later on when about two hours to address the nation. a lot of issues coming up like the russian hacking and the soaring stock market and concerns about donald trump and whether he should divest businesses. there's back and forth even going on as to whether this is barack obama rally or a donald trump rally. no matter what you think, it is happening under this president and so those are the metrics and the measures that'll be used for the next president that he will hand off to him a tow that is at these records levels, assuming at the stay at record levels but when he handles to donald trump. democratic strategist, begin with you on this notion of whose rally this is. what do you think?

>> no question, it's president obama's rally, we have seen 81 straight months of job growth under his administration. neil: but even the last five weeks, that took up -- that was a sprint, that's his too? >> absolutely, absolutely. neil: okay. >> i think without a doubt. president obama has maid it -- neil: a little bit trump? >> even carl icahn said it's overblown to believe that donald trump is the reason for the bump. i do believe. it's very clear looking at the trend lines. 81 straight of months of job growth. neil: nothing in terms of the speed, the pace, the broader nature of gives any hint to donald trump? >> look, i actually -- neil: i want you to say good about donald trump. >> looking at donald trump it's clear that he has a lot of power right now. we have seen that with a single tweet.

he can send markets in disarray for a little bit and obviously they restabilize. neil: that's an awful little thing to say. a little condescending. >> i'm not ready to make any predictions for him as president elect at this point because he seemed pret ri -- pretty erratic at this point. neil: someone is a hater. [laughter] neil: jon, what do you make of that, but to make point that she's right that this is happening under this occupant of the white house, that would be the level and performance to beat for the next occupant of the white house, what do you think? >> i agree on the premise that the guy in charge gets credit for what happens underneath him. neil: we certainly blamed him if things were tumbling, right? >> yeah, absolutely. it's fair that things are going up, you give him credit. he's the captain of the ship

right now. the same thing happened to jimmy carter's presidency we'll. and the same thing is happening now. nobody looks back at hindsight and say that is was a jimmy carter rally. history proves it was a ronald reagan rally. nothing changed except donald trump good elected. we have gdp for 3% and we have seen growth but the only thing changed is donald trump. i think that's where credit has to go. neil: one of the things you read on these polls, fox and others have done, people grading barack obama very highly, the highest since the first days of his administration and other groups high in the economy in the mid-50's as well. so they remember where we were, they might not flip over where we are, but it's a loot better than where we were.

how do you think barack obama is going to to go down in history for shepherding us through crisis? >> i think he's going to get credit although i don't think it's warranted since a lot started earlier. he will get credit for getting us out of the financial crisis in 2008. neil: you sound like a kid that i'm giving beans too. [laughter] >> i think on everything else specially compared to what i'm hoping and expecting donald trump to do he, will look average at rest on the rest of the economy. look, i have to be honest. i've never been an obama fan and main it's just those lima beans

in the taste of my mouth. from everything that i've seen, trump is going to do a lot better. by the way, i would challenge marcie on one thing. i'm willing to bet if we were down instead of up 8% since the election, she would say that was a trump selloff. neil: well, i don't know. marcie, you would never say that? >> never. >> you would say it's obama selloff. neil: we do have 4.6 unemployment. this is full employment levels right here. donald trump talks about getting a lot jobs back. that unemployment level, of course, as you know and i think you discussed in the past, marcie, part time workers still working part time but that pay is down, average hourly gains, weekly salary gains are poultry

for recovery. do you think trump could significantly up that? >> i don't think he really knows what the details of a lot of the plans look like. neil: you're still in the hating mode. [laughter] >> the entire transition is centered about public image, not the public interest. and this is the same guy -- neil: you didn't vote for donald trump, did you? >> i'm sorry, i'm sad to report that i didn't. neil: go ahead. >> sure. but this is the same guy who in 2006 cheered on the housing crisis and this is the same crisis where 9 million people lost jobs and 5 million people lost homes. he said that was a smart business decision. that is donald trump to his essence. he said that just a couple of months ago. so -- neil: there's somebody buying

when everybody is selling. he was buying a lot of real estate when everybody was abandoning. >> sure, as a real estate investor but as president of the united states he should be worried as people. neil: john, do you think that he with the selections have seen has potential to keep this rally going and has the potential to give housing a boost even with rates moving up. >> it's going to be hart to -- hard to keep the rally moving. it took 18 months for the market to get back to that. that's going to take a while to move into the economy. so when you have rising rates, economy should dip. remember, reagan, not till '82 did the economy started recovering. i think there's going to be a dip.

neil: i don't remember regan, i wasn't born, of course. [laughter] neil: all right, work with me. do you think, gary, that people are getting ahead of themselves and that's just the nature of the beast, whether you're right, left, republican, or democrat, the market has built a lot of steam here and it's going to have to correct a little bit? >> yeah, i do. i mean, look you know, niel, that i'm a chartist, technician from way back. you look at this move, it's almost parabolic. i was kidding with marcie, up 8% since right after the election. no doubt, due to obama but still up 8% regardless. you just can't make -- that's too far too fast. i think at best, i think once we see the first one hundred days of trump, i'm hoping it just kind of moves sideways and this is a big relief rally that, yes,

john is right. maybe 45% or so -- 5% or so and then we are off to the races. neil: great catching up with you. as we are talking here, we are getting this alert. it's being confirmed by the pentagon, a chinese warship has seized a ship that was carrying unclassified data. same neck of the woods where the chinese have militarizing islands that technically didn't belong to them and that's something that donald trump indicated as president, he simply would not accept. he has not spelled out he would respond but we know the president will likely be asked about in conference less than two hours from now. so much to touch on with former virginia governor, gilmore. this had been out there that the chinese were doing this. what do you make of this? how should we respond?

