jonathan ferro alongside david westin and alix steel. it is a countdown to the truck news conference. the first unchanged session on the s&p 500 since january 1977. the cable rate touching a 1985 low. 120 17. it at treasuries yielding 238 on the u.s. 10 year. alix: it's like straight out of a movie. u.s. intel agencies tell resident trump about unsubstantiated reports that the russian government compiled damaging information on him. the kremlin and donald trump denying reports ahead of trumps news conference later today. the stage is set. former exxon ceo rex tillerson facing a tough confirmation hearing on capitol hill this morning. what we are learning about him

and what could stand in the way of him becoming the next secretary of state. 10 year treasury yield hitting 3% went and the three decade rally in bonds. that is what you need to know at this hour. david: as if the president-elect news conference needed any more attention, we have reports of possible russian intelligence hacking of his private information. to set the stage for donald trump's news conference in five months, we're joined by marty schenker here in new york and kevin cirilli coming to us from washington. let us start with the russian story fit what the me know about story. what we know about it and what don't we know about it? marty: donald trump was brought this story about unconfirmed and unsubstantiated allegations against him compiled by a british intelligence officer and

it was given to the president-elect. salaciousbly has very permission that cannot be confirmed about his activities in russia. it is quite amazing. david: it's enough to give to the president-elect and president obama. some people are calling it unprecedented and i don't know how unprecedented it is, but intelligence agencies are leaking this information. to me and goes back to the whole narrative of donald trump questioning our intelligence agencies. that is a dangerous game. david: that is a nice appetizer, but the real main course today will be that news conference. july 27 was the last time he did a news conference. the world is a very different place since july 27. what are the markets looking to find out from this news conference? marty: what they will be looking to find out is just how clear he is about policy. very clear inn

the past and his grasp of the in just days before he is going to be inaugurated. what kind of president is he going to be? david: markets seem to be holding their breath. thanks to marty schenker. bigill turn to another story out of washington and that's the secretary of state nominee, former exxon ceo rex tillerson. panel toace a senate confirm his nomination to donald trump's cabinet. joining us now is kevin cirilli. what we looking for in that hearing today? kevin: i would imagine he is going to face questions about the reports that came out last night. tillerson will discuss russia and he will say that should russia behave inappropriately on issues like cyber meddling, the u.s. should hold them accountable. i spoke with transition sources inside this transition team last

night as the story was breaking regarding the russia intel briefing and what they potentially have on trump. the mood inside trump world is that all these rumors were going on during the campaign and they are pushing back against the notion that trump could be blackmailed, simply arguing that there were plenty of harsh media reports and accounts throughout the campaign. how much more salacious could this quite really get for the president-elect? prepared. tillerson's testimony, which we looked at, does deal with the russian issues straight up. what does it say? kevin: that they need to be held accountable. what you will notice is that he is going to have to win over not only democrats, which i don't expect him to get, but certain key republicans. if you lose the support of key republicans, his nomination y.uld be rock

look at reactions from senator john mccain, who is cut up in the latest developments regarding the russia intel briefing to see whether or not he will support tillerson. david: that was kevin cirilli reporting from capitol hill. jonathan: investors hang uconn on his everywhere. how investors should position themselves? we have indexes and stocks that takes a strong trumps tweets. exxon, goldmande sachs, and ford. the other is called the drain amazon, gm,dex like time warner, and "the new york times." you can see it right there, the spread between the companies he seems to support and the ones which he is going after the moment. isn't that simple? >> it's not that simple.

he is tweeting about four or five companies and he has a natural reaction. he is not hit silicon valley ?et, but can he hit them you got to get used to this guy. this is a brand-new presidency and he is not even president yet. i think you have to take it with a grand assault -- a grain of salt. jonathan: we have that cliche question -- which innings are we in? is that a reason to consolidate alone? paul: it's only two months since he was elected and we have had some fabulous moves. i think where we are is tailgating. we know what the playbook is going to look like, but we still don't know what it's going to be like. whether orw not we will get that climbs in touchdown with one seconds ago.

clemson touchdown with one second to go. if you have a chief of state with trump, you have a prime minister with pets, which i think is good for the health. ill. let's see what he does in a couple of weeks, but there are certain things that i do not think will get done. one thing we are really taking up on and we wrote about this in december is that border tax could be too far. a place to what he wants, but his ideology, but it would be really hard for republican senators to vote for that. i don't think walmart would be pleased about that one. there are certain things that might be able to get done, but some might be a stretch. alix: you take is tweeting as a grain of salt, but does it provide opportunity? this is the gm chart over the last year. right here is one trump tweeted negatively about gm and it has

rebounded at a higher level. looking at them negatively, does it look like an opportunity to buy? paul: what we are seeing is daytraders late tweets. macro traders are looking at it with a grain of salt. beentially there is going to a reaction from that company and it will be in the affirmative for trump. david: what do daytraders feel about the long-term? whether they feel about corporate tax reform? repatriation seems to be coming to the fore. are really managers focused on trump's first 100 days and beyond. good last couple of months and are ready to put money to work. a lot of people came at the beginning of the year to see this rally and it's going to break 20,000, but it will not be in the first 10 days. we need to see him in office. i think we are going to see absolute reform in regards to

tax on the corporate and personal side. i think the border tax is a step too far to start. they're wondering what obama camercare reform will look like. alix: howard marks wrote his letter yesterday. jonathan: he said there are two types of forecasters -- those who don't know and those who don't know they don't know. everyone around the table is saying the same thing. paul: it doesn't worry me to do this is the one thing i was asking people about in the last few days. have you got it wrong? is typically not enough. i is a lot of money getting put to work. the fed and that the ecb are relatively easy. trump'ss potentially best friend in this environment, having a dovish stance on policy. for a guy that loves leverage, low interest rates will he work. alix: the issues if you get the

growth and inflation, the fed has to hike faster and that changes the whole dynamic again. how do you hedge and deal with potential volatility? paul: you wait. take march out of the equation with the fed. they have the hedge with the three dots. will they use it? i don't know. a year ago we were expecting four. this year and we got one. you expect three, but i bet you will get two. they can go in for a meeting, but probably unlikely, not with this fed. jonathan: paul richards is sticking with us. let's get an update on what is making headlines outside the business world. good morning, emma chandra. emma: president obama said farewell to america west night, join a contrast between himself and his successor. he warned against turning economic issues between the white middle class and

minorities. >> if we are unwilling to invest in the children of immigrants just because they don't look like us, we will diminish the prospect of our own children because those brown kids will represent a larger and larger share of america's workforce . obama alsodent acknowledged that despite his historic election eight years ago that his vision to lead the country believe the white house with them. into ratetigation emissions tested the german automaker will pay $4.3 billion and plead guilty. costwill raise vw's total to more than $23 billion, more than the company had set aside. one of the federal reserve's most hawkish inflation fighters is staying down. it plans to retire october 1 this year. he has led the regional fed bank since 2004. global news 24 hours a day powered by more than 2600 journalists and analysts and more than one poin 120

countries, i'm emma chandra. david: we talked about the great debate about the great rotation. is all the money really going into equities and at what point do we call the bond bull market dead? that is next. this is bloomberg. ♪

jonathan: from new york, this is bloomberg. i'm jonathan ferro and we will talk about the great rate debate. gross gave his outlook for the new year, saying this is his only forecast for 7.e 10 year in 201 if yields move higher than 2.6%, a secular bear bond market has started. is much more important than doubt 20 k. hours later, double line ceo

jeff goodlett called gross out but not by name. of second-tiere bond managers are talking about ,.6% as a key technical level ignoring the fact that the 10 year made an intraday high of 2.64% back in december. still with us is paul richards. not ask you to weigh in on some of the serious shade grown, but the difference between 2.6 and three -- how important is it? paul: not much. the point they are making is that there is a point where there has got to be a cyclical change. you have to think about where to put your money. there's an alternative to investing in stocks. personally i like 3%. we saw buyers at that level, but 3% is where people say that's a really good yield. stocks don't necessarily fall over, but you have an alternative for investing. that is the point they are

trying to make. what i would be worried about is that if we flew to 3.5% and that's a whole new story. alix: take a look at a bloomberg here. this is a normalized return from jeff's performance and gross's performance. he is trumping them here. isgoes to show how hard it to figure out this market when you don't know if the channel we have seen for 30 years is actually going to rivers. paul: i think the key is when you look at their performance, there is respect for both managers and firms, but one of them is potentially more dynamic than the other. i will let you decide who. these are markets that you need to be a dynamic and. we are entering a higher period of volatility, but anyone trading in markets knows about dynamic. this is what is happening in the bond market as well. you can see it in the currency market. in particular we may see

volatility in stocks. david: going to 2.6% versus 3%, lach make some points because central banks cannot sell all their vaunted by equities. a lot of institutions are required to have a certain amount of fixed income. does that really deter the ships away from bonds into equities? paul: just to answer it in another way, think about the fact that a lot of fast money really caught on to the trends two months ago, but a lot of longer-term money has not necessarily made the portfolio adjustment yet. to them it is more prudent to wait and see what you have the president in place what his policies are and so forth. i think it is yet to come. respect, if we were to see very stimulatory policies and are coming from trump the backup and yields may be up to 270, then that question will

be answered. jonathan: this great rotation, say you have a portfolio with a 60-40 split, do you need to think less of a switch into bonds and into equities? so say sovereign underperforms in high-yield outperforms within six income and you look at the high data plays in equities, is that a better way to think about it? paul: yeah, it is a better way to look at it. i did my yearly portfolio review and there really time to push you and equities because it's a reactionary stunt. where yields can be attractive to a balanced portfolio and this is what asset managers are going to do. do you going to sovereigns, credits, corporate's? what is your view on energy, for example? all that is coming, but i think we are still very much -- we may be not tailgating anymore, but we are in the first inning. two months ago we do not imagine this and people are still reacting. alix: paul, great to see you. paul richards, medley global

advisors president. rex tillerson, trump's secretary of state nominee, will face tough questions today during his confirmation on capitol hill. we will talk to one former executive who is no stranger to the international oil business, john hofmeister. this is bloomberg. ♪

alix: this is "bloomberg daybreak." tillerson, former chairman and ceo of exxon mobil, set to face questions today during a senate confirmation hearing to be donald trump secretary of state. some have expressed concerns over his nomination due to close ties with russia and the middle east. according to prepared remarks, he will set the hearing that while russia seeks respect and relevance on the global stage, its recent activities have disregarded american interests.

