CHARLIE: HE BRINGS WHAT? >> TILLERSON BRINGS FOR DONALD TRUMP A COUPLE OF THINGS YOU MAY NOT ASSOCIATE WITH THE POSITION OF SECRETARY OF STATE. HE HAS NO GOVERNMENT EXPERIENCE. HE’S NOT A TRAINED FOREIGN SERVICE DIPLOMAT BY ANY STRETCH OF THE IMAGINATION, BUT HE IS A BIG AMERICAN BUSINESSMAN, A CORPORATE CHIEFTAIN WHO HAS DONE DEALS. BECAUSE EXXON MOBIL OPERATES IN MORE THAN 50 COUNTRIES, IT EXPLORES FOR OIL AND NATURAL GAS ON SIX OF THE SEVEN CONTINENTS ON EARTH, HE HAS, IF YOU WILL, A CORPORATE WORLDVIEW. HE HAS EXPERIENCE WITH LOTS OF DIFFERENT GOVERNMENTS, AND POSSIBLY MOST IMPORTANT, HE HAS LONG EXPERIENCE IN RUSSIA AND WITH VLADIMIR PUTIN. THEY KNEW EACH OTHER BACK IN THE 1990’S, WHEN PUTIN WAS A KGB FUNCTIONARY IN THE GOVERNMENT. THEY GOT TO KNOW EACH OTHER THEN. IF YOU’RE LOOKING FOR AN ANALOGY, LOOK FOR THE CHINESE AMBASSADOR FOR DONALD TRUMP, TERRY BRANSTAD, CURRENTLY THE GOVERNOR OF IOWA, WHO GOT TO KNOW THE CURRENT HEAD OF CHINA WHEN HE WAS A FUNCTIONARY IN THE CHINESE BUREAUCRACY. IF YOU LOOK AT THAT AS A TEMPLATE, YOU MIGHT SEE REX TILLERSON AS SOMEONE PARTICULARLY AMENABLE TO PRESIDENT-ELECT TRUMP’S WORLDVIEW. CHARLIE: IT’S CLEAR THAT THE PRESIDENT HAS WHATEVER DIFFERENCES THERE WERE WITH MITT ROMNEY, WHATEVER WAS SAID ABOUT BOTH MEN IN THE CAMPAIGN, THAT THEY WORK THEIR WAY THROUGH THAT AND THIS NOW IS A CONVERSATION WHICH IS A POSITIVE CONVERSATION ABOUT THE DIFFICULT PROCESS OF SELECTING A SECRETARY OF STATE. ON THE ONE HAND, THE MENU HAS TO — A MAN WHO HAS TO MAKE THE DECISION FOR THE BENEFIT OF THE COUNTRY, AND ON THE OTHER HAND A MAN WHO HAS HIS OWN INTEGRITY AND IS PREPARED TO GO TO WORK, FOR A MAN HE WAS DEEPLY CRITICAL OF DURING THE CAMPAIGN. >> WHEREVER THIS LANDS, IF MITT ROMNEY BECOMES OR DOES NOT BECOME SECRETARY OF STATE, WHEN — WHAT HE LEAVES THE PROCESS WITH IS A DIFFERENT APPRECIATION OF DONALD TRUMP, AND IMPORTANTLY TO MITT ROMNEY, A DIFFERENT APPRECIATION OF DONALD TRUMP TO MITT ROMNEY, JUST AS DONALD TRUMP HAS A DIFFERENT APPRECIATION OF THE CURRENT PRESIDENT, BARACK OBAMA. I ATTENDED MORE THAN 70 MITT — 70 DONALD TRUMP RALLIES AND THERE WAS NOT ONE SCINTILLA OF APPRECIATION FOR BARACK OBAMA. DONALD TRUMP HAS A DEEPER APPRECIATION OF BARACK OBAMA AS PRESIDENT, AS A MAN, AND A FIGURE IN HISTORY. SO THERE IS EVOLUTION WITH DONALD TRUMP. HE HAS EVOLVED WITH MITT ROMNEY. THESE ARE SERIOUS CONVERSATIONS. MITT ROMNEY IS IN THE FINAL TWO HE IS CARNIVAL EVER-EXPANDING LIST AND IF HE LANDS IT IT WILL BE AMONG THE MOST FASCINATING TORIES IN THE TRUNK TRANSITION. CHARLIE: SO MUCH WAS SAID ABOUT TEMPERAMENT AND BEING FIT FOR THE PRESIDENT DELIVERS NEXT TO OBAMA AND ROMNEY, THE PRESIDENT-ELECT IS REFLECTING A VERY ADULT BEHAVIOR. >> IT IS AN ADULT BEHAVIOR, BUT A BEHAVIOR I WOULD CAUTIOUSLY SUGGEST IN AWE. I READ A LOT ABOUT THOSE BEFORE THE THREE HOURS PRIVILEGED ENOUGH TO COVER. SUGGEST IN AWE. IT IS, IN ITS OWN SENSE, AN AWE-INSPIRING INSTITUTION. THE AMERICAN CULTURE NEEDS TO APPRECIATE ABOUT DONALD TRUMP THAT IN SOME AREAS, HE IS AWED BY THE INSTITUTION AND SOME WHO HAVE ACHIEVED IT. IN WAYS PERHAPS SURPRISING TO HIMSELF, DONALD TRUMP HAS COME TO APPRECIATE THAT. CHARLIE: HE IS A MAN WHO ADMIRES SUCCESS. LET US TALK ABOUT THIS IDEA OF HOW HE DOES IT, FAR MORE THAN BARACK OBAMA OR GEORGE BUSH 43 HAS THROWN HIMSELF INTO THIS PROCESS, INTERVIEWED PEOPLE, IS ON THE PHONE CONSTANTLY. THE IMPRESSION I HAVE IS THAT BY SELECTION OF OTHER PRESIDENTS WAS MUCH MORE A PRODUCT OF A TRANSITION TEAM AND INVOLVEMENT BY THE PRESIDENT-ELECT, MUCH MORE INVOLVEMENT OF A TEAM. THIS PRESIDENT WANTS TO TOUCH AND TALK TO AND GET A PERSONAL SENSE OF THE MEN AND WOMEN HE WANTS TO SERVE. >> EXACTLY. I THINK IT’S FAR TOO EARLY, CHARLIE, TO OFFER AN APPRAISAL IN WAYS PERHAPS SURPRISING TO OF THIS APPROACH THAT IS EITHER POSITIVE OR NEGATIVE. I THINK THE COUNTRY AND THOSE OF US OBLIGATED TO COVER THIS PROCESS AS IT UNFOLDS BEFORE US NEED TO TAKE IT STEP BY STEP AND JUDGE IT AS THE RESULTS SPEAK FOR THEMSELVES. REMEMBER, JIMMY CARTER WAS THE PRESIDENT WHO WAS DEEPLY INVOLVED IN THE DAY-TO-DAY AND HOUR-BY-HOUR DETAILS OF HIS PRESIDENCY. IT BOGGED HIM DOWN AND SEPARATED HIM FROM THE LARGER VISION. THERE IS A DANGER INVOLVED IN A KIND OF INVOLVEMENT AND GET, WE TEND TO APPRECIATE SOMEONE WHO HAS AN APPRECIATION FOR DETAILS AND EVALUATING SOMEONE AT THE PERSONAL GUT LEVEL. IF I HAVE LEARNED ANYTHING ABOUT PRESIDENT-ELECT TRUMP IN MY 18 OR SO MONTHS COVERING HIM IT IS THAT HE MAKES VERY IMPORTANT AND CRUCIAL SNAP JUDGMENTS ABOUT PEOPLE BY APPRAISING THEM HIMSELF, AND NOT GETTING IT FILTERED BY THOSE AROUND HIM. THAT IS AN IMPORTANT CHARACTERISTIC OF AN EMERGING TRUMP PRESIDENCY. IT JUST IS A REALITY. CHARLIE: THANK YOU SO MUCH FOR JOINING US. IT IS A PLEASURE. WE’LL BE RIGHT BACK. STAY WITH US. ♪ CHARLIE: MORE ON THIS WEEKEND. THE ANNOUNCEMENT, I HAD HEARD BEFORE THAT GIULIANI WAS OUT OF THE RUNNING. IS THAT SIMPLY TODAY’S ANNOUNCEMENT TO MAKE THAT CLEAR THAT THIS POSSIBLE NOMINEE WITHDREW HIMSELF? >> HE NOT ONLY MADE THE OFFICIAL WORD THAT GIULIANI WAS WITHDRAWING HIMSELF FROM ANY ADMINISTRATION JOB, BUT REINCE PRIEBUS STATED IN A QUOTE ON THIS ANNOUNCEMENT THAT GIULIANI WAS VETTED THOROUGHLY BY THE TRUMP TEAM AND PASSED WITH FLYING COLORS. IT CLEARS RUDY GIULIANI OF ANY RUMORS OF WHETHER HE WAS PASSED OVER FOR SECRETARY OF STATE. YOUR REPORTING IS CORRECT. IT MATCHES WITH MY REPORTING WHICH IS THAT RUDY GIULIANI IS FADING IN THE VIEW OF DONALD TRUMP. CHARLIE: DO WE KNOW WHETHER HE COULD HAVE BEEN ATTORNEY GENERAL WHETHER HE HAD NOT INSISTED ON BEING SECRETARY OF STATE? PHILIP: I DON’T KNOW FOR SURE. THERE WOULD HAVE BEEN SOME DISCUSSION ABOUT WHETHER JEFF SESSIONS SHOULD GET IT OR RUDY GIULIANI, SO YOU KNOW, POTENTIALLY, HE COULD HAVE GOTTEN HIMSELF A JOB. HE IMAGINED GIULIANI — BUT GIULIANI WAS INSISTENT FROM THE BEGINNING THAT STATE WAS ALL HE WANTED. CHARLIE: HE COULD HAVE PROMISED SESSIONS A SUPREME COURT APPOINTMENT OR SOMETHING LIKE THAT. PHILIP: EXACTLY. CHARLIE: WHICH WOULD HAVE BEEN ENTIRELY WITHIN THE SORT OF THING HE MIGHT WANT BECAUSE OF HIS LIFE WITHIN, YOU KNOW, THE JUDICIAL PROCESS OF BOTH