>> i think we are going to have a solid policy, something more than just a an asian reset or an asian pivot and decide what policy is going to be in freedom of navigation to the seas. the chinese coont to try to spread influence. we have an interest to making sure that ourselves and allies have freedom of navigation and frankly this is a real friction and the new president is going to have policy so there's no misunderstanding either with adversaries or allies. niel noil i think we -- neil: i think we have been so focused in russians that they were mocking around election that we are losing sight of a bigger threat, and that is china? >> we have many adversaries in the modern world that we have to deal with. we have to address the iranian issue going forward. the chinese issue in the pacific, we have an interest to mange -- make sure allies are

secure and chinese continue to push that while simultaneously they are being good trading partners and now, of course, the russians, which is the subject of your sort of hacking issue here. the russians are emerging also. we are going to have strength, decisiveness and clear foreign policy which we have not had at this point. neil: you mentioned the russians. essentially saying to the white house, prove it, show the proof that i was behind it or my country was behind this. the back and forth on this has been endless. it used to be unanimous. not everyone in the intelligence community but it is a mess. is it your sense that russia was involved in hacking in the election and did so alean or does it matter? >> well, i think this is part of an overall propaganda program on the part of the russians to try to influence not only american

policy but those are allies as well. there's evidence that they actually broadcasting into luthenia. we did rad ie in europe, we broadcast in. i personally think russia would be better off as a good democracy. we are better off if ukraine is independence and i would expect them to try to create chaos and confusion on our side of the aisle. so i just think if i had one thing to say, when the obama people basically said this is all about trump and the election, that's really wrong. they are just seeing this through this kind of antitrump lens. neil: do you think the russian move, on their own they actually pushed to make sure elect auguster have access to this intelligence. do you think that it changed the

results of the election? >> it obviously did not. the people in the united states voted for change. that's why the industrial midwest part changed parties and voted for republicans. to suggest anything else is distortion there's no assertion that the russians did anything to change voting machines or totals. the question of the information of what is going on, i think we have to be more sophisticated. we are going to live in a communication society, we have to have a better understanding of what that means and better defense ourselves. neil: hillary clinton was telling backers, i believe, that james comey and the russian hack experience for her loss, what do you think of that? >> it's just delusional. they have to self-justify as to why they lost. american people rejected the policies of the democrat party. slow growth, less opportunity,

people who are working an not really getting anywhere, wage slow growth and really a message of all based upon redistribution of wealth and sexism and racism, these are the things that the people in the united states rejected an wanted to have a change. she thinks it's comey or the russians or something like that, that's just not in touch with reality. neil: thank you very much, sir. chinese capture of an american vessel. they claim a spy vessel that was sort of mapping the round underneath the south china sea and spying on the chinese and what they are doing this. this is the same neck of the woods that the chinese have been taking islands that were not theirs and quickly militarizing them. they have done this in more than a dozen cases. the chinese have it and this is

what they call the makings of an international incident here. now, again, there are other reports here in the new york times is reporting that this is an unmanned dreeb and the washington post not convinced of that. we are just keeping you posted for the time being on something that will no doubt come up in the press conference today and we will put added pressure on donald trump as president elect to respond to it. he has said that that militarizing with the suite china sea would stop under him. exactly how? much more after this. generosity is its own form of power.

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south china sea. the neck of the woods where china has been busy occupying islands that are not its own. comes in the heels of the report that was in the london telegraph, the aircraft carrier is also in that region but it was conducting the first live fire drill in some of the escalating tensions this week after the fact that china was off the coast of taiwan with a number of nuclear vessels in a strong show of protest against the tie -- taiwanese president making the call. i doubt exclusively but it is up

51.70 a barrel. i know there's been reports of other services that dispute this this was an unmanned underwater glider but i'm seeing from at least three out of four sources i'm looking at that it was unmanned. so again the chinese seized it, we don't know what they're doing with it. they are reviewing the intelligence that was gathered from it and here we go and that will no doubt come an hour and a half and barack obama in press conference. pops up on social sites like facebook, is what you're reading about real, a combat on fake news. the daily joins us right now, conservative leaning sites might want to be leery of this. i definitely see what you're talking about katie. one of the things that's been recommended that facebook use is

sites that provide fake news about the democratic national election and a lot of stuff about you guys. so be careful who is doing the checking, i guess. >> right. the first -- the first thing to mention about this is what conservative outlets fear is going to happen, has already happened. we had the trending topics where we had own employees suppressing conservative news in the trending topics portion of facebook and knew you're giving outlets that you said have attacked the daily caller for legitimate news and created false news to try and debunk us. you have giving them power in facebook which is the biggest social media outlet in the entire world. it has immense power to shape the news and discussion and you are giving outlets like snoops. neil, what do you think? [laughter]

>> there's a few, political fact, we are not sure if they are looking at multiple outlets for fact-checking, it makes you curious. snopes has had a of issues in the past, they attacked us over john kerry's daughter and noon profit. they omitted key facts from a story trying to debunk us that again was false, trying to slander us and try to knock us down and they are given power under the guys of protecting journalism. neil: is he aware of this? >> i'm sure -- wait, again, it's also going to suppress free speech and one of the problems is zuckerberg, i don't think he really wants to do that. i don't think he's intending to push things down but that is going to be a natural by-product of what is happening when you're giving biased outlet it is power to say what is true and what is false. neil: katie, thank you very much. all right, we are back to china real quickly.

quoting the telegraph here, china staged first live fire drills involving soviet aircraft carrier amid taiwan and island building in south china sea. this was triggered after yesterday's developments that dozens of ships and aircraft were and continue to be used for this massive exercise that supposedly wrapped up in the china's northeast. that's the northeast area of that region. how close that is to military islands, i don't know. but now u.s. drone and unmanned drone of sort of an underwater drone, if you will, taken by the chinese and things are escalating. that my friends is what people call international incident at the worst of times. more after this ♪ ♪ ♪ ♪

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neil: a little bit more on the chinese situation here. we have apparently demanded the

chinese turn over this navy unmanned underwater glider that was picked up by the chinese in the south china sea. chinese have not responded to that. they have the glider and what intelligence that glider was gathering, the pentagon has demanded that it be return. it's not like the chinese have said no, they have not responded period. we will keep an eye on all of that. keeping an eye on more developments in the trump transition news and now the fast-moving developments half a globe away, charlie with all of that in the news room. hey, charlie. >> as you know, niel, we are probably going to get more cabinet appointments or at least from what i understand cabinet appointments are going to be presented for president-elect trump to decide, various other white house appointments including deputy chief of staff and issues like that. as they are doing that, there's sort of a little battle within the transition team and within the emerging trump

administration, the players that have been assembled right now about legislative priorities, which issues are they going to address first when they -- when president-elect trump becomes president trump in january. from what i understand, the battle is between obamacare and tax cuts, which comes first and what we do here now is people such as vice president elect mike pence, they're pushing for the legislative priority to be obamacare out of the gate and making tax cut something later that the administration takes on. now, this is kind of interesting, obamacare, we should point out, the rise in premiums is clearly one of the reasons why the polls tightened toward the end of the 2016 campaign. they were a tax hike on working and middle-class people and didn't sit well and it could have been part -- that's one of the reasons for the margin of victory of donald trump specially in those key battleground states.