with us now on the phone is no stranger to running an international oil company, john hoffmeister. he is the former president of the shell oil company. john, great to talk to you on this topic. the criticism around rex tillerson is that he is the ceo and not a diplomat. in your extensive work at shell and your relationship with rex tillerson, how true is that statement? john: i do not think you can succeed as the ceo of an international oil company if you are not first and foremost a diplomat. you are continuously in the external world. yes, you're working for your shareholders, but at the same time, you cannot satisfy your inreholders if you are not the next on stage of preparation and execution of diplomacy around the world, where you have to not only represent them, but you are bringing a firm into another country where you're not only going to exploit their resources, but you are going to build a supply chain, you're

going to build a workforce, you're going to build relationships across communities and across the entirety of the government if you're going to succeed. i think rex tillerson has far more diplomatic experience that many previous secretaries of state in this country for all practical purposes. alix: in your experience, how high level to the talks become when a big oil company goes into another country? i cannot imagine every well drilled that you at the meeting table. at what point did you get your hands dirty? john: i think it is really setting the stage for what the company is going to bring into the country and assessing the needs and also assessing the environment and figuring out if you can make money in the process of working through the various differences in that country. coming yearhe stage 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 multiple levels of the industry

to figure out if you can make it go at what you are attempting to do. but then, there is the closure. you cannot close a deal if it is not advantageous for you and the other country will not close a deal if it is not advantageous for them. that is where the negotiations take place. they take place at multiple levels, you're right, but the closure of the deal, billion-dollar deals, can generally be at the very top of the company and the top of the country. david: you make a persuasive case that rex tillerson is a andfective negotiator diplomat, but he's an oil negotiator and diplomat. i what extent is this an advantage or disadvantage to see everything through the lens of oil? john: oil is clearly the endgame. natural resources is the endgame. way, you are and your people are investigating and working with everything from universities for the future of a

skilled workforce, skills training, in order to develop a workforce. you are looking at the law surrounding oil and gas to see if there is a jew case in for differences -- adjudication for cases for differences. you looking at the communities in which you are going to be operating and what kind of a community education requirement is considered or necessary to succeed. you are looking at all the environmental conditions that need to be honored and met and whether you can work within that environmental framework. there are all kinds of other issues that enter into it, which really cover the entirety of working in another society. alix: john, quickly, if you are an international oil company today, what do you look like in four years? john: four years is actually a d of time in terms of

what actually happens on the ground. oil and gas work on long-term cycles, which go decades in many cases. what you are looking for is to maintain and to really certify that there is a safe and there is a financially successful operating environment over that time and something does not get thate way and four years makes the longer lifecycle of the project not good for shareholders. alix: john, great to talk to you. and siter your inf on rex tillerson. john hoffmeister, former president of the shell company. trump is communicating with companies and a very unique way. the way his tweets have influence on companies and foreign relations. ♪

jonathan: from new york city, i'm jonathan ferro. here is the state of play. features pretty much unchanged. if the day flat, flat, flat. the record streak

continues with the ftse. switch up the boards very quickly and sterling earlier weak, touching a 1985 low despite some really strong data. still, the trade getting through the day is good and they shake it off and that seems to be the theme of her in the u.k.. alix: mark carney going to feel that he later on in the day. here's what you need to know at this hour. straight out of a movie, intelligence agencies tell trump about unsubstantiated reports that the russian government compiled potentially damaging and personal financial information on him. the kremlin and donald trump then i those reports. it's ahead of donald trump's news conference today. former exxon mobil ceo rex tillerson faces a tough confirmation hearing on capitol hill this morning. what will we learn about him and will anything stand in the way of him becoming the next secretary of state? bond king battle. lach wasgund

putting down bill gross's earlier call of treasuries that 2.6% would end the bond bull market. that is what you need to know at this hour. jonathan: everest announcing its first deal of the year from u.s. group aviation capital. the deal comes with the $3.8 billion price tag despite concerns that 2017 will be a tough year for abuse aviation. guy johnson caught up with the airbus ceo in france. >> your new president is right. he is supporting the u.s. economy and jobs. we are anticipating that because we decided a few years ago to invest massively in the assembly of these and we started the operations last year. we delivered 17 aircraft to our american coul consumers and we

are on track to move to four aircraft a month by the end of 2017. we deliver on our promises and we create american jobs. it's a fantastic location for us. guy: are you planning to meet the president-elect or the president in a few days time? >> i have a lot to do personally, so perhaps commanders will have this opportunity him up and i think the president has probably other priorities to deal with. guy: he also seems to be focused on corporate news at the moment, but what is interesting is that he has met bernard. i wonder if there is a great find among french executives as they talk to each other about what they are learning. >> not yet, but i'm sure he will debrief me. toare extremely sensitive liquidation of value.

we have decided four years ago to invest in america not only because it is a big market for us, but this is the biggest place to be regarding aerospace. and so we create jobs. on top of that, you don't know that we are probably procuring more u.s. equipment then our competitor, boeing. our biggest contributor is american suppliers. guy: we are going to see this afternoon here the handing over of an aircraft. do you think that may cause political problems for you in washington? >> i don't think so because we got all the international licenses, and especially the licenses from the u.s. administration. process,quite a long but we went through that. we abide by all recommendations international, european, and

american. guy: you expected to become more problematic? do you think there will be issues to deliver aircraft to iran later this year? >> iran is a big market. iran will be a very good customer for us and boeing as well. then of course, we will continue to apply the international rules and the american ones because iran,rket is not europe, or solely the american market. we produce a lot and supply a lot for america. intend to continue with the way we proceed, talking to europe and international and american administrations. jonathan: that was the airbus ceo speaking with guy johnson. let's take the a3 80 and break it up to its individual components. the wings made in the united kingdom and you now face brexit.

the next generation of aircraft -- where are those components going to be made? pressure is going to come from europe on these companies to germany or france. that you face what is happening in the united states as well. if you want to take a company with a very complex supply chain, take a company like airbus or boeing and think about the political pressure around them at the moment. david: one thing that we know has changed, whatever happens with the trump administration is that ceos are much more focused on where they make things now. it was not a big issue a year ago, but whether it was brexit or donald trump, executives are focused on where we are making our cars. the question is what does that do to international trade with those supply chains? alix: he talked about how he made these decisions for years and but it's now coming out i'm editorializing, but butter up to trump. you sort of front it now as a way of getting better. david: is this been or really changing business? jonathan: it's a mix of everything.

they used a purely be about cost, but now it's about pr. david: it's a challenge for ceos to sort this. i don't envy the job. let's go to another ceo. imagine now that you are the ceo of general motors and you wake up last tuesday morning to this tweet coming from the president-elect, telling you that you have to make your chevy cruze in the united states or you will have to pay a "big border tax." you see your stock plunge under 1% in immediate traded. since the tweet, the stock has come up very nicely. if you are mary bar, what do you do? what do you do if you are one of the countless ceos hoping they are not in the crosshairs of another trump tweet? joining us now is a man whose clients are asking just this question and ran white house to medications for bill clinton. the chairman of companies

worldwide. thank you very much for joining us from washington today. me. thanks for having david: you are in a particular positioned to address this question. what are you advising ceos who may be waking up to a trump tweet? don: the first thing is to try not to be surprised. you have to do d risk assessment and understand where you may be exposed long before this can happen and companies are beginning to do this, understanding there is real potential here. the most important thing is to not be surprised. once you have identified what your issues could be, and all these companies do what they are, but to assess and then and understand where they could go, you have to have your story. you have to have your narrative down. you have to really understand what you will say, what your proof points are, how you're going to correct the record. and one ofd lawyer the first rules of being a good

lawyer is preparation, preparation, preparation. that is key to this right off. there's a more important point that goes right beyond that. companies that know that they could be exposed need to begin to establish what i like to call reputational equity . there are things they can do to begin to reinforce the sense that they are part of a solution and not part of the problem. we did a poll last week that we released to the consumer electronics show that talked about how the public as well as technology elites are seeing what is going on with regard to the technology sector. one of the things that came back so sharply was that the public wants to see more high skills training for people so that more people can take advantage of the new jobs that are emerging. what is interesting is they don't want government to do that. they want to see the private sector doing that high skills training. why not get out there and begin to do that? why not do it just in urban areas but in more rural areas

across the country and even some of those places perhaps where president-elect trump did well in some of the rust belt states where you can begin to show people that you as a company are helping to bring more people long? david: i don't expect you to reveal anything, but how alarmed rc suites across the country right now? how active are they tried to anticipate what might come out of trump tower? don: it has begun to dawn on many see sweet executives that they may be exposed and it's unpredictable. that's the nature of this. alarmist may be the wrong word. knowing they have to be prepared is what they are doing and we are definitely seeing that across the board. david: your first rule is don't be surprised, but you pointed out it seems unpredictable, different from other administrations. clintont in the administration it was more of a warning to companies. the way you know that this communication apparatus is working under donald trump right now, is it anyway to get a heads up? don: maybe.

even his incoming press secretary said the other day he doesn't know what to expect from his boss in terms of tweeting overnight. i think it's going to be hard. that said, there is intelligence that people can do and an understanding of what is going on. there's a small handful of people who are influencing the president-elect. to understand where their heads are, what their positions have been come all that kind of background work is going to be important. that said, there's going to be no predictability with donald trump. that is kind of the story of donald trump -- he is unpredictable. you can predict what your exposure is going to be pretty well and certainly be ready for it. we are moving out to an age of more and more rapid response . in order to respond rapidly, you have to respond accurately and effectively and that means getting out ahead of it. david: finally, do you have a

sense yet of how much of this is a short-term spin issued and how much it could really do long-term damage to a company? we looked at general motors and the stock went down immediately, but now it's treading above for the tweet. how much his appearance and how much is reality? don: it's reality. it's real and happening and having real impacts on companies making decisions as a result of it. i see it as an opportunity. i see it as a glass half-full and not half-empty. i think a company that faces something like this can pivot andturn it to its advantage show again, to my point, it is now becoming the solution and not part of the problem. how they got there and whether or not president trump pushed them in that direction may or may not matter in the long haul if the company responds appropriately and begins to be a leader in some of these areas as it goes forward. aer.d: that is don b thank you so much.

