Welcome, everybody, to power lunch. Were just 98 points away from dow 20,000. It is worth noting all three major indices record highs today. Among the biggest winners, nike, ibm, apple, exxon and microsoft. Tyler . Melissa, im tyler mathisen. Thank you for joining us. Here is what is happening at this hour. Apples new air pod earbuds are now available on online ahead of the holiday rush. They hit the stores next week. Nfib says it is Small BusinessSentiment Index jumps to the second highest on record. And 85. 5 of all u. S. Airline flights were on time in the month of october. Who had the best performance . Hawaiian airlines, the most on time arrival. The worst, virgin america. Michelle . Welcome to power lunch. I am michelle carusocabrera. We have a busy two hours ahead. We kick it off with your big market story today. The dow just a stones throw away from hitting 20,000. Bob pisani live at the nyse as we close in on the big 20 k. Bob, first you, the preview. Yes, the important thing is what pushed the dow and all the other major indices to historic highs in the most recent leg of the rally has been a notable rotation. Look at the sectors in the s p 500 in november that were the market leaders. We talked about the financials all throughout the month as well as industrial and material names. Consumer discretionary to a lesser extent. Thats changed in december. Yes, take a look at december. Yes, financials are still up there and doing well. We see Telecom Stocks, real estate stocks, we see utility stocks, we see consumer staples, these were all laggards in november. Theyre coming forward. As a result of that rotation, something falls back, like industrial material name, something comes to take this place. Like consumer staples, for example, you see this in the dow as well. And the dow is also seeing this. So, yes, you got Goldman Sachs and you got jpmorgan all doing really well. That hasnt gone away. But now youve got big cap tech that lags a bit in november, like intel coming to the floor. You got consumer names like walt disney and cocacola that didnt do as well in november. You have Telecom Stocks like verizon that are coming to the floor. Thats why every single day you can see the market moving forward because if something falls back that is a leadership group, something comes in and takes its place. A powerful rally were in the middle of. That was more immediate history of what got us there. Now to dom chu, a look at the stocks that got us here over the last year. If we talk about what bob spoke about, lets look at since the election, that last leg higher is the important part here. And we mentioned the biggest contributors, the biggest percentage gainers so far in the dow since that big election run higher, which is what got us to the election levels, look at caterpillar, bob said the industrials may be falling behind a little bit. Look at the chart, up 15 just since donald trump got elected. Again, a huge move here. And 96, carries a good amount of weight in the Dow Jones Industrial average. Jpmorgan chase, 85 stock, dow is price weighted, higher the stock price, the more impact it has. Jpmorgan, 21 since then. Biggest of them all, Goldman Sachs, dont say it over and over again. Worth pointing out, Goldman Sachs, a 238 stock, has a huge amount of impact on the dow. As for the biggest laggards, so far, the biggest weight, if these stocks can turn positive, maybe doing even better, past 20,000, Procter Gamble down 2 . 84 stock. Biggest drag since the election. Visa shares, off by about 4 , 80 stock. If these guys turn positive, some of these get some momentum going, we could see dow 20 k plus in short order. The nations second Biggest Pension Fund says forget dow 20k. Dow 21k could be around the corner. Chris, welcome to the show. Good to see you in person. Good to see you. Lets be clear, mostly through passive funds or active stakes in those companies. We own the market. 70 of our u. S. Equity exposure is in a passive russell 3,000 fund. These arent active bets, these are the thats the waiting of the largest stocks in the usa. Is your feeling that youre going to remain mostly a passive investor or has time changed and time for stock picking in this market . Sadly times have changed and time for more passive. More passive. It has been a tough year for active managers. Since the election, the value managers have done very, very well. But i think when we go back and look at 2015, most people, especially Retail Investors, will be disappointed with their active manager. Five minutes ago just said hes worried about a blowup in passive in some passive funds, etf, fixed income. Are you worried about that . Etf is all over the map. Youve got two times, three times market exposure. Were in just a straight cap weighted index fund. Those arent going to blow up. Those are the markets. We can do it almost no cost, a fraction of a basis point, we run most of that with an awesome team in house, all of the u. S. Equity is in house and part of the passive you run your own index, your own indexers, you dont ship it out to black rock or wherever. We used to. But now we run it all inhouse. Fractions of a basis point, cheaper than black rock can do it. We can track the market, very tight tracking, we can do smart rebalancing. We own the market. When the market dow 20,000 is off, were moving with the market and not having to take risks on active i look at your top ten exposures, the very top, u. S. Government bonds, 9 . Is that correct . Is that going to get smaller or bigger in the wake of the election. If you think dow 21,000 is around the corner, do you reduce that exposure . We have been. Were a longterm investor, we have been reducing our exposure to fixed income and i would say for most of the Retail Investors out there, they have got to go back and look at their 401 k s and fixed income exposure. Were about 20 in fixed income, reducing that down to 16 and were heading eventually down to probably about 12 . To michelles question, 30 year bull market in