IN TERMS OF LAW ENFORCEMENT ALSO IN TERMS OF JUDGING. TERMS OF LAW ENFORCEMENT ALSO IN LET ME TURN TO THE SECRETARY OF STATE. WHAT DO WE KNOW? PHILIP: WELL, WE KNOW THAT THERE ARE TWO PEOPLE CONSIDERED LEADING CANDIDATES. MITT ROMNEY WHO HAS BEEN A CANDIDATE FOR SOME TIME AND A NEW FIGURE, REX TILLERSON, THE CEO OF EXXON MOBIL, AND INTERNATIONAL BUSINESS EXECUTIVE WHO HAS DONE WORK AROUND THE WORLD BECAUSE OF HIS ROLE IN THE OIL INDUSTRY AND INCLUDING WITH RUSSIA. HE HAS RELATIONSHIPS WITH THE PUTIN GOVERNMENT AND HAS BEEN AROUND THE WORLD. HE DID — MITT ROMNEY MIGHT BE A MORE TRADITIONAL POLITICAL FIGURE IN THAT DIPLOMATIC POST. BOTH ARE LIKED BY DONALD TRUMP. THERE ARE POLITICAL CONSIDERATIONS. TRUMP SUPPORTERS ARE HOSTILE TO THE IDEA OF MITT ROMNEY, OF REWARDING A FORMER ANTAGONIST WHO WAS NOT LOYAL ON THE CAMPAIGN AND WAS TO LISTEN — WITH TILLERSON, HE IS MORE OF AN UNKNOWN. I DON’T KNOW OF LINDSEY GRAHAM WOULD SCRUTINIZE HIS TIES WITH RUSSIA. CHARLIE: TAKE US INSIDE THE TRUMP TRANSITION TEAM. WHAT OTHER CONFLICTS BETWEEN DIFFERENT GROUPS? PHILIP: THERE ARE DIFFERENT PERSPECTIVES ON SECTORS OF STATE. THIS HAS BEEN GOING ON FOR SOMETIME NOW, REALLY FOR ABOUT A MONTH, THIS DISCUSSION ABOUT WHO THE DIPLOMATS SHOULD BE. MIKE PENCE IS SAID TO BE IN COURAGE AND REINCE PRIEBUS. BOTH HAVE RELATIONSHIPS WITH ROMNEY AND SIT IN WITH THE PARTY ESTABLISHMENT AND THERE ARE OTHER ADVISORS INSIDE THE CIRCLE, ESPECIALLY KELLYANNE CONWAY, WHO HAVE BEEN HOSTILE TO THE IDEA OF ROMNEY. THAT IS WHY TILLERSON HAS EMERGED. HE MATCHES THE QUALITIES TRUMP LIKES IN ROMNEY. HE HAS A CERTAIN STATURE AND GRAVITAS AND CAN TRAVEL THE WORLD WITH THE AUTHORITY OF A WORLD WITH THE AUTHORITY OF A PRESIDENT. AND THEN TILLERSON IS SEEN AS SOMEONE WHO CARRIES HIMSELF IN A SIMILAR WAY AND I THINK WHEN HE CAME TO MEET WITH TRUMP THIS WEEK AT TRUMP TOWER, HE WAS VERY IMPRESSIVE AND THEY HAD A GOOD CONVERSATION. THAT IS WHAT PEOPLE ARE SAYING. THOSE ARE THE QUALITIES TRUMP IS LOOKING FOR IN A DIPLOMAT. IT IS AT THIS POINT A POLITICAL CALCULATION OF WHETHER HE GOES WITH ROMNEY, WHO IS MORE OF THE PARTY INSIDER, AT THE RISK OF ALIENATING HIS LOYAL BASE AND ADVISORS, OR GOING WITH SOMEONE NEW LIKE TILLERSON. CHARLIE: IS THERE PUSHED BACK BECAUSE HE PRAISES THE PRESIDENT? PHILIP: NOT WITHIN THE TRANSITION TEAM THAT I HAVE HEARD OF. I THINK A LOT OF HIS VOTERS ARE TRYING TO GIVE HIM THE BENEFIT OF THE DOUBT HERE. IT IS ONE THING TO HAVE A MEETING WITH AL GORE BECAUSE YOUR DAUGHTER TRIED TO SET UP A MEETING AND HE LISTENED TO WHAT THE GUY HAS TO SAY. IT IS ANOTHER THING TO CHANGE HER VIEW ON THE POLICIES. TRUMP IS AS FAR TO THE RIGHT ON THE CLIMATE ENVIRONMENTAL ISSUES AS HE CAN BE. HE JUST APPOINTED PRUITT TO BE THE HEAD OF THE EPA. IT IS PRETTY CLEAR, WHATEVER AL GORE TOLD TRUMP IN THAT MEETING, HE’S NOT REALLY HEATING THAT COUNSEL. CHARLIE: WHAT MIGHT WE LEARN ABOUT HOW PRESIDENT-ELECT TRUMP WILL GOVERN BASED ON HOW HE IS RUNNING THE TRANSITION? PHILIP: HE’S VERY HANDS-ON AS YOU GUYS WERE TALKING ABOUT IN THE EARLIER SEGMENT. HE IS INTERVIEWING ALL OF THESE PEOPLE PERSONALLY. HE’S WEIGHING IN ON THEM PERSONALLY AND MAKING ASSESSMENTS ABOUT WHETHER THEY WOULD BE A GOOD FIT AND HIS CABINET, WHETHER THEY HAVE THE LEADERSHIP STRENGTH HE IS LOOKING FOR. HE HAS BEEN REALLY DRAWN TO ALPHAS, TO LEADERS, TO PEOPLE WHO ARE CEO’S IN THE CORPORATE WORLD OR MILITARY GENERALS. HE’S NOT LOOKING AT ACADEMICS, POLICY MINDS, FOLKS WHO SPENT YEARS READING BOOKS ABOUT YEARS READING BOOKS ABOUT THINGS. HE WANTS PEOPLE WHO HAVE BEEN IN THE REAL WORLD, MAKING DECISIONS THAT HAVE IMPACTS ON MARKETS AND YEARS READING BOOKS ABOUT THINGS. HE WANTS PEOPLE WHO HAVE BEEN IN THE REAL WORLD, MAKING DECISIONS THAT HAVE IMPACTS ON MARKETS AND GLOBAL AFFAIRS. THAT IS THE APPROACH IS TAKING SOME OF THESE BIG JOBS, CERTAINLY SECRETARY OF STATE AND SOME OF THE OTHERS. THE ASSISTANT SECRETARY AT THE AGENCY, THEY HAVE ALSO NOT YET ANNOUNCED SENIOR WHITE HOUSE STAFF POSITIONS BEYOND REINCE PRIEBUS AND STEVE BANNON AND THE WHITE HOUSE COUNSEL. THERE IS GOING TO BE SOME GIVE AND PULL ABOUT WHO FEEL THEM AS JOBS. WHO IS THE WHITE HOUSE, WHO IS GOING TO BE THE DEPUTY CHIEF OF STAFF, LEE IS ON THE CONGRESS, VICE PRESIDENT-ELECT PENCE’S OFFICE. THE REPUBLICAN NATIONAL COMMITTEE CHAIRMANSHIP IS A JOB THAT REINCE PRIEBUS IS VACATING. IT WILL BE THE POLITICAL ARM. IT STARTS TO TAKE SHAPE EARLY ON AND THERE IS A LOT OF DIFFERENT CANDIDATES IN THE MIX FOR THAT. WE ARE HEARING THE LEADING CONTENDER SEEMS TO BE RONA ROBBIE MCDANIEL. CHARLIE: IS IT AN ACCURATE STATEMENT OF WHICH SEEMS TO BE THE IMPRESSION THAT WHILE DONALD TRUMP IS URGED NOT TO TWEET AS MUCH AS HE DOES, IT IS IRRESISTIBLE FOR HIM? PHILIP: THAT IS A GREAT QUESTION. HE HAS INDICATED HE WILL CONTINUE MAKING HIS VIEWS KNOWN ON TWITTER. HE HAS BEEN DOING IT EVERY DAY. HE PLANS TO CONTINUE INTO THE WHITE HOUSE. THERE HAS BEEN SOME SUGGESTION THAT PERHAPS HE WOULD BACK OFF OF TWITTER AND ONE PERSON MENTIONED SECRET SERVICE WOULD HAVE SOMETHING TO SAY ABOUT THAT, BUT IF HE IS ABLE TO TWEET, HE WILL TWEET. HE WANTS TO COMMUNICATE DIRECTLY WITH THE AMERICAN PEOPLE AND THAT IS WHAT WE HAVE BEEN SEEING THROUGHOUT THE CAMPAIGN AND DURING THIS TRANSITION. HE REALLY WANTS TO DO EVERYTHING HE CAN TO BREAK THROUGH WHAT HE SEES AS A PRESS FILTER AND SPEAK DIRECTLY TO PEOPLE. THAT IS TWITTER, RALLIES, DOING CALL-INS ON RADIO. CHARLIE: WE WILL BE RIGHT BACK. STAY WITH US. ♪ CHARLIE: AS IT HAS, SINCE 1927, TIME MAGAZINE ANNOUNCED ITS PERSON OF THE YEAR THIS WEEK. THIS TIME IT IS THE INDIVIDUAL WHO FOR BETTER OR WORSE HAD THE MOST INFLUENCE ON THE EVENTS OF THE YEAR. PRESIDENT-ELECT DONALD TRUMP MIGHT BE THE OBVIOUS CHOICE BUT THE NATION REMAINS DIVIDED OVER WIDE. WITH ME AS NANCY GIBBS, THE MANAGING EDITOR OF TIME. I’M PLEASED TO HAVE HER BACK AT THIS TABLE. YOU HAS ALWAYS FRAMED THIS AS THE PERSON WHO HAS THE MOST INFLUENCE, NOT THE MOST POPULAR. THIS IS A SLAMDUNK, ISN’T IT? NANCY: WHAT IS INTERESTING TO ME IS, WHO HAS HAD THE MOST INFLUENCE ON THE YEAR FOR BETTER OR WORSE? IT SEEMS LIKE UNIVERSAL AGREEMENT THAT HE HAS THE MOST INFLUENCE AND HIS