so what pence is saying is that this needs to be the first priority although it is difficult to put the genie back in the bottle, at least what pence is pushing for, make that priority number one and tax cuts priority number two and i think that's probably what's going to happen. if you look at the administration as it's working out, there aren't many tax cutters in there right now. we did talk about larry possibly getting the cea job. you could see how the priorities are lining up right now. it looks like it's obamacare first and tax cuts mid year at some later point. as you know with president obama -- excuse me with president trump, all things can change. [laughter] >> that's what i'm hearing coming out of the administration. pence is pushing for obamacare first and tax cut second. neil: all right, buddy, thank

you very much. a little more details on the chinese vessel. the chinese are claiming it happened in their waters in south china sea. the international waters, the argument is international waters hence are urgent according to journal that this vessel, this drone vessel be returned to the united states, they have not heard back, apparently this vessel conducts underwater survey drones and routinely maps out the area but it occurred in a disputed area of the south china sea where chinese have been militarizing the islands of their own and donald trump, not to mention barack obama have been critical of that, but now this is escalating to the point where we are demanding the vessel be returned, chinese aren't responding, we are saying these are an international

waters, the chinese they are saying their waters. here we go. more after this

neil: you're hearing a lot about the underwater drones that we have apparently throughout the world and this is what one of them looks like, unmanned, chinese naval vessel today shadowing, seized one of these

things as mapping out disputed area, we are apparently insisting that we are in international waters, the chinese are arguing in that neck of the woods in south china sea that it's their waters, this is roughly, roughly the same neck of the woods that the chinese have been militarizing a lot of the islands and for all i know that's what was going on here where we were mapping that land and area out. normally it's within close contact of a u.s. ship in the area, but not all of the time. but this is an area which i'm vastly ignore rant. why should i add insult to injury. what do you make of what you've heard and how the chinese are not responding? >> well, first, i don't have the specific details but i can tell you china has been very provocative in the south china

sea doing things inconsistent with international law. the right of free commerce on international waters, the right to transit in international waters, it must be maintained and the united states has been very clear about that. neil: what is the mileage, sir, to be clear when you're 2 miles, 10 miles off the coast of the country, that's international waters, do you know in this area what is? >> well, with china -- china's claims are basically the entire china sea, they are their waters because of islands and the island ownerships are in dispute and need to be determined by rule of law by the people have countries that have conflicting claims. china has acted unilaterally and has caused a very dangerous situation. we strongly disagree of how china has pursued this issue. it's not only the waters are claiming, the air is exclusive to them. we do not recognize that. the international community does not recognize that.

now, we don't know exactly where this vehicle was -- neil: right. >> if it were in international waters this is an extremely dangerous act by china. neil: it follows other provocative actions, just yesterday off the coast of taiwan following on actions they took last week when the leader headphoned to congratulate trump and they responded by a show of force off the coast of taiwan, tripling up and quadrupling up with russian military aircraft they had purchased. where is this going? what does your gut tell you? >> well, clearly what we are trying to do is get the countries in the region to use protocols to determine disputes over territory, maintaining the international community's ability through commerce to the

china sea which is critically important, so much of the world's commerce travels to the china sea. that's the u.s. position. we have certain treaty responsibilities with players in the china seas and we will honor our treaty obligations, but our objective is to use the rule of law to resolve these disputes and we strongly disagree with unilateral provocative action and china has been the principal player in militarizing some of the islands, in stopping commerce by fishing vessels and has caused significant concerned. neil: all of us curious in what the president has to say about all of this, what president-elect trump is going to have to say about this. he has been warning as well about prooftive actions by china indicating he's far more worried about china than almost any other country.

do you believe that china is a bigger worry and threat to us than any other country? >> ill not say particularly when we see what russia is doing today and what we see what iran and north korea. there are many countries that give us great heartburn and concern. make no mistake about it. kurt is not only great national security interest to the united states, but to every country in that region for a stable asia and stable world commerce china's action present a very serious challenge. i do want to minimize the challenge here but there are other parts of the world that are troublesome. neil: a lot of at the same time. all of this occurs as you have been pushing -- your democratic colleagues now close to a dozen now we are not sure exactly he's going to do but what was interesting about what you want to do is that anything that

looks like it might be a conflict of interest would be according to what you're working on here a high-crime and misdemeanor. do you think that's a bit presumptuous? hints of a conflict is grounds for maybe getting impeachment stuff going. >> well, there are several issues here, first the constitution of the united states is very clear that any person who holds an office of trust including the president of the united states cannot accept any foreign gratuities and gifts. it would be impossible to determine whether a foreign government is not doing favor by giving special treatment of one of the enterprises, therefore when he takes oath of office in january 20th, we don't want him in violation of constitution. a resolution that i filed say

that is he needs to divest himself to comply with the constitution of the united states. the most recent concerns -- neil: lawyers said back on the idea that given the unique nature, the oddity is that cabinet members are more behold into that than are presidents, is that true? >> no, that's not true. the constitution applies equally to all, every president since george washington has taken important steps to divorce themselves from their personal wealth -- neil: he has a multibillion dollar largely in real estate. how would you -- how would you have him separate that, a blind trust handed over to his kids wouldn't be good enough, right? >> well, i'm certainly going to agree with you that mr. trump is truly unique, that's absolutely correct. the business holdings need to be put in blind trust or divested