coming up, the u.s. is colombia's most important trading partner. how will donald trumps stance on foreign trade affect the country? : be as finance minister joins us next. -- colombia's finance minister joins us next. this is bloomberg. ♪

emma: this is "bloomberg daybreak." i'm emma chandra here in the hewlett-packard greenroom. what to expect as more trump nominees face confirmation hearings. ♪ from new york city, this is bloomberg. i'm jonathan ferro. in the g 10 space and broad

dollar strength for emerging markets, the mexican peso very much under pressure. that as a weaker peso on the screen. that is a new record high for the dollar against the peso and a record low for the mexican peso against the dollar. under pressure once again even though last week the central bank came in trying to support the currency. the move is back on it seems. david: donald trump's election has not been good for mexico thus far. i think it's fair to say. let's stay south of the border. the one of the united states's staunchest allies for years and we are one of their most and port and trading partners by a longshot. with us now is the man responsible for managing the columbian economy. welcome very much to the program could mauricio. mauricio: good to be here. david: you were in new york because you had a major tax reform. tell us about it and white important to the colombian economy. mauricio: columbia law

significant revenues from declining oil prices. .e have to offset that enacted tax reform that would raise up to 3% of gdp by the end of this decade. with that, the rating agencies couldold us that columbia preserve its triple b rating and that is what we're here for. explain the content of this tax bill, which raised the vat from 16 to 19%. our rating,ngthen which has been very important to ombia to lower the cost of capital. alix: with donald trump as president, trade wars and what we talk about an u.s. is your biggest trading partner. how do you factor that into your assessment? mauricio: the relationship with colombia has been bipartisan.

we have engaged with both republicans and democrats. colombia poses no risk to the u.s. economy. the u.s. runs a trade surplus with colombia. we are a big buyer of american goods, especially machinery, airplanes, equipment. it makes all the sense for the united states to keep this free trade with colombia as it has been good for both countries. david: do you have a sense from the incoming administration what their latin american policy more broadly will be and how colombia fits into it? is there an opportunity for you? mauricio: we will be as we have been in the past a strong ally. colombia can play a very important role in terms of the relationship between the united states and the region as a whole. we are reliable. we are credible. we do what we commit to. and we are making progress.

colombia has been a very successful country, not just an economics -- on economics, but on the political side. we just had the end of the .egotiations they were sealed by congress last year and we are moving into the implementation of those agreements. that means colombia will not just have a stronger. economy but a peaceful country as well. jonathan: an economy that has been not strong, but you faced upside risk and growth. how do you manage those two things? mauricio: last year was the worst year in a sense that we had to do most of the adjustments. we had to basically reduce growth to cut our current account deficit. this is all after the italian oil crisis. we had a major depreciation, but the currency has stabilized. this year, we will grow at the

rate of about 2.5% this year. means the worst is over and: be as economy is going to be back on track. jonathan: give me an idea for 2017. is that going to work the door for more rate cuts? mauricio: the independent central bank has an inflation target of 2.4%. all the model forecasts that inflation will be back within that range. it will be within 2% and 4%. last year, inflation was slightly above the target. the reason for that is we had a major depreciation. depreciation was passed through inflation. this year we are confident that inflation will be below 4%. david: does that open the door for a rate cut? mauricio: it does. we started cutting rates and december. we will have the january board meeting at the end of this month . i very much hope that we will

continue cutting rates. alix: if we do see inflation moving down basis points, what do you see for rate cuts? how many would help the growth target? mauricio: hard to say at this point. alix: one or 3 -- can you give me a range? mauricio: we do not have a specific idea on where the range should be for the new monetary policy could we hav. got the measure that month by month. we know now that the rate is high and we will propose that to the seven-member board. i'm just one of the members. this is an independent decision by the board of the central bank , but we will basically bring the issue of cutting rates to accelerate aggregate demand and have the economy grow more this year than last year. we think last year that gdp grew 2%. we expect this year to be between that depending on what happens with interest rates. david: thank you very much for being here, colombia's minister of finance. we want to get to stories making

headlights at this hour -- headlines at this hour. emma: the european plane maker in 320 jetliner audits december alone to end up with 731 for the year. boeing said it sold 668 aircraft in 2016. they have been the leader in sales since 2012. both companies saw new business doing the last year. job cuts are on the way i walmart according to a person familiar with the matter. hundreds of jobs will be eliminated this month at the world's largest retailer. walmart has been looking for ways to cut costs at a time of rising wages for employees. sayswall street journal" the job will hit the human resources department. a primary as similar apple's iphone's has posted his first annual revenue decline after the global smart phone market went to its worst year on record.

the company is the world's biggest contract manufacturer of electronics. that is your bloomberg business flash. i'm emma chandra. this is bloomberg. alix: coming up, financials -- one of the best performing sectors since trump's victory, but now hitting downgrades that before earnings. that is next in off the charts. this is bloomberg. ♪

alix: welcome to "bloomberg daybreak." financials is the best sector since trump was elected, but as we head into earnings on friday, is the optimism too high for financials? this is investor flows on the etf and we have seen the most inflows since 2008, jumping in the weeks after president trump's election. multi-year extremes in those inflows. thinks that there is more upside because this has been about short covering, not necessarily new longs being put in the financials.

the difficulty comes when you look at what is happening with yields here in the u.s. this is one of my favorite charts. the purple line is s&p financial index in the white line is the 10 year yield and the blue line is the real yield. you see the blue and white line rolling over a little bit, but you have s&p financials going sideways. that does put pressure on earnings. can they deliver when jpmorgan comes out with earnings friday? you are getting downgrade in the space. ubs downgrading city to sell. a cautious view because valuations seem particularly stressed. the other question becomes -- are we in overbought territory that we have to look for some kind of pullback? this is the rsi, a great way to look at overbought. you can see that over 70 means your overbought. we have seen the longest streak of overbought conditions in 2016 as we saw this huge spike after trump was elected. over at ubs says

that financial was vulnerable to hold back. hedge funds have been sellers of financials and that retailers were loading up. it will be really hard for financials to make that higher. jonathan: thank you very much. coming up, the peterson institute of economics president talks president-elect trumps trade and his concerns for fiscal policy. that is all next as we count you down to the trump news conference in the market open. future slightly negative on the dow. negative two on the s&p 500. this is bloomberg. ♪

♪ jonathan: from new york city, welcome back to bloomberg

daybreak. i am jonathan ferro along with david westin and alix steel. it is the countdown to the first news conference for donald trump since july. futures are a little bit soft, the record run continues with a 10 consecutive record over in london. a 1985 low.sing treasuries stable. alix: there is what you need to know. u.s. intel the agencies tell president-elect trump about unsubstantiated reports that the russian government compiled potentially damaging information on him. the kremlin and donald trump both deny the reports. this ahead of his news conference later on, this morning. former exxonmobil ceo rex tillerson faces a tough confirmation hearing on capitol hill. what will we learn about him, and will anything stand in the

way of his becoming the next secretary of state? 10 year treasury yields hitting --within the rally in bonds would and the rally in bonds -- would end the rally in bonds. david: donald trump is set to hold his first news conference in five months and 11:00 eastern time. the president-elect took to twitter, saying the unverified report paid for by political opponents is a complete fabrication, utter nonsense, very unfair. russia has never tried to use leverage over me. i have nothing to do with russia let's get the team coverage. politics over in capitol hill. can you think of a time previously where we have had such conflict, publicly but -- between the intelligence community and a president-elect? no, it is unprecedented and

it raises the issue of the back-and-forth between donald trump and his view of the russian hacking. as many people have noted, it is a dangerous game. intelligence community can leaked documents has happened in this case and can make life very uncomfortable for the president. jonathan: the timing is something else, the first news conference since july. how are we expecting that news conference to go about? >> the markets are so anticipating how this is going to go. questions will probably center on this report, but then will move quickly into policy issues. it will be interesting to see how clear and concise donald is on some of these policy questions, like a border tax. jonathan: great to have you on the program. the other bigt to story over in d.c., where secretary of state nominee rex tillerson will face a senate panel to confirm his nomination to the donald trump cabinet.

joining us now is kevin cirilli. to be even more fascinating than many people thought it was going to be. have we got any idea how rex tillerson will address the issue of russia in this hearing? kevin: when we look at his opening statements, rex tillerson will say that nato and its allies have a right to be alarmed and a resurgent russia. with the backdrop of the latest developments, he is going to have his work cut out for him to convince some republicans who are concerned about his ties with russia. he is also going to face interesting questions about whether or not his own business interests will be able to nash -- mesh with his job at the state department. lot of information surfacing that he will not have to pay taxes on some of the business interests he has in his stock during his time as ceo of

exxonmobil. jonathan: how does he achieve not putting himself against the president-elect? kevin: when you read that testimony from rex tillerson, it is striking a much different town than what we have heard from president-elect trump with regards to russia. frankly, i think this is because of the criticism from republicans like senator john mccain and lindsey graham about their concerns with tillerson's ties with russia. aggressive, more perhaps the most aggressive rhetoric we have seen against russia from anyone inside the trunk administration. -- the trump administration. jonathan: thank you very much for your time. david: besides those confirmation hearings, we will be waiting to hear from the

president-elect -- markets will be waiting eagerly to hear from the president-elect from trump tower in new york city. with us to take us to the possible consequences is adam pozen, the president of the peterson institute for economics. specifics about some and let's start with this border adjustment tax. one of the economic effects of a border adjustment tax? adam: there's a lot of believe that the u.s. corporate tax code is not favor to exporting -- favorable to exporting u.s. companies. on the economics, it is a terrible idea. it is a huge revenue sink and goes with the other tax cuts and will not make enough to pay back for them. the dynamic effects are going to be very low.

it is not pro-investment, it is pro-reallocation. said we areountry going to put a 20% tax on exports in subsidized reduction, the u.s. would say a good, you will do what india did in the 70's and fail and that is what they are talking about. alix: at the end of the day, it is kind of a vat tax. adam: first, it is not, because it does not include everything. it is biased against exports. can have a different tax code from the rest of the world. -- the fact that the u.s. has a trade deficit is not driven by the tax, there is no correlation. the only countries that have those taxes have large welfare is incredibly it regressive. your tax burden shifts

from capital to consuming people, otherwise you have a huge shock. jonathan: it is just a concept. can you take the experience of others when they put up vat, what happened to gdp afterwards? adam: you are right, the people are framing it as a convergence to global standards and i don't mean to disagree with that, but the actual impacts are likely to be different because the difference with the u.s. the global standards is we have an incredibly low tax base, riddled with loopholes. that is the big change. if you want to change that, the big effect is it will be hugely a redistribution of who pays taxes and it will hugely raise deficits. do itestion is, could you in such a way, in addition that it will cause a trade world that it won't annoy or cause a trade

world -- trade war with the rest of the world. if there's one thing economists should not be doing right now, it is asserting they know what is going to happen to currencies. the amount of currency trading having to do with international trade is between a tent and a 20th of the daily turnover in financial markets. idea that this trade adjustment is going to have any major adjustment on the currency is crazy. if the currency does not appreciate -- depreciated, it is a total attack on the rest of the world. david: do we have any historical experience with this border adjustment tax? adam: japan is the one rich country that did a major shift in increasing its value added tax in recent years. --r recent years, it may go made no difference in the trade deficit would continue to increase as japan aged and its savings went down. it made no difference in the

fiscal deficit and it made no difference to the currency which was driven by other things. we are doing work at peterson because you are raising the right question. the problem is the u.s. is unique, it is the world's reserve currency. it is more likely to assume nothing big is going to happen. david: thank you so much. with us, buttaying right now it's in an update on was making headlines from outside the business world with emma chandra. emma: barack obama's last appearance as president of the united states, last night. he used his farewell address to draw a contrast with his successor. he called on americans to preserve his legacy by embracing inclusiveness. issue isry economic framed as a struggle between a hard-working white middle-class minority, then

workers of all shades are going to be left writing for scraps while the wealthy withdraw further into their private opulence. emma: the president also warned that a fear of change posed a greater risk to democracy or bombs -- then bombs or missiles -- than bombs or missiles. the number of asylum seekers plump deked plummeted, last year. last year, authorities closed the balkan migrant route. turkey and eu -- and the eu agreed to stem the flow of migrants. mayu.s., mexico and canada make a joint bid to host the soccer world cup. the u.s. would be the main host with the most gains. the 2026 world cup will be the largest ever with the field expanded to 48 teams.