AGREEMENT OVER WHETHER IT WAS FOR BETTER OR FOR WORSE. THIS IS ONE OF THE THINGS THAT WE REALLY LOOKED AT IS THAT EVERY PRESIDENTIAL ELECTION, WE NAMED BARACK OBAMA FOUR YEARS AGO AND EIGHT YEARS AGO. WE NAMED GEORGE W. BUSH 12 YEARS AGO AND 16 YEARS AGO. IN PRESIDENTIAL ELECTION YEARS, IT WOULD BE UNUSUAL FOR SOMEONE OTHER THAN THE NEWLY ELECTED PRESIDENT TO BE THE DOMINANT FIGURE THAT YEAR. IN ANY PRESIDENTIAL YEAR, THE COUNTRY IS DIVIDED. ROUGHLY HALF THE COUNTRY VOTES FOR ONE OR THE OTHER. THERE IS SOMETHING THAT FEELS DIFFERENT THIS YEAR, AT LEAST FROM WHERE I SIT, OF THE LEVEL OF SURPRISE AT THE OUTCOME, WHICH SPEAKS TO HOW MANY PEOPLE WHO WERE MEANT TO BE THE EXPERTS AND THE DATA ANALYSTS AND POLLSTERS DID NOT SEE HIS VICTORY COMING, AND THE REACTION SINCE THEN THAT EVEN WHEN YOU THINK ABOUT BUSH AND GORE IN 2000 WITH THE EXTRAORDINARY FIVE-WEEK LONG DRAMA, EVEN THAT ONE DID NOT FEEL AS DRAMATIC AND FRAUGHT AS THIS ONE, AND THAT IS A LOT OF THE CHALLENGE THAT THE PRESIDENT-ELECT I THINK FACES. HE TALKS ABOUT WANTING TO BRING THE COUNTRY TOGETHER AND HE APOLOGIES THAT RECOGNIZES THAT THAT REPRESENTS A SIGNIFICANT CHALLENGE. HE TALKS ABOUT IT AS AN HONOR. WE HAVE RUN INTO THAT FOR YEARS. IT SOUNDS LIKE THE KINDS OF THINGS PEOPLE ON WITH PEOPLE WITHOUT THE END OF THE YEAR, AND WE HAVE ALWAYS SAID THAT IT IS A MEASURE OF INFLUENCE. LAST YEAR, WE PICKED ANGELA MERKEL. THE POSITION SHE TOOK ON THE REFUGEE CRISIS AND THE EUROZONE AND ON THE ECONOMIC POLICY IN EUROPE MADE HER PRETTY DIVISIVE FIGURE AS WELL. SHE WAS BY NO MEANS UNIVERSALLY ADMIRED. CHARLIE: AND SHE SUFFERED POLITICALLY EVEN THOUGH SHE WILL RUN FOR REELECTION. SHE IS UP FOR REELECTION. WE WILL HAVE SOME CHANGE GOING ON IN ITALY. THE NETHERLANDS I THINK HAS AN ELECTION. WE SAW AN ELECTION IN AUSTRIA. THE WHOLE IDEA — IF I THOUGHT OF ANYTHING OTHER THAN TRUMP, TO BE OBVIOUS, AT THIS PARTICULAR YEAR, BECAUSE YOU HAVE FRAMED THE QUESTION, IT WOULD BE POPULISM AS AN IDEA. NANCY: WE HAVE A STORY ABOUT THE RISE OF THE POPULISTS AROUND THE WORLD. NIGEL FARAGE, THE PERSON IN THE PHILIPPINES. ONE OF THE REASONS WE WERE NOT TEMPTED TO DO A GROUP IS WHAT IS REMARKABLE ABOUT ON TIME THAT WE HAVE NOT SEEN BEFORE IS SOMEBODY WHO COMES IN AND DEFIES ALL EXPECTATIONS, BREAKS ALL THE RULES, SHATTERS EVERY SORT OF NORM AND CONVENTION OF HOW YOU RUN FOR PRESIDENT, DEFEATED NOT ONE BUT BOTH MAJOR POLITICAL PARTIES ON HIS WAY TO WINNING, IT — CHARLIE: AND DEFEATED TWO DYNASTIES. NANCY: AND DID IT WITH LARGELY BASED ON HIS OWN INSTINCTS, NOT A HUGE CADRE OF ADVISORS AND POLLSTERS, THE HELP OF THE REPUBLICAN PARTY INFRASTRUCTURE OR DONOR CLASS. THE ALARM IS ARMY OF PEOPLE WHO ARE USUALLY A MOUND OPENING PRESIDENTIAL CANDIDATE AND TAKING SOME RESPONSIBILITY FOR THE VICTORY, — HE HAS A SMALL COTERIE OF ADVISORS AND HIS KIDS. CHARLIE: THIS WAS A TRANSFORMATIVE ELECTION IN TERMS OF THE WAY PEOPLE WHEN THE PRESIDENCY? NANCY: THERE ARE QUESTIONS FOR THE VICTORY, — JOURNALISTS COMING OUT OF THIS, ONE OF WHICH WILL BE, DO WE SEE OTHER POLITICIANS TRYING TO COPY HIS MODEL AND CAN THEY? IT’S POSSIBLE THAT HE WAS UNIQUE IN THE ABILITY TO ACCOMPLISH WHAT HE DID. I THINK OF THE MANY THINGS ABOUT THE 2016 RACE THAT WAS UNPRECEDENTED, WE HAD TO BEEN CANDIDATES WHO WENT INTO IT WITH 100% NAME RECOGNITION. IT IS EASY TO FORGET THAT DONALD TRUMP HAS BEEN A VERY FAMILIAR FIGURE IN MILLIONS OF PEOPLE’S LIVING ROOMS FROM HIS TELEVISION CAREER QUITE APART FROM HIS LIFE AS A REAL ESTATE BARON AND CASINO OWNER. SELF-PROMOTION WAS CENTRAL TO SELF-PROMOTION WAS CENTRAL TO HIS BRAND. PEOPLE FELT THEY KNEW HIM. YOU KNOW, THE LIFETIME THEM, THEY HATED HIM, THEY FELT THAT THEY KNEW WHAT HE WAS ABOUT FROM THE BEGINNING. THAT IS HARD FOR SOMEONE ELSE TO REPLICATE. CHARLIE: I THINK ALSO, AND I THOUGHT ABOUT THIS MORE RECENTLY THAN I DID BEFORE THE ELECTION, IS THAT, AND HE MAY HAVE UNDERSTOOD THIS, IN TERMS OF THE WINNING OF THE PRESIDENCY, THE DISRUPTIVENESS OF THE WAY HE RAN HIS CAMPAIGN, THE ATTACKS ON OTHER PEOPLE MADE HIM BE PERCEIVED BY HIS PEOPLE WHO WERE ENTHUSIASTIC ABOUT HIM AS A LEADER, A STRONG LEADER. THAT WAS PART OF HOW HE VIEWED THE DISRUPTION, THAT IT WAS NECESSARY TO OVERCOME THE CHALLENGE HE HAD ACHIEVED. NANCY: THE SUBTEXT OF IT, WHATEVER OUTRAGEOUS THING HE WAS SAYING, THIS IS SOMEONE WILLING TO SAY CONTROVERSIAL THINGS AND SO, EVEN ON ELECTION DAY, AS HE ENDED UP WINNING THE ELECTORAL COLLEGE ROAD, SIX OUT OF 10 VOTERS DON’T THINK HE HAS THE JUDGMENT OR TEMPERAMENT TO BE PRESIDENT. CHARLIE: AND ONLY 40% OF PEOPLE DO? NANCY: YEAH, AND PEOPLE FOR WHOM JUDGMENT AND TEMPERAMENT WERE THE MOST IMPORTANT ISSUES, HILLARY CLINTON WON BY MILES, BUT BY A FACTOR OF TWO TO ONE, MOST PEOPLE CARED MOST ABOUT WHO COULD BRING CHANGE TO WASHINGTON AND HE WON THAT GROUP BY 60 POINTS. THAT DESIRE FOR CHANGE AND THE BELIEF THAT HE WAS MORE LIKELY TO BRING IT, I MEAN, THE IRONY THERE IS THAT HILLARY CLINTON, WHAT SHE PUNISHED FOR THE VERY EXPERIENCE AND LONG TRACK RECORD THAT SHE HAD? CHARLIE: YOUR INSTINCT WOULD BE THAT SHE WAS, PUNISHED BY THE FACT THAT HE WAS ABLE TO GRAB THE CHANGE MANTLE? NANCY: EVERYONE KNEW THIS WAS MEANT TO BE A CHANGE ELECTION. AMERICANS TYPICALLY DON’T GRANT THIRD TERMS. ONE OF THE REASONS THAT THE POLITICAL EXPERTS ALL ALONG THOUGHT THIS COULD NOT POSSIBLY SUCCEED WAS THAT HE KEPT DOING THINGS THAT NO ONE HAD DONE BEFORE OR TO THE EXTENT THAT PEOPLE HAD, IT PROVED FATAL. CHARLIE: LOOKING BACK, IT IS THE CAPACITY TO STAND IN FRONT OF A HUGE AUDIENCE AND HAVE A CONVERSATION WITH THEM IS TO ME ONE OF HIS, ONE OF THE QUALITIES THAT MADE HIS RALLIES DIFFERENT. IT WAS NOT A SPEECH. IF IT WAS A SPEECH, IT WAS A REGURGITATION OF WHAT HE WAS SAYING BEFORE, BUT MUCH MORE OF IT WAS REACTING, IMPRESSIONS, TALKING ABOUT — HE ALMOST WAS HAVING A CONVERSATION WITH THEM ABOUT WHAT HE READ IN THE PAPER OR HAD SEEN ON TELEVISION, AND WHAT DO YOU THINK OF THIS, OR DID YOU AGREE WITH ME? IT WAS MUCH MORE THAT KIND OF DIALOGUE. NANCY: THAT IS WHY, ON THE OCCASIONS HE WAS BACK ON THE TELEPROMPTER, IT FELT SO ODD BECAUSE THAT WAS NOT THE VERNACULAR OF HIS CAMPAIGN. CHARLIE: AND THE