so he does not have a violation of the constitution or conflicts that questions whether he's acting on america's best interest or commercial best interest. neil: how would you know that with real estate because in the days of john f kennedy, his father had ample real estate holdings in the united states and father was saying, the wealth is from me and it's not jack. there was an understanding that the president was apart from that because this was the wealth of his father and again largely in real estate. what's different now versus then? >> well, kennedy took steps to divorce himself from all of his business holdings, all of his personal wealth. neil: the personal wealth was his father's wealth. >> you can't control every member of your family but if that member of the family has direct contact as an adviser to the president, then that is unacceptable. neil: where do you draw the

line? the obama bust the trend, i'm not questioning ethics at all. but they did have bank accounts and treasury notes, treasuries were pristine investments where the federal reserve is keeping interest very low. you could make the argument that that looked like a conflict of interest or something from which he was personally benefiting when the fed led bond prices so high and yields so low. >> president obama did both. he divested himself of his corporate holdings. neil: he didn't divest himself from bank accounts, treasury notes. he was by no means quite right. the appearance of holding treasuries at a time the federal reserve is benefiting your

recovery efforts would look like you are personally benefiting from that policy. >> well, completing he also set a blind trust so that he didn't control his wealth at all during his presidency and that's what presidents have done since the beginning of george washington. neil: you see now the eyes of the beholder -- >> no, it's not. there's a big difference rooting for our country with treasury bonds than holding corporate interest in russia in which you're seeking favors on a trump enterprises. that's a huge difference. neil: would you have been vigilant if hillary clinton had become president maybe shutting -- >> absolutely. neil: you would have been doing this right now? >> i would have been insisting whoever hold the office of president, whoever that person is, they have to comply with the constitution of the united

states, they need to avoid conflicts, they need to set up arrangements where either divest themselves of potential conflicts or put it into a blind trust. neil: so you would look at hillary clinton if she became president, she divorced herself from that, not him, divorced herself from that foundation, shut it down, don't pass on to the child, but shut it down, you would have aggressively called for that? >> there's a big difference between owning a personal asset and being involved in a foundation, having said that -- neil: i don't know about that. hundreds of millions of dollars in that foundation, right? >> there's also a big difference between a member of your family and their potential conflicts and a member of your family is going to be part of the inner circle of your advisory team. all of that -- neil: i don't know. just seems like grades of gray here, senator. the couple's daughter chelsea

presumably taking over the enterprise. we will never know. we will never know. i'm just saying -- >> well, i appreciate -- neil: you're telling a guy whose wealth with real estate around the world and to avoid appearance of impropriety, right? >> you cannot accept favors favors from foreign government. neil: you're saying the appearance of that. >> that's not appearance. that's a constitutional proo vision. neil: your legislation reads just the conflict of interest alone is a high crime and -- >> there's two issues here. one is the clause of the constitution which applies to public officials that congress can't change. this is the law of the land.

that deals with foreign gifts, trump enterprises deals globally. the second is americans want to make sure that the president of the united states is going to do what's in their best interest when he negotiates trade deals or when he sends our soldiers into harm's way and not commercial interest. neil: but you don't need prove if i'm reading this correctly, senator, if i'm reading it correctly, you don't need prove. normally you have to see a quid pro quo and all of a sudden you're profiting of operations or deals you're getting as a result of relationship with mac macau and china, whatever. i don't know if you want that. >> we don't want impeachment. we don't want a constitutional crisis. [inaudible] >> we want this done before january the 20th, the constitution is already there. we can't change the constitution. neil: where is he going to take

all the real estate? it's very different than those who come before him because of his wealth i think as you point out. what is he supposed to do? >> he has to comply with the constitution of the united states. it's not something that we can say, maybe, might be not. the constitution is there for ui given reason. neil: sell it in mass? >> either sell it or put it in a blind trust. that's the practice of every president. look, the constitution has served us well, there's a reason why we don't want foreign government inappropriately influencing our election, public officials. donald trump needs to comply with the constitution. neil: thank you very much, good having you. thank you for handling the china questions as well.

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neil: all right, let's take a look at the markets. you might say the whole chinese incident is sort of like the ship hitting the fan here because a chinese navy warship has seized underwater drone. we don't know exactly when. we do know that word turned rally in reversal. oil still up. take a look right now. 51.59 a barrel. normally in times like this when it looks like things are getting iffy, it's time to park cash.

markets to sell equities, buying things like oil later. so let's get to read from fox news state department pentagon producer who is meeting with inch on the story. tell me what this stands now and what the chinese are doing or what? >> niel, i can tell you when the incident happened, thursday noon local time. late wednesday night on the west coast. a chinese ship had been shadowing a usns vessel, owned by the navy, civilian crew aboard with scientists, research vessel. this is not a wink-wink spy ship. they had underwater drone in the water. the chinese ship put it along the side and stole it right under the nose, right in front of the americans, u.s. ship was unarmed, they made repeated calls over the radio that every ship is required to have at sea

and chinese, they ignored it and just kept going. neil: this american vessel watched the men and women, watched the chinese seize the drone and they couldn't do anything about it, they kept radioed them, don't do this, this is international water, whatever, the chinese ignored them? >> correct. these are international waters, this incident happened 40 miles west from the philippines. one of the contested areas where both chinese and philippines claim to this reef and in the past two years china has put 3,000 acres into artificial islands and now have 7 and this week washington base think thank produced satellite imagery showing artificial islands that have been weponized. close in weapon systems to shoot

down incoming missiles and this is another area of provocation and also there's some fox news reporting, niel, late last week for the first time after president-elect donald trump spoke to to taiwanese counterpart, first time they conducted the flight on that particular route since march 2015. another indication that chinese are ramping things up. yesterday the chinese defense ministry respond to go fox news reporting, said that the flights are routine. you asked about chinese reaction to the incident today, it is hours old and still braking, we have not heard from the chinese. i can tell you though, niel that state department has launched a formal protest, u.s. embassador in beijing has deliver that had protest and we are waiting more. neil: lucas, thank you very much. fox news state department pentagon producer. again, we are monitoring this here. markets suddenly reversed on

this news and oil picked up a little steam on this news. say

neil: all right. a few more details on the capture of american underwater drone that apparently maps the -- in this case the south china sea surfaced but it's always close to a us vessel, in this case one that we were renting out for the area, if i understand that correctly, we were imploring the chinese when they came to scoop this up, not to do it. the chinese ignored us again and again and again, took it away and left and that was it. u.s. navy reserve commander, former deputy assisted to fed secretary for bush 41. welcome to both of you. tom, you first, they haven't

