i want to thank united technologies. we have been meeting with a lot of companies. what really is happening is the word is now, wow, when you want to move your plants to mexico or some other place and you want to fire all your workers from michigan and ohio and all those places i won, for good reason, not going to happen that way anymore. you want to move your plant, and you think you are going to build a plant in mexico and you are going to make your air-conditioners or cars or whatever you are making,, and you are going to sell through what will be a very strong border -- we don't even have a border -- but you are going to sell through a very strong border -- not going to happen. you will pay a very large border tax. if you want to move to another if you want to fire all

of our great american workers who got you there in the first place, you can move from michigan to tennessee and north carolina and south carolina, you can move from south carolina back to michigan, you can do anywhere. you have a lot of states that play, a lot of competition. we got a lot of places you can move, and i don't care as long as it's within the borders of the united states. there will be a major border tax on thesethere will be a major bx on these companies that are leaving and getting away with murder. if our politicians had what it takes, they would have done this years ago and you would have millions more workers right now in the united states who are 96 million wanting a job and they can't get it. ok, go ahead. [inaudible] a question about the supreme court and border security. i also want to ask you about something you said on twitter this morning. are we living in nazi germany?

what were you driving at here? on the supreme court, what is your timeline? have you conducted those interviews yet? and on the border fence? it seems clear. u.s. taxpayers will have to pay for it up front. what is your plan to get mexico to pay for it? mr. trump: do you have any more? [laughter] on the fence, wall. you misreported it. we are going to build a wall. i did wait until we finish -- i could wait until we finish our negotiations with mexico. mike pence is leading an effort to get final approvals through various agencies and congress for the wall to begin. i don't feel like waiting a year or a year and a half. form, willsome

reimburse us, and they will reimburse us for the cost of the wall. that will happen. payment,t's a tax or a form, probably less likely that it's a payment, but it will happen. remember this, ok? i would say we are going to build a wall, and people would go crazy. paymenti would then say, who'so pay for the wall? and people would scream out, because nobody's had crowds like trump has had -- you know that, you don't like to report that -- finally he agrees. who's going to pay for the wall? and they will scream out, mexico. reports went out last week, mexico's not going to pay for the wall because of a reimbursement. what's the difference? i want to get the ball started. i don't want to wait a year and a half until i get my deal with mexico. nice. has been so i respect the government of mexico. i respect the people of mexico. many people from mexico are

working for me and they are phenomenal people. the government of mexico is terrific. i don't blame them for what's happened. i don't blame them for taking advantage of the united states. i wish our politicians were so smart. mexico has taken advantage of the united states. i don't blame the representatives and various presidents of mexico. what i say is we shouldn't have allowed that to happen. in order to get teh wall started, mexico will pay for the wall but it will be reimbursed. supreme court judge. i have a list of 20. we have met with numerous candidates. they are outstanding in every case. they were highly recommended by federalist society. jim demint was very much involved in his group, which has

been fantastic, and he's a fantastic guy. between leo and jim demint and some senators and congress people, we have a great group of people. i will be making the decision on who we will put up for justice of the united states supreme court, a replacement for the great justice calia. -- scalia. that will probably be within 2 weeks of the 20th. week.ly the second i consider the first day because we will also be doing some pretty good signings. think we will wait till monday. that will be our first business on, as opposed to doing friday. on friday people will have a good time at the inauguration. saturday we are having a big church service and lots of good things are happening. our first day -- we will be doing some pretty good signings, monday and tuesday and wednesday and thursday and friday, and

also next week. you are all invited. on the supreme court i will be making that decision and it will be a decision which i strongly believe in. i think it's one of the reasons i got elected to the people of this country did not want to see what was happening with the supreme court. it was a big decision as to why i was elected. this morningu had about, are we living in nazi germany? what were you driving at here? mr. trump: i think it's disgraceful that the intelligence agencies allowed any information that turned out to be so false and fake out. i think it's a disgrace. and that is something that not to germany would have done -- na zi germany would have done and do, that information that was false and fake and never happened got released to the public. as far as buzzfeed, which is a failing pile of garbage, writing

it, i think they will suffer the consequences. they already are. their as cnn going out of way to build that up -- we just found out, michael cohen is a very talented lawyer, just reported that it wasn't this michael cohen they were talking about. all night long it's michael cohen. i said, i want to see your passport. he brings his passport to my office. i say, he didn't leave the country. michael cohen of the trump organization was in prague. to be a different michael cohen. it's a disgrace what took place. i think they ought to apologize, to start with, michael cohen. since you are attacking our nose -- news organization, can you give us a chance? you -- mr. president-elect, can you say categorically -- if you are

attacking us, can you give us a question? mr. trump: i'm not going to give us a question. you're fake news. >> can you say categorically -- mr. president-elect, that's not appropriate. president obama went to far with the sanctions that on russia after the hacking -- what will you roll them back and what do you think of lindsey graham -- [inaudible] mr. trump: i hadn't heard lindsey graham was going to do that. lindsey graham. i've been competing with him for a long time. he's going to crack that 1% barrier one day. i didn't realize lindsey graham was still at it. i think lindsey graham is a nice guy, actually. i've heard he's a nice guy. go ahead. [inaudible] as far as we understand, the

intelligence community -- bbc news. as far as we understand, the intelligence community is still looking at allegations of false news, as you describe it. if they come back to any conclusion that any of it stands of it is true, will you consider your position? [inaudible] >> public safety and all the problems we have seen throughout the course of the election, what reforms do you recommend for the tech industry? mr. trump: i recommend reforms, i recommend people that have some moral compass. morebeen hearing more and about a thing called fake news and they talk about people who go and sale sorts of things. some of the media outlets with the fake news more so than anybody.

they're very dishonest people. will havesomething we to live with. i guess the advantage i have is that i can speak back. when it happens to somebody who doesn't have this, that kind of they can't speak back. it's a very sad thing. i seen people destroyed. i think it's very unfair. all i can ask for is honest reporters. [inaudible] >> i want to follow-up with questions about the u.s. intelligence community. do you trust your u.s. intelligence officials, and what do you say to policy experts who say you are weakening national security by waging this or of words against that community -- war of words against that community? mr. trump: we are going to be others in mr. pompeo and

, senator dan coats, and we are going to put an people. within 90 days they will be coming back to me with a major report on hacking. i want them to cover the situation. cover, maybehem to most importantly because we are hacked by everybody -- the united states, our government, out of a list of 17 in terms of industries, is the worst, number 17, in terms of protection. if you look at the retail industry, the banking industry, various industries, out of 17 industries they put this in the category of an industry, the in termsates is last of protecting, let's say hacking defense, like we had a great hacking defense at the republican national committee. we were told they were trying to hack us, but they weren't able to hack. i told reince, and reince did a

phenomenal job, i said i want strong hacking defense. the democratic national committee didn't do that. maybe that's why the country run so badly. wait, let me finish. within 90 days we will be coming up with a major report on hacking defense, how do we stop this new phenomenon, fairly new phenomenon, because the united states is hacked by everybody. that includes russia and china and everybody. [inaudible] go ahead. you said that you believe russia was responsible for the hacking of the dnc. mr. trump: there could have been others also. >> why did you spend weeks undermining the u.s. intelligence community before getting the facts and then making a public statement? mr. trump: when intelligence

reports get leaked to the press, it's illegal. these are classified and certified meetings and reports. i have many meetings with intelligence, and every time i meet, people are reading about it. somebody is leaking it out. maybe it's my office. i have a lot of great people. maybe it's them. i won't tell anybody. i won't tell anybody about my meeting with intelligence. i had my meeting. nobody knew, not even my executive assistant for years. she didn't know. i didn't tell her. nobody knew. the meeting was had, the meeting was over. immediately word got out that i had a meeting. i don't want that. it's very unfair to the country, very unfair to our country

what's happened. that report never should have been printed. i think "the new york times" for saying that. i will tell you, that should never have happened. [inaudible] you, mr. president-elect. can you stand here today once and for all and say that no one connected to you or your campaign had any contact with russia leading up to or during the presidential campaign, and if you indeed do believe that russia was behind the hacking, what is your message to vladimir putin right now? mr. trump: he shouldn't be doing it, he won't be doing it. russia will have much greater respect for our country when i'm leading it than when other people have let it. -- led it. russia will respect our country more. he shouldn't have done it. i don't believe he will be doing it mroe now. -- more now. we have to work something out, but it's not just russia.

you don't report it the same way. 22 million accounts were hacked in this country by china. that's because we have no defense. that's because we are run by people who don't know what they are doing. russia will have far greater respect for our country when i'm leading it. and i believe, and i hope -- maybe it won't happen, it's possible -- i won't be given a little reset button like hillary. press this little piece of plastic. there's no reset button. i hope we get along. but if we don't, that's possible too. and other countries, including china, which has taken total advantage of us economically, totally advantage of us in the south china sea by building their massive fortress, russia, china, japan, mexico, all countries will respect us far more, far more than they do

under past administrations. i want to thank everybody. papers are -- these all just a piece of the many, many companies that are being put into trust to be run by my two sons. i hope that the end of eight years i will come back and say, you did a good job rate if they did a bad job, i will say, you're fired. goodbye, everybody. goodbye. [inaudible] endingident-elect trump the first news conference he's given us presidents elect, the first news conference he's given in almost 170 days. surrounded by many manila folders. a point in the middle of the press conference when one of his attorneys took to the stage for some minutes to talk

business agreements going forward, how his sons will be in control of the trump organization. i want to bring in two of bloomberg's news staff. business agreements going forward, how his sons will be in control of the trump organization. i want to bringjennifer, let meu and get your sense of the press conference. it was pretty freewheeling. a lot of the reporters when it to talk about two new stories. it's important to draw that distinction on how do you color for it. there was a buzzfeed story, a cnn story. they are separate things. explain the difference between those two stories and what donald trump had to say today. story was just saying that there is intelligence out there that has been collected. it's not clear if it's been verified, about interactions between the russian government and people on trump's team. what buzzfeed did after that initial report from cnn was to

publish this dossier which came from a former british intelligence official, has not been independently verified by the u.s. intelligence community, and their justification for buzzfeed was, the american people can decide for themselves whether to believe this or not. and that kind of put it out in the open and let less a discussion about what was in that document. was able to say, there was mention of a michael cohen who met with russian officials in prague, but michael cohen who works for me has never been to prague, was in the u.s. on the days when this was believed to have happened. we looked at his passport to get that evidence. that created a way for trump to bash the media and have an easy out on that, rather than talking about the real issues at play, which anybody on trump's team

have interactions with the russian government during the does -- is the russian government holding information on him that they could use against him if he does not show a cooperative face towards russia. those were two different things that were sort of related but not quite the same. want to also bring your attention to the fact that this hearing is still ongoing, the united states senate foreign relations committee, with rex tillerson, the potential secretary of state, testifying that is chris murphy there, democratic center of connecticut who is questioning rex tillerson. that has been going on for the last several hours, two hours plus. i want to bring in tim o'brien who is on set with us in new york. you couldn't get any more

different rhetoric than you are getting on the one hand on capitol hill with the testimony of rex tillerson talking about russia and sanctions and how he hasn't had a chance yet to speak with the president-elect about russia and what just happened with the president-elect in the news conference. your area of expertise is finances. what do you make of the plan that was laid out by sheri dillon that he wasn't going to have anything to do with the trump organization? >> the plan they put in place is basically, trust donald and trust donald's judgment. they have taken none of the steps that trumps predecessors had done in the white house to make sure the president is insulated from conflict of interest, a blind trust, and divestment of assets that could create conflict. fact that he will still be attached in any way to businesses that have those loans is problematic. his sons will remain in place running the company.