alix: equity futures moving slightly lower, but we have some movers in the free market. the fda has a free already review for mark's one care -- lung cancer treatment -- merck's lung cancer treatment. competitive pressure on bristol-myers, down by 3.5%. 1%.r zeneca down by almost american airlines just releasing some of its fourth-quarter numbers. that stock up by about 1%. total revenue per available seat mile is going to be unchanged. the airline had expended -- expected to be down. good news trickling in on the margins. wrapping up with rite aid.

according to a person familiar with the matter, we do have near post reporting the ftc is expected to report writing a's walgreen steel -- write a's -- rite aid's walgreens deal. definitely a name to watch as we head into the final days of the obama administration. posen isming up, adam here to take us beyond the to donaldustments tax trump's policies that could drive the u.s. economy. that is next. ♪

jonathan: from new york, this is bloomberg.

the campaignon trail, china, china, china. the developing relationship between donald trump in the future of trade between the notice states and the world's largest -- second-largest economy. -- not that simple, take a listen. >> every one of those people is a free trader. you would be surprised to hear that peter navarro is a free trader. what peter navarro is looking for is fairness in the trade process. he is looking for evenness in the playing field. jonathan: still what thus is adam posen, peterson international for economics. peter navarro wants to see a leveling of the playing field. there are a lot of tariffs in china, particularly around the auto sector. how do you get them to reduce there's -- theirs? with if you are dealing

someone who exists and is -- and is not going somewhere, -- going anywhere, you cannot leave them and make a threat. monitorsson institute what a trade war with china would look like and it would put people out of work in las vegas and walmart. it would put people out of work in the production in ge and in the auto industry in the u.s.. the fact that you can do more harm to china than to the u.s. does not mean it would not do huge harm to the u.s. this is why for the last 40 years, american administrations have tried to convince china and its own interest to behave, and usually that has worked. the other thing is going to football playoff season, trump loves football. the whole point is you don't want about the referee calls. about the whine referee calls or tom brady. you go out and win so it is not

up to the referee. what trump is doing is taking america out of competition, whining to the referee in trying to pout and all that means is you are going to forfeit the game. alix: football metaphor, you are killing my brain. on the flipside, rex tillerson said in regards to china that the economic well-being of our nation's are intertwined. that is a very different than the tweets from trump. very different from what we hear. what is going to be the reality? adam: secretary of state nominee tillerson's comments are critically reasonable. we gain from their benefits and they benefit from us and it is good for the rest of the world. alix: what does that relationship look like that does make sense? adam: to get into conflicts with them in a rules-based way and like on steel, steel is the hot point.

chinese no question the have been behaving irresponsibly on steel, adding a huge amount of capacity. it is terrible for them, they u.s. usually, the does high-end steel. to reject the people in the chinese government recognize this is a problem. to come up with a symbolic and exchange at the g-20 were people starts taking steel capacity off-line and you come up with a world in which you say we know that there is overcapacity and everybody has employment problems, so try to make it so nobody gets more than an unfair share. you raise thee referee because the discussions we have had what we have heard some of these individuals around trump himself is questioning the referee and the whole institution around them.

these institutions are under threat, and away. i wonder who the referee is going to be. adam: sorry to go back to football, but essentially no one ever likes the referee. the entire rest of the world including china legitimate methinks the referee has been biased against -- towards the u.s. because we are the ones that hired them and help them write the rules. donald trump is not worrying about the referee. we are the ones to put the referees in place. the rules are written to suit the rich countries, to suit the market countries and occasionally one call does not go your way, don't whine about it. david: let me present the other side of this. i read history when you have a trade surplus country go to a trade war with a trade deficit country, the trade deficit country always wins. is their strength of the argument that there is

unfairness going on and we need to cause some damage, but going to a better solution ultimately? adam: there are two problems with that in my opinion. you have to make a call on how much damage is done for what you supposedly win. the answer is it does a lot of damage. it is very hard to come up with a so-called win when a is killing mechanization. the second problem is that going back to the point about the u.s. wrote the rules and higher the refugees -- hired the referees. if the u.s. blows up the system, there will be referees, going forward. the u.s. will survive that better than anybody else, but it does not mean that the u.s. will be hurt, going forward. david: adam posen, apparently a

new england patriots fan. also president of the peterson institute for international economics. coming up, the verbal battle of the bond kings. bill gross says a 10 year yield up 2.6% would be a turning point. jeff gundlach says not so fast. he is looking at 3%. that is next. ♪

alix: the rate debate. bill gross giving his investment outlook for the new year, he says this is my only forecast for the 10 year. if 2.6% is broken on the upside, if yields move higher than that, a secular bear bond market has begun. doubtmore important than 20,000. calling gross out, not by name, saying a couple of second-tier bond managers talking about 2.6% at a key

technical level, ignoring the fact that the 10 year made an intraday high of 2.64% in mid-december. and with us is adam pozen the -- of the peterson institute. a little bit of a smack down. >> i don't of that i want to weigh in on the war of the bond kings -- i don't know that i want to weigh in on the war of the bond kings. aboutundlach was talking once you have 10 year treasuries above 3% yield, you start seeing a threat to the rally in stocks. he talked about a weaker dollar. this is an important development. and does not mean investors from other countries are going to be seeing the u.s. and a light of incredible growth and they are going to be pulling their money back in through the dollar.

it means the u.s. will either be , andding its deficit therefore experiencing higher yields and higher inflation. jonathan: you look at 3% as a number? what is important to you? me iswhat is important to how much the inflation rate persists. how much the bond rate does not just flip up and down but moves upward in a trend. lisa is right to raise the issue of what does it mean for the dollar, what are the fundamentals? andbond market is too big too diverse for technical levels to mean the same thing for an individual stock. what matters is whether or not we think we are on an upward inflation trend that will be sustained. alix: the great rotation, is that a thing?

david kosten says not really. lisa: if everybody gets out of equities and bonds, or did they go? do they go back to bonds if yields rise? adam: i agree with that. there is no place else to go, especially if we are looking at the world of a strengthening dollar and widening u.s. trade deficits. that tends to suck and money from the rest of the world. jonathan: adam posen, lisa brown which, thank you very much. coming up, what to expect in the new administration's personal hundred days. we take a look at trump's tax reforms. ♪

jonathan: from new york city, this is bloomberg daybreak. one hour away from the cash open, teachers unchanged. yesterday, the s&p 500 dead flat for the first time since 97.

rate despite -- a weaker pound story, a broader dollar strength story. at 237 on theble, u.s. -- 2.37 on the u.s. 10 year. -- that the russian government compiled potentially damaging information on him. the kremlin and donald trump denied the report, this ahead of trump's news conference. later, this morning. rex tillerson facing 8 -- news conference, later this morning. toughllerson facing a confirmation hearing. jeff gundlach saying treasury yields hitting 3% would end --

-- would end the bond bull market. this is where we hear from what key banks are looking at. city global market economist dana peterson joining us from new york. her i is a what to expect from the first hundred days of the new congress. you have this note taking us through the first hundred days. let's talk about what comes first and what comes later. tax reform and obamacare seems to be high up on the agenda. deficit spending is down the road. is that what you concluded? the words of the first hundred days are reform and repeal. the republican congress is shaping up battle is going to be over these items. we are ready have republicans looking to repeal obamacare processe reconciliation and also in terms of tax reform,

we should fully expect that we will see cuts in both individual and corporate taxes. tickets into the health-care debate because there are reports that the health care industry has been caught a little flat-footed. they were not expecting this much action, this early with the repeal and reform or repeal and later reform. what is going on in terms of the process in congress? can they repeal and reform at the same time? ana: there is not quite cohesive plan on what the replacement for obamacare would be. effectively, legislation can repeal it and then implement a sunset or obamacare what essentially disappear after a wild and they would take that time in between to come up with some replacement. some options include allowing states to have greater say, giving consumers tax credits. something very different from what we have. david: where does that leave the

health care industry? what do you conclude, investing in health care stocks? dana: the big word is uncertainty. one issue is whether or not republicans are going to repeal the individual mandate. that is removed, many experts feel that obamacare with certain -- would basically collapse in on itself. it leaves a lot of uncertainty for the health insurance sector, and also for businesses who must get a sense of what this is going to look like for their bottom line. you have the -- alix: you have the press conference later on, today. does anything justify the market we have seen in the last three months? dana: the run-up we have seen in financial markets is pretty common in terms of economic terms. markets are anticipating legislation that will result in faster u.s. gdp growth. all of that is being

accelerated, so it is not unnatural. it is whether or not some of this optimism dies off as markets realize that this is going to be a process that may take several months and even for it to be realized, we may not see any stimulus until 2018. expectation, that we will not see material stimulus until next year. in your note, you suggest infrastructure spending might take quite a wild. -- take quite a while. trump ishink mr. trying to line his agenda with what the congressional -- align agenda with what the congressional agenda is. many fiscal hawks believe infrastructure is not necessarily stimulative. you would need a huge outlay from the federal government to have a multiplier effects you the multiplier affect your desire. alix: you are staying with us

because you brought up tax reform. michael mckee, national economics and foreign policy corresponded. is the border tax adjustment, the idea you help exports and pare back imports and help domestic manufacturing. does that actually happen? is in theory, but this comes down to the republican house gop plan, not donald trump and it is garnering bipartisan interest. there are people interested on both sides of the aisle. a destination-based cash flow, profits would be taxed where things are consumed rather than where the headquarters are of a company to you don't have to play games like inversions. the border tax adjustment you are talking about, exports are essentially tax-free. imports, you can't deduct the cost of buying them. there is an indirect tax, there.