responded to that. what do you make of this? >> this is a longer story, 20 years ago we put the seventh fleet in taiwan straights. you recall 16 years ago american ep3 being forced to land in china after it bumped a fighter jet, chinese fighter jet and chinese have demonstrated very rapidly ability to build up islands. they are in desperate need of oil and resources which are underneath the islands. the new president, president-elect trump is now engaged in an dialogue with them which started even before he's been sworn in and i expect it will continue and there has to be some kind of international understanding about the use of these exclusive economic zones and the freedom of navigation that every nation enjies. neil: apparently we have different versions of what is

international. neil: we are saying we were in international waters and the drone was in international waters, the chinese claimed their waters as their own so they do not see them as international waters. these are the same waters by all small islands that they have been militarizing quite a few of them. the pentagon has responded, peter, by using appropriate government chance, they have called upon china too return unmanned underwater vehicle that china unlawfully seized while it was being recovered by a u.s. navy oceangraphic survey ship. they still have not heard. we called upon china to comply under international law. crickets from beijing. what do you make of this?

>> well, it's a problem. we are likely to get it back at some point after the chinese are made their statement or signaled after a thousand pieces to see what it was actually doing. i have no doubt that what the navy says it was doing is mapping the floor. the chinese claimed the entirety of south china sea as chinese lake. one million scare miles and as i understand, this is breaking news, if i understand from what i've read, this was close to the philippines. neil: right. >> maybe within the philippines zone. this is harassment. look, you're operating in what we consider to be our lake and we are not going to put up with it and we are going to go after you. they have done similar things to us. neil: going back to the famous donald trump's phone call from

president of taiwan that really started this in that neck of the woods and that this is just an escalation from that. >> well, we don't know, the chinese will have to tell us. we have seen the sort of incidents before. we've seen when our surveillance ships have been -- neil: you find it odd that this long 12 hours that they have ignored us? forget about responding. tell us to stick it or whatever. they are not saying anything. >> well, this is how the chinese operate. they don't want to escalate crisis but they wanttous take on board and wonder why they did this including any of the number of possible answers that you've brought up. they've been building the islands which is much more egregious offense and militarizing the islands which is much more egregious than this. and another thing we don't know, niel, whether this was national policy or this was a local commander gone row.

we see that sometimes. neil: very good point. >> with the ep3 incident we had a hot pilot around our aircraft. that's maybe why the chinese are numb. maybe something that should have been done without beijing explicit consent. neil: one of the things we do know is that in the last week we have seen a lot more provocative act on the part of the chinese in that whole region. you know, not only conducting nuclear tests off the coast of taiwan but then using a lot of russian-purchased material and weaponry for tests in roughly the same area yesterday. so they have up the annie, to what end, what do you think they are up to? >> if the reports are right, it's a little more braising to do it right in front of the cruise, they are going to continue to up the annie.

the rapid rate at which they developed those islands is indication of their interpretations there -- intentions there and we shouldn't expect them to go quietly. the freedom of navigation is extremely important. they understand that the wealth of the oil and natural gas reserves underneath it are extremely valuable and important to their country. they understand the tensions with taiwan and they understand that there's a new administration coming in and we shouldn't expect there to be rapid resolution for something that's been going for 25 years and this is more bracing than we have seen. neil: a little bit more. even in front of our eyes and we are telling them not to do it. the region we are talking about, the chinese have a few, the whole region, you go there and you're not wanted, you shouldn't be there, they're going to take you. whether this could be a

commander who is going a little further than would be necessary or certainly justified, it comes at a time when, of course, over the last few years we have seen the militarization of the islands, how that is stopped or can it be stopped with the new administration. we know the president of the united states is planning press conference and we don't know that donald trump has to respond to this and it did take a market that was up and pull it down and took gas prices and bring them a lot up from what they were. charlie from the fallout from this. we all talk about, you know, sort of out of the usual events here. >> yes. here is the thing, niel, we don't know if it's a rogue commander or something centrally planned. i don't almost don't think it matters because the chinese are looking at our market reaction, what they are saying, we -- if

we engage in a battle with them, this is what they're looking at right now whether it's economic, a battle, not war of words, we impose trade sanctions, we go to war with them, there would be an economic price to pay for the u.s., the market is signaling that. neil: be careful what you wish for. >> if he wants to go to war whether it's militarily which i doubt it or if it's economically which is what he -- neil: he said throughout the campaign that he would not tolerate the chinese constantly rigging currency and rigging trade but even with militarization of islands takes stuff that doesn't belong to them and we look the other way. >> yeah. they're going to do even more. let's be real clear here, china is a big economy, they're integrated with us. i don't think anybody is sayingm have whatever they want but there's a way of dialogue and what they're telling you with

this is that you save a rattle with us and rerattle with you and we can have an economic impact on the markets. the markets are saying right now that if we engage in any type of pitch battle with china, economic or military, you will pay a price. if you go into a trade war with them, the u.s. economy will pay a price. that dow jones that doon eald is bragging about right now going up maybe to 20,000, that's going to go down. neil: peter, let me ask you about doing this, could be arrogant commander, we don't know to that find insight. but you could be taking advantage, that is china of a vacuum here. we are in between administrations, this one kind of powerless to respond with only weeks in office and the new one will be getting up to speed. how much is that playing into any of this, you think, if it's

bigger than just a commander here? >> right. like i said, this is -- this was also done by chinese warship against american belonging to the naval service. not an american warship. it wasn't that provocative. the chinese are using coast guard and fishing vessels to play role in presence in the south china sea and doing harassing, sure. neil: didn't we -- we only have a carrier, it's a big region, i grant you, but when they first started doing this, we sort of just floated into the neighborhood and i'm wondering where that stands now. >> well, we have a carrier that's a base-home ported in japan in the seventh fleet, that's always there. we have carriers that transit the south china sea to the indian ocean and middle east and come back through. so they are often there. we have flown b-52's. the real challenge for the u.s. today in not only the two points that ewe made about an administration going out and a new one coming, is that we have

a smaller navy than we've had in many, many years and covering that territory of the pacific is a real challenge against a rising china. neil: tom, real quickly, we are told drones are commercially available. i have not seen them at my wal-mart, but i will look. there's nothing military super sensitive about them but the chinese see it and they deem that they are, right, so they seize it, maybe will look at everything it's tracking and what will they find? >> they'll probably find nothing but like our ep3, we got it back in boxes. i assume we will get back our technology but it's going to be in pieces. they're going to exploit it for whatever it's worth but the more upsetting aspect of this is you have to be very close to a naval research vessel with a combating warship to accomplish this.