Treasury Bonds . Youre acting like it. Yeah, you know, i have to be honest if youre selling im laughing because i said that about three years ago and i was dead wrong. Really early. Thats indistinguishable from being wrong. But i think it is. The fed is tightening barely the long bonds already tightened four times for what the fed will do this year. I dont know if it is officially gone there is a tenyear channel. There is a 20year channel in rate. We havent quite broken out on the up side, but we will. Why do you think the dow is going to 21,000 . I think that were going to have some steady income from u. S. Corporations, they have decent earnings. Things arent going to be robots. Theyre not going to get there overnight. Is it because of the election . No, it is because we believe the usa has a decent economy, not a great, were the best dirty shirt in the country in the world right now. So we think well see some consistent increase. Were not saying, you know, were not timing the market. You know im a 30year investor. How do you build alpha into a portfolio where you say basically i own the market . Where do you get that little increment to perform that will enable you to meet the obligations that you have to your beneficiaries . First private equity. Were going to do it in private markets, private equity and real estate. A little bit out of infrastructure, im looking for more income out of infrastructure. And then it is going to be waiting within u. S. , nonu. S. When you say real estate, do you mean owning buildings or investing in publicly traded real estate corporations or a little of both . I consider reits publicly traded and they are more public stocks than they are real estate. We own buildings, physical buildings, office, retail, industrial, which is one of my favorites. And have done so for years. Most of the gateway cities in the usa are more than fairly priced. New york you do these investments yourself, your view on the economy has not changed one iota based on what has happened in the election, not on the premise that perhaps there will be a Corporate Tax cut coming or a personal tax cut coming. Nothing has changed . To say nothing has changed, we were uncertain coming into the election, and our view is right now we actually dont know a whole heck of a lot. We have a lot of speculation. We havent had Inauguration Day. I said to several people, lets talk after the first 100 days, which right now is may. Youre going to have leaves on the tree, spring, then well have a better idea. The challenge for washington is in my career, washington has not been functional. I know the percentage of individuals that own equities in america is at an all time low. But yet you represent teachers and educators. The russell 3,000, which is your biggest exposure, is up 12 this year. What does that mean for all the public educators out there . How much does a year like this help secure their future . I have a 30year horizon. This is one leg in a marathon, this is a good mile, and a good pace. For all those people who have been saying were in a low Interest Rate environment forever, or a low return environment forever, ive been saying, one or two years, buts talk over a five to tenyear time period. This shows were still seeing compressed returns, but youll have periods like this one year where we might get a double return at equities. Who would have thought. Not me. Thank you. A news alert in the bond market now. 30 year bonds up for auction. Lets check in with Rick Santelli and see how it went. It has been so long since we had a good auction, so stop the presses, we finally have one. 29year, 11month securities, original released auction in september, three years reopening, 3. 152. Thats 12 billion of them. Well below the one issued trade lower yield higher price. We give this one a c plus. This caps off 56 billion in supply, everything was above average. If you look at the bid to cover, 2. 39, well above 2. 28 ten auction average, 63. 9 on indirects. Almost 2 better than ten auction average. And 9. 3 versus 9 on direct. Dealers only take 26. 8 . This was a good one. The juiciest yield. We built in a big concession, and i guess the longer the maturity is given some courage to those investors who are a bit more fearful for 3s and 10s earlier in the week. Tyler and the gang, back to you. Pack Donald Trumps pick f diplomat is not a diplomat, but a dealmaker. Will his strategy of picking people unfamiliar with the job actually get the job done better . Plus, are things at trump tower got a little harder, better, faster, stronger today. Youll understand the reference coming up. Were drowning in information. Where, in all of this, is the stuff that matters . The stakes are so high, your finances, your future. How do you solve this . You dont. You partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you. Morgan stanley. Welcome back, everybody. This happened today. Rapper kanye west stopping by trump tower for a meeting with the president elect. John harwood gets to see it all. Hes outside of the tower with the latest on the trump transition. Hi, john. Hi, tyler. We have a wide diversity of activity here at trump tower including which maybes the day more interesting too. Look, well start with bill gates, bill gates is in meeting with donald trump right now. And we did not hear from the transition advisers, exactly what the topics were going to be. But bill gates said hes hoping to take advantage of the wide latitude the president elect has to choose among a wide array of priorities that he has. Here is bill gates with becky quick this morning. Energy and wide range in conversation about the power of innovation. Thank you. Okay. So there you see bill gates speaking as he left trump tower. But heres what he told becky quick about what he intended to focus on with the president elect in that meeting today. I think there is a lot of fascination to see what the new direction will be. Donald trump was elected not so much for specific policies, but because the kind