they are going to put in a compliance and ethics monitor at trump tower to make sure the communication between the sons and father is limited. vonnie: said there wouldn't be any foreign deals. said he also would not get individual profit and loss statements. it's not a big business, contrary to what mr. trump said during his press conference. he does have a significant amount of debt, contrary to what mr. trump said during his press conference. any kind of pnl would probably get a pretty good handle on how the individual businesses are doing. >> julie hyman is in washington. donald trump talking about the

health care industry, saying there will be a repeal and replace of the affordable care will happenis essentially simultaneously. what were you seeing as you watch the markets during the course of that news conference? julie: i the same time there were these macro moves in the markets and stock and sector moves like the one you are talking about within health care. we are not seeing much changes in markets right now but that doesn't really tell the full story. if you look at the s&p 500 over the course of the past hour and a half while we were hearing trumps speaking, you get a lot of volatility here. stocks holding steady than dropping off in the middle or so of his press conference. the s&p 500 has now rallied by around 6% since the election, in part on the hopes that we would see this administration introducing new fiscal stimulus, reducing regulation, introducing other, more business friendly or what are viewed as more business friendly measures. none of that was discussed in

the press conference today. that may be the reason we are not seeing more positive activity coming from the stock market. let's get to health care, specifically the nasdaq biotech index. if you look anywhere within drugmakers, pharmaceutical makers, you saw a drop off when trump said there would be bidding with in order to try to bring crisis down. even though there's a little bounce off the middle, many of the stocks remain under pressure. likewise, he talked about getting prices down for the f-35 and other planes. that is when we saw a reaction from lockheed martin and some of its competitors, specifically lockheed against that leg downward in the stock. as we saw this volatility happening within some of these individual groups within the stock market as a whole, if you look at what are viewed as the so-called haven assets, we were seeing a little bit more buying, although that subsided to some extent. the 10-year price is higher.

as iss little changed, the dollar versus the yen. really the currency you want to watch is the mexican peso, as trump talked about getting mexico, insisting mexico will pay for the wall in some fashion or another. this is the dollar versus the peso. here, a lot of gyrations at one point during the session, once again touching a record low, and oil prices had also been climbing steeply during his commentary. a lot of different market reaction. vonnie: president-elect donald pic for secretary of state, rex tillerson, is still testifying before the senate foreign relations committee. is with us from capitol hill. the main take away for me, at least in terms of the russian part of the testimony, was the

phrase "russia can help us fight isis." is this a very different foreign-policy? >> clearly he faced tough questions at capitol hill on this ongoing hearing and he echoed president-elect donald trump, saying just as trump has said repeatedly on the campaign trail, he believes russia could potentially be an ally, and the u.s. effort to counterterrorism. however, he did also criticize russia, and the president was a fair assessment to ensure they were involved in the meddling of u.s. elections. he also said the trump administration would be more tough on russia, responding to the cyber attacks and the meddling of the election. he did get into specifics as to how. a particular moment i found quite interesting was when he evoked teddy roosevelt. he said that like roosevelt, he would advocate that the u.s. use of military force

while also seeking to get along with other foreign nations. vonnie: kevin on capitol hill. say crimes it been committed by the russian leader. we will continue to bring you the latest updates. you can follow along on bloomberg life go. --bloomberg life go -- live go. this is bloomberg. ♪ with the xfinity tv app,

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only xfinity gives you more to stream to any screen. download the xfinity tv app today. i've spent my life planting a size-six, non-slip shoe into that door. on this side, i want my customers to relax and enjoy themselves. but these days it's phones before forks. they want wifi out here. but behind that door, i need a private connection for my business. wifi pro from comcast business. public wifi for your customers. private wifi for your business. strong and secure. good for a door. and a network. comcast business. built for security. built for business. david: live from bloomberg headquarters -- alix: this is "bloomberg markets ."

emma: donald trump says russia is a danger to the u.s. and must be held accountable. rex tillerson is testifying today at a senate confirmation hearing. >> twitchy the stability that is desperate to achieve the stability that is foundational to american security, u.s. leadership must be asserted. we have many advantages on which to build. our alliances are durable and our allies are looking for return to our leadership. troubleddin said he is that tillerson's opening statement made no mention of the russian cyber attack. the former goldman sachs banker is planning to divest interests

and 43 companies. afghan security forces are still not capable of securing their country by themselves. inspector general for afghanistan says this country needs a stable government environment -- iere gentle loney -- he is in good condition and alert. he took over as premier last month after the previous governor resigned. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm emma chandra. this is bloomberg. vonnie: we want to give you a quick check on u.s. stocks now.

is aost interesting there racing games. -- erasing gains. the nasdaq down .1%. the ruble weakening dramatically. the peso as well, still weaker at 21.88. now to our markets wall and abigail doolittle. abigail: we saw a brief burst of volatility there. around donald trump's press conference. the sector most hit, health care on bearish statements from trump. and health care stock that its gains, mark. it remains the biggest boost to the dow today. -- merck.

street is very bullish on this come including goldman come ever core isi, jpmorgan. this is a distinct positive. investors seem to agree with this bucking the trend for health care. before the press conference, verizon was the biggest drag on the dow. we now have johnson & johnson ,nd pfizer in that standpoint quickly living after president-elect trump did mention that he thought drug companies would have to bring their businesses back to the u.s. there could be bidding processes this may come as a bit of surprise to some investors. all of this still has the dow below 20,000.

a famous technician last friday on bloomberg tv did say he thinks the dow will not achieve 20,000. katie stockton said her work suggests there will be a near-term pullback. supports the assertion of both. the near term uptrend starting to reverse. we see this as this sideways trend is dropping below those uptrends. typically, that is bearish. it may suggest this range here could break to the downside and keep the dow away from 20,000 in the near term. when the weakness in health care today, that certainly seems to be the case today. last month, the nation's known asension fund calpers rolled back the expected rate of return on its investments from 7.5% to 7% over the next three years. does that mean that what does that mean for the fund going forward?

erik schatzker is standing by with the cio of calpers. erik: so pleased to be here with calpers in san francisco. ted, good morning. cut in the discount rate is a big deal. it is going from 7.5% down to 7%. hitare the guy who has to or ideally be that target. his 7% low enough? ted: a great question and a consequential question. sending the discount rate and the assumed rate of return is the highest order decision that our system has to make in order to protect the system, provide for the sustainable the sustainability of our system for generations to come for our

beneficiaries. his seven the exact number? it is not an exact science. is it a reasonable number? we think so. we think it is a reasonable number over the long-term. as a long-term investor, we look out 30, 40, 60 years. much of the reduction of hours and rate of return really comes from our intermediate forecasts. erik: with the number be lower if it were up to you? the argument for a lower assumed return is a powerful one. we live in a low rate world with no returns on risk-free assets -- low returns on risk-free assets. your own advisor argued for a and a numberreturn of well-regarded professional investors who have given the subject some thought like howard think five or 5.5 is more

realistic. we looked at all that advice and analysis on her own as well. assumed rateng our of return, we took into account a low interest rate environment that you alluded to. marketding our capital assumptions, we assume over the next 10 years are fixed income portfolio will achieve a 3.5% return. , in constructing our portfolio and constructing our assumptions that undergo it, we assume our global equity portfolio our stock portfolio n 6.75 over that period. , thoseyear period capital market assumptions at up to that 6.2 number.

that is a reasonable number over for a year time period broadly diversified portfolio like calpers. they took our ten-year forecast and look out from years 11-60. in doing that, they assume some correction, some reversion to the mean in interest rates. it's reasonable to look out years 11-60 that we have some return to normalcy in interest-rate environment. when that happens, we should expect some higher rates of return in the out years. when you add all that together in our analysis looking out over when is iteriod reasonable to us or we could achieve a 7.5% return over that? the underfunding situation

continues to be exacerbated in the intermediate if you don't hit that. ted: it makes it tough, makes it a challenge. that is the word i've used over and over again with our investment committee. over theo this period next 10 years, we have quite a challenge in front of us. not only the market challenges we just discussed, but the funding status of calpers. 60% funded. best 68% funded. now, 64% funded. of a maturing fund, the demographics of the baby boomers retiring, the cash flow of calpers has turned negative. we are taking in less cash than we pay out. it is a challenge and we have to pay attention to that. one of the ways we do that is to

invest for the long term and pay attention where we can take some risk off the table, where we can redeploy assets within the allocation into other asset classes. erik: let's talk about your critics. you have many. they say that calpers returns over the past couple of years which have been well south of that new 7% target are evidence that you and your investment team are feeling. -- failing. they accuse you of trying to sell panic by advocating for a lower assumed rate of return. panicked.e not we are cognizant of critics on both sides of the equation saying the return assumptions are too low and others saying it is too high. look at our 20 year return number. it's right about 7%. look at our five year number, it

is at 8%. are important. a three-year number is more like five. 4.5.ear is more like this risks -- there is risks to any portfolio. in any given year, we might underperform that 7% number or over perform. mentioneds don't the 18% return we received three years ago. there's a decent amount of volatility. over a long period of time, a 6.5% return is reasonable. erik: what is your macro overlay? as you determine the asset allocation and make investment decisions, what you expect u.s. growth and inflation? for u.s.o you expect growth and inflation? ted: we see moderate world

growth. we have seen moderate growth here in the u.s. erik: faster than what we've seen over the last several years? ted: we can all hope. we hope so. that could occur. our base case is the u.s. has grown about 2% out of this recovery over the last 7.5-8 years. we are expecting that to continue. moderate to tepid u.s. growth. but sustained. plus that world growth -- world growth, 3% plus. erik: it sounds like you are a subscriber to the new normal camp. ted: i am a subscriber to lopez interest rates -- low base interest rates and moderate growth.

as the new normal camp has described it, some pretty heavy demographic forces at work across the globe to keep growth muted in developed economies. erik: you cannot ignore the change in the political environment. what is the trump impact? ted: it raises and widens the tail risk on both sides. there are opportunities on the toitive side i alluded to have more of a focus away from the monetary policy of the federal reserve to politics and policy moving to the forefront and hopefully amplifying the growth prospects of the u.s. those are positives that could affect the base case. there are also some negatives. discussions around tariffs and our trade agreements come immigration. this could impact a slow growth in the u.s. and around the globe.