so whether it's state action bay beijing or independent commander, that will be a huge mistake if it was accidental but the proximity to peaceful civilian vessels is concerning and it's something that the united states needs to continue to enforce freedom of navigation operations and contesting a ridiculous economic zone which extends into -- neil: this is our world. we always talk about black swan events. ewe don't see coming. way too early to tell. we are never prepared for them. >> right. by the way, we kind of saw what happened in 2008, there were warning sign that is the mortgage market was getting too high and people were defaulting. to lehman, we weren't in the you know what. this could be one of those things. the warning signs are here. i'm not saying that we should just let china do whatever they want. let's be real clear what the market is saying here, you want

to engage negatively with this military and economic power house, you will pay an economic price, usa. i'm not saying it's not worth it. it was worth it to fight nazi germany and we paid the economic price. you name it. there will be an economic price the market is saying right now. this is a minor -- neil: this is their minor. a whole different thing. guys, thank you very much and for your patience. bottom line, the chinese still have this droab or -- drone or whatever you call it and you can buy something similar on amazon. wouldn't that be the christmas present to end all christmas presents? look, it caused international incident. we will have more after this.

neil: all right, you notice every prominent dem graph, blaming james comey, hack attacks u -- lunar eclipses but anything but what they hit them. media was unfair. electoral college stinks, comey is evil. russia and all that and, you know, tiger woods, he was going to be come back and start golfing any moment. [laughter] neil: niel, you say that a lot of them are valid excuses. what i'm saying, none of them were being raised prior to the election, maybe because they were so confident that as democrats they were going to win.

now they're all coming cropping out of nowhere and, i mean, you have to look in the mirror and say, we go -- >> number one there was discussion of russian hacking prior to november result in october. neil: not nearly as much as it was donald trump's potty mouth. >> well, donald trump stepped in it himself. neil: far margin than anything damaging to hillary clinton. >> niel, i agree with you that more coverage -- more time should have been spent on russia's role that it was playing in trying to give the election to donald trump. i think -- neil: do you think that with this push to get -- >> it was a factor. neil: a factor or that it was, push to get -- >> i think it was a factor. neil: push to get electors to change their streets as a result

of this because the russians stole the election, do you agree with that? >> well, what i think is really unfortunate that the election was close enough that the tilting of the table that russia was doing actually had an impact. but i think it is important that -- neil: but it didn't. other factors did that. >> you can't in one phrase say all hillary talk about was russia and it was a part of the campaign. it was in october, she and her surrogates would go on tv and say we can't talk about this because of russia. russia is involved. and then say after the fact that well, russia played a role. you are saying russia was playing a role and the american people they didn't care. that's what the polls showed. the american people cared about the u.s. economy, bringing jobs back here specially in pivotal swing states and you can't say in one word we were talking about russia and when russia thing happened and that made a difference in the election. neil: here where it worries me

and all i know we could have, could, have an international crisis ahead with china and going nuts in the south china sea and we are still debating who won the election because democrats are still ticked off about it, i don't know if now is the time to still be wining and doing all of this stuff when we should be rallying around the winner. >> particularly for democrats it's a bad thick because it's prolonging the inevitable and the fact that think need -- that they need to do soul searching. the republicans entered a pretty brutal period of self-reflection and they came out the other end identifying some of the factors that coon tributed to -- contributed to his loss and strengthened part of operation. neil: to be fair, they didn't see a donald trump coming so you're giving them maybe more credit than they deserve. niel,d

about. do you worry on whatever political leanings, now is not the time to rehash, reexcuse and complain? we are getting close to electors meeting in a few days, it wasn't close in the electoral college, it's certainly right to point out the popular vote how we went, we don't campaign based on the popular vote. could have been different if we did. having said that, do you have any words of advice for fellow democrats who look at this and don't change a thing? >> this is about defending american democracy at the end of the day. neil: you don't mean a word of that? >> no, it is. the russian interference in this election is historic. that's what this is about. listen, if donald trump -- if donald trump is seriously doesn't think this was a factor, why isn't he calling for open independent investigation.

neil: he's not condoning it. do you want him to agree with the democrats like pelosi to get electors to maybe change their vote? >> niel, he's putting political interest ahead of the country. we have to be certain -- neil: we are not certain the russians hacked it alone. >> intelligence communities are fairly certain that not only russians hacked it but directed by putin. neil: they're not all so sure that it was russians alone. by the way i do find but there's a picking and choosing among information when it comes to intelligence, weapons of mass destruction or 9/11. i >> i mean, the democrats can't have it both ways.

we have china. neil: you're candidate lost, would you be doing right now what niel is doing? >> absolutely not. [laughter] >> here is the thing specially today. you don't think china is taking advantage of the uncertainty in american politics. neil: this is actually vacuum of uncertainty compounding the problems, president elect is going to have. >> if russia -- neil: sarah what do you think? >> well, absolutely. if your ultimate goal is protection of democracy, it does more to undermine confidence in the institutions to overblow the selected los angeles -- leaks to a few cia analysts and hack into the democratic system. neil: did you say extrapolate? we don't allow big words in the show. [laughter]

neil: the thing still sticking in my mind, we kept telling to china, no, no, don't take it, don't you dare take it, now we are told that the chinese kept lifting it out of the water, put it on the vessel and we are going, no, no, don't you do it. i ought to -- wow. more after this fight heartburn fast. with tums chewy delights. the mouthwatering soft chew that goes to work in seconds to conquer heartburn fast. tum tum tum tum. chewy delights. only from tums. this is my new alert system for whenever anything happens in the market. but thinkorswim already lets you create custom alerts for all the things that are important to you. i guess we don't need the kid anymore. custom alerts on thinkorswim. only at td ameritrade.