this would favor exporters over importers. a company like walmart that has to import a lot of clothing would seem to get hammered. the theory is that the dollar would adjust and go up significantly and they are talking about a 20% tax rate to the dollar would have to go up by about 25%. you can see how much of an adjustment that would be. the question is would that really happened -- would that really happen? that is the theory, we don't know and practice. jonathan: another theory is that it would just push of cost. where are we on the price of the consumer? dana: we are seeing some inflationary pressure, but most of that is commodity prices rising. with wage pressure starting to build, consumers may be able to absorb this. without the big tax cuts, it is unlikely consumers are going to spend more and even if they do receive these cuts, when we look

at the example of the oil price shock, consumers only spend about a third of the benefits from cheaper energy prices. there certainly is a risk for consumer spending. david: there seems to be bipartisan consensus on repatriation, they bring out some way to bring those billions of dollars back onto u.s. shores. as you noted, there is a lot of discretion as to what you do with that money. dana: roughly $2.6 trillion in unpaid created profits. atwe bring that in at 10%, most we get $260 billion. there is division over whether that is used to shore up your trust funds for the highway and transportation trust fund or use that money to help offset the reductions in revenues we will see from the tax cuts. right now, republicans are not really sure about which way they will go. would nottriation change the winners and losers as dramatically as the dollar

border tax adjustment would. getschool of thought is you the dollar adjustment that winds up hurting exporters because nobody wants to buy their good, but deutsche bank says it could be a accelerator if the dollar remains stable and factories ramp up fairly quickly. what are the chances of that scenario playing out in a positive way? michael: the theory would say that does not work. if we reduce demand for imports because the cost goes up, and there are fewer dollars available to send overseas, at a time when more dollars would be needed to buy exports. in theory, there is no way that would work. the real concern is the dollar would adjust so quickly that companies with overseas dollar debt could be hit because the dollar would start adjusting if this certitude look like it was going to happen. this would take a long time to play out, in practice. david: a conversation we keep

having, it is the hope that we will get the stuff that will stimulate growth, but not the stuff that will be a headwind. clearly, we're getting a mix of both. how does that influence your forecast for gdp versus the base case in the market, which is a little bit of euphoria and the recalibration of optimism around growth, inflation, etc.? our forecast for this year's more conservative than what many of our colleagues. we are looking at one to three quarters of a percent growth. we do think there is going to be a drag on higher interest rates, as well as the rapid appreciation we have seen in the u.s. dollar. if you want to fall into that uncertainty drag from what policy is going to look like in terms of taxation and obamacare, that could present more of a drag. in terms of stimulus, much of what we have baked into our 2018

andcast is from tax cuts only a little bit from the potential for infrastructure. there is going to be a lot of uncertainty and it is not clear what we are going to get, this year. david: thank you very much for joining us, dana peterson and michael mckee. the countdown to donald trump's news conference continues, 11:00 eastern right here on bloomberg television. coming up, we look at investor expectations for 2017 and western asset management. ♪ jonathan: treasury stable throughout the morning, five basis points lower to 2.37 and

some broad dollar strength. we found a weaker euro. this is bloomberg. ♪

emma: this is bloomberg daybreak. coming up in the next hour, south dakota senator on what to expect as more trump nominees -- more of trump's nominees face a congressional hearing. from new jonathan: york, this is bloomberg. with goldmanpoke sachs chief u.s. equity strategist on investor expectations. >> the expectation of investors

is that there will be more significant growth in earnings and my concern as a portfolio thategist is a lack -- is enthusiasm has overextended relative to the amount of tax cuts that are likely to be implemented as a result of the budget deficit. jonathan: joining us now is john bellows, looking at all of this, equities down -- equities had a little too much euphoria. in bonds, where are we with that? john: we have moved a long way and i think we are at the point where it has run a little bit ahead of reality. we are trying to form an outlook based on what we know about the data, what we know about the fundamentals and what we know about the political agenda. frankly, i think the authority euphoria isk the out of sync with reality. jonathan: where the pockets of value and how do you achieve

that? there is some value to having duration risk in portfolios. credit risklement and other parts of the portfolio and provides that diversification. when you think about the other parts of the portfolio, the corporate bond market had a great year, last year. high-yield bonds up 17% id corporate's outperform -- ig corporate's outperforming. after a good year like that, you need to be thoughtful. you can't have the same position that you had last year because prices are up. that said, we think there are areas of value. alix: which brings us to the great rotation. you have the bond guys saying at some point, we will see the end of the bond bull market if we see treasuries hit 2.6%, 3%. the equity guys say the great rotation is not real. which side are you on?

john: let me say something about the gross gundlach fixation. we would say that -- fundamentals are more important. we would say go back to what drives higher bond yields, which is sustainably higher inflation. we don't think we are there, yet. we think we are a long ways from having a higher growth level and a concrete policy delivered. we think we are a long way from higher inflation. there is still slack in the labor market and long-term downward pressure on income, around the world. rather than focusing on levels, we go back to the fundamentals and we don't think they justify sustainably higher bond yields. jonathan: bond market technicals for second-tier money managers. levels, look at the some people feel like -- when you look at those kinds of

levels, at what point does the risk rally get damaged by the backup in yield because there has not been a 2.5%, we are still ok. equity markets are holding up. do you have something in mind? michael: there is an offsetting effect of higher rates and the stronger dollar. have seen rates move higher and the dollar move higher, that will have an offsetting factor on growth. conversation that is important this year is the fed. the fed has been consistent in their message that they intend to offset higher growth and easier fiscal policy with tighter monetary policy. that intentional offset is important because that will put a break or a dampening effect on growth. it is not the case for we will have runaway fiscal policy and much higher growth as a result because the fed is going to take some of that away. you are right to point out those offsetting impacts and what that

should do is moderate your expectation for growth and yield. david: just to put a pin in this. take us inside your bond portfolio and talk about the rotation within fixed income. it sounds like you think high yields are fully bought and that might not be a good bet. when you coming out of and what are you going into? ichael: i do think -- emma: do think -- john: whether it is energy earnings, that should be supportive of corporate bonds, high yield and ig. i don't want to suggest the story is bad, but i want to suggest the price has moved along, a long ways. one area where we think there is value is commercial mortgage-backed securities. that light, last year but the fundamentals are still decent that it is an area that

-- it isast year, but an area that lagged, last year, but the fundamentals are still decent. there is still value in this sector, you can buy investment-grade bonds at 400 basis points over swaps. the message we would have is given the price-performance last year, each was very good, it makes sense to reduce positions where they are fully priced and look for places that have value like cmb yes. david: john bellows, it is great to have you with us. time for the other stories making headlines. emma: there was a report that justice department -- that the justice department has not found -- the wall street journal said the investigation into american, delta, united, continental and out west -- companies that are

the primary ascent -- assembler of apple's iphone's has seen a decline in revenue after the global smartphone raker -- -- global smartphone market went through its biggest slump, last year. the company is the world's biggest contract manager of assets. -- british chain had better-than-expected holiday sales. same-store sales rose 1/10 of 1%. the median estimate called for a decline. coming up, trump communicating with companies in a unique way on social media. how his tweets have moved markets. ♪

alix: welcome back to bloomberg daybreak.

frome two hours away donald trump's press conference and markets are looking for clarity. trump has not been silent on twitter. his tweets have been market moving and for investors, aching sense of his twitter is an entirely new exercise. we want to delve a little deeper in that. we want to start with the autos. his tweet on gm. general motors is sending mexican made models to the u.s., tax-free across borders. usa or usc -- make in pay a big border tax. decline within the stock rallied and is know about that rep -- above that level. you can get hit in the short-term, what if you are a good company, video have some resilience. we found out not that many cruises are coming north anyway, they are hatchbacks and there are hardly any.

the gm stocks soared up. a short-term blitz but in the long term, it did not hurt gm. alix: on the flipside, the peso has been absolutely hammered. the dollar just keeps grinding higher against the peso, that circle is where he tweeted around -- about gm and mexico, as well. jonathan: the central banks themselves trying to intervene, but cannot do anything about it. it has not been the negative market reaction the people anticipated on a trump presidency. david: we saw it during the race. every time the polls when upper trump, the peso went down. bowling in december, executives got to read about their company in a tweet from the incoming president. he said boeing is building a new air force one for future presidents but the cost is out of control, more than $4 billion, cancel order.

boeing stocks sort of went down, little bit, but it came back up again and once again, when you look at the facts, it was not a $4 billion price tag. the capturing goal of this, you can have the oligarch index and the drain the swamp index. the oligarch index including coney capital, exxonmobil, facebook, goldman sachs, paypal, sprint, united technologies, all companies trump said nice things about. drain the swamp index, the gm's, amazons and goings of the world. -- and boeings of the world. david: highly scientific. jonathan: very scientific. alix: we'll use that index for the next four years. jonathan: coming up in 15

minutes, former exxonmobil ceo rex tillerson's confirmation hearing begins on capitol hill. south dakota senator john thune what to expect as more trumped up -- as more trump nominations face congress. in the bond market, we look like this. treasury yields down about a basis point to 2.36 on the u.s. broad-based dollar strength in the d10 space. bloombergork, this is -- in the d10 space. from new york, this is bloomberg. ♪

♪ jonathan: from new york city, a warm welcome and good morning to bloomberg daybreak.

as we count you down to a trumped news conference with the president-elect and the cash open, 30 minutes away. futures stable throughout the session. london, anything but, potentially a 10th consecutive record on the ftse 100. in the bond market, treasury stable, yields down eight basis point and dollar strength in the g10 space. david: reports say u.s. intelligence tells president-elect trump about unsubstantiated reports that the russian government hasn't -- 6 -- has damaging information on him. trump and the kremlin denying the reports. former exxonmobil ceo rex tillerson faces a confirmation hearing on capitol hill. what will we learn about him, and will anything stand in his way of becoming the next secretary of state? -- jeff gun lock says

gundlach says 3% yields would , versus billrally gross's earlier call that 2.6% would end the bond rally. alix: there are some individual movers. 1%, raisinglines up its fourth-quarter forecast for revenue measuring, expecting that measure to the between unchanged and 2%. they expected it to be down as much as 2%. the company -- rising to as much as 9% on the upside. friday and walgreen -- right aid and walgreens -- rite aid and walgreens. on the downside, supervalu is

getting totally crushed, off by about 6%. it sales did beat, but disappointed in the ceo says the operating environment has been challenging. we go down to capitol hill where there is the confirmation process involving several candidates. we are now looking at the -- senatecommittee foreign relations committee where rex tillerson is going to be going in, for his nomination process. we are joined by senator john thune who will be holding hearings later today on the nominee for transportation secretary. senator, thank you for joining us. as we look at the foreign relations committee room and the chair, let's start with that. you will be responsible for voting on mr. tillerson. what are your views?