SPONTANEITY. YOU HAVE INTERVIEWED BEFORE, YOU INTERVIEWED HIM LAST TIME WITH THE EVIL AND ALL THAT. YOU GO BACK A WEEK AGO, HOW WAS HE? WAS HE DIFFERENT ANYWAY? NANCY: I WOULD BE THE FIRST TO SAY THAT THERE IS EVERY CHANCE THAT BECAUSE I EXPECTED HE WOULD BE DIFFERENT THAT I SAW A DIFFERENCE. BUT I DID SEE A DIFFERENCE, THE MAIN ONE BEING, THE THING THAT STRUCK ME SO MUCH, I’M INTERESTED IN THE RELATIONSHIP THE BETWEEN PRESIDENT BECAUSE OF WHAT THAT JOB DOES TO YOU. THE NIGHT BEFORE, HE HAD BEEN ON THE PHONE FOR 45 MINUTES WITH PRESIDENT OBAMA, TALKING WITH HIM ABOUT IDEAS FOR HIS CABINET CHOICES, AND OTHER TOPICS THAT WERE ON HIS MIND, AND HE SPOKE WITH EXTRAORDINARY WARMTH AND RESPECT. HE TALKED ABOUT THE CHEMISTRY HE FELT BETWEEN THEM. HE FELT THAT HE EXPECTED THAT DAY HE WENT TO THE WHITE HOUSE AND THEY SAT TOGETHER, HE HE SAID, EVERYONE WOULD HAVE THOUGHT THAT WOULD HAVE BEEN AN AWKWARD MOMENT. WE STARTED TALKING, WE TALKED FOR A LONG TIME, I FOUND IT VERY GRACIOUS AND HELPFUL, AND WE TALKED SINCE THEN, AND, YOU KNOW, IN LISTENING TO HIM TALK, PARTICULARLY ABOUT HIS CONVERSATIONS OF PRESIDENT OBAMA, YOU START TO SEE A GLIMPSE THAT HE IS HAVING TO GET HIS HEAD AROUND WHAT HAS JUST HAPPENED, AND I SOMETIMES WONDERED, DID HE EXPECT — OF COURSE THEY WILL SAY, WE ALWAYS KNEW WE WERE GOING TO WIN — CHARLIE: EARLY IN THE EVENING, THEY DID NOT THINK THEY WERE GOING TO WIN. IT WAS ONLY AFTER 8:00 THAT THEY BEGAN TO SEE WHAT THE POSITIVES WERE IN PENNSYLVANIA AND WISCONSIN AND MICHIGAN THAT THEY REALIZED VICTORY MIGHT BE POSSIBLE. NANCY: SO THEN, YOU WIN AND YOU WAKE UP. IS IT LIKE THE DOG THAT CATCHES THE CAR? NOW, I AM ASKED TO GOING TO HAVE TO BE PRESIDENT, AND WHAT DOES THAT MEAN, AND HOW IS THAT GOING TO WORK? THE CONVERSATIONS HE IS HAVING WITH EVERYONE, THIS IS THE NEXT SEASON OF THE REALITY SHOW THAT HE HAS BEEN STAGING. CHARLIE: IT IS INTERESTING IN TERMS OF THE PEOPLE HE IS TALKING TO, NOT ONLY MITT ROMNEY SAYING THE THINGS HE SAID ABOUT HIM, BUT AL GORE SHOWS UP. NANCY: IT IS A PECULIAR — HOW IS THIS BETWEEN BUSINESS LEADERS AND POLITICIANS AND PRIVATE SECTOR ACTIVISTS? THAT THIS PART OF HIS OWN PERSONAL TRANSITION, YES, THERE IS THE ADMINISTRATIVE INSTITUTIONAL TRANSITION, BUT A PERSONAL TRANSITION, TOO. THAT IS WHAT I WAS STRUCK WITH, TALKING TO HIM THIS TIME IS THAT HE IS VERY MUCH IN THE THROES OF THAT PROCESS. CHARLIE: THANK YOU FOR JOINING US. SEE YOU NEXT TIME. ♪ ALIX: CHINA FACTORY OUTPUT AND RETAIL SALES SHOW FURTHER STRENGTHEN THE ECONOMY, BUT THE REASONS ARE ABOUT TO CHANGE. AND OPEC NATIONS BOOSTED PRODUCTION LAST MONTH DESPITE AGREEING TO HISTORIC CUTS. NO ONE WANTS TO LOSE MARKET SHARE. DONALD TRUMP NOMINATES GOLDMAN’S PRESIDENT AS ECONOMIC ADVISOR. HE’S ALSO DELAYING HIS BUSINESS PLAN WHILE IN THE WHITE HOUSE. AND TURKEY GETS A $140 BILLION BOOST TO THE ECONOMY, WILL THANKS TO A NEW WAY OF ACCOUNTING. IT IS 8:00 A.M. ACROSS THE EMIRATES. I’M TRACY ALLOWAY IN DUBAI. ANGIE: WELCOME TO BLOOMBERG MARKETS MIDDLE EAST. THE OIL SURPRISE THAT SAUDI ARABIA ADMINISTERED — IT LOOKS LIKE MAYBE WE ARE NOW NEAR OVERBOUGHT TERRITORY. TRACY: THAT’S EXACTLY RIGHT. I THOUGHT THEY WOULD BRING A LITTLE PESSIMISM ENTIRE TUESDAY SHOW THIS MORNING, A LITTLE BIT OF A REALITY CHECK AND SOME TECHNICAL ANALYSIS. TAKE A LOOK AT THIS CHART. THIS SHOWS THE PRICE OF OIL, THE WHITE LINE, BUT MORE INTERESTING FOR OUR PURPOSES IS THE WHITE LINE ON THE BOTTOM HALF OF THE SCREEN. THAT IS THE RELATIVE VALUE INDEX, A TECHNICAL INDICATOR THAT LOOKS LIKE THE SPEED AND DEGREE OF MOVEMENT OF PARTICULAR ASSET PRICE. YOU CAN SEE IT IS NOW ABOVE 70. WHEN THAT REACHES ABOUT 70, TRADITIONALLY IT IS VIEWED AS AN OVERBOUGHT INDICATOR. IT SUGGESTS TO SOME THAT THE RALLY IN CRUDE MAY HAVE GONE TOO FAR, TOO FAST. ANGIE: WELL, TOO FAR, TOO FAST LOOKS LIKE IT MAY BE MORE SIDELINE ACTION RIGHT NOW ACROSS THE ASIA-PACIFIC TRADE SEEN. LET’S GET YOU A QUICK CHECK THE STATE OF PLAY. MUMBAI TRADING FOR 20 MINUTES, RIGHT NOW IT IS FLAT. THERE IS A VERY INTERESTING MOVE IN TERMS OF THE — SHAREHOLDERS ARE BEING ASKED TO PICK SIDES. HANG SENG SHRUGGING OFF THE POSITIVE DATA OUT OF CHINA, AND WE ARE SEEING FLUCTUATIONS IN THE JAPANESE BENCHMARK, NEAR THE YEAR HIGHS. IT’S REALLY ABOUT THE FOMC THIS WEEK, IT APPEARS. TRACY: ALL FOMC, ALL THE TIME. HERE IN THE MIDDLE EAST IT IS JUST UNDER TWO HOURS AWAY FROM THE OPEN OF THE EMIRATES MARKETS AT 10:00 A.M. LOCAL TIME. LET’S TAKE A LOOK AT HOW THEY DID YESTERDAY. YOU CAN SEE THE DUBAI MARKET WAS UP ALMOST A PERCENT YESTERDAY, LED BY MORE THAN 4% IN GAIN ON THE BACK OF THE IDEA THAT THE RALLY IN OIL WILL FEED INTO BUSINESS OPTIMISM. BUT YOU CAN SEE SAUDI ARABIA AND STOCKS ARE ACTUALLY DOWN YESTERDAY, PERHAPS A BIT OF PROFIT OFF THE BACK OF THE BIG MOVE THEY HAD ON SUNDAY. WE WILL HAVE TO SEE WHETHER THEY RECOVER LATER IN THE WEEK. BEFORE WE DO THAT, HOWEVER, LET’S CHECK IN ON THE FIRST WERE HEADLINES FROM AROUND THE WORLD WITH SOPHIE. SOPHIE: THANKS. THE ASSOCIATED PRESS AND “NEW YORK TIMES” SAYS DONALD TRUMP HAS CHOSEN THE EXXON MOBIL CEO AS SECRETARY OF STATE. TILLERSON’S CLOSE TIES TO RUSSIA COULD COMPLICATE HIS CONFIRMATION. TRUMP IS ALSO POSTPONING GIVING DETAILS ON HOW HE WILL HANDLE HIS BUSINESS OPERATIONS WHILE IN THE WHITE HOUSE. HIS TEAM SAYS HE IS TOO BUSY FILLING ADMINISTRATION POSITIONS. THE EUROPEAN UNION IS LOOKING AT HOW TO WORK OUT WITH THE U.K. LEADERS WILL WORK WITHOUT BRITISH PRIME MINISTER THERESA MAY TO DISCUSS THE STRATEGY ONCE SHE TRIGGERS ARTICLE 50. A STATEMENT FOUND BY BLOOMBERG SAYS THEY WILL BE EXCLUDED FROM ALL MEETINGS WITH THE 27 REMAINING EU MEMBERS. IMF CHIEF CHRISTINE LAGARDE HAS TOLD THE PARIS COURT THAT AN IMAGINARY PLOT HAS LED TO A TRIAL OF NEGLIGENCE CHARGES. SHE SAYS SHE ACTED IN THE PUBLIC INTEREST, AND DID NOT TRY TO BLOCK OF $300 MILLION PUBLIC PAYOUT. JUDGES REJECTED IT IN THE TRIAL AND SHE WILL RETURN TO COURT ON TUESDAY. PARLIAMENT SHORT SELLER MUDDY WATERS HAS TARGETED A JAPANESE FIRM FOR THE FIRST TIME WITH A NEGATIVE REPORT OF A MOTOR MAKER. THEY SAY THEY CONSISTENTLY MISS SALES AND PROFIT TARGETS AND USE HIGHLY AGGRESSIVE ACCOUNTING TO BOOST PROFIT