, but we worry about moreide risk more so asymmetrically than we worried about the upside risk. because of the position of calpers. erik: you talked about the increase in tail risks on the upside and downside. do you more about those downside risks because of the change in political leadership? the range ofidened outcomes. until we see the policies that come forward, it will be hard to handicap which outcome will play out. the prospect of having a unified u.s. government across congress and the federal government allows for greater action and action can have either result.

erik: we talked about the kind of return you can generate over the next six years. can you do it without piling up risk in the portfolio? ted: one of the major impacts of lowering the discount rate is we can keep the risk profile we currently have in the portfolio intact. so, yes. erik: right now, you have about 9% allocated to private equity and 62% to equity in general. why given that a pension plan ,as mostly known liabilities some much of that is in public markets, white paper liquidity much of that is in public markets, why pay for that liquidity premium? ted: one of our greatest strengths is our long-term

positioning. the ability to realize and equity premium in the public stock markets is an advantage of hours for the long-term. in private equity, the ability only in thet private markets but to lock our capital up for long amounts of time we think place to our advantage. erik: is the problem with private equity because calpers has come down from 14% three years ago? the assetblem managers? ted: we are committed to the asset class. less than we used to be. that is more of a function of valuationsator, the in private equity markets that we have been net sellers. there are times to invest in the

private markets and we are comfortable taking our foot off the pedal a little bit. if we see more favorable conditions in the future, we will be actively moving back. if valuations remain robust, you will take it below 8%? ted: we could. erik: what do you think private equity could return? we estimated a net 9.5. a lot lower than the historical norms. who is doing a good job among private equity managers? ted: one of the real benefits of accessed very is talented managers. we've been reducing the overall number of private equity managers.

the collection of private equity managers that we have currently in the fun is really a relation of managers that have done really well for us. i will not single out anyone by name. what is you are beef with external managers just your biggest beef -- what is your biggest beef with external managers? we rely on the talent of external managers, particularly in our private asset classes. we have been able to access some of the very best talent in the world. it is expensive. is a marketplace, just like all the other marketplaces we compete for. it is expensive, but we monitor whether or not we are receiving the returns from that. erik: the you see more room to -- do you seefees

more room to squeeze those fees? the --e pushback given erik: in other words, they are still targeting you too much -- charging you too much? ted: yes. that is a reflection of the marketplace. there is such a desire for return that there is incredible amounts of capital going into these vehicles and that competition gives comparative advantages to the general partners. erik: if you think about the money you spent on private equity fees, by how much do you think you can reduce it in percentage terms? ted: we would like it to be lower. othere seen calpers and institutional investors paying on an asset management fee basis 100-150 basis points. when you look at the other private asset classes, real

estate, infrastructure, those fees are more in the 50-70 basis points. erik: that is where you would like to get. is that realistic? ted: not in the current marketplace. there's too much capital chasing private equity. erik: calpers famously led the pension fund stampede out of hedge funds. do you have any regrets? ted: no. it has been a good decision for us in the last couple of years. given the scale and size of calpers, we just don't see it -- ted: can you envision rebooting the programs? our i don't think so, given skill and ability to deploy assets into other diversifying asset classes. erik: great to spend time with you in sacramento. i have been waiting for this opportunity. , theis ted eliopoulos chief investment officer at the california public employees retirement system.

--manages $306 million david: thank you very much. donald trump outline plans to exit his businesses. rex tillerson testifying on capitol hill. he has been there all day answering questions -- kevin cirilli is standing by with elizabeth warren. kevin: thank you. i'm joined by senator elizabeth warren. thank you for being here. you've been talking a lot about conflict of interest, particularly with president-elect trump's cabinet appointees. ease any ofough to your concerns about potential conflict of interest between the drum -- the trump organization? senator warren: he did not. we need to have him divest.

he needs to get rid of his business interests and put them in a blind trust. that means there will be someone independent who buys, sells, runs the business operation. not someone he sits down to dinner with come about someone he can look over their shoulder. not someone you can do a little elbow and wink. focusedhis attention 100% on what is good for the american people. kevin: you don't bite when his attorney just said it would be impractical to have a blind trust? senator warren: people do this all the time. they set it up because they have changed positions in this world. this is not a democrat versus republican -- this is the difference between being on the private side and you get to get out there and make money and finance or business interests and becoming a public servant. it is called a public servant the one userans

serve as the public, not your own business interests. kevin: you held your own hearing trump'sesident-elect k labor secretary. warren: and is the person who has been nominated to be secretary of labor. the job of the secretary of labor is to watch out for 150 million people across this country who work for wages. to make sure the laws are fairly enforced and right new regulations when necessary. he has a long history in labor. unfortunately, it is on the other side. restaurants that it go restaurants, carl's jr.

and parties. these restaurants are known for making their profits by squeezing low-wage workers. when his hearing was coming up, we asked the republicans, could we please have some of his employees come in and talk about what it was like to work for him? to talk about what he has said i about the labor laws and the republican said you cannot do that. our own hearing and we invited employees and it would tear your heart out to hear what people were talking about firsthand to work in one of his restaurants. say thiss supporters is someone who is a job creator, someone who was able to help grow the economy. everything seemingly signaling that the market reaction is that they are warming up to donald trump. what you say to your critics who

say there is another side of the story. senator warren: there's not much doubt that he knows how to drive a profit. he made a lot of money. i assume his shareholders made a lot of money. but they did it on the backs of workers that they stole time from. let me give you a couple examples. one woman who worked at the company for 22 years -- she got promoted to manager. she worked consistently 50-60 hours a week, week after week at low wages. she gets paid for 40 hours. you can build some real property you can manage to get your employees to work 10-20 hours for free. talked about how she was held at minimum wage all the way through. how did you survive? , sheas to have food stamps

has to have rent assistance and medicaid for her children. his idea of how to make money is get the taxpayers to subsidize his workers and he pays his workers the lowest amount he possibly could. that ipublicans argue want to talk -- i want to talk about steven mnuchin. you will be dealing with some of the issues that he will raise. wereinancial disclosures just released earlier today. have you had a chance to review them? senator warren: i have not. i understand he will put them in blind trusts. kevin: you think mr. trump should follow steve nugent -- steven mnuchin's lead.

aboutoncerns do you have him leading the treasury department and gary cohen being involved in this and ministers in as well? he will be the chief financial officer for the united states of america. how do you approach profit? to buy a bank after the financial crisis, one that had a big portfolio of loans that a lot of people have been tricked on and she did on and then aggressively foreclose against those people. to build an entire business model out of squeezing these families and he did it successfully within his narrow confine. he was known as the foreclosure king. not the guy who was kind of average in doing this or a little behind the curve, but the guy who really led the charge. kevin: i'm hearing you making

these cases, hearing these releases you are putting out. democrats in this congressional landscape face an uphill battle with blocking any of these appointees. so, what realistically can you get done at these confirmation hearings? at the warren: you look point of advice and consent -- power.olks have enormous they will touch the lives of every single american. many judgments they will make that we won't even get to see in public. they will determine what happens to our economy, what happens to workers. i think it's important for the american people to get a chance to look at these folks. in the end, it will be up to a republican majority to decide whether they will stick behind

someone who made his money by foreclosing on families and squeezing low-wage workers. whether or not we need someone who is at least that has at least demonstrated a little bit that they are working for the public interest. kevin: i want to ask you about dodd-frank regulation. a lot of of publicans on capitol hill are saying that they view the choice act coming from the benchmark potential for what we can see in the senate. with regards to dodd-frank, the , whater protection bureau do you expect to happen to these regulations and the cf pd in senator warren: let's start out with how people around the .ountry look at bank regulation

i'm talking about democrats, republicans, independents, libertarians. people are not saying please, let's make it easier for the giant financial institutions to blow up the economy again. let's get rid of the consumer agency that has beaten back mortgage fraud and has beaten back wells fargo when they were opening fake accounts for customers. most people around the country, democrats and republicans want to see stronger regulations not weaker regulations. in the unitedans states congress who are out of step with the rest of america. be supportiveou of a cfp be bored if that's what it takes to keep it alive? senator warren: i do not support the cfp board. because support a board the reason republicans keep

pushing for a board as they are trying to find a way to neuter this agency. this agency not to work. kevin: senator elizabeth moran, thank you for your time. vonnie: senator elizabeth warren on capitol hill. >> tillerson's confirmation hearing is still going on on capitol hill. it is nearing its fourth hour and now we go back to it live on capitol hill. >> i assume this is a concern you might share as well? uglynoted in the hub available report that i read that the interagency report acknowledged these types of activities were carried out , theg the cold war as well tools of sophistication have only advanced with the advent of cyber. >> many of these tools were

internet-based cyber warfare that was much different in that setting. when we come back in our next round, i would like to ask a few questions about exxon's involvement in equatorial guinea. i think that would be of interest. >> congratulations on your nomination. i want to go to your opening statement and talk about a couple of things we have not gotten into yet. one of the statements had to do with defeating isis. you said it must be our foremost priority in the middle east, but that defeat will not occur on the battlefield alone. we must win the war of ideas. if i could engage you to talk about how we can use diplomatic efforts and others to undermine the isis ideology and its legitimacy, how can we do that and improve the u.s. led coalition?

tillerson: it is a challenge because it does not represent a country we can apply traditional approaches to. the defeat of isis as an ideology is going to require and our capabilities own communication tools in terms of disrupting their communication to develop their network and further their ideology. this means getting into the internet airspace and putting forth different ideas and ideas forlivery of people persuaded to join them. the defeat of isis in the middle east removes their caliphate territory which undermines their legitimacy. that in itself will not defeat isis once and for all. it will simply warp to its next version as we see with terrorist

organizations that exist in the other world identify themselves with isis because of the strength of their brand, quite frankly. going to require a comprehensive interagency effort informed by intelligence and the defense department and other agencies as to how can we disrupt the delivery of this ideology, why the ideology takes hold in a particular location. there's not a country that identifies itself as isis, that's why taking away the caliphate is so important. >> it looks like they are trying to extend into afghanistan. it seems like they are trying to establish a caliphate in that area as well. the cancer has spread. in your opening statement and those who introduced you, you've talked about how the united states is not a strong and respected as it has been previously and we need a foreign

policy aimed at securing our andonal leadership improving national security. you and i have talked about having the capacity and commitment to use that capacity in communicating the commitment about the capacity. what youhare about intend to do as far as restoring america pasta edition in the world? : we are dealing from a position of strength, so the reason we are not perceived as that is that we are not asserting that strengthen these issues. it begins with re-engaging with friends and allies, reconnecting with them that our commitment is to the stability of the region, that if there are existing commitments, that we fully intend to fill those and developing a strategy in the region to deal with the most imminent threat. it means projecting the strength

of our u.s. military might and hopefully not having to use it. in terms of trying to persuade countries to change their course of action, but in the case of the most immediate threat, it involves can we construct a renewed coalition that using the forces that are already there, including the syrian kurds which have been our greatest allies, that we recommit and continue to support you with the capability raccatinue the advance on and contain isis if it attempts to move into other parts of the country and eliminate them from syria. in iraq is area progressing and will hopefully progress to a successful conclusion as far as removing the caliphate from isis. >> staying in the middle east in terms of the relationship between the israelis and

palestinians, i've always felt withoutect negotiations interference from outsiders was and the obama administration recently abandoned israel at the security council of the united nations by abstaining from a vote, which in the past we would have vetoed. your views onbout the vote to veto the un security council resolution and the subsequent speech by secretary kerry? is andlerson: israel always has been our most important ally in the region. they are important to our national security. the yuan resolution that was passed is not helpful. undermines setting a good set of conditions for talks to continue. the secretary's speech which followed the resolution i found

quite troubling because of the attacks on israel and in many ways undermining the government of israel itself in the terms of its own legitimacy in the talks. the president-elect has made it clear and if i am confirmed, i will agree and support that we have two recommit. this is in the statements i keep making about renewing and committing that we are going to meet our obligations to israel as are most are to partner in the region. >> staying with the united about the you talked international agreement and were asked about the climate agreement and climate change funding is a part of that. the obama administration has pledged $3 billion to the u.n. green climate fund. the administration is requesting

$1.3 billion in the budget for fiscal year 2017. you mentioned donald trump campaigning on america first. will you commit to know funding going to the u.n. green climate fund? mr. tillerson: my expectation is we are going to look at all of these things from the bottom up in terms of the funds we have committed toward this effort. aboutator isakson talked the value of using soft power. it seems there are so many opportunities that are necessary in countering global terrorism threats where money could be better spent than on these efforts, so i appreciate your effort to look into that. someor corker talked about of the wonderful things that had been done around the world because of u.s. involvement in soft power. part of that is power helping to power energy in a number of communities around the world.

many of us have been to africa to see what happens in the community where there's energy available that had not been in terms of helping as a tool so people could get education opportunities. situation where some of the programs in place have not supported the above energy and we have seen where the world bank has blocked funding for coal powered fire plants -- coal-fired power plants that would help bring opportunities to a number of countries in africa and i wonder if you could, and on the need to use all the sources of energy to help people living in pollard -- in poverty without power. talkedlerson: i know you about it but nothing lifts people out of poverty faster than electricity. give them light and the ability to refrigerate, food and medicine, it changes their entire quality-of-life. they no longer cook on animal

dung and wood cooking in their homes, so their health improves. i think it is important that we use wisely the american people's dollars as we support these programs. that means whatever is the most efficient, effective way to deliver electricity to these areas that do not have it, that should be the choice. use of the wisest american dollars. >> we are running slightly behind and we are going to go ahead and finish up senator kaine's and senator portman. recess take a 45 minute when these two german finish their time and each of them will have 10 minutes on the get back to start and we will resume in the same order and to seven minute rounds when we get back. we will recess at about 1:30 and come back at 2:15.