john: i think he is an impressive individual, somebody who has a lot of experience. he is a decision-maker, someone who has made relationships all over the world. he is well-suited for this job. they will press him, today and they will have questions about his relation ships in russia and creating a level of separation from that as he assumes this position. i'm interested in the answers to those questions. based on his experience, he is somebody that i think concert the country well in net position -- in that position. alix: he came across as much harder against russia and much more conciliatory towards china. that is different from the rhetoric we have heard from trump. how do you square that as a senator? john: the commander-in-chief sets the policy and the members of his cabinet take their lead

from him, but i think it is good he is surrounding himself with people who have different points of view and different experiences. i think he will need a diversity of opinion and when it comes to making decisions about some of these areas of the world marie have vital national security and economic interest. i'm encouraged by what i'm hearing from the people, the nominees. i think they will provide sound advice but in the end, it is ultimately the president that makes the decision. david: i want to go to your committee, looking at elaine chao, the nomination for transportation secretary. that is a job that seems particularly important in a trump administration. what are you looking for? john: she has broad experience in the transportation sector and labor department, but we are interested in what we can do to get projects -- get projects moving faster, what can we do to

provide regulatory relief that would enable infrastructure projects to get done in a more timely way and hopefully at less cost. what is she going to do to integrate unmanned aerial systems and driverless vehicles into our transportation system? those are things that will be relevant in the years ahead. infrastructure needs all across the country, particularly in states like mine, rural areas. let's spend a moment on the politics. your party has a majority in the senate. at the same time, there are democrats raising questions about some of the nominees. one elaine chao the easiest , given her experience and she is married to mitch mcconnell. john: i suspect that does not hurt, but i think she sells herself.

her background, experience, capabilities are going to make her argument, today. i think she will clear the hurdle very easily and be confirmed. getpe she is someone we can voted on, right away when trump is sworn in. we have about 100 under our committee's jurisdiction. wilbur ross will be the secretary of commerce if confirmed and his background is more in the private sector, so more extensive holdings and things to look at. end, these nominees all have a process they have to go through, and we want to make sure we are doing everything we , becausecilitate that we think the new president needs to have his team in place. david: you raised over ross and he was scheduled to go to hearings, earlier. it has been postponed. is it a method -- matter of time or an ethics memorandum? john: it want to have all that stuff in.

it is not unprecedented. there are examples of confirmation hearings being held before all the ethics paperwork is in. we want to give them an opportunity to complete that. we think it will be done in a few days. pushing this to next wednesday enables us to have all that available to our members so that when the time comes, they can ask the right questions and have all the information. you manage the fact that ceos are coming to washington? this is a confirmation process we have never seen before. how do you do your due diligence? john: it is unusual, and we kind of expected. this was a nominee who ran on a different platform and really did not want to have so-called establishment figures or people with political experience surrounding him. with deepot of people backgrounds in business and we think that is a good thing, but it does create some challenges

in terms of processing all the paperwork and looking at some significant financial holdings. we have a little experience with this in the last administration. penny pritzker had to invest yourself and -- the best -- divest herself. we have to make sure we are looking at all the right issues and asking all the right questions and making sure that these nominees are ready to go. david: give us a sense of the timeline. we have a lot of these confirmation hearings happening simultaneously. how quickly do you hope to have the core team for donald trump in place? what are you hearing from the trunk transition team? what do they want to get done in terms of confirming nominees? is to haveeal key his national security team in place. we don't want to have any gaps, here.

defense, homeland security, state if possible. taking water like from a fire hose, there is a volume of hearings, a lot of information to process. we are trying to space it so members of congress in both houses can get the answers they want, but it is not easy. it is not unusual, either. if you look at the obama presidency, there were 12 confirmation hearings held before he took office and on day one, he had eight of his nominees confirmed. we want to keep up with that president -- we want to keep up with that precedent. there is another event happening in new york, little later today and that is when the president-elect will be having his first news conference since july. what will you be listening for? john: i hope that he lays out

his vision for the future of the country, particularly with respect to the economy. that is the issue that ways the most heavily on the minds of americans. i hope that he is able to put that vision forward and lay out an agenda. obviously he will get a lot of questions about the confirmation process because that is the issue of the day. i hope it is a freewheeling interview. when he has an opportunity to go before the press, it normally ends up being a very spirited of their -- spirited affair. jonathan: we have an open conflict between the intelligence community and the president-elect. what do you make of that? i hope they can build a

relationship and develop a way to work together. obviously is -- it is going to be important. there are a lot of good, hard-working patriots in the intelligence community who are doing their best to get it right. they are human like all of us and they will not be 100% right all the time. we need to make sure they are as close to 100% as possible and when need to have a commander-in-chief that has a good relationship with the intelligence community. we hope that develops and i think it will. , andnk once he is sworn in getting his daily briefings and interacting on a regular basis with members of that community, he will start to see that relationship take shape in a hope continues to protect america's vital national interests here and abroad. jonathan: the president-elect is questioningpenly the credibility of intelligence communities.

what do you say to that? john: in terms of the assessments they have made in the past. we rely heavily on them. i have a high level of confidence in our intelligence community. they are doing the best they can. our -- they are pretty exceptional in the work they do. i hope that the president eventually comes around to that point of view, as well. he is somebody that wants to ask hard questions and those questions need to be asked. i don't think there is necessarily anything wrong with that, that in the end, we have to make decisions based upon conclusions reached on the evidence as presented by the intelligence community, and we need to have a high level of trust and confidence in them. to be frank, we are not talking about skepticism, we are talking about accusations of political witchhunts of the

intelligence community. it is more than just skepticism. john: there have been statements made and questions raised about whether or not some of the information is somehow politicized. i don't believe that and i hope that is the conclusion the new administration will come to. david: you have not seen evidence, yourself of politicization of the intelligence community. john: i see they are doing their best to report the facts, to collect the type of intelligence necessary to keep americans safe and i certainly hope, i don't expect it to be politicized, i hope it is not, and i think every american auto have that expectation as well. david: beyond these hearings, there is quite a legislative agenda being proposed by the president-elect. how confident are you of the ability of the congress to get

this legislation through, in a timely fashion. to you have a sense on what the priorities are? -- do you have a sense of what the priorities are? obamacare repeal and replace, tax reform, regulatory relief would be among the top priorities. some of that can be accomplished through administrative actions. they will be able to undo a lot of what we believe are harmful regulations done by the previous administration. the things proposed by congress are -- they don't happen overnight. most things take 60 votes. the rest of the things we can do at 51, but for the most part, any sort of legislation will require 60 votes and that requires a certain number of democrats to participate. -- i hope he is reaching out and developing relationships on both sides, and working with us and consulting with us in

shaping that agenda. i think he is committed to growing the economy and creating better paying jobs for americans. that is something we need to be focused on, and i hope that his efforts in working with congress on the legislative front are focused in that way, and designed to try and get a result. i think americans just want to get the result. david: senator john thune, thank you very much. we appreciate it. good luck with those hearings. you can follow rex tillerson's confirmation hearing on bloomberg. alix: joining us now is tina davis. and moments, we will start to hear from rex tillerson, the big question is, can the ceo of a major oil company become the head diplomat of the u.s.? in your experience, can he? tina: what is interesting about

this choice is a guy who has no government experience whatsoever, but a lot of experience dealing with foreign leaders, doing rather tough negotiations in places that are not always friendly to u.s. interests. his pronounced speech, earlier, but it's a much harder line on russia than you might've expected, saying recent activities have disregarded american interests. this comes from the guy that was able to work his way through some sanctions to keep fields open in russia and have that relationship. was that dynamic surprising? man who wass a behind exxon's huge push into russia in the 90's. --one point, russia where russia was the place where exxon had the most acreage. voice ofto echo the the administration he is joining, to some extent. what we have seen is someone who is going to be receiving a lot of questions about russia, especially today, so he needs to

take a stronger stance going into the hearing. jonathan: you now have to flip that relationship. is it fair to have the doubt that he is unable to put the state department before his former company? tina: he definitely has relationships to come from his .ong-standing tenure at exxon we know that he has met vladimir .utin several times he is in a process of selling his entire state in exxon so there will not be the appearance, at least, of a conflict of interest. alix: how can rex tillerson, who was at exxon for 41 years, truly be independent? tina: that is a question for

anyone going into a brand-new job. this is a man who is planning to transition away from exxon. he was already scheduled to step down in march of this year. he was already looking for new things to do. is not a neophyte to washington. he has obviously testified to congress, before. david: let's assume that he will be a loyal america -- a loyal american. it is about what he knows. he will look as -- look at problems at energy problems, as oil problems. -- there are state problems that may not be best looked at from oil. tina: that is a key problem. exxon does not have anything to do with the middle east -- the middle east, but israel and palestine. that is not an area where exxon has had any real partnership or

play, and i think it will take up a lot of his time as secretary of state, as we have seen with john kerry. it will be a steep learning curve, that this is a man who is not afraid to travel and meet with international leaders. integrity,much about a sort of boy scout mentality. joining us now live from capitol hill is kevin cirilli. financial disclosures have been released by the state's ethics office. he now holds 50 million shares of cit. you have ceos and businessmen coming in and the disclosure they need to make. imony wasthe ross' test put off for a few weeks. the hearing is underway,

and what they are hoping is to get more clarity because if you look at what the statements coming out of the president-elect office is anti-juxtapose that with what we are hearing from the opening testimony from rex tillerson, there seems to be a lot of gray area about whether or not these two messages are going to be cohesive and mesh well together. a lot of leadership circles as well as lawmakers offices are going to be watching closely about whether or not the president-elect and his potential secretary of state are on the same page. david: i wonder if there is not a different argument to this when you talk about steve newton -- steve munchen -- they will not be able to hold them to anyone. these are wealthy people unlike some people who come to office and need to make money. they don't need to make money, is that a strength? kevin: i spoke to top transition

officials and they said this is what trump meant when he said of the campaign trail that he was going to drain the swamp. i've also been speaking with democrats on the flipside, particularly in senator elizabeth warren's office were looking at these picks and say this is not draining the swamp, it is clogging the system with more of the same, from big banks and large financial institutions. the battle lines are being drawn and you can bet as we see, like senator elizabeth warren and jerry brown a carefully looking mnuchin's --ian -- alix: we are getting more news on the disclosure as steven mnuchin all the more than $59 of cit group shares and also shares of ge and goldman sachs. as we talk a lot about rex tillerson and the intertwined meant at exxon, the same

question goes for any of the strong businessmen. jonathan: is not new. we have seen examples of this. this is not actually anything new for the hill, is it? is not new, and neither is the playbook we are seeing from more of the -- from some of the more progressive senators. i remember hearing the same criticism about hillary clinton and barack obama's ties to business that we were hearing from elizabeth warren. any extent toave what this is -- where this is resonating with constituents? kevin: i'm not sure there is, because in terms of the republicans, but i can tell you this. as fascinated as we are with all these confirmation hearings in

all these cabinet appointees, the broader takeaway is going to trump says at that press conference, so right now i think on capitol hill, when we are focusing on folks like rex tillerson and jeff sessions and what senator cory booker will tell -- testified that hearing, the we are seeing -- testify at that hearing. always for seeing is the left to organize and characterize these folks, but it is part of the same playbook we have seen consistently over the last couple of years since that 2008 crash. an hour and a half, we will get that press conference up. what do you think we are really going to be able to glean from donald trump's president be at this press conference? kevin: i have covered several press conferences and you never know what to expect when he gets to the podium.