of leadership, you know, those voters wanted. Ha he has a lot of flexibility on which issues he goes after. Thats why i think that a dialogue now, you know, what are the positive things for america that hes thinking and who can help out with that. Now, it tells you something that the meeting with bill gates was the second most important thing that happened here at trump tower today. The most important thing was president elect announced his choice for secretary of state. That is Rex Tillerson, the exxonmobil ceo, somebody who the president elect is praised as a Global Business player, somebody who makes great deals. Theyre concerned in the congress about his ties to russia, especially in light of the russian hacking of the election. So Rex Tillerson may be facing a challenging confirmation fight. Now, the tillerson thing may have been the most important issue that happened at trump tower today, but the most interesting was kanye west, you mentioned, tyler, kanye west, who recently got out of the hospital, went up to meet with donald trump. He came they came down, they talked about life, they have been friends a long time. And who knows maybe ill have to run against kanye west in 2020. John, thank you very much. Lets get back to talking about Rex Tillerson, if hes confirmed, hell face a new set of challenges as he transitions from ceo of exxonmobil to the nations top diplomat. Lets bring in james jeffrey, u. S. Ambassador to iraq in 20102012. Both have long resumes related to supremacy work. Can a man who runs an oil company run the state department . Were going to have to wait and see. One thing that is clear is that the state department is not an oil company. The responsibilities and requirements for success as a diplomat are quite different than one would look at for a top oil official or top business man. So without knowing very much about mr. Tillerson, i think well have to wait and see whether he has the right whether he has the right makeup to be a successful diplomat. You have some doubts. What about you . Well, first, i served as adviser to exxon. Im not completely unbiased. I absolutely think that somebody with this background can be a fine secretary of state. We dont take our secretary of state from the ranks of diplomacy for better or for worse. We take them from the military, from politics, law, business and academia. And the people who do best are the people who have the trust in the president and the president s trust in them, who know the International Scene and who can negotiate. Sorry to interrupt you, but do you know Rex Tillerson, did you meet him . I met him, yes. What do you think of him . I think that he meets all of the qualifications that i laid out to be potentially a very good secretary of state. Is he friends with vladimir putin. How do you describe this relationship, already becoming controversial . Let me put it this way, in much many years in europe, i found many people who identified ideologically, philosophically with russia as an alternative to america. Thats not what youve got with tillerson. What you have is someone who did deals with the russians, just like he did deals in iraq when i was in iraq. And, in fact, u. S. Government wanted exxon and other u. S. Oil companies and other major u. S. Firms to work in russia and to work in iraq and other places as a complement to our diplomacy. Thats not abnormal and thats what oil firms and other firms do. They make deals around the world. Thats what keeps the economy going. How transferrable are the dealmaking skills that mr. Tillerson may have employed as the chairman of a Multinational Oil company with the dealmaking skills that hell have to employ as secretary of state . How did the two correlate and how are they different . Well, i would have to say that i think everybody in washington is either reading or rereading the private empire book that steve cowrote a few years ago, trying to come to some understanding of the answer to that question. It is the character the personality of Rex Tillerson, somebody who is going to be able to make that transition. I would say that the skill set that you require for secretary of state not necessarily what we have seen and what is understood of the corporate personality, the Corporate Culture of exxonmobil. Jim knows him. He knows the knows exxon better than i do. What i would say is that to be a successful secretary of state, you have to have strong listening skills, you have to you have to have a nuanced approach to issues. You have to be able to understand both sides of the question. And frankly speaking, you have to be willing to come to a compromise and not expect that youre going to win every argument that youre going to win every deal. And, im sorry to cut you off, just running out of time, james, back to you, the book that jerry referenced is called private empire. A country unto themselves. Do you believe that running a company like an exxon does in many ways put you at odds with american interests, even if you are an American Company . There is no doubt that firms have their own interests. But when it is the same thing running an army as Dwight Eisenhower did, a different set of skills and different focus than being president of the United States. Colin powell faced the same thing. But absent entire career and diplomacy, the people you get at the head of the state department are always going to come with a different background and a question is always will they be able to translate that background into the background you need for the department of state. Gentlemen, thanks so much for joining us. We appreciate it. Thank you. Were closing in on dow 20,000. At this point, were just about 50 points away. This is my headquarters. This is where i trade and manage my portfolio. Since i added futures, i have access to the oil markets and gold markets. Okay. Im plugged into equities trade confirmed and i have Global Access 24 7. Meaning i can do what i need to do, then i can focus on what i want to do. Visit learnfuturestod