REPORTS. INVESTORS QUESTIONED THE ACCOUNTING. >> WHEN WE LOOK INTO THE FINANCIAL STATEMENTS OF SMC, WE FIND THAT INVENTORY LEVEL AND OPERATING MARGINS IN DOMESTIC MARKET IS QUITE DUBIOUS WHEN COMPARED TO THE COMPETITORS. THOSE ARE THE MAIN POINTS THAT WE MADE IN THE REPORT. SOPHIE: GLOBAL NEWS, 24 HOURS A DAY, POWERED BY OVER 2600 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I’M SOPHIE, ROOTED. THIS IS BLOOMBERG. TRACY: THANKS. LET’S STICK WITH DONALD TRUMP, BECAUSE THE NAMES OF HIS TEAM ARE COMING IN SECOND TEST. HE WANTS FORMER TEXAS GOVERNOR AS ENERGY SECRETARY HAS CHOSEN YET ANOTHER GOLDMAN SACHS EXECUTIVE, GARY COHEN, AS ECONOMIC POLICY ADVISER. OUR COUNTRY EDITOR JOINS US NOW ON THE LINE FROM NEW YORK. BILL, WE SAW ANOTHER GOLDMAN VETERAN, STIMULATION, PICKED AS TREASURY SECRETARY. NOW WE HAVE GARY COHEN TAKING ON ONE OF THE MOST IMPORTANT ECONOMIC POSITIONS AVAILABLE AT THE WHITE HOUSE. LIKE A REMAKE OF THESE TAKES? WHAT IS THE LOWER, AND — THE ALLURE, AND WHAT HOLE DOES IT LEAVE AT GOLDMAN? >> AS FAR AS DONALD TRUMP IS CONCERNED, HIRING PEOPLE FROM GOLDMAN SACHS AFFIRMS HIM IMMEDIATELY IN THE WALL STREET/CAPITAL MARKETS. IN HIS PUBLIC AFFIRMATION FOR DONALD TRUMP, THAT YOU HAVE PEOPLE FROM GOLDMAN SACHS WHO ARE WILLING TO BET THEIR CAREERS ON HIS PRESIDENCY, AND THIS IS A MAN THAT GOLDMAN SACHS WOULD NEVER DO BUSINESS WITH. IT IS IRONIC THAT HE IS NOW TURNING TO GOLDMAN SACHS TO GIVE HIM CREDIBILITY WITH THE PUBLIC MARKET. AS FAR AS GOLDMAN SACHS IS CONCERNED, WE ALL KNOW IT’S A BIT OF A CLICHE, BUT THEY HAVE A VERY DEEP BENCH. THEY HAVE A LOT OF TALENT, AND THIS IS VERY HEALTHY FOR GOLDMAN SACHS, BECAUSE A LOT OF FIRMS, PEOPLE WOULD NEVER LEAVE AND THE JUNIORS WITH GET DISCOURAGED AND FEEL LIKE THEY NEVER HAD A CHANCE TO MOVE UP. NOW AT THE SPACE OF A FEW MONTHS, MICHAEL SHERWOOD, MARK SWARTZ, GARY COHN WITH, WHO PUT0 YEARS WAITING FOR LLOYD WHITE PINE TO MOVE ON. NOW IT LOOKS LIKE GARY IS MOVING ON BEFORE HIM. THAT’S A AS A SURPRISE. ANGIE: DEEP BENCH, BUT IN TERMS OF THE PECKING ORDER, CAN SOMEONE — NOT A BANKER OR A TRAITOR — TAKE THESE LEADERSHIP ROLES? COO, CEO? >> YOU KNOW, LOOK — I WOULD NEVER SAY NEVER. IT’S ALWAYS IMPOSSIBLE TO KNOW EXACTLY WHAT THE CALCULUS IS INSIDE OF GOLDMAN SACHS. I’VE ONLY WRITTEN A BOOK ABOUT THEM AND I AM NOT SURE I UNDERSTAND THEM BETTER THAN MANY PEOPLE WHO WORK THERE. BUT IT IS CLEAR THAT THEY HAVE NEVER TURNED TO ANYONE OTHER THAN A BANKER OR TRAITOR IN THE PAST. IS SEEMS TO ME THAT WE ARE IN THE PERIOD OF TIME WHERE BANKING IS IN THE ASCENDANCY. THAT WOULD MAKE SOMEBODY LIKE DAVID SOLOMON, WHO IS A VERY SMART AND VERY GOOD GUY, BE IN A STRONG POSITION. TO NEGATIVE OF DAVID SOLOMON IS THAT HE CAME FROM — THE LAST TIME THEY DID THAT WAS IN THE 1920’S WITH A GUY WHO NOBODY REMEMBERS ANYMORE, WHO ENDED UP ALMOST CAUSING THE FIRM TO GO INTO BANKRUPTCY IN 1929 BECAUSE HE WAS THE ARCHITECT OF THE SO-CALLED GOLDMAN SACHS TRADING CORPORATION. IT SEEMS TO BE THAT, ALTHOUGH HE HAS BEEN A GOLDMAN-S SINCE 1999, HE MAY NOT BE CONSIDERED A TRUE OUTSIDER, BUT HE WASN’T BORN THERE, AND A LOT OF THE OTHER PEOPLE WHO WERE CEOS WERE BORN THERE. LLOYD BLANKFEIN WAS INHERITED THROUGH AN ACQUISITION, BUT HE IS IN A SENSE TRAINED THERE. ANGIE: BILL THANK YOU SO MUCH FOR JOINING US ON THE LINE. WE WANT TO CONFIRM THAT BREAKING NEWS FOR YOU, BLOOMBERG HAS CONFIRMED THAT EXXON MOBIL CEO REX TILLERSON HAS BEEN NAMED AS PRESIDENT-ELECT DONALD TRUMP’S CHOICE FOR SECRETARY OF STATE. THIS IS THE CEO OF EXXON MOBIL, SO APPARENTLY THE PECKING ORDER THERE WILL HAVE A VACANCY, AND JUST LIKE GOLDMAN SACHS, THEY WILL HAVE TO FIND SOMEBODY TO FILL THE SLOT. CHINA’S ECONOMY CONTINUES TO SHOW STRENGTH IN NOVEMBER, WHICH SHOULD GIVE POLICYMAKERS MORE ROOM TO REIN IN AND TACKLE FINANCIAL THREATS. WE HAVE OUR CHINA CORRESPONDENT, TOM MACKENZIE, WHO HAS BEEN THROUGH THE NUMBERS. THESE NUMBERS LOOK PRETTY GOOD. >> YES, CHINA’S ECONOMIC, ENGINE CHUGGING ALONG NICELY AT LEAST ON THE SURFACE. RETAIL SALES UP 10%, THE NUMBER FLATTENED BY A BIG PICKUP AND AUTO SALES BECAUSE THERE WAS A TAX INCENTIVE THAT MIGHT COME TO AN END IN DECEMBER. INDUSTRIAL PRODUCTION IS ROUGHLY IN LINE WITH ESTIMATES AND FIXED ASSET INVESTMENT THAT CAME IN LINE WITH ESTIMATES. INTERESTINGLY, THERE IS STILL A LOT OF FIXED ASSET INVESTMENTS COMING FROM THE STATE AND A MARGINAL PICKUP IN PRIVATE INVESTMENT. THESE ARE BUILDING ON THE STRONG NUMBERS IN TERMS OF MANUFACTURING, EXPORTS, AND INFLATION CAUSING A PAUSE — PAINTING A POSITIVE PICTURE. THERE ARE PLENTY OF HEADWINDS FOR 2017. TRACY: LET’S TRY TO FEED THE BEARS. WHAT ARE THE THREATS THAT ARE FACING CHINA NEXT YEAR? >> LET’S GIVE THEM SOMETHING. TRUMP IS TOP OF THE LIST, AS IS A REIGNING IN OF CREDIT AND CONTINUED CURBS ON THE HOUSING MARKET. WE HAVE SOME INSIGHT FROM THE CHIEF CHINA ECONOMIST AT BARCLAYS — TAKE A LISTEN WHAT SHE HAD TO SAY EARLIER. >> I THINK THE ECONOMY DOES SEE SOME HEADWINDS DOWN THE ROAD. NUMBER ONE, I THINK WE HAVE CERTAIN TRADE POLICIES COMING FROM TRUMP, AND THEN THERE IS THAT CHINA HAS BEEN TIGHTENING ON THE HOUSING MARKET, WHICH COULD LEAD TO A KEY DOWNSIDE RISK IN 2017. >> JIAN CHANG, FROM BARCLAYS. POLICYMAKERS HAVE BEEN QUIETLY RATING IN FUNDAMENTAL LIQUIDITY IN THE MONEY MARKET TO REIN IN THIS CREDIT. WE HAVE HEARD FROM BLOOMBERG INTELLIGENCE — THEY SAY THIS ECONOMIC DATA WE HAVE HAD GIVES POLICYMAKERS CONTINUED SPACE TO DO MORE OF THE, THAT THE SPACE IS CLOSING. THERE WAS A SWEET SPOT, BUT FOR HOW LONG IS THE QUESTION. TRACY: OK. OUR CHINA CORRESPONDENT, TOM MACKENZIE, LIVE IN BEIJING. LATER IN THE SHOW, THE MIDDLE EAST IS A MAGNET FOR SOME OF THE WORLD’S COSTLIEST CYBER ATTACKS. WE TAKE A LOOK AT WHAT IS BEING DONE ABOUT IT. ANGIE: COMING UP NEXT, WE GAUGE THE STATE OF DUBAI’S ECONOMY WITH THE EMIRATES. ALL OF THAT STILL TO COME. THIS IS BLOOMBERG. ♪ ANGIE: THIS IS BLOOMBERG MARKETS MIDDLE EAST, LIVE ON BLOOMBERG TELEVISION AND RADIO. I’ ANGIE LAUM. TRACY: I’M TRACY ALLOWAY. BREAKING NEWS — THE EMIRATES ECONOMY TRACKER IS JUST OUT WITH A FRESH READING OF 55.24 NOVEMBER, UP FROM 58 IN OCTOBER. JOINING US TO DISCUSS IS THE HEAD OF NINA