does his message on russia he did confirm that concern of senators like lindsey graham or john mccain, or does it add new questions? second, whether or not he creates a clear division of his own business assets and the incoming and administration. he won't be able to silence all the critics on the left, but can he ease the concerns of republicans in his own party that he is prepared to take office on january 20 and does his message aligned with folks we are hearing like senator tillerson?d rex what are the odds that what they say about russia's going to put them in conflict with each other? read rexen i tillerson's opening testimony and saw things like nato allies should be alarmed at the

resurgent russia and when i hear him speaking critically of russia's meddling in the u.s. election, and when i talked to a who are trying to prepare him for questions you look at about the latest reports regarding those two page briefings that were just made public or even more public, last night, that is what everybody is going to be watching for. if there is any division in terms of whether or not they are not speaking from the same policy, you can expect even more questions. that of course is what everybody is going to be carefully listening to. the tone he strikes in his opening statement is very different from the town that i covered on the campaign trail, for donald trump. alix: thank you so much, kevin cirilli. tina davis, thank you as well. waiting for rex tillerson, former ceo of exxonmobil to begin speaking in front of the foreign relations committee. >> having been mostly a

businessperson. when i came here, the first order of business was to deal with the surge in iraq. a pretty monumental time. we had in under resourced effort that was taking place in iraq and at a time when the united states had unleashed forces in the region that had not been seen, not unlike taking a big stick and hitting a hornets nest and changing dramatically the dynamic in the region. wehave the choice of whether search and try to be successful at what we began, or take another course. afghanistan also had been under resourced and all of a sudden, we began discussing things like nationbuilding, things that had not been part of our vocabulary for many years.

we have the -- we had the arab spring that took place in 2011, some of which was built off of some of the activities that i mentioned earlier. we had all kinds of incoherent things that took place. the quick throwing aside of a leader in egypt that we had known for years. an undertaking in libya that i still have never understood what the goal was, but left a large vacuum in the region, with arms spreading throughout northern africa. we have the conflict in syria that began with us cheering on the people who wanted basic human rights and more of a democracy, then we have the red line that our country did not follow up on. after that, we had the taking of crimea and the destabilizing of eastern ukraine, some of which i believe was driven by observing

u.s. leadership. we had china redraw in a map that had been around for thousands of years in the south china sea, claiming islands and properties and willing runways and doing things that until that time, had not occurred. we halve the hole destabilization of europe where i think confidence levels in europe are probably the lowest they have been in our lifetimes. about, inconcerns many cases, what our role is and the role of russia and what it has been doing in the region, the role of immigrants that are flowing in, the whole challenging of the european model. than we had a campaign that has been somewhat on orthodox -- somewhat unorthodox. america is going

to be. with all of this chaos that has exhibited through multiple administrations and will continue under this, we have had chaos where the united states has been withdrawing in his leadership role, and that is a recipe for further chaos -- in its leadership role, and that is a recipe for further chaos. i have the ability the other day to sit down with a general who will be the national security advisor and spent time with people around him and i know that rightly so, his focus is also on our country doing well, economically. every military leader we have had before us and certainly secretary gates have told us that if our nation is not strong economically, if we are not doing the things escalate to keep ourselves strong, then our nation will be weak and our

leadership around the world will be diminished. i'm thankful that that is the case. a lot of people here realize that it is we understand that all the people in other places when they themselves are not successful and of creating havoc around the world for nationalistic reasons to build support within their countries. therefore we do not wish the other -- >> we will have more from that hearing with the nominee to be the head of the state department, rex tillerson. the markets, opening just into dow,ession, 0.5% on the the s&p was close yesterday, unchanged for the first time since 1997. reopen today unchanged for the

s&p 500. the fx market in action, dollar strength, raw face dollar strength, energy captured on a bloomberg index, dollar index up 0.5%. the yield is down a basis points to 237. compliance is the buzzword for 2017. it looks like countries including saudi arabia are including the agreement. backey are cutting shipments to asia, but not as much as the u.s. and europe. you are looking at a nude market, -- muted market. you will see a press conference with donald trump. in the meantime you are also having confirmation hearings continuing. you can see rex tillerson a waiting to make his statement in his case to become secretary of state. >> and we are watching senator bob corker of tennessee

basically going through a litany of what he sees as republican senators, all of them mishandling. he has checked them all off one after another, why we are under store -- underway for something better under mr. tillerson. >> and 10 the market continue? will there be enough crude that will prove you can continue the equities with the nasdaq. it has not had one down davis year. -- day this year. jonathan: can they agree though? i mean within the republican party. even before donald trump gets into the white house, there are his agreements in the party itself like about russia and of the intelligence interviews. if you look at the center the beginning, he was very diplomatic about the intelligence community, but that is actively odds with donald trump who had accused the

intelligence community of carrying out a witchhunt. david: you made that point. the has said that, and they say i see no evidence. >> you raise a good point, do we see rhetoric from trump with his nominees? rex tillerson is a good example. he was much more aggressive against russia, saying recent activities had disregarded american activities. china, much less aggressive than what donald trump might imply. he said our nations are intertwined. you have a secretary of state that does not agree with the president. that will not work. jonathan: fundamental disagreements. they are on the same page on trade. they are different people. david: and also the infrastructure spending. a lot of republicans are saying we are not interested in

infrastructure spending. we would rather not do that. one of the key things donald trump campaigned on for president. >> and will anything get done? is a obamacare as an example, you get repeal, but then how do you repair its? and what about how the markets will be? jonathan: if you spend too much time trying to repeal health care when the market is looking for something else, you wonder what it will look like. if you prioritize that, it will go quickly before you have the fiscal land laid down. thing to repeal obamacare, another not to have anything in place. republicans will be unhappy if it goes away. >> and there are certain things like the taxes that some senators want to keep because the need to pay for whatever new health care they want to put in place. david: and pre-existing conditions, that is something donald trump wanted to keep.

>> if you look at that health care sector, it has been up 8% or 9%. the uncertainty is still helping to fuel some kind of movement in health care stocks. jonathan: so five minutes into the open, i will give you a market check. we opened up a 10th of 1% higher on the doubt. the s&p 500 closing but unchanged since 1997 first time. a rock of run. there is a 10th consecutive record, which is a record in itself, the ftse 100 up 0.5%. this,k something like broad-based dollar strength captured against the dollar and pound,the euro and the $1.05 south of that. cyclical data in the uk's holding up. it is solid, but politics

dominates the story. david: the fx reflects the politics more than reality of economics. >> and this is about oil. it all revolves around oil, which is often the highs of the session. the energy index in the s&p is one of the leaders relatively flat because it is a quiet day. you have telecom and financials and real estate leading the s&p a little lower. david: i really think that to election night -- back to election night when the president-elect first focused on the market reaction and what he had to say. was not the substance but the tone. as we look forward to this news conference, it is an hour and a half away now, whether he seems presidential, organized? let's be frank, it can be annoying to be harassed. >> we are awaiting for rex tillerson, former ceo of on

mobile, to begin speaking. the managing director for commodities, tina. what do you think will be the biggest question they want to get out of him? >> it is all about russia. not only the news of last night but also his approach. he was more strident that we have heard previously from trump himself. is there a disconnect? what are we needed to look for? >> take us through exxons relationship with russia. how big a bad is russia for exxon? tina: russia is a lot less war,tant since the crimea so it has been a sea change for exxon having to switch around. as i mentioned at one point, russia was the longest --

largest landholding huge deal. got oile have known, he over friendship from bladder and written, very -- friendship with vladimir putin. >> what might he lead in terms of sanctions? they need to have more bite, but he also said he did not think they worked. tina: he was very clear, he said sanctions are not a one-size-fits-all. they are not a panacea to the problem. exxon had to get special dispensation to close up the drill with russia when the sanctions hit under obama. this is something that he will have to tackle immediately. it will be interesting to see if he is taking a different stance from the trump administration. trump has questions this. jonathan: another hearing taking

place is governor mark carney in front of the treasury select committee, to bring the comments of that and what he has said. according to the governor, rex it has potential to implicate the major financial risk, but they would do it even if we were not leading the european union. risker on the continent than the united kingdom. this is a step down if you think about it he said of the vote itself. this seems to be a global phenomenon, maybe he should listen to the experts. david: he has been climbing back down a fairly strong statements he made before the vote. maybe not so bad after all. >> he has taken a lot of heat for the decisions he made. will he wind up staying for the full term? you know he did not want that when he took the job.