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.. neil: a little bit more on the chinese seizing of an underwater drone, the defense department saying the unmanned vehicle was discovered missing thursday when the crew of the u.s. navy vessel tried to retrieve it. it is an oceanographic ship, they claim in international

waters carrying out research, under conditions of anonymity, this is not the sort of conduct we expect from professional navy captain jeff davis, a pentagon spokesman says the second time this week coming after china, it had installed weapons that it would use to repel threats and a lot of this, they go on to say, complicated by president-elect donald trump's phone call with the president of taiwan, which i suspected but i am no foreign policy expert. this guy, thank the lord, is the former national security advisor under president ronald reagan doug mcfarland. despite our protests of don't do it, leave it alone, they sees it, left the area, not a word, they didn't say a word. what do you make of that?

>> it is the kind of diplomatic response that is fairly normal in international politics. the phone call is more than a small perturbation from the beijing point of view and you can expect something to happen. it does demonstrate they don't take it lying down. this is a little above the normal predictable response, but it is key to what is acceptable or not from their point of view. i don't think it is designed to escalate. that is the last thing president ping in beijing would do before president trump is even in office. it is a marker but it was really a comment more than a signal of anything more serious.

neil: this is nothing along the magnitude of when the iranians use one of our vessels, captured our shoulders -- soldiers, nothing like that but you argue it is a provocative action and they ignored our protest in taking the vehicle period, right there in real time. >> it is and it is uncalled for, it is too much in the way of equivalence in normal protocol but it is something, your mention of the uranian incident, a good contrast because henceforward i believe the seventh fleet and the new president of the united states is going to put in place authorities for contingent operations that go well beyond diplomacy in the case of iran for example in the u.s. navy would like nothing better than to have an opportunity to go after the revolutionary guard corps's installations and you can bet if there is a challenge to innocent passage through the strait of hormuz you will see

fireworks. neil: what about the south china sea and this region? at this point in international waters, chinese saying it is there waters, they have been militarizing these islands that aren't even there is for years now. you are advising donald trump if he comes in and has to deal with this type of behavior, that would obviously continue. very few signs that it would not. what does he do? >> i think there needs to be a rebalancing in the terms of trade. more important, and improving relations, to engage and trade

negotiations back and forth, president-elect trump has an opportunity to demonstrate the art of the deal more than any other place in the world and time has come. neil: hope you have a merry christmas. ample service to this country, national security adviser, crucial time in our history, more after this.

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neil: i honestly don't know how a market watcher is going to top what he did in 2016-17. not only did joe predict donald trump would win the election, everybody thought he was crazy but that the dow would have 20,000 and we would be looking at the markets we are looking at. i don't know what he is drinking but i want some of it. good to have you, thanks for coming. just in the middle of this bullish series of developments we have this, i don't know if you call it a black swan event with the chinese seizing drones and all that. it might not escalate but then again it might. this where he in 2017 that we are focused on russia and what they are doing, and what they are saying? >> a lot of geopolitical events in the past three to five years, always a knee-jerk reaction but the markets get gobbled up, sentiment get negative quickly and we rebound pretty well.

the last three to five years especially when you consider where we have come from, 10001500 points on the dow. neil: you think the last few weeks showed a little bit, you saw it is too much. nothing goes straight up. >> short-term for sure. go back and look at the past 12 to 18 months, the market hasn't gone anywhere. a lot of people say you made a call for 20,000 back in april and they ask me now what is next, i feel we are just starting a new blue market and we have been in a consolidation for 12 to 18 months and although the s&p didn't correct by the official definition which i think is stupid, 20%, when you look beneath the surface, financial, 30%, energy 50%, biotech, small and mid-cap 30%. beneath the surface we have been in a bear market and we are just

starting to emerge. does it go straight up? of course that. will we have corrections and pullbacks and shakeups along the way? absolutely. however, since i feel a lot of technicals and improving fundamentals are coming up going forward i feel we are starting a new market. neil: where does it take of? >> targetwise i don't know, the next one to two years of gdp can shift from one and a half to 3%, steve mnuchin -- steve mnuchin has mentioned -- neil: the treasury secretary does. >> that is their target, 4% but even if you can move one and a half to 31/2, that has a tremendous impact on the economy. part of my call back in april when the dow was 17-5 a big portion of the call was sentiment meaning a lot of people, both retail and professional, who i highly

respect were very negative on the market and not long ago the sentiment was near five year lows. everyone was expecting a correction. that sentiment, although it has improved recently, will continue with that 1 foot out the door mentality so every time it looks like we are going to go into a correction the market tends to fool the majority and i feel the dips will continue to get bought up. neil: 20,000 now, 21, 22, what are you looking at? >> i could see a double-digit gain next year. with corrections along the way. neil: double digit gain would be 2000. >> at least as i am thinking longer term since the beginning of a new bull market. neil: you would not be concerned it is pricing, the theory that the economy picks up, earnings pickup and multiples are adjusted and you are not worried. >> the dow trading 16 times

earnings, i don't think that is tracy. it is a low interest rate environment although the fed will be increasing rates, they said they would do it gradually. i think we are in a favorable global environment where all the fed's keep interest rates low. neil: will donald trump be a market friendly president? the policies he is talking about, cut regulations, healthcare, market friendly? >> for sure. you heard a lot of ceos say that. it is not just regulations in the financial sector. it is regulations overall, tax-cut, repatriation and so forth. you heard a lot of ceos and different industries more positive. i do believe it will be a business friendly environment. neil: good seeing you. thank you for taking the time. goldman when we are talking about the dow, the biggest spin, the biggest reason it is down is

pricing stock. the pricing, more disproportionate influence it has on the overall dow, down 11/2% as we speak. more after this. or stop to find a bathroom? cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, or adempas for pulmonary hypertension, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any symptoms of an allergic reaction, stop taking cialis and get medical help right away. ask your doctor about cialis and a $200 savings card.

>> the federal reserve hiking rates, now is a good time to survey the debt and see how the decision will face the bottom line. a credit card debt is $16,000,

it doesn't stop there. median household debt is 132,500 including mortgages and because of that, mortgage rates are moving higher. when you have adjustable rate mortgage you see increases in the coming weeks, credit card balances even faster. credit card debt is below prerecession levels nationally. it exceeded by 2019. other forms of debt become more expensive. back to cavuto coast-to-coast.