>> good afternoon. your whole family, welcome and thank you for your willingness to serve in this important post. the frankte conversation we had and i want the american people to hear some of the answers and the pressing and relevant questions around your views in a focused way and on the record. have askedcolleagues about how you will handle the the world'srom leading oil company to secretary of state advocating for human rights and open press and democracy. say --been encouraged to to hear you say you would not accept the annexation of crimea by russia and that you see russia as an adversary and possibly an enemy. i want to focus in on how you see putin off leadership and you

said previously the russians are strategic thinkers and have a plan. they have a plan to restore their role in the world order. plan is tois their actually change the world order and have used a wide range of tools and we have not successfully pushed back on their campaign. a bipartisan delegation to eastern europe and was struck at the number of times where we were briefed on a continuous campaign to divide europe and the united states to undermine our nato alliance and divide europe from within and russia has used all the tools both overt and covert to wage an aggressive propaganda campaign. back in the 90's after the fall of the soviet union, we used effectively radio free europe and we were engaged in a full on fight for democracy in the .arsaw pact countries

we should be using all of our tools to push back on this russian aggression. do you see rt as a russian propaganda outlet and how would you use the resources of the state department to counter russian propaganda and push back on this effort to change the rules of the world order? mr. tillerson: utilizing the opportunity to communicate to witheople of russia mechanisms that were successful in the past and utilizing those types of sources and providing information on the internet so people can access the internet and have availability to the facts, the fact that they exist to the alternative and reporting of events that are presented through the largely controlled media outlets inside of moscow, that is an important way in

which to inform the russian people as to what the realities are in the world. it is an important tool and should be utilized. >> it is the intelligence community's assessment of the kremlin has a long-standing plan to undermine the global democratic order we spent so much time building in the decades since the second world war. will you rely on and encourage the president-elect to rely on career professionals in the intelligence community in your role as secretary of state? tremendouson: i have respect for the intelligence communities and the role that they play and i will be informed by their findings and i think in terms of understanding that as they apply to the fact on the ground, it is important in guiding our future options for how to respond. >> i know this press conference has happened while you are here,

but our so ago, the president-elect finally publicly said he thinks is most likely true that russia was behind the hacking effort and he gave no more specific response to the question what should we do about it other than we will work something out. many of us are concerned about ae lack of a clear embrace of congressional role and congressional led sanctions. there's a bipartisan bill that will move forward so it's not just the actions of one outgoing president. instructiveen some answers and if done a solid and sustainable way, they can be a constructive tool of foreign policy. please reassure me you would welcome working closely with congress on an acting sanctions against russia in response to their war crimes in syria, their invasion of crimea and their

attack on our democracy. mr. tillerson: if confirmed, look forward to engaging with this entirely -- entire committee, particularly on the construct of new sanctions and in response to other questions. what i would hope is the executive ranch and my role at the state department, if confirmed, would be the latitude to use the sanctions to cause modifications in russia's positions. if they are already in place and mandatory, that may remove some opportunities for us to explore ways in which we can use them as a tool and give the russian government the option of moving because of the threat of those. >> i will say that i was a member of this committee when the current secretary of state came and asked us not to strengthen sanctions against iran not to give the executive branch the freedom to operate

and i think by a vote of 99 20, the senate when ahead with bipartisan sanctions. senator menendez press you about this earlier. i think we should work in consort and consultation, but there are some tools congress sometimes chooses to move forward with and it is my hope we can strengthen sanctions to contain putin's aggression and push back on his adversarial action. do you think it advances aerica's interest to support solid coordinating with iran and engaging in combat actions in syria against the moderate opposition and folks we have relied on as allies in the fight against isis? : as i indicated in my remarks, that is contrary to american interests. >> how can we strengthen our hand against iran giving their -- given their destabilizing actions?

as you reconsider the nuclear agreement with iran, if we withdraw from the agreement you let lori -- unilaterally, how visibilityain the into iran's nuclear program and how would that make us safer or stronger? mr. tillerson: with respect to the agreement to limit iran possibility to a progress on developing a nuclear weapon, if confirmed, my recommendations and i think this is consistent with where the president-elect is now, is to do a full agreement with that as well as number of side agreements that i understand are part of that agreement. whether iran and our ability to verify whether iran is meeting its obligations under the agreement and ensure we are enforcing all the mechanisms to hold them to that agreement. no one disagrees with the objective that iran cannot have

a nuclear weapon. the current agreement that does freeze their ability to progress but does not ultimately deny them the ability to have a nuclear weapon is the current agreement and does not deny them the ability to purchase a nuclear weapon. it just nice and the ability to develop one. i think there are additional areas that have to be considered and most importantly, if we choose to use this agreement as a way to provide an opportunity as to what comes next because the important question is what comes at the end of this agreement? what comes at the end of this agreement must be a mechanism that does deny the ability for iran to develop a nuclear weapon. that means no uranium enrichment, no nuclear material stored in iran. the other side is what does iran get working through nuclear partners and that would be the

access to peaceful use of nuclear material. nuclear power and medical and industrial applications would be under a very controlled process. whether iran is prepared to chart a pathway that looks like that, we will only know once we engage in discussions. here look forward to work with you to make sure we are restraining their nuclear ambitions effectively and fiercely and we are implementing what we get out of that current agreement and review it going forward. >> i appreciate your observation that every administration is anxious to work with congress until such a time it inhibits their ability to do whatever they wish. thank you for that. senator portman? >> thank you, mr. chairman. it has been a long morning and

now going into a long afternoon and i think of the one person between you and a break, so i will try to be as quick as i can. i appreciate your willingness to step forward and serve your country and i know it's not without some sacrifice, but it is an incredible opportunity. we talked a little in my office about restoring america's role in the world and listening today to your testimony, i think there is a consensus building that we need to do some things immediately to put america back in a position to be trusted and respected by our allies and adversaries. i like that we are not looking to be the world's policeman, but to put it in texas terms, or like a sheriff that gets the posse together. on the eastern border of ukraine and in crimea, that would be nato. memberh ukraine is not a of nato, that region relies on it and those countries need

leadership. with regard to syria, it's the kurds and the sunni countries in the neighborhood. china sea where china has been increasingly aggressive, i think it is pacific rim countries who as you know are very nervous. they are looking for leadership in the security umbrella has kept the peace. withe that is consistent what you have told me in private and what you are saying publicly today as well as an opportunity for sacrifice related to your service. a number of my constituents have family ties to eastern and central europe, including ukraine. it gotten deeply involved in those issues, including traveling in that region. my questions are going to focus on that. i know there was discussion about that, particularly article five. that you believe

article five creates a binding obligation to assist any member of the alliance is a victim of aggression regardless of their size or geographic location? mr. tillerson: yes, i do. >> would you threaten to break the commitment to article five as a means to pressure allies more -- to spend more? mr. tillerson: i would not recommend that. >> i think all of us would like to see our partner step up and do more in terms of the budget. ukraine has struggled to maintain its territorial integrity against russian aggression. one point that has not been discussed in the way out to be in 1994, theback united states, britain, russia and ukraine signed the budapest memorandum that said when ukraine gained its independence following the collapse having possessed the world's third

largest nuclear arsenal in exchange for giving up the nuclear arsenal, we would assure ukraine's sovereignty. i think that's important. we talked about sam nunn and his work on nuclear nonproliferation. that agreement has been violated by russia. question is whether we are going to agree to that as well. in her written statement, you talk about the taking of crimea. do you regard the russian annexation of crimea as an illegal occupation? mr. tillerson: yes, i do. if you served as secretary of state, similar to the way the united states never recognized the occupation of the baltic states question mark mr. tillerson: neeley that could happen is if there was a broader agreement that was satisfactory

to the ukrainian people. >> i think that's fair. if the president-elect were to ask you your device as to whether we should maintain sanctions against russia for its actions in ukraine until russia seized its aggression and the filled its obligation under the minsk agreement, what would you tell them? esther tillerson: i would recommend maintaining the status engageil we are able to with russia and understand what their intentions are. that mean keeping sanctions in place? mr. tillerson: yes, sir. >> do you support providing of lethal assistance so ukrainians can defend themselves? mr. tillerson: i think it's important we support the ukrainians in all ways to protect themselves from any further expansion or aggression. the cease-fires

will hold, but in the absence of that, it's important to support them in their ability to defend themselves. not provide them with defensive leave -- defensive lethal methods? >> outcome in consultation with the national security council and require the input of others but i would support that. >> the administration has chosen not to do that. this is significant and i heard you say it earlier today and this is a big change in terms of policy that is positive. talked about the terrorist threat today and that's a growing threat that we need to dress in a much more aggressive way. i believe there is another growing threat to our national security and the stability of our allies around the world, democratic allies in particulars. kinetic or military

threat. russia, china in particular and other countries are more and more pursuing extensive disinformation of propaganda campaigns against the united states and other democracies. this happened will before our most recent presidential election and the information we have about what might have happened here i think is part of a broader effort we ought to be more focused on, which is this effort of disinformation and not just by russia. ukraine,ve been to i've been struck by the conversations i've had with the leadership. this is at the top of their list. they feel like they are under assault every day and their democratically elected governments are being attacked through this disinformation propaganda campaigns. i've been struck public comments by officials in germany and the friends comments by our

in japan, taiwan and other places and the meddling in their democracies. blend a rangens of tools and methods, including cyber attacks entry forms to flood the zone on social media, the funding of ink tanks right here in this town and political organizations that help them and state owned media, some of whom are following your meeting today and are in the room with us today. have legislation meant to strengthen our outdated u.s. response to this disinformation propaganda campaign and establishes a new center at the state department to synchronize u.s. helped her propaganda activities that has just been passed. my question is how would you characterize the threat post by foreign government operations, not just russia, but in general and what should be done about it question mark do you support the establishment of this new agency and would you put your support behind that? : in terms of the

broader threat of cyber, i've put all the activities you have as a subset because those are delivered through digital means to people in terms undermining, or the placing of fake news, that's done by and large in the digital space. as part of the cyber strategy, it has to include how do we deal with this misinformation that goes on around the world and there are a number of actors playing in this space, russia, most actively, but we know others are playing in this space as well to undermine legitimate governments. the bad actors have got to jump on us. they've been at this for some time and we failed to develop a way to respond to that in the digital space. complex, technical issue that has to be part of a

comprehensive assessment of how is the u.s. going to protect itself in cyberspace and the aspect of those threats that present themselves and what are the mechanisms for appropriate responses and how do we get international agreement that sends messages back to the bad actors that there is going to be a cost if this continues, that there's a consequence to these actions. what is the proper proportional or maybe it is asymmetrical -- i don't know the answers because that is part of what is needed in the comprehensive assessment. that's one of the most vexing challenges, but we need to begin to address it. >> it sounds like you acknowledge the threat.