RESEARCH FOR EMIRATES NBD. I SUPPOSE WE SHOULD START WITH THE OBVIOUS QUESTION — WHAT IS DRIVING THIS ECONOMY? >> IN NOVEMBER IT WAS STRONG FOR TRAVEL AND TOURISM. THEY ACTUALLY REACHED A SERIOUS HIGH IN TERMS OF PMI RATING. THAT CERTAINLY SIGNALS A VERY STRONG RATE OF GROWTH IN THE TOURISM SECTOR. TRACY: SO IF TRAVEL AND TOURISM — IF THEY ARE THE BEST-PERFORMING SECTORS, IS THAT A VINDICATION OF DUBAI’S ECONOMIC TRANSFORMATION, OR ARE THERE SHORT-TERM FACTORS AT PLAY? >> ONE OF THE FACTORS WHICH MAY HAVE HAD AN IMPACT ON THE NOVEMBER NUMBERS IS THE INTRODUCTION OF THESE ON ARRIVAL FOR CHINESE VISITORS, ANNOUNCED IN SEPTEMBER, BUT ONLY COMING INTO EFFECT LATE OCTOBER TO EARLY NOVEMBER. I THINK THAT MAY HAVE CONTRIBUTED SOMEWHAT TO THE EXCEPTIONALLY HIGH READING FOR TRAVEL AND TOURISM. BUT I THINK IT HAS BEEN ADJUSTING REALLY WELL TO THE FACT THAT THEY HAVE HAD COMPETITIVENESS ERODED BECAUSE OF THE STRONG CURRENCY. HOTELS HAD REDUCED THEIR REVENUE PER ROOM, TRYING TO MAINTAIN HIGH OCCUPANCY LEVELS. AT THIS TIME OF YEAR IT IS NORMALLY A HIGH SEASON FOR THE HOSPITALITY SECTOR. I THINK TRAVEL TOURISM WILL BE ONE OF THE BIG DRIVERS GOT GROWTH GOING FORWARD. TRACY: LET’S TURN TO THE WEAK SPOTS, BECAUSE WE DID, FOR INSTANCE, SEE CONSTRUCTION DOWN A BIT. >> IT WAS FAR FROM OCTOBER’S READING, BUT IT IS QUITE A LOW INDEX NUMBER. UNDER 52 SHOWING A LITTLE BIT OF EXPANSION, BUT NOT NEARLY AS MUCH AS SOME WOULD LIKE TO SEE. I THINK OPTIMISM IN THE SECTOR IS QUITE HIGH. THE SURVEY SAYS TO CHECK FOR 12 MONTHS AND THAT REMAINS ABOUT 70. THAT’S VERY STRONG OPTIMISTIC. I THINK A LOT OF THAT IS DRIVEN BY EXPECTATIONS ABOUT SPENDING AND PROJECTS RELATED TO EXPO, I WILL PROBABLY START KICKING OFF IN EARNEST NEXT YEAR. WE ARE HOPING TO SEE SOME IMPROVEMENT IN THE CONSTRUCTION SECTOR INDICATORS FROM THE BEGINNING OF NEXT YEAR. TRACY: HOW YOU GAUGE THE CURRENCY VOLATILITY AND FLUCTUATION AS A RESULT OF THE STRONGER U.S. DOLLAR, AS A RESULT OF ALL THINGS BEING FOMC TIGHTENING? >> WE WHERE EXPECTING THE STRONG DOLLAR GOING FORWARD, BECAUSE WE ARE EXPECTING THE FED TO CONTINUE WITH ITS TIGHTENING PROGRAM NEXT YEAR. WE ARE LOOKING FOR TO RATE HIKES IN 2017, AND OBVIOUSLY WITH THE CURRENCIES, THAT IS AUTOMATICALLY GOING TO HAVE AN IMPACT ON THIS REGION AND ON DUBAI’S SERVICES SECTOR. WE THINK FIRMS HAVE ADJUSTED TO THAT, TO A LARGE EXTENT. WE HAVE SEEN CONSISTENT PRICE DISCOUNTING IS ONE OF THE STRATEGIES EMPLOYED TO TRY AND MAINTAIN VOLUME GROWTH, EVEN IN THE FACE OF STRONGER CURRENCY. ANGIE: THAT IS DEFINITELY GOING TO HAVE TO BE THE CASE WHEN WE MOVE FORWARD, AN EXPECTATION OF THE CONTINUED WEAKNESS IN THE YUAN, AND FOR CHINESE TOURISTS, THAT IS GOING TO BE A REALLY IMPORTANT FACTOR WHEN THEY DECIDE WHERE THEY ARE GOING TO GO. >> ABSOLUTELY. I DO THINK IT IS EASIER FOR CHINESE VISITORS TO COME TO DO BY THEN TO TRAVEL TO WESTERN EUROPE OR OTHER AREAS WHERE THEY NEED TO GET VISAS IN ADVANCE. WE HAVE ALSO SEEN A LOT OF FIRMS IN THE HALF ITALIAN SECTOR TARGETING THE CHINESE MARKET SPECIFICALLY, WITH OFFICES AND INCENTIVES TRYING TO TRACK VISITORS AND GROW THE MARKET WHERE WE ARE SEEING SLOWER GROWTH FOR TOURISM. TRACY: CORRECT ME IF I AM WRONG, BUT I BELIEVE THIS PARTICULAR TRACKER DOESN’T TAKE INTO ACCOUNT WHAT IS HAPPENING WITH ENERGY FIRMS IN THE REGION. WITH YOUR HEAD OF RESEARCH HAT ON, PLEASE GIVE US SOME INSIGHT INTO WHAT’S GOING ON WITH THE OTHER SIDE OF THE PICTURE. >> YOU ARE RIGHT. THE TRACKER JUST LOOKS AT NONOIL SECTOR ACTIVITY. WHAT WE HAVE SEEN WHEN WE LOOK AT THE OVERALL PMI’S, EVEN THOUGH THEY ARE NONOIL SURVEYS, MANUFACTURING IN THE REGION IS VERY HEAVILY OIL RELATED. TO THE FACT THAT A PMI CONTINUES TO SHOW EXPANSION, EVEN THOUGH OIL PRICES AT THE BEGINNING OF THE YEAR FELL TO $35 PER BARREL AND HAVE BEEN SIGNIFICANTLY WEAKER THAN 2015, WE CONTINUE TO SEE GROWTH IN THE MANUFACTURING SECTOR. I THINK THAT REFLECTS A STRONGER OUTPUT GROWTH. LOOKING IN A 2017 WITH THE OPEC AGREEMENT TO CUT OUTPUT, I THINK THAT WILL WEIGH ON THE PMI READINGS IN SOME ASPECTS, PARTICULARLY RELATED TO THE MANUFACTURING SECTOR. WHAT WE ARE HOPING IS THAT WE START TO SEE AN ACCELERATION OF GROWTH, IN CONSTRUCTION, INFRASTRUCTURE, ESPECIALLY IN THE UAE, WHICH AND HELP OFFSET SLOWING. TRACY: A SLYLY LONGER-TERM QUESTION — WOULD YOU EXPECT A BIG RALLY IN OIL PRICES IF IT CONTINUES TO DENT SOME OF THE ATTEMPT AT DIVERSIFICATION IN TERMS OF THE ECONOMY THAT HAS BEEN MADE? >> IT’S A GOOD QUESTION. I THINK A LOT OF THE CHANGES THAT HAVE ALREADY BEEN IMPLEMENTED, THAT CUTS AND SUBSIDIES AND ATTEMPTS TO OPEN UP MARKETS FOR INVESTMENT FROM FOREIGN CAPITAL, I DON’T THINK THOSE ARE GOING TO BE REVERSED. EVEN IF WE SEE OIL PRICES SUSTAINED, RALLY UP TO $65, $80 A BARREL, I DON’T THINK GOVERNMENTS ARE GOING TO SUDDENLY COME BACK IN AND SAY WE WILL REINTRODUCE ENERGY SUBSIDIES. I THINK THOSE SORTS OF THINGS, THE DAMAGE HAS BEEN DONE. CONSUMERS ARE GOING TO HAVE TO CONTINUE TO ADJUST TO THOSE HIGH ENERGY PRICES. THAT IN ITSELF IS GOING TO PROVIDE ANOTHER FACTOR, WHICH MEANS WE TAKE INTO ACCOUNT — WHEN WE LOOK AT CONSUMPTION AND DEMAND, IF WE SEE A SUSTAINED PRICE, THAT IS GOING TO FEED THROUGH TO INFLATION IN THE TRANSPORT SECTOR. THAT IS SOMETHING THAT WE HAVEN’T REALLY SEEN IN THIS REGION BEFORE, AND WE WILL HAVE TO SEE HOW IT PLAYS OUT. TRACY: IT’S ALL CHANGING. THANK YOU SO MUCH FOR JOINING US TODAY. COMING UP, HOW NEW ACCOUNTING METHODS HAVE CATAPULTED TURKEY’S ECONOMY AHEAD OF INDIA’S. THIS IS BLOOMBERG. ♪ ANGIE: A QUICK CHECK OF THE HEADLINES. APPLE IS DISCUSSING INVESTING IN THE $100 BILLION TAX FUND AS SOFTBANK ENDS TO LAUNCH — AIMS TO LAUNCH NEXT YEAR. THERE IS A CONTRIBUTION OF ABOUT $1 BILLION TO GAIN ACCESS. APPLE HAS INVESTED IN DIDI, ITS BIGGEST OUTRIGHT INVESTMENT SINCE BEATS IN 2014. TRACY: SINOPEC IS SELLING A 50% STAKE IN A PIPELINE UNIT FOR $3.3 BILLION, SINKING FUNDS TO EXTEND ITS NATURAL GAS BUSINESS. CHINA WILL PAY 2.9% BILLION DOLLARS FOR 40% OF THE PROJECT. AA DIVISION WILL TAKE THE REMAINING 6%. ANGIE: KOREA’S NEWSPAPER SAYS SHIPPING IS LIKELY TO BE LIQUIDATED. THE ACCOUNTING FIRM IN CHARGE OF DUE DILIGENCE SAYS HANJIN WILL