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soon learned that one of our ancestors we thought was italian was eastern european. this is my ancestor who i didn't know about. he looks a little bit like me, yes. ancestry has many paths to discovering your story. get started for free at ancestry.com neil: just the appearance of impropriety, what looks like a conflict of interest is good enough for democratic senator ben cardin to threaten impeachment of donald trump doesn't divest. >> we don't want impeachment, we don't with the constitutional crisis. neil: a misdemeanor. >> we went this done before january 20th. the constitution is artie there, we can't change the constitution. neil: you can't put -- you just can't throw that into a blind

trust was very different than those who come before because of his wealth as you point out. what is he supposed to do? >> that is the constitution. he has to comply with the constitution of the united states was this is not something we can say maybe, maybe not. the constitution is their -- neil: what do they do with a real estate empire the world over? sell it in mass? >> sell it or put it in a blind trust. that is the practice of every president since george washington. neil: i looked this up the constitution doesn't say anything about that. you can run a business and the president of the united states was the proof of accepting bribes or special favors or leveraging off of that, unequivocal proof of it is a big no-no and that causes a problem but the senator's measure, elizabeth warner to the democrats goes a step farther by saying just the appearance of that would be good enough to be

a high crime or misdemeanor that would warrant impeachment proceedings which is that fair or right? a former advisor to george w. bush, another step based on the appearance. you are rich and all over the world, impeachable offense. >> this is what self-important people do when they have no power. it is pretty rough being in the minority in the u.s. senate and the u.s. house. this is what you do, issue proposed resolutions that won't pass, the claim you have the power to impeach which they won't have because they will never have the votes and go on tv to talk about it because that is the ultimate objective, to draw attention to you, the opposition party hoping to position themselves to take back the senate in two years so it is frivolous and ridiculous. neil: real estate is always a tough thing to handle. if you think about joe kennedy and his son john kennedy when he became president much of the kennedy fortune was tied up in

real estate around the country, used to be around the globe, john kennedy divorced himself from that, his money, his real estate, you could make an argument that many of the policies or economic measures would benefit the family fortune but no one made that extra leap back then. it is very different with a guy of trump's wealth to put it in a blind trust. you are talking global real estate empire, easier said than done. what should he do? with businesses all over the world that is going to keep coming up. >> this is a unique situation, we never had a president like this who has real estate holdings and investments like donald trump does. in terms of the question of whether he should, absolutely not. the american people elected donald trump, it certainly didn't stop him, he didn't release his taxes, his tax

returns, that didn't hurt him at all. he doesn't need to. he is a billionaire but he is a guy that has set a new standard because he's not a politician. neil: if he gave that business to his kids and said you deal with it, even if that worked fine for john kennedy saying this is my dad's wealth, i didn't create this, he did, there was that arm's-length thing. back then it was a friendly media. what about this? >> let's play out the scenario. supposed donald trump puts all his holdings into a blind trust. that will not stop then cardin or elizabeth warren from still claiming that he is profiting, his family is profiting from this. won't make a difference because he has such bad polling, they will still find a way to claim his policies have enriched him and yet they had no problem,

hillary clinton expected to be president, they had no problem with her moneymaking machine, paid to play she had for years when they expected her to be president, never said a word about it. neil: would have been aggressive on this about how you would divorce yourself if hillary clinton got elected from her husband's charitable foundation. wasn't quite the same deal but i might have missed something. >> they ought to be calling for an investigation of the clinton foundation but they don't. the democrats have to make a choice. do they want to advance the interests of the people and at least try to work with the president of the united states or do they want publicity stuff for politics purposes? warner: the we shall see. good seeing you, have a merry christmas. former bush xli campaign advisor, smarty-pants. we expect the president of the united states in a few minutes, he will weigh in on all these developments the least of which is the sudden incursion in the south china sea, technically

yesterday, the chinese seizing and unmanned underwater drone. i did not know you could purchase them online. every show i do i learn something and for you if it is new you are welcome, america. your insurance company

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neil: you are looking at the white house where the president of the united states is going to be briefing folks, dealing with a press conference. no doubt this whole china navy seizing a us underwater drone will come up. the little tidbit i found interesting, this represents the first time, from the wall street journal, that the government in beijing has seized a piece of us military hardware since the chinese took a navy surveillance

plane following a midair collision back in april of 2001. what makes this even all the more remarkable is the chinese seized this drone with in full view of an american ocean -- a -- oceanographic vessel that was being rented out. the guys on that ship were saying don't take this thing. kept shouting at the chinese, pull this thing out of the water, through it on their ship and didn't say a word, not a word, just floated out of sight. despite protests to give it back, we have done this through different channels, not a word. they have not responded at all. look at how the markets are responding to this. this could be one of those black swan events. we were up before we got news of this and we are down 11 points,

not a lot but this could easily escalate something akin to what we had when soldiers and sailors were captured by the iranians, the coast of iran and it doesn't look like something like that and that could explain why the loss in stocks has been nominal and the gain has been nominal. it comes at a time when much of the world and certainly our political theater has been around what the russians did, not so much attention to china but president-elect donald trump has said china is his real worry, not so much the russians. how that pans out when the president of the united states addresses reporters for the last time, you can imagine quite a few things have changed and been added. we will hear from the president soon. we have not heard at all from the president-elect on any of this but we likely will a little later on. trish regan following that and more. we are going to take a quick break but i do want to stress

that these losses, these are nominal losses in a week we have seen robust gains. i want to put that in perspective. stick around. :

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breathe right. . neil: all right, the press conference about to start, and trish regan will take you through that and so much more. trish: major display of aggression out of china. china seizes an unmanned, underwater u.s. navy vehicle in international waters of the south china sea. exclusive reaction from former ambassador to the u.n. john bolton, a contender for the position in the trump administration. the president of the united states is expected to address this issue any minute from now. live picture of the podium at the white house. could this be his last news conference ever. all happening momentarily. hello, everyone. i'm trish regan, welcome to "the intelligence report". i want to get you up to speed on this aggressive move out of china. a u.s. navy drone that was studying ocean conditions in