it but it strengthen is beyond cyber. it is funding think tanks spreading disinformation and false news. some of it is pretty old-fashioned and we are just not up to the task and radio free europe is not the answer. it has to be much more sophisticated and i look forward to working with you in that regard. >> we are going to recess until 2:15 sharp. then we will start at the beginning. i will see you at 2:15. vonnie: that is the senate foreign relations committee grilling rex tillerson, nominee for secretary of state and they will return after a 45 minute recess. you will be able to follow it right here on bloomberg. breaking news -- volkswagen adrs are up 3.3% and climbing after volkswagen agreed to plead guilty to the emissions scandal's and pay $4.3 billion

to settle criminal and civil cases. the department of justice says six folks wagon employees have been indicted. the auto maker has pleaded guilty to obstruction of justice and says of the cars were designed to evade u.s. emissions tests. this ties up this candle and shares are rising 3.3%. david: we were just watching rex tillerson testifying before the senate foreign relations committee. they are going to take a break and when they come back, cory booker is going to testify. he was absent from the hearing because he was taking the unprecedented that of an -- of testifying against jeff sessions.

this is a hearing that will last well into the afternoon here on capitol hill. kevin's are really has been covering the hearings on capitol hill. we heard a lot of back and forth with rob portman, about a relationship with nato and russia, about ukraine. to what degree has that been central to this hearing now about four hours long? kevin: this has been the main topic of this hearing in which rex tillerson are grilling him him about have to be frank, one of the most surprising to elements we've heard from this hearing is that rex tillerson says he was somewhat supportive of the transpacific partnership. he supports it but thought he would like to change aspects of a but did not get into which ones. i've covered trump since the beginning of his campaign and opposition to tpp was a central point of trump's candidacy. hearing rex tillerson say he would be somewhat supportive of

tpp is a major signal to the tpp willcommunity that be the basis point starting forward in negotiations with the international community should trump rip up and throw out the entire thing. we did hear comments to the extent that he can have his opinion on things that he's not going to make the president-elect feels same way. for example, in rolling back executive orders, he said it's good to give the president-elect the tools to do that but would not require it. trump he is going to let the trump as they like to stay -- as they like to say in the staffing world. if you're a republican, you are watching to see whether rex tillerson was able to keep the andort of the republicans when you listen to what he had to say with regards to whether

russia was meddling in the u.s. elections, he cleared that bar according to a time communicating with on the hill. a lot of questions heading into the hearing that some more guidance when you just oppose -- juxtapose what they say as far as having a failing human rights record and that they should not be cyber attacking the u.s. and he would take action to retaliate appropriately against them. when you take all of that and juxtapose it with the press today, you saw them speaking from the same political playbook, that there is some space in between. jen epstein is in washington dc and was watching the press conference. what was your main take away from the news conference? jen: this was promised about a month ago to be specifically focused on the president-elect's conflicts of interest in his

business and that was the big take away, that he did finally address that, talking about plans to step away from the daily interactions with his sons who will be running the business the a part of how the business operates, that he will not be divesting from the business, so he's not fully walking away from it. another was on russia that he did it knowledge for the first time that russia was responsible for hacking the dnc. he had this intelligence briefing and it put him in a position where he had technology that fact as opposed to the things he said during the final month of the campaign as far as a 400 pound guy in his basement might be the one who hacked it. he did a lot of redirection and now he has conceded that point and as kevin was talking about,

we are seeing the people in the being lessmay be kind and accommodating to russia and vladimir putin than they were even a week ago. that is striking, that there's a sign that while there is a willingness to work with russia, the trump team seems to be beginning to say we won't just agree with everything they are going to say and tried to deal with us. less kind tole russia and less cordial to reporters. the president-elect called buzzfeed a pile of garbage, a cnn reporter tried to get a question in to get the president-elect respond to this story published last night. he called cnn fake news. what is your sense of watching a news conference today of what the relationship is going to be like between the president-elect and the press for one thing. it did not seem like there was much of a way to schedule for a list of reporters.

this seems like a real free-for-all and there was not a lot of time for questions. it did seem like he called on some faces he recognized. fromd call on a reporter breitbart who is close to the trump team. these seems to be people he knew -- he did ultimately call on someone else from cnn, a reporter who had been one of the embedded reporters on the trump after he resisted jim costa fossil attempt, aggressively shouting trying to get a question in. reporter from abc did ask about russian interference in the election that jim costa had been planning to ask. is dealing press with something new here.

there were several times when people asked either multiple questions of the president-elect multi part questions. those are things that have worked with president obama. you can ask about five different topics and president obama will go back and talk about them all. a trump, i think it's clear he does not have the same kind of attention span and when he is doing a bunch of hard questions and not policy questions, questions about his values, it is easy to skip the ones he does not want to answer. and it will create a situation where reporters will have to reform you how they deal with press conferences. david: hard to downplay how much is going on in the political arena today. and we had the news conference from the president-elect. coming up, the ceo of a global engine maker talk

straight and the state of global manufacturing. this is bloomberg. ♪

david: this is bloomberg markets. vonnie: they are paying close policies to the trump and what it would mean. indianapolistom in and asked how a border tax could hurt his business. if they are trying to make american business more competitive, we support that part of his agenda, but the

american businesses already competitive. cummins has remarkable capability and we have over 25,000 employees in the u.s. and are able to export $2.5 billion in the last several years. we have a very competitive workforce and capability here, but we look forward to working with this administration to doing what we can to make u.s. businesses more competitive globally. vonnie: we know there is going to be a major border tax. what kind of tax could you sustain and still be of profitability right now? think a border tax or other things that will come into play are open. we don't know what the administration is going to put in and what congress going to approve. we stand ready to work with the industry -- with the of ministration and congress to find ways to make businesses

more competitive and we know toy are talking about ways look at making exports more attractive from the u.s.. one of the considerations is a border tax. what we cannot react to a proposal that is not their area. when there is a proposal, we will react to it but we support the effort to try to make american business more competitive. all of us that run businesses are looking for ways to drive and addnd improve wages jobs that are quality jobs for american workers. the president-elect has shown a propensity to micromanage companies on twitter and in public forums. if you were to see something like that written about your company, would it compel you to create more jobs in the united states? i can speak for our

business, that we are always trying to create more high-quality jobs. it's my primary duty to be a ball to help all of our stakeholders succeed. that includes our shareholders. that is a primary duty for me as a leader. long as i serve in this job, i will look for ways to add quality jobs to help improve the well-being of the people who work for cummins. i'm not clear what needs to change but that is what i think is my primary duty. vonnie: sales were down 10% but your is up two thirds of the you have increased your dividend and initiated a stock buyback. what is on tap for 2017 in terms of growth?

sayt: it is nice of you to we had a phenomenal year. we face challenges around the world and that's one of the reasons we are excited about things that might make businesses more competitive, where looking at ways to fill that primary mission and we will be doing that in 2017 for sure. nearly onelaunching product per week, making sure you have the best products to offer for our customers and we do supply a lot of products around the world as well as in the u.s. we export more than $2.5 million and we will try to continue to drive that production of because we think people want more of our products. more than half your sales are outside the u.s. what do you see in terms of

employment in the next year or ?2 months the president-elect says he's one of the best job creators got has given us. guest: we will be creating new jobs. we have every single year. one of the opportunities when you are leading a company like cummins is as we have great technology and strong customer partners, we create new business opportunities, and that means we can create new jobs. you mentioned sales outside the u.s. were in the last year, the u.s. sales have been about equal with sales outside the u.s. and we are trying to grow both through launching new products and offering our customers the best technologies in the world. we see the chinese

currency weaken and hawkish comments from the incoming administration and we know it's important for your business that china continues to grow. how does china figure in your strategy? andt: china is a big market we've been in place in china since the mid-70's. we've been there a very long time and have a number of strong partnerships there. bring able to technologies we developed in the u.s. and products that we make in the u.s. to the china market which helps our customers and helps to grow our customers at home. china has slowed its growth in infrastructure areas, but we think there is strong growth ahead for china and we believe we will benefit from that growth. coming up, could wall

street seaforth quarter earnings . bloomberg has the data heading into bank earnings season. this is bloomberg. ♪

david: this is bloomberg markets. i'm david gura. vonnie: and i'm vonnie quinn. some of the asset classes moving after the donald trump press conference -- the president-elect speaking about many different things, including from thoseself away assets. the ruble had been above 60 come a very topsy-turvy day for the ruble, now it is stronger versus the u.s. dollar. the mexican is a roundabout where it was this morning.

the chinese yuan continued to weaken as did the chart -- as did the turkish lira. today which auction is why this yield is moving. pfizer down 2% and the biotechnology index down. bank of america will report on friday kicking off bank earnings season. their post to post a biggest fourth-quarter profit since the financial crisis. banksg us now is our reporter, laura keller. we are looking for comments on conference calls as to what to expect in the next quarter, particularly now that we know there's going to be a whole new administration and regulatory regime. have three of these big bank ceos speaking on friday morning and we would love to share their comments on what they expect from a trump administration, and how those things will impact the banking

sector. unfortunately for us, a lot of times the people doing these come in the executives of these banks don't give us as much insight as we would like to hear. but perhaps some analysts will drill down and ask how interest rates will move bank stocks or help with lending more things like mortgages. vonnie: we know that bond traders did well, equity traders not so much. what are you looking to see in the results? laura: we are interested in seeing where the trading is going. we have heard little more from james warman, morgan stanley. they have talked about how we are not hitting this upsurge in bond trading every analyst on the street would love to see. but what we looked at and wrote about on the terminal is analyst

predictions for trading income and revenues there. if the productions go where we think a are going, it could be the best year we've had since 2009. will they give us good things were bad things? it is both for them. laura: i don't think they ever feel they are prognosticators of where the interest rate is going to go. they would like to see it going higher because the net interest margin does rise. they are able to keep a bigger portion when the intest rate does rise. general commercial banking, they will get more revenue from that. vonnie: how have the stocks been doing? laura: things have been up for the year's and struck -- since

trump came on board as president-elect. some analysts are saying they feel may be some of the stocks are overbought on this production that we will see a lot of administrative change for things like dodd-frank and the rules around the department of labor in terms of implementing. we hope to see some changes. up, the codirector of diversified fixed income, her fund is being all of her peers after rebounding from a loss. we will get her insight, next. this is bloomberg. ♪

♪ >> and scarlet fu. all over: -- oliver: welcome to bloomberg markets.

david: we are covering stories -- scarlet: donald trump holding his first news conference since being elected, details on how he is stepping away from his business interests. he also spoke about russian hacking and immigration. donald trump: we are going to build a wall. i could wait a year and a half until we finish negotiations with mexico, which will start immediately after we get the office, but i don't want to wait. scarlett: is secretary of state nominee rex tillerson faces off against senators. he is pressed aggressively on his ties to russia. speaking of russian oil, prices are rising today after that processed a record amount of crude last week. u.s. markets close in just under two hours. let's check where they are trading with julie hyman. you look at the mexican peso, or

drug stocks, let's look at major indexes. julie: there was a volatility while trump was speaking. the s&p almost unchanged entirely, down. dow gaining. littlea split here but change to the market is what we are seeing. look at the intraday bouncing around. that trump presser starting at 11:00 a.m. stocks climbing a little after that and then coming down. investors were looking for more clarity on his fiscal policy, fiscal stimulus. he did not speak about that. that could be what is behind some of the disappointment as the s&p now stands about 6% above where it was pre-election. if you look under the hood, we are seeing movement among the groups. if you look on the map. energy shares of the best performing spot, one third of 1%.