RECOMMEND THE OPTION. THEIR VALUE AFTER LIQUIDATION IS ESTIMATED AROUND $1.5 BILLION. TRACY: WHERE REFORMS AND A SERIES OF RATE CUTS FAILED, NEW ACCOUNTING METHODS HAVE SUCCEEDED IN DELIVERING A $140 BILLION BOOST TO THE TURKISH ECONOMY. BOB FINKEL JOINS US FROM ISTANBUL. WALK US THROUGH WHAT EXACTLY TURKEY HAS DONE, HERE. >> WELL, WHAT TURKEY HAS DONE IS PRESENT A DRAMATICALLY REVISED PICTURE OF ITS ECONOMY. IT HAS GONE BACK AND REVISED ITS GDP ACCOUNTING, AND THAT HAS RESULTED IN GROWTH FIGURES IMPROVING. AS YOU SAID, WHEREAS LAST YEAR THE ECONOMY WAS SUPPOSED TO HAVE CONTRACTED IN DOLLAR TERMS — WE THOUGHT WE HAD A $720 BILLION — IT TURNS OUT THE ECONOMY GREW. IT’S LESS PEOPLE REALLY HAS THEY TAKE COUNT. TRACY: HOW ARE PEOPLE REACTING OVER THERE? >> WELL, WITH SOME CONFUSION. THE STRANGE THING IS NOT THE NEWLY RELEASED THIRD-QUARTER FIGURE, WHICH SHOWS THE ECONOMY SHRUNK 1.8% YEAR-OVER-YEAR IN THE THIRD QUARTER, WHICH IS EVERYTHING YOU MIGHT EXPECT FROM AN ECONOMY DEALING WITH THE FALLOUT OF A FAILED COUP, WITH SLOWING INVESTMENT. BUT THE STRANGE THING IS THE UPWARD TRAJECTORY OF THESE OTHER FIGURES — WHICH SITS VERY STRANGELY WITH OTHER, MORE HIGH-FREQUENCY MEASURES OF THE ECONOMY, INDUSTRIAL OUTPUT, 3% YEAR ON YEAR GROWTH, IT TURNS OUT IT GREW 6.1% HIGHER THAN PREVIOUSLY THOUGHT. THE GAP BETWEEN THESE SETS OF FIGURES IS HAVING PEOPLE PORE OVER THE STATISTICS CLOSELY. ANGIE: ABSOLUTELY. BUT IN TERMS OF CONCRETE THINGS THAT THE ACTUAL GOVERNMENT IS DOING, ARE THEY DOING ANYTHING CONCRETE TO IMPROVE THE ECONOMY OVER THERE? >> WELL, IT SEEMS LIKE THE GOVERNMENT IS THE ONLY ONE DOING ANYTHING. IF YOU LOOK AT THE MOST RECENT FIGURES, THAT 1.8 CONTRACTION, ALMOST ALL SECTORS EXCEPT FOR GOVERNMENT CONSUMPTION, WHICH INCREASED 24%. IT IS DEFINITELY GOVERNMENT LED. HOW HEALTHY THAT IS IS SUBJECT TO SOME DEBATE. ANGIE: ALL RIGHT. WE WILL LEAVE IT THERE. ISOBEL THINK OF, THANK YOU. COMING UP, THE OIL OUTPUT DEAL SENT CRUDE PRICES SURGING AND SENDING BOMBS TUMBLING AROUND THE WORLD. THIS IS BLOOMBERG. ♪ ANGIE: 12:30 IN HONG KONG, 11:30 IN NEW YORK. THESE ARE THE FIRST WORD HEADLINES FROM AROUND THE WORLD. SOURCES HAVE CONFIRMED THAT DONALD TRUMP HAS CHOSEN EXXON MOBIL CEO REX TILLERSON AS SECRETARY OF STATE. A FOR THE ANNOUNCEMENT IS DUE ON TUESDAY MORNING. SOURCES CLOSE TO RUSSIA ARE LIKELY TO COME UNDER QUESTION DURING HIS SENATE CONFIRMATION. THE PRESIDENT-ELECT ALSO PICKED A THIRD GOLDMAN SACHS EXECUTIVE FOR HIS TEAM. GARY COHN WILL HAVE A NATIONAL ECONOMIC COUNCIL. CHINA’S STABILIZATION HELD IN NOVEMBER, WITH INDUSTRIAL PRODUCTION CLIMBING 6.2% FROM A YEAR EARLIER, ABOVE ESTIMATES. RETAIL SALES WERE UP 10.8% LAST MONTH, WHILE FIXED ASSET INVESTMENT INCREASED 8.3%. IT GIVES POLICYMAKERS MORE ROOM TO SWITCH FROM STIMULUS TOWARD FINANCIAL THREATS. PHARMA HAS BEEN CRITICIZED BY THE FDA OVER SOME INADEQUATELY DESIGNED TESTING PROGRAMS, WITH POTENTIAL CONTAMINATION. A T RECENT VISITO SUN PHARMA SAYS REPORTS WERE NOT SUBMITTED WITHIN THE 30 DAY TIMEFRAME. IMPACT VIOLATIONS HAVE PREVENTED NEW PRODUCTS FROM BEING LAUNCHED IN THE U.S. SOUTH KOREA, JAPAN, AND THE UNITED STATES HAVE MET TO TALK NEW SANCTIONS ON NORTH KOREA. THEY DISCUSSED SECURITY COUNCIL RESOLUTION 2321, ADOPTED LAST MONTH. HAD HOPES THE MEASURE WOULD LEAVE NORTH KOREA WITH “NO CHOICE” BUT TO DENUCLEARIZE. THE U.S. SENATE IT WILL ENGAGE WITH THE NORTH IF IT GIVES UP ITS NUCLEAR PROGRAM. GLOBAL NEWS, 24 HOURS A DAY, POWERED BY OVER 2600 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. THIS IS BLOOMBERG. ANGIE: THE FED IS WIDELY EXPECTED TO ANNOUNCE A RATE HIKE ON WEDNESDAY, THAT BOND TRADERS ARE ALREADY PUSHING APPEALS. KATHLEEN HAYS HAS MORE. >> THE GLOBAL BOND MARKET SELLOFF. IT STARTED WITH SOME UPSIDE SURPRISES ON THE U.S. ECONOMY THE PAST FEW MONTHS, AND REALLY PICKED UP STEAM WHEN DONALD TRUMP WAS ELECTED RESIDENT, PROMISING TO STIMULATE THE ECONOMY, CREATE JOBS, AND MORE. ON MONDAY, THE RUN UP IN OIL PRICES TO A 17 MONTH HIGH PORT MORE FUEL ON THE BOND MARKET SELLOFF FIRE. LET’S GET A G-CHART. ON THE FAR RIGHT, YOU CAN SEE THE 10-YEAR NOTE TRADED AS HIGH AS 2.5%. COMPARE THAT TO JULY, WHEN IT HIT A RECORD LOW. THAT’S THE LITTLE RED CIRCLE, 1.32%. THAT IS A DOUBLING OF YIELDS IN SIX MONTHS, QUITE A RUN. GO TO THE FAR LEFT OF YOUR SCREEN, UPPER LEFT CORNER. YOU CAN SEE THE YIELDS WERE AT 5.29% IN 2007 JUST BEFORE THE U.S. WENT INTO RECESSION. SO WHAT IS NEXT? WHERE IS THE FED TAKING US? AFTER DOUBTING THE FED WOULD RAISE KEY RATES FOUR TIMES IN 2016 AND PROVING TO BE RIGHT,.ON TRADERS ARE STARTING TO SHIFT THEIR VIEWS. THEY ARE ALSO GETTING ON BOARD WITH THE FED DOING MORE. LET’S LOOK AT THIS — YOU HAVE TO WATCH THIS IN THE NEXT COUPLE DAYS. THAT YELLOW DOT SHOWS CLUSTERS FOR THE FED FORECASTS OF RATE HIKES. WHAT THEY SEE FOR 2016 THROUGH 2019 — IF YOU LOOK AT THE GREEN LINE, ONE RATE HIKE IN 2016, TWO IN 2017, THREE IN 2018. THE REDLINE ACROSS THE BOTTOM IS WHAT TRADERS WERE FORECASTING IN SEPTEMBER. NOT MANY RATE HIKES AT ALL. BUT LOOK AT THE PURPLE LINE, MOVING UP NOW. DERIVATIVE TRADERS ARE BETTING IT WILL GET CLOSER TO WHAT THE FED IS LOOKING FOR. EXPECTATIONS OF DONALD TRUMP BOOSTING THE ECONOMY, DOES THAT MEAN THE FED WILL NECESSARILY BOOST THE NUMBER OF RATE HIKES IT SEES? MANY FED OFFICIALS HAVE MADE IT CLEAR, THEY CAN’T CHANGE THEIR VIEWS OF THE ECONOMY UNTIL THEY SEE WHAT DONALD TRUMP CAN DO, NOT LET HE IS PLANNING AT HOPING TO DO. . FISHER’S FORMER EXECUTIVE VICE PRESIDENT OF THE FEDERAL RESERVE BANK OF NEW YORK SAYS IT MAY BE TIME FOR CHAIR YELLEN TO SIGNAL LESS OF A ROLE. >> YORK THE HARDEST THING IS THT THEY DON’T KNOW WHERE THEY ARE GOING TO BE A YEAR OR TWO FROM NOW. THEY DON’T KNOW HOW MUCH THIS RECOVERY WILL COME THROUGH. THEY DON’T KNOW HOW MUCH ON TOP OF THAT THE TRUMP ADMINISTRATION WILL PUT. WHAT I AM LOOKING FOR IS WHAT CAN WE GET ABOUT THIS? SHE HAS GOT TO PULL BACK FROM FORWARD GUIDANCE. SHE WILL HAVE TO PULL BACK FROM PRETENDING SHE KNOWS A POINT ESTIMATE FOR 12 MONTHS FROM NOW, WHICH SHE REALLY DOESN’T KNOW. >> ON WEDNESDAY, THE RATE HIKE IS IMPORTANT. BUT FOR THE MARKET, IT MAY BE ALL ABOUT THE DOT. ANGIE: WE