what we: it is a net of are seeing globally. maybe it is here in the united states and surrounding the federal reserve, federal independence and a big way under threat after the vote in the united kingdom when the likes of the anti-go politicians came out talking about experts and have their opinion was not worth the paper they were written on. people would like to see the federal reserve come down a notch or not. david: rex tillerson getting ready to testify, mark carney -- they are joined to some extent. brexit and relations with england, what happens with europe? rex tillerson will have to be the steward of that. i wonder what prepares him for that. jonathan: he will have to pair up with boris johnson. david: that will be interesting. >> we heard he was a closer time with the u.k.. -- going back to the

independence of the central bank , data has been better, but we know prices will rise. was right, but he was wrong on that signing -- timing? jonathan: they met some pretty dire forecasts of what would happen after the vote. the forecasters turned out to be wrong. david: recession. we will have a recession. jonathan: he still said one of the potential outcomes is a technical recession. it has not happened. david: he has got a difficult job. and he really seems to have handled it quite well, with regrets to other u.k. leaders. jonathan: he was the only person in town after the brexit vote himself. thecould not find chancellor or the prime

minister. he was the only man in the room with any authority that could stabilize things so to speak. on the right side of the screen, to pick up on your point you made earlier, so much is said about what he will prioritize, business or state department. as he prejudiced by which side of the deal he was on when he faced the state department? , part ofrt of the deal the conversation. he understands the mechanics. david: he certainly does. he is an effective leader. there is no question he can manage an organization, which we underestimate in a bureaucracy. >> the big question being, does oil take front and center when it comes to the secretary of state. you brought this up earlier. will we see foreign policy through the oil war? how does that change the world in the next few years? anid: you can't not have influence how you see questions outside the industry.

they will inform the way you look at the problem, the questions you ask and if you can surround yourself and have a broader view. ofathan: is the former ceo exxon mobil. we are waiting for his hearing to begin from that of the senate. , iore he begins to speak want to go back to what we were saying earlier, maybe that wasn't donald trump -- maybe that president-elect donald trump is going back. full coverage on bloomberg. as you know congress has a separate and can we go ranch of government, has -- coequal branch of government that has helped the nation since its founding -- founding. my vision of the united states foreign-policy and the role of the secretary of state in carrying out that policy. i approach this hearing and discussion today with a clear set of expectations for the next administration. i believe strongly in the world

where america works with allies and partners, governed by laws and institutions with liberal and international order where we champion values both at home and abroad. i think it is worth spending minutes this morning on the questions of human rights, democracy for governance, anticorruption and civil site is a sport -- civil site he support. -- civil society support. our values and our interests, not a separate set of considerations. it is cause of the nature of exxon and your work there. mr. tillerson leaves troubling questions about how you do these issues and how you as secretary of state intended to approach them. as you know, over the course of my tenure in the house and senate, i have caused -- championed the cause of human rights and democratic governance

. when i see the violations by china in the south china sea, i speak out. when i see gross human rights violations in ethiopia, i speak out. when i see massive corruptions in countries with extreme guinea, like equatorial i speak out. when i see severe erosion of institutions in venezuela, i speak out. it is a spark -- stark reminder that democracy will not defend itself. it is for those of us who believe in the democratic nurture ando support it and defend it from authoritarian opponents who do not share our values. perhaps the most egregious events we have seen recently have been what has happened by russia,t putin of having effectively killed the newest democracy, has led efforts across europe and the former soviet union to erode

democratic institutions and call in question well-established rules of the road. moscow undermined democracy through propaganda, cyber attacks and funding for populist political parties abroad. it should come as no surprise that in the various activities that reached our shores but are stunning nonetheless. last week the intelligence community found mr. bruton did indeed -- putin did indeed direct efforts to erode our democracy. i'm not saying the russia efforts were decisive in the election outcome. that is not the point. the point is that we were victims of cyber attacks of the democratic process. recent news accounts indicate russia may have information about mr. trump, and they could use that to compromise our

presidency. it cannot be business as usual. introduce --e must why i am proud to introduce a bipartisan bill with several members of this community along with senator glam -- graham and others to impose sanctions on russia for its interference in our election. we need to stand up to this bully in moscow and increase the cost for his behavior. i was disappointed in that in your prepared opening remarks submitted yesterday there was no mention about the direct confirmed cyber attack by russia on america. you did find time to say it was the essence of american leadership that this door was open. what additional actions the united states should have taken against russia in your view. you support additional sanctions

against russia demonstrating america's leadership like what my colleagues and i introduced yesterday? i am sure you can understand why i and many of my colleagues have deep concerns about your relationship with mr. putin. this is not just what you saw in his eyes. you do not strike me as someone naive. but how exxon conducted itself with this funding for the tools putin has used to crush democracy and dissent at home and sow abroad. i do not suggest it was your intent, but it is not too great from the exxon's partnerships and the kremlin's slush funds for this continued activity around the world. you are representing a president that may blatantly ignore the consensus of 17 independent and independent --

intelligence agencies. he may also ignore ukraine as a crimea.nexation of battlefield momentum to the dictator guilty of war crimes. russia itself is culpable of war crimes for backing the charlotte al-assad.shar and yet present electronic may make bruton a close ally. -- putin a close ally. so there is serious discussion about the president-elect's plans for prudent, but we need to understand your views on these critical issues of national security. and it could take seriously that 'sur tenure at exxon qualifications for secretary of state, but there is serious discussion the community -- committee is to have for conflicts of interests that

arise from your long corporate tenure. for too long, u.s. foreign-policy has treated for governance issues as secondary. if you become the top diplomat, i want to know if governance issues will become a primary consideration. i also worked to treat government issues as one of the most important of foreign-policy. involveden centrally in legislative efforts to bring transparency, foster high standards, and use tools at our disposal when it comes to supporting human rights, so i am troubled on many of these issues, exxon appears to be have been pushing in the opposite direction. , you will be assuming your new job at a consequential time. i believe the united states stands at a turning point in history, national power, economic military diplomatic is

being redefined and redistributed. international institutions and financial economic orders are under stress. i'm a change is causing irreparable harm -- climate change is comic -- is causing irreparable harm. and trump added to that uncertainty. we have global challenges. the middle east is undergoing unprecedented violence and security, iran is committed to confrontations with the united states and its allies. there are no less than three civil wars in this part of the world. u.s. leadership is required for these. six years after the hope of arab spring, there is a long winter where many governments are backsliding the fractured middle east.

the united states cannot pursue agendanosed economic without prioritizing values like political inclusion, human rights, and free active media in civil society. without these, there will be erosion. refugeesthe flow of will be difficult. i also need to stress our important partner in this part of the world, israel, these more than tweets about how great a relationship is going to be. i hope we will hear concrete visions and proposals for strengthening that partnership. despite the challenges, increasing opportunities for our country, president obama leaves the next administration and inheritance, strengthened relationships with our allies in europe and asia, re-energize partnership with india and africacs in sub-saharan

that can advance u.s. security and economic interests. i recognize what may not be in mind with president trump's vision of the world, like core values of international law, war crimes, human rights violations, corruption, standing up for democracy must be at the front of american foreign-policy agenda. i want to note that is confirmed you are taking one of the most skilled and able workforces of any organization on the planet. foreign affairs professionals are among the most dedicated of public servants. as a ranking member of this committee, i have benefited greatly from their insight and counsel over the years. i hope and trust and encourage you to take full advantage of these people should you be confirmed.

they are deeply committed to taking and extending the nation's values and interests. you will benefit greatly from a full and robust partnership between your office and the department you have been nominated to lead. i look forward to hearing from our witness. >> thank you for being here. you have been adequately introduced, and i think the world knows more about you than they ever thought today. without using any more time, we will thank you for being here today. you may have some family members to introduce, which is always helpful. if you wish to do so, begin with that and then your comments. chairman.ou, mr. i do have members of my family with me today. my wife renda of more than 30 years who has kept a welcoming home when i would come back from my many travels. also our five sons and grandchildren.

this person is a lifelong educator, math teacher, coach, teaching many years in public schools in texas. hamilton, family practice and abilene, texas, and judge lee-in-law, hamilton, is serving his fifth term at the 104th in abilene, texas. i appreciate so much the love and support they have given me in past endeavors, but most particularly that they would, from texas to be with me today. -- they would come up from texas to be with me today. good morning, chairman corker and others. i am honored to have the backing of senator corrine and senator cruz. , want to thank senator nunn hoping he remains steadfast as ever and as secretary gates for his service to eight u.s. presidents and his own secretary

leadership as president for the boy scouts of america. chairman corker, ranking member cardin, members of the committee, it is an honor to appear before you as pressing electron's nominee for secretary of state and seeking the approval of this community -- committee and the full senate. i come before you at a pivotal time in the history of the nation and world. everywhere we look, people and nations are deeply unsettled. old ideas and international arms -- norms of which were well understood and behaviors in the past may no longer be effective in our time. threat onnsiderable this evolving new environment. china has emerged as an economic power in global trade, and our interactions have been both friendly and adversarial. russia seeks respect and relevance on the global stage, its recent activities have disregarded americans interests.

radical islam is not a new ideology, but it is hateful, deadly, and an illegitimate expression of the islamic faith. adversaries like iran and north korea pose grave threat to the world because of their refusal to conform to international norms. as we confront these realities, how should america respond? my answer is simple, achieve stability that is foundational for peace and security in the 21st century, american leadership must not only be renewed but asserted. we have many advantages on which to build. our alliances are durable, and our allies are looking for the return of our leadership. men and women in uniform are the finest fighting force, and we possess -- >> [indiscernible] brave, protect my

community. protect america. [indiscernible] destroyed -- >> our men and women in uniform are the world's finest fighting force, and we possess the world largest economy. america is still the destination of choice for the people the world over because of benevolence and hope for fellow man. indispensableen preventing another cold war -- increasing liberty. our role in the world has also historically entailed a place of moral leadership, the scope of international affairs, america's goodwill is unique. we must continue to display this commitment to personal liberty, human dignity and principled action and foreign-policy. quite simply, we are the only global superpower with the means

and moral compass capable of shaping the world for good. if we do not lead, we risk plunging the world the birth into confusion and danger. but we have stumbled. in recent decades we have cast american leadership into doubt. in some instances we have withdrawn from the world. in others we have intervened with good intentions but did not achieve the stability and global security we sought. instead our actions and non-actions have triggered a host of unintended consequences and triggered a void of uncertainty. friends want to help but don't know how. adversaries have been emboldened to take advantage of the absence of leadership. in this campaign, pressing electron proposed a bold, new commitment for foreign-policy. i hope to explain what this approach means and how i would implement it if confirmed.

americans welcomed this rededication to american security, liberty, and prosperity. newly leadership but new leadership is incomplete without accountability. if credibility does not start with ourselves, we cannot extend it to our friends and our adversaries. we must hold ourselves accountable to upholding the promises we make to others. an america that can be trusted in good faith is essential to supporting our partners, achieving our goals, and assuring our security. we must hold our allies accountable to commitments they made. we cannot look the other way at allies who do not meet their obligations. this is an injustice not only to us, but to long-standing friends who honor their promises and bolster our own national security, such as israel. those who areld not our friends accountable to the agreements they make.