that is the push and pull equaling zero when it comes to the overall change in the s&p 500. specialty pharmaceutical companies. caps like pfizer, bristol-myers, specialty pharma percentagewise appears to be taking some of the worst of it. after trumps did say there would be some kind of dating process to bring down drug prices. it looks like that is what we are seeing this reaction to. we have seen reactions in the defense stocks as he spoke. on the flipside, if you look at the so-called haven areas, we see buying within treasuries. that is pushing the yield down .35%.5%. -- 2 we are not seeing that as of yet. gold futures catching a bid

here. there does seem to be a little bit of a rotation today. with the refinery utilization rate, notable we did see prices climbed more while he was speaking. unclear if there is a connection. we now see a 3.5% gain. oliver: a lot of interesting moves. thank you for breaking it down for us. taylor riggs is in the newsroom with more. taylor: donald trump in his first news conference since winning the presidency in november reiterated the need for best repealing the volcker act. donald trump: as soon as our secretary is approved, almost simultaneously, shortly thereafter, a plan. it will be repealed and replaced. it will be essentially simultaneously. taylor: he is cautioning republicans to let democratic the blame for problems with the aca. afterent obama's tweet

his address was the most popular address last night. my last ask is the same as my first, believe not in my ability to create change but in yours. the messages and retweeted more than 500,000 times. the number of asylum-seekers arriving in germany plunged last year. the government says about 280,000 arrived in 2016, below the knee hundred thousand that sought asylum in 2015. 800,000 that sought asylum in 2015. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. oliver: thank you. for more on the big moves and pharma today, let's bring in drew armstrong.

we just brought up the biotech index because you can see what happened in the drop off. it is incredible at about 1120 12 -- 11:20 will trump was giving his press conference. drew: if you have the doubt that trump the not have the power to ave markets, in the span of couple of seconds he surprised everyone and so the pharmaceutical industry has been "getting away with murder" and crossing to have the u.s. government negotiate prices on behalf of consumers. he's presumably talking about things like medicare which is not currently what is done. to destroy the nasdaq. the s&p pharmaceutical index and the industry reaction. they thought he would be relatively friendly to drugmakers. hillary clinton and bernie sanders were the ones going after the industry. trump seemed like a pro-business kind of guy. he is a populist. point, just to that

december, we saw some outflows with the big n -- big move in november. scarlett: that has been the case. the expectations coming in his counter to what we are seeing. he is taking up the middle of them are present pushing back against high drug prices. drew: this idea of having the government negotiate drug prices is been forever a top democratic issue, when that republicans, including tom price, donald trump's hhs secretary nominee has a very against. the drug industry has been trying to defend tooth and nail against this, now he's picking up the populist banner. this is a pocketbook issue that hits a lot of americans and he said we will use the power of the government to negotiate. it will run into a lot of opposition. scarlett: compare and contrast how the u.s. government pays for drug prices compared other places in the world. drew: it is complicated. plant medicare to cover the

elderly, which contracts out to private companies, insurers, benefit managers to run the health plans that cover drugs for seniors. you have medicaid which covers the poor. medicaid does have some statutory rebates and discounts that drugmakers have to give to. other countries typically in europe negotiate directly with drugmakers. they say if you want to sell this here, you have to sell it for this much. we have seen cases where they have refused to cover these drugs. that can be bad for patients. whereas in the u.s., if you can pay for it, you can get it. oliver: member ranked returns for the nasdaq biotechs. the story is clear. everything is in the red apart from a few stocks. we have seen that he has a habit specific out of the

traded companies. is there anyone on this list of its endangered or he could point out their prices? drew: the folks he was see him go after, deftly have to take a guess, he will not go after some obscure pharmaceutical company that only folks trading on the nvi have heard of. equal go up to the biggest, best known automakers. the biggest, best known aerospace companies. this is an issue that is not getting what specific company. this is a sector-white issue that affects not just what pharmaceutical companies are able to charge now, but what are they going to be returning on r&d. is he going to come in and regulate pricing on the drug i just poured in $50 million? this will have an effect across the sector if it turns out he is able to carry out some of these ideas. scarlett: what the you think -- how do you think the drug lobbyists will proceed?

who do they go talk to? they areave a feeling negligent. the folks on the hill, republicans that are long relationship with -- trump is in charge. he has a bully pulpit but is not writing legislation. that is key to remember. the industry will do a very concerted effort. to have started up and advertising campaigns saying our products save lives. if you want them in america, is the cradle of pharmaceutical innovation, high-tech jobs, you need to support this industry. -- u.s. has for a long time they get other cheaper prices than we do. the industry is going to fight back extremely hard against this and will find as many allies as they can on capitol hill. oliver: some of these places

were people follow the conducive to positive thought. rex tillerson has in testifying before the senate foreign relations committee on his nomination to be secretary of state in the trump administration. here is what assessment he get the lawmakers earlier today. rex tillerson: the imminent threat is isis. probably the greatest and most complex threat we are facing today is in the area of cyber security. the u.s. has significant capabilities of its own, but we also are extraordinarily vulnerable. scarlett: let's get the latest on bloomberg's kevin from capitol hill. you have been following the hearings for rex tillerson and the headlines generated out of the trunk news conference. -- trump news conference. kevin: there wasn't as much contradictions coming from rex tillerson as perhaps some of the republican aides i spoke with

before the hearing were concerned about. i think both president-elect trump and tillerson district in which more aggressive tone against russia than what we are used to. in particular rex tillerson testifying before the committee earlier, saying russia was to blame for the meddling in the u.s. election. trump said that on the podium earlier. respond,aid we should the united states should respond to rush it does that. he also criticized the obama administration's response to crimea and the situation in the ukraine. what you saw from tillerson was an effort to try to appease and went over and ease the concerns of senators like lindsey graham and john mccain. the type of senators he will need to give support with if he wants to be confirmed. i think that was the goal and he a conflict that mission. oliver: it seemed like one of

those more stark changes of town from trump's conference today and tillerson was they took a little bit of a harder position on russia and their involvement in the hacking. this is coming at the same time that these hearings have to go through to get approved. they just got the intelligence report. was he faced with information that was too much and overwhelming or was this a way to get people more comfortable with him? kevin: this is a tactic we have seen from donald trump for quite some time on the campaign trail. he lambasted the media. he called it fake news. and a continued pressing onward with his own agenda and what he wanted to say. with regards to tillerson, if you're in the business community and you hear him talk about things like the transpacific partnership, saying he is not opposed to it and would like to take a second look at it, that the key signal to the business

community he will be willing to negotiate on that deal despite the rhetoric we are hearing from president-elect trump, who has been incredibly critical of it. if i'm looking at the distance between tillerson and trump, trade was the big take away for me that i noticed. again, a strong signal from tillerson that he is going to be much more aligned with the traditional position on tpp. scarlett: it doesn't really matter because he is 30 donald trump's bidding -- he is there to do donald trump's bidding. what will you be listening for in this afternoon's session? kevin: you have to watch carefully with what democrats will continue to press him on. when they do return this is an opportunity for democrats the huddle and to continue to press or responded to what we heard at a new york from trump. look for key questions about tillerson based on what we just

heard from trump. and again russia, russia, russia. that is what everyone will be talking about with rex tillerson. scarlett: kevin, thank you very much. nation's'show the pension fund will position its investments. we will hear from the cio of calpers. loretta lynch discussing the fines against volkswagen. this is bloomberg. ♪

♪ scarlett: this is bloomberg markets. oliver: last month, the nation's largest pension fund role at the rate of return on investments from 7.5% to 7% over the next

three years. erik schatzker spoke with the cio of calpers about what this decision means for the $306 billion funding going forward. >> setting the discount rate, the assumed rate of return. decision ourrder system has to make in order to protect the system, provide for the sustainable and sustainability of our system for generations to come for our beneficiaries. a very important decision, very consequential. the exact number is not an exact science. is at a reasonable number? we think so. we think it's a reasonable number over the long-term, again, as a long-term investor we look at 40, 50, 60 years. it costamare intermediate forecast, which were attention fun like eliopoulos is for 10-year. erik: with the number below or?

the argument for a lower assumed return is a powerful one. we live in a low rate world with low rate returns on assets. argued for asor 6.2% assumed return. a number of well-regarded professional investors who have given the subject some thought, like howard marks of the tree with which eliopoulos has investments --calpers thanks 5.5% is more realistic. ted: we look at that advice in our analysis. establishing our suit rate of return took into account the low interest rate environment that you allude to. in building our capital market assumptions we assumed over the next 10 years are fixed income portfolio would be at about 3.5%

over a 10-year timeframe. on top of that in constructing our portfolio in constructing our sessions, we assumed our global equity portfolio, are stock portfolio return at about six point 3% -- 6.3%. the intermediate trade i referred to earlier, the 10-year period, those assumptions added to that 6.2 number. i think that's a reasonable number over the 10-year time period, the intermediate period to expect returns from a broadly diversified portfolio like calpers. our actuaries with longer. they took our 10-year forecast and look from years 11 to 60. in doing that we assume some correction, summer version to the median interest rates. i think is reasonable to look at years 11 to 60 and have some

return to normalcy and interest rate environment. when that happens we should expect some higher rates of return in the out years. when you add all that together in our analysis looking out over 60-year period, is a reasonable to assume he could achieve a 7% return over that time period and it is premised on this intermediate period of getting a 6% return. erik: in that intermediate period, underfunding continues to be exacerbated. ted: that is right. erik: that make your job nearly impossible. ted: it makes it a challenge. that's the word i have used over and over again with our committee. going into this period over the next 10 years, we have quite a challenge in front of us. not only the market challenges we just discussed, what the funding status of calpers. we enter this time period 68%

funded. now the discount rate lowered, 64% lowered -- funded. the cash flow of the calpers system, the demographics of the baby boomers retiring, the cash flow of calpers has turned negative. we're taking in less cash. is a challenge and we have to pay attention to that. one of the ways we do that is we want to invest for the long term, but the pay attention to where we can take some risk off the table. where we can redeploy assets within the asset allocation out of equities into other asset classes who are taking advantages of opportunities. erik: let's talk about your critics. you have many. they say calpers' returns over the past couple of years have been well south of that new 7% target our evidence you and your investment team are failing. they accuse you of trying to

sow panic, as he did for the lower rate of return than 7.5%. ted: we are not panicked. we are cognizant of critics on both sides of the equation saying the return assumptions are too low and others say it's too high. what we look at is look at the 20-year return number over the course of the last 20 years. it's right at about 7%. over the five year number, 8%. important.eriod are three-year numbers are more like five. to 10-your number is more like 4.5%. there is risk to this portfolio. know weiven year we might underperform that 7% number or over perform. our critics don't mention the 18% return we received three years ago.

there is a decent amount of volatility in the portfolio we account for. over a very long time i think a 6% return with a broadly diversified portfolio is reasonable. oliver: that was the cio of calpers speaking with erik schatzker earlier today on bloomberg markets. scarlett: we are following the markets and tracking the movement, particularly the declining health care compans. the dow moving around quite a bit. of 3/10 of 1%. inching ever closer to 20,000, but still not there yet. oliver: beating the s&p today. quite a bit better than the benchmark index since the election. scarlett: this is bloomberg. ♪

♪ oliver: this is bloomberg

markets. scarlet: the confirmation hearing for exxon mobil ceo rex tillerson, donald trump's nominee for secretary of state has resumed on capitol hill. senators are questioning his ties to russia and vladimir putin. one thing that is notable here is how much of a department -- the parts are tillerson'-- departure tillerson's remarks of than from trump's. considering russia as perhaps a threat to the united states. scarlet: oliver: he said it was a fair assumption that they were involved. >> again -- wow, x1 has netflix?