ARE GOING TO BE DISCUSSING MORE ON THE BOND MARKET SELLOFF IN JUST A FEW MINUTES, BUT FIRST, LET’S GET THE LATEST FROM MARKETS WITH HAIDI LUN. HAIDI: WE’RE LOOKING LIKE A PRETTY FLUCTUATED MARKET, NEXT AS WE HEAD INTO THE LAST FEW HOURS BEFORE THE FED DECISION DAY. A LOT OF UNCERTAINTY ABOUT WHAT THE FED WILL DO, BUT UNCERTAINTY ABOUT HOW THIS TRUMP TRADE WILL PLAY OUT FOR ASIAN MARKETS. LET’S TAKE A LOOK AT THESE — THE NIKKEI 225, HIGHER GAINS FOR MUCH OF THE MORNING SESSION, AND WE ARE UP BYA LOT OF UNCERTAINTT THE FED WILL .5%. THE YEN FLUCTUATING, WEIGHING ON SENTIMENT. WE HAD SOME NICE BUYING EARLY ON, GIVING UP ALL THE GAMES AS WE HEAD INTO THE AFTERNOON. ELSEWHERE, THE BIGGEST STORY OF THE DAY HAS BEEN THAT CHINA DATA DUMP. IT WAS PRETTY DECENT, ACCELERATION WAS A REALLY NICE BEING ON EXPECTATION. AS YOU CAN SEE, THAT HASN’T PLAYED OUT FOR THE GREATER CHINA MARKET. LIQUIDITY ISSUES CAME TO THE FOUR, SHANGHAI BREAKING THROUGH THAT 55 DAY MOVING AVERAGE FOR THE FIRST TIME SINCE MID-OCTOBER. WE HAVE SEEN THAT SUPPORT BRIDGE, SAYING IT’S AN OUTSTANDING INDICATOR OF WHAT WE WILL SEE IN THE LONGER TERM, POTENTIALLY NOT VOTING VERY WELL FOR CHINESE EQUITIES. WE HAVE ALSO SEEN SHENZHEN BREAKING THROUGH, COPPER BREAKING THROUGH THE DAY MOVING AVERAGE. .5%. NOT DOING TERRIBLY WELL IN THE SESSION. SOME WEAKNESS COMING THROUGH FROM JAKARTA, DOWN BY .8%. INDIAN STOCKS ARE UP BY ABOUT .2%. ALSO TAKING A LOOK AT THE FX SPACE, THIS IS WHERE WE ARE GOING TO SEE SOME MOVEMENT. TWO DAYS OF DOLLAR WEAKNESS IS HELPING PUSH UP THE STRENGTH WHEN IT COMES TO THE JAPANESE CURRENCY. YOU CAN SEE IT PLAYING OUT WHEN IT COMES TO EQUITIES. THE AUSSIE DOLLAR HAS BEEN STUCK, 75 RESISTANCE LEVEL. WE ARE HOPING WITH THAT STRONGER-THAN-EXPECTED DATA, WE COULD SEE IT GOING TOWARDS 76, BUT THE AUSSIE DOLLAR HAS BEEN PRETTY MUCH UNMOVED. WHAT WE ARE SEEING IS A LITTLE BIT OF A BREATHER WHEN IT COMES TO THE WEAKNESS, COMING OFF THESE ASIAN CURRENCIES. YOU WILL HAVE TO SEE HOW THE DOLLAR INDEX GOES FROM THERE, BUT CERTAINLY THAT WEAKNESS HAS BEEN TAKING THE PRESSURE OFF A LITTLE BIT. TRACY: THANKS SO MUCH. LET’S TAKE A TURN TOWARD FIXED INCOME AGAIN, WITH THE HEAD OF ASIAN FIXED INCOME MATCH ROTOR INVESTMENT MANAGEMENT. I WANT TO START WITH THE SHARP THAT I THINK SUMS UP ALL WE HAVE BEEN SEEING IN THE BOND MARKET. YESTERDAY, WE HAD A TREASURY AUCTION OF 10 YEAR, SOME 20 BILLION SOLD YESTERDAY. THE YIELD ON THOSE NOTES WAS AT 2.48%, THE HIGHEST SINCE SEPTEMBER 2014. THE SELLOFF CONTINUES, ESPECIALLY IN THE MARKET, FOR NEW TREASURY ISSUES. I QUESTION IS ESSENTIALLY HOW MUCH FURTHER, HOW MUCH HIGHER COULD WE SEE U.S. BOND YIELDS GO FROM HERE? >> WELL, THAT IS THE QUESTION BOND INVESTORS ARE ASKING OURSELVES AFTER THIS SIGNIFICANT INCREASE IN YIELD OVER THE LAST SIX MONTHS, PRACTICALLY DOUBLE SINCE THE U.S. ELECTION. WELL WE HAVE PRICED IN SOME FED RATE HIKES FOR NEXT YEAR AND SOME FOR THE YEAR AFTER, THERE IS PROBABLY STILL MORE TO GO FOR THE SELLOFF. INVESTORS HAVE TO REALLY GET USED TO THIS NEW PARADIGM. ALREADY, GROWTH AND INFLATION NUMBERS ARE GOING UP EVEN BEFORE THE U.S. ELECTION, AND NOW WITH THE POTENTIALLY NEW POLICIES TO BE IMPLEMENTED IN THE COURSE OF THE NEXT YEAR, THOSE SHOULD BE FURTHER STIMULATIVE AN ENVIRONMENT WHERE THE U.S. GROWTH IS ALREADY AT POTENTIAL AND WOULD LEAD TO HIGHER BOND YIELDS. THIS IS A CHANGE IN PARADIGM FROM SOMETHING WE HAVE SEEN AND GOTTEN USED TO, LOWER BOND YIELDS. ANGIE: YOU ARE MENTIONING A CHANGE IN PARADIGM. I WANT TO BRING A BOND MARKET VOLATILITY. ONE PIECE OF RESEARCH THAT REALLY CAUGHT MY EYE RECENTLY WAS HSBC WARNING THAT WE COULD SEE THE 10 YEAR YIELD AT 2.5% AROUND THE FIRST QUARTER OF 2017, BUT THEN IT WILL TUMBLE TO 1.35% BY THE END OF THE YEAR. THAT IS A HUGE CHANGE FOR A MARKET THAT HAS BEEN REALLY USED TO YIELDS GRINDING LOWER. >> ABSOLUTELY. WE’RE THERE AT 2.5%, SO I THINK WE CAN PROBABLY GO HIGHER. I DON’T REALLY SEE THE WAY BOND YIELDS WOULD TUMBLE IN THE SECOND HALF OF THE YEAR, UNLESS SOMETHING OUT OF THE BLUE HAPPENED. I WOULD THINK HEELS WOULD TEND TO DRIFT HIGHER, AND GO CLOSER TO THE 3% BY NEXT YEAR. IT’S QUITE DIFFERENT FOR INVESTORS WHO ARE USED TO LOWER YIELDS AND CAPITAL GAINS COMING FROM LOWER YIELDS. THIS IS AN ENVIRONMENT WHERE GROWTH IS PICKING UP, EXPECTATIONS ARE REVERSING THEMSELVES. YOU TALKED ABOUT HIGHER OIL PRICES EARLIER IN THE PROGRAM. THEY WILL CONTRIBUTE TO HIGH INFLATION AS WELL. THOSE ARE FACTORS WHICH ARE QUITE DIFFERENT FROM WHAT WE HAVE SEEN IN THE LAST COUPLE YEARS. ANGIE: YET, LET’S TALK ABOUT EMERGING MARKETS FOR FX. HOW DO YOU SELECT THE WINNERS IN THE LOSERS HERE, AND WHERE DO YOU SEE IT SITTING IN THE GLOBAL STORY? IS IT ALL FIXED TO A GLOBAL SUPPLY CHAIN FACTOR? >> WELL, PART OF THE FX STORY IS LINKED TO THE DOLLAR. WHAT HIGHER RATES AND VARIOUS TAX INCENTIVES WHICH WOULD BE FAVORABLE FOR U.S. CORPORATE — I WOULD THINK THAT WOULD LEAD TO A STRONGER DOLLAR. SO THAT WOULD BE ONE PART OF THE STORY. THE OTHER PART IS THE DIFFERENTIAL OF INTEREST RATES. THE FED PROBABLY HIKES RATES NEXT YEAR AFTER HIKING THIS WEEK, AND THAT CONTINUES INTO 2018. CENTRAL BANKS IN THE REGION HERE ARE LESS LIKELY TO FOLLOW IF THEY CAN AVOID THAT, AND THAT SHOULD LEAD TO STRONGER DOLLARS AS WELL. THE OTHER COMPONENT IS, OF COURSE, ON THE TRADE SIDE. PROTECTIONISM AND PROTECTIONIST TALK IN THE U.S. IS NOT GOOD FOR GLOBAL TRADE AND NOT GOOD FOR THE EXPORTERS OF PRODUCTS WHO SHOULD COMPETE WITH THOSE MADE IN THE U.S. MORE ADVANCED ECONOMIES IN ASIA WILL PROBABLY BE HIT BY THAT TYPE OF PROTECTIONIST MEASURE. THE CHINESE EXPECT TO WEAKEN, I WOULD EXPECT SOME CURRENCIES TO WEAKEN AS WELL. WHEREAS SOME OTHER COUNTRIES WHERE IT IS MORE COMMODITY EXPORTING, UNLESS THE COMPETITION TO THE U.S. IS LESS EFFECTIVE. THOSE TYPICAL COMMODITY PRODUCING COUNTRIES IN ASIA — MALAYSIA, INDONESIA — BY THEMSELVES, THEY WOULD HAVE LESS IMPACT FROM THE PROTECTIONIST MEASURES. ANGIE: BUT IT REALLY SOUNDS LIKE WHEN IT COMES TO EMERGING MARKETS, ALL EYES ARE ON THE UNITED STATES, ON THE FOMC, WHETHER OR NOT THAT TIGHTENING WILL CONTINUE, THE

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