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show me house of cards. finally, you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. anything with a screen is a tv. stream 130 live channels, plus 40,000 on demand tv shows and movies, all on the go. you can even download from your x1 dvr and watch it offline. only xfinity gives you more to stream to any screen. download the xfinity tv app today. bloomberg world headquarters, this is bloomberg markets. i am scarlet fu. let's check on oil and more with julie hyman. julie: oil has been interesting.

we have seen this volatility as we saw the press conference by the president-elect. there was some volatility, but mostly it has been an upward now at 5129. it does seem as though oil was off the weekly inventory data. at issue is not of importance the supply data, which showed a builder 4.1 billion barrels. it is the crude processing. how much are refiners processing? we have a chart of that. million barrels per day. that is the most going back to 1989. this shows the one-year chart and the 17.1 million figure. we are seeing a high refinery utilization rate and a lot of barrels are processed and so that is leaning speculation

inventories will not last long. it is bullish for oil. we are watching gold today. .old has been bouncing around at the moment it is higher. we have seen a bid coming back into the risk aversion trade. this moving higher along with treasury. i want to check on week. the usda coming out with a report at noon. wheat futures are down today. this is the first report of the season. it could be the smallest since 1913. the same time, inventories are and other grains. that could be putting pressure on the greens today. oliver: thank you so much. rex tillerson is in the hot seat today to become donald trump's

secretary of state. some have expressed concerns due to his ties with russia. he said the following today -- >> i have found the russians to be strategic in their thinking and they have a clear plan they have laid before them. they have a view that following the breakup of the soviet union, they were mistreated in some respects in the transition period. they believe they deserve a rightful role in the global word ld order and are searching as to how to establish that. oliver: this morning we spoke to , the formerter president of the shell oil company who asked about the critics. succeed't think you can as the ceo of an international oil company if you are not a diplomat. you are continuously in the

external world. yes, you are working for your shareholders. you cannot satisfy your shareholders if you're not in an excellent stage of preparation and execution of diplomacy around the world where you have to represent them and you are bringing a firm into another country where you're not only going to exploit their resources, you're going to build a supply chain. you're going to build a workforce, build relationships across communities and the entire government if you're going to succeed. rex tillerson has far more diplomatic experience than many previous secretaries of state. high your experience, how of level to the talks become going into another country? i can't imagine that every well drilled you are at the meeting table. >> i think it really is setting the stage for what that company

is going to bring into the country and assessing the needs and also the environment and figuring out if you can make money in the process of working through the various and sundry differences. by setting the stage, you are operating at the highest levels of the country to make sure you are welcome. then you have a team of people who are working at other levels of the industry to figure out if you can make a go of what you are attempting to do. closure.e is the you can't close a deal if it is not advantageous for you and the other country will not close if it is not advantageous for them. that is where the negotiations take place. they take place at multiple levels but ultimately the closure of the deal in a big deal, billion dollars, can the of the top of the company and country. >> you make a case rex is a

negotiator and diplomat. he is an oil diplomat. to what extent is this an advantage or disadvantage as he comes to this job? .> oil is the endgame natural resources is the endgame. you are, and your people are, investigating everything from universities for the future of the skilled workforce, skills training, to develop a workforce, you are looking at the legal, the law surrounding oil and gas to see if there is adjudication for differences of opinion and whether that is workable. you are looking at the sophistication of the communities in which you're going to be operating and what kind of a community education requirement is necessary in order to succeed. you are looking at all the

environmental conditions that need to be honored and whether you can work with that environmental framework. there are all kinds of issues that enter into it, which really cover the entirety of working in another society. oliver: that was john hofmeister. the former president of the shell oil companies speaking to bloomberg this morning. scarlet: joining us more is david marino. you covered the energy market for 15 years. talk about your impressions of tillerson in this hearing, his performance, his tone and body language. how does it differ from him as ceo of exxon? >> what might have been a surprise was his harder tone on russia. he is saying nader when the u.s. should have supplied weapons to ukraine.

that was a bit of a bit of a surprise from those who thought he might be soft on russia. he is trying to put forth the is a toughhe negotiator and is a fair negotiator and is open-minded on a lot of issues. he can translate his skills as a negotiator from the oil industry into diplomacy. oliver: when you come from a journalist's perspective about energy, how does he fare as a leader throughout the ups and downs of the industry? anid: exxon is known as aircraft carrier compared to a lot of companies. they take the long view. they tend not to get as or as reactive to ups and downs of the market as smaller companies. they can write things out. they look for 20 years, 10 years, not this year and next year. scarlet: how careful is a rex

tillerson? we have in donald trump, issued from the hip leader. head of a hundreds of billions of dollars company, you can't be shooting from the hip. you are working in 20 plus exploring for oil, managing relationships, do can't go around shooting from the hip. you have to be measured in what you say and let your actions speak. oliver: we talk about his dealmaking and travels. who did he deal with when he is doing that? is it other energy ceos, is that the government and corporations? david: it depends. in some countries there's very little difference between the oil company and the government. in that case, he is dealing with the highest levels of government. scarlet: do you wonder if

there's going to be tough questions on mexico? exxon just bid on deep water assets and it is deeply involved in the country. donald trump says mexico will pay for the wall. would not be surprised if he gets questions on that. he will try to come across as a wordsed, more measured than donald trump. scarlet: then saying they will pay for the wall. david: exactly. exxon needs to do business there. that is something he will try to get across. oliver: talking about measured words, he was asked about the withvement through exxon sanctions on russia. what actually happened? david: but he said was he did not directly lobby and to his knowledge there was not lobbying by exxon. they were looking at the effect

of the sanctions rather than whethero influence sanction should be brought. it is hard to tell what the discussions were. there is a lot of nuance. scarlet: nuance that might be tough to capture in a confirmation hearing. you can follow the rex tillerson hearing on the bloomberg at live go and at bloomberg.com/tv. oliver: taylor riggs is in the newsroom. says donald warren trump's refusal to do vest ownership of his companies is a red flag. she spoke to bloomberg tv today. >> i am concerned because he is not moving where he needs to move, we need to have him divest. he needs to get rid of his business interest and put them

in a blind trust. taylor: trump's choice for treasury secretary is planning to divest his interest in 43 companies and investments. he has $1 million in companies including ge, berkshire hathaway, and microsoft. trump has chosen david choking to head the department of veteran affairs. of v.a. system has a budget $180 billion and has been engulfed in controversy over mismanagement and falsifies record. a new report says afghan security forces are not capable of securing the country by themselves. forinspector general afghanistan finds the country needs a stable security environment to greet event from becoming attractive to al qaeda. years sincetwo nato-led forces withdrew. italian premier is

hospitalized after falling ill. news agency says he underwent surgery at a hospital today and is in good condition and alert. the 62-year-old took over as premier last month after the previous government resigned. news, 24 hours a day powered by 2600 journalists and analysts in 120 countries. i am taylor riggs. this is bloomberg. scarlet: coming up, we will hear from david of goldman sachs. from new york, this is bloomberg. ♪

are watching

bloomberg. i am scarlet fu. oliver: this is your global business report. says the s&p 500 will rise in the first quarter of this year. for another year, boeing has lost in the competition of who can book the most plane orders. new business shrank last year. oliver: how jack ma turned alibaba into an e-commerce giant and became china's richest man. scarlet: goldman sachs strategist david kostin gives his latest take on the market. he says the s&p 500 will rise to 2400 and the rally has the potential to stay lower by the end of the year. more from this interview from the strategy conference in frankfurt. >> the expectation is they will be -- there will be significant

growth in earnings. my concern as a strategist is that enthusiasm is overextended relative to the amount of tax cuts. in bonds, jeffrey warns decadee end of the three rally in bonds could be near. he says if the treasury yields goes over 3%, say goodbye to the bond bull market. he predicts the level could be reached in this year. airbus and boeing booked 320 jetliner orders to end up with 731 for the year. ining sold 668 aircraft 2016. airbus has been the leader since 2012. both companies saw new business dwindle in 2016. the taiwanese company that is posted its first

annual revenue decline after the global smartphone maker went through its worst year on record. sales fell 2.6% last year. it is the biggest contract manufacture of electronics. scarlet: time now for our bloomberg quick take where we provide background on issues of interest. jack ma is china's richest man, a net worth of $36 billion. he can think the internet and alibaba. alibaba became a global high fire when he took it public in 2014 and it sold $25 billion in the new york stock exchange in the biggest ipo in history. has been meeting with donald trump to discuss how alibaba could create one million jobs in the u.s. trump predicted they would do great things together. ofwas focusing on expanding the u.s., hoping to position alibaba as a platform for the middle class to buy from the

rest of the world. ma traces his inspiration to 1995 in seattle. he tied to the word beer into a search engine and could not find information in chinese. he registered a directory which eventually failed. alibaba withtarted his wife and 16 cofounders. he called the company alibaba to sesame," phrase "open magic words in the arabian nights legend. makers, auired apt movie studio, and part of a soccer team. now he must convince investors his buying spree will help in oversee markets including the u.s. to be sure, he has benefited from government policies. he is also whether mercy. china could alter the contract, tight and censorship, or restrict the payment service. being a high-profile billion or attack -- attracts scrutiny.

you can read more about jack ma and oliver kahn takes on the bloomberg. -- all of our takes on the bloomberg. oliver: coming up, more of our interview with david kostin. this is bloomberg. ♪

this is bloomberg markets. i am scarlet fu. oliver: investors expect to innings to grow 12.5%, due part to promise tax cuts by the donald trump administration. that enthusiasm may be overdone, according to david kostin. he predicted the s&p 500 will go to 2400 in the first quarter of the year. he explained his reasoning to matt miller in frankfurt today. >> the corporate tax cuts are the area investors are focused

on, in terms of the magnitude of accretion to earnings. of the a key driver overall market. the concern i would have would be sometimes in the latter part of the quarter, in early march, we are likely to get information from the senate and house budget committees as to how large of a deficit congress is willing to live with. one of the issues of the tax cuts is what the impact would be on the budget deficit. a key aspect of earnings would a lower taxes and there is cost to that from a fiscal point of view. the investor community is focused on the upside opportunities, the idea of the repeat -- repatriation tax, a change in the tax policy about companies, their flexibility in repatriating overseas cash. matt: this is something donald trump talked about. people said $2 trillion held

overseas. do you expect a lot of that money to come back into the u.s.? >> this was one of the items hillary clinton and donald trump the cash heldg, overseas by corporations should be repatriated back to the united states to generate tax revenue for the government and free up flexibilities for companies to reinvest. in 2004 whene there was a tax holiday, a lot of the money came back. that is probably the most immediate way for companies to get at that cash. my forecast is there will be $200 billion of cash that will come back later in 2017 with more coming back in 2018. of the money coming back this year, expectations would be billion used to

repatriate, repurchase shares. that is a key source. one of the most important sources of demand and that is likely to be the case this year as well. expect the s&p at 2400 in the first quarter. 2300 at the end of the year. you expect to the optimism to fade. >> the basic issue is the level of earnings. think about what happened, the discussion was about how high multiples should go. there was not debate about earnings. could the multiple of the s&p 500 on a forward bases climb from 17, 18, 20 times. the idea of an expansion was the story of 2014. 2017 interest rates have been moving higher and we expect them this year.her that environment is about earnings, not about the

multiple. the question about earnings, the lower taxes or changes in deregulation, or lesson force meant of the existing regulations, which would be potential drivers of earnings. expecting 5% in adjusted earnings. the expectation of investors right now is they will be much more significant growth in earnings and my concern as a portfolio strategist is the enthusiasm is overextended relative to the amount of tax cuts that are likely to be implemented as a result of the budget deficit. that would leave the market to rise to around 2400 in the first quarter and fade toward the latter part of the year. we are trading at a high valuation. around thetrades at 90 percentile of historical valuation. 10% of the time over 40 years has the market had an index at a

higher level than today. the median stock, and for portfolio managers who are choosing individual stocks, the around 98des are percentile. it is extremely high which means the earnings are the key part of how you get to aim higher market. oliver: that was strategist david kostin. scarlet: the confirmation hearing for rex tillerson resuming on capitol hill. call a saudio arabia a human rights violator. you can watch the hearing on the bloomberg at live go and on bloomberg.com/live. from new york, this is bloomberg. ♪

>> 3:00 p.m. in new york. i'm oliver renick. scarlet: i've scholar -- scarlet fu. welcome to bloomberg markets. ♪

oliver: we are alive from bloomberg world headquarters in the next hour to we will cover stories in chicago, boston, and moscow. president-elect donald trump turns his company over and there is no interest in it though he is not quite giving up ownership. mr. trump: i can run my business and government at the same time. i do not like the way that looks, but i would be able to do that if i wanted to be reality only one. you cannot do that in another capacity but as the president, i could run the trump organization, a great company, and run the country. i would do a great job. dissect what he said about ties to russia and vladimir putin. and how far will bond yields climb? the yield is up 2.3%. some investors are warning of an

end to bull market. we will discuss that with kathleen. we are one hour away from the close of trading. we have been bouncing around. what is the latest? julie: still bouncing around. things are picking up a little bit with trading. 500 is just holding on to a gain of about one point this bouncing all around while donald trump was speaking in the press conference today as investors try to figure out what happens next. taking a quick look back at what happened since the election, we have seen a big rally in stocks, about 6%. it is notable much of the rally came in the first several weeks following the election. then we flattened out if we will. we have hit relatively consistently records in the major averages. small increments. we have not seen the big movements like we were as investors now wait for promises

the market is pricing in. decreasing regulation, particularly in industries like financials. an area where we could potentially see more regulation or different types is in the pharmaceutical industry. it is there we find the biggest drags on the s&p 500 today. some of the big drugmakers declining on the day, after donald trump talked about introducing some kind of bidding system to keep drug prices down. johnson & johnson and pfizer again are the biggest point drags on the s&p and percentagewise, we have big percentage decliners within pharmaceuticals as well. peridot and alexi on, the biggest specialty makers falling. offsetting that declined to some extent is again we are seeing an energy shares as oil client -- climbs today, it increase in the pumping,e refiners are

we have oil majors also getting today'session. you mentioned what is going on with the 10 year yield. right now is unchanged. the tenure hadn't been getting a bit earlier today. 2.6 percent of the threshold to the end of the bull market, now, weo three right will be moving in that direction very substantially. president-elect donald trump says he will lead -- leave his position of various companies but will not divest his ownership. caleb has been covering trump's finances. you listen to what he said earlier, we're he said he could run the company and the government at the same time. it wouldn't look good but he could do it. by law, he is not required to step down, is he?

caleb: no, he could do that if you wanted to. it is certainly more than he is required to do. watchdogs hoped he would or at least transfer ownership to his children. he is not doing that. he is maintaining ownership interests, turning over management to his two sons and his current chief financial officer. ethics advisorn there. they will not do new deals or licensing agreements overseas. they are leaving open the option for themselves in the u.s. there will be a lot to watch for going forward. it is not an established law but we have had rich presidents in the past. anyone as wealthy as him, with the sort of business size, or just the general mouth behind it?

caleb: i think the best example would be rockefeller. he turned over 10 years of test reset -- returns and the fbi allowed him to be grilled specifically on his finances before congress. he kept his interest in the family inch -- family business, oil among them, but he went to fantastic lengths to make sure everyone understood them, could see who he was paying money to hear it in exchange for getting to keep those interests, he went to the real depth of transparency, and we had not even gone one year of tax returns from donald trump. oliver: yes, they have not have the same degree of transparency. scarlet: the trump organization to be run by his sons and donald trump would not be involved. do we know what their involvements in politics will be?

yvonne cattrall -- ivanka trump will play a larger role in the administration. >> yes. we know of vodka -- of vodka trunk -- ivanka trump will not be involved. his family business trust for his brother and his mother. the brothers will run the company. that theoretically should be a complete bright line between the organization and the president. this is the family business. they do als, the kids will go looking for them and bring them to their father. it has always been very informal. the man does not use email or any like that. you know, dinnertable conversations, part of the trump organization has been run. goingf the problem forward is still having these conversations.

>> people will wonder and ask if you are. scarlet: there is more to discuss on the topic. contains to testify on his nomination to be the secretary of state in the trump administration. he has faced questions from both parties about russian hacking and the best ways to respond. >> i have not had the briefings yet. the other potential ways to respond to these types of attacks, and if sanctions are the most effective, that is what i would support. >> running us now from capitol hill, kevin has been covering the earring. what is going on, what is the latest they are tackling now -- now? mark what we are noticing here is

risks tillerson -- rex tillerson is looking to an over support of republican slick senator john mccain and senator lindsey graham. they are the types of republicans who are skeptical of rex tillerson's ties to russia. donald trump adopted a more russia,ve tone toward and tillerson is echoing those sentiments here on capitol hill. a lot of tough questions from lawmakers. i would note rex tillerson unlike trump said on capitol hill that he actually supports the trespass of a partnership but he would want to -- the transpacific partnership but he would want to take a look at it. trump is opposed to ttp. it does not matter what they think or what their stance is. in the end, rex tillerson will execute what donald trump us his

ideals are and what donald trump's ideas will be. >> that is a great point. particularly with the issue of russia and meddling in the u.s. election, so interesting to watch especially on a dual screen. tillerson discussing ways of how he would respond on the issue of cyber attacks. at one point in the hearing, he evoke roosevelt and said he would adopt it takes stick mentality in that he would be someone, particularly more aggressive. a lot of back-and-forth here today. one exchange in particular with senator marco rubio, a republican, skeptical of rex tillerson's business in russia who asked point blank if he thought if tillerson thought that vladimir putin is a war criminal. tillerson said he did not think

but that he believes vladimir putin and russia have violated human rights laws in the world. i think that perhaps the best example of how he has to navigate potentially put the difficult waters. oliver: we will check back to see how that is coming along. you can follow the conversation on bloomberg.com. scarlet: taylor is in the newsroom. taylor: two as people in brussels in connection with the 2015 attacks that left 123 people dead. a series of coordinated attacks at a football stadium, restaurant, where a concert was taking place here the number of asylum seekers plunged last year. in 2016,,000 arrived far below the 800,000 who sought asylum there in 2015. int year, authorities closed

the eu agreed to stem the flow of migrants to turkey. the late rockstar, prints, to cover so-called performing rights. those are song royalties. collect royalties for songs on the radio and groups to make deals for online services like spotify and apple. global news 24 hours a day powered by more than 2600 journalists and analysts. this is bloomberg. oliver: thank you. coming up, is the bull market and treasuries over? we will ponder next. ♪

scarlet: this is "bloomberg markets." oliver: time now for a look at the biggest business stories in the news right now. civil investigations and volkswagen emissions cheating scandal. they will pay $4.3 billion. costine raises the total to $40 million more than the company has set aside. ,irbus is the main rival reaffirming a dedication to made in america. jets wereame liable built to reinforce the commitment to the united states. the company also stressing it foruced 17 aircraft

carriers in 2016. claims -- pricey travel tickets and cash to boost the use of drugs. that is your bloomberg business flash update. let's turn to the bond rate. the bull market in treasuries is over here the codirector of diversified fixed income, $300 billion in assets under management. i've got to get your take on what they are saying. topic 3% this year, that would be the end of the bull market. agree, the directions for

interest rates is definitely headed up, the bull market in bonds is over and executives need to take -- to pay attention and think about fixed income. what is exactly the level there, i guess -- they that expecting continued rate hike path, certain policies trump has talked about, isn't there a lot baked into that? i think what investors are not thinking about, which is not fairly tied to the new administration's's actions, is just the fact inflation is coming back. the labor market is getting tighter and with what the new policies are that we will see

being enacted, that will continue to pressure rates higher. they will not go up in a straight line but i do not think we will go back and test the lows. aboutors have to think what type of flexibility they have in their fixed income allocations. the edges straight risk poses a real risk to return. we talked about how yields have been rising since the election of donald trump, yet we have seen them settle down at least. the yield curve, we have got the two-year versus the 30 year spread there. has flattened a bit. what does that signal to you? a little biteing of a pause in the move up. yes, we had a pretty rapid adjustment in rates. i do not think they will go up in a straight line. you have some uncertainty.

we will not know what the effect of new policies particularly on the fiscal side is actually itng to be and how quickly will work its way in the economy. i expect interest rates to take a pause here. it is a great opportunity to get higher rates down the road in 2017. it will be less about what the fed does and more about surprisesand how that the market not only here in the u.s., but also globally. that has significant impacts and investors want to think more ofut their position in terms greater flexibility, have a more exposure to the credit market but also the global credit market, diversifying the type of risk they are taking in fixed income.

that is what you could do with a multisector strategy. a lot of times you see a risk on move in the market, you will see high-yield on and those bonds are moving with the s&p 500 and some of the risk your assets in stocks. are about 6% higher on the s&p in the election. pretty much flat on the high-yield bond etf. what is keeping investors about -- from getting excited? >> credit had a big move in 2016. market, you are looking at a broader corporate like investment-grade corporate market. spreads in general have come in quite a bit. does not mean there is a specific opportunity in particular companies. i think this will be a

challenging year for benchmark managers tied to any one particular market. tong able to pick the bonds own in high-yield or investment-grade and emerging markets is going to be the key to generate a good return relative to a challenging bond market. become morets have interest-rate sensitive because the yield over treasuries have narrowed quite a bit. there is not a big cushion there. scarlet: perhaps the easy pickings are gone there. still ahead, delta airlines picks up the earnings season tomorrow. oliver: that is coming up in options insight. this is bloomberg. ♪

oliver: this is "bloomberg markets." scarlet: time now for options insight. me is scottng bauer, senior market strategist at trading advantage out in chicago. it has been an interesting day. around ofen bouncing stocks as a result. we have been in the sideways, slightly up trend. is anything coming down the pike that changes that? scott: not really. i think if you look longer at the narrow range we have been in, it is forming a base to get through the 20,000 mark and everybody said, is that a relevant number? it is forming a base to move higher here.

it is really forming the space. every time we get a little to the selloff, we stop and consolidate. buyerss like there are ready to step in at any point in the marketplace. julie: are you looking for s&p calls at the moment? scott: yes. i would also by s&p puts as protection. with be if you are in the market already, name the mark and by really treat -- really cheap attention. -- protection. it is way too cheap not to have insurance in the marketplace. we have gotten commentary from the airlines about how the last couple of months have been. thea will be next in morning. what do you think they will say? scott: the stock looks great.

me is aunbelievable to huge interest in delta airlines. that has risen by 30%. you will see a lot of short covering. the upside, especially when they are coming out and saying something good, i am buying the .3 call spread it is trading about $.75. good support down below the 49 level. there is support right below. it is really for the near future in delta, i think it is all upside. and the impact has been

more positive. scott bauer of trading advantage, thank you. we appreciate it. ahead, michael is our guest. but he sees as the biggest traits of 2017 and a confirmation hearing for rex tillerson continues. tillerson speaking on china at the moment. you can watch this life on the bloomberg at life go. it is available at bloomberg.com. this is bloomberg. ♪

>> president-elect donald trump says he loves mexico. trump reiterated his claim that

mexico will pay for a border wall with the u.s. to build: we are going a wall. i can wait about a year and a half before we finish our negotiations with mexico which with john immediately after we get to office, but i do not want to wait. >> mexican leaders repeatedly said they will not pay for a raw -- a law. nominees to trump as his cabinet tomorrow, the senate intelligence committee will hold , originally set for today. facing lawmakers questions on capitol hill, he will appear before the housing urban affairs committee, the secretary of housing and urban development. trump has chosen david to have the department of veterans affairs. he is currently the secretary of health at the v.a., a budget of about $180 billion. he has previously been engulfed in controversy.