By MICHAEL FALCONE ( @michaelpfalcone )

NOTABLES

• TODAY AT THE WHITE HOUSE: President Obama holds his annual year-end press conference at 1:30 pm ET in the White House briefing room. Obama last fielded reporters' questions the day after the mid-term elections and there's a lot of new ground to cover since then, ABC's MARY BRUCE notes. The president is expected to face tough questions on relations with Cuba, cyber-terrorism, torture, immigration, the economy, and race relations. As ABC's JONATHAN KARL noted on "Good Morning America," many are watching closely to see whether the president will refer to the Sony hack as "terrorism" and how the U.S. is going to respond to North Korea. The president will also likely tout his strong finish to the year - in recent weeks he's announced a major climate deal with China, unilaterally reformed the nation's immigration system and seen a boost in job growth. This evening, the president departs for his 17-day holiday vacation in Hawaii . WATCH Karl's take on "Good Morning America" today: http://abcn.ws/1wsq08P

• BY THE NUMBERS: This will be President Obama's 7th solo news conference of the year, according to the American Presidency Project at University of California, Santa Barbara. ABC's DEVIN DWYER notes it's the 46th time in six years he will take questions in a solo session with reporters. George W. Bush held 34 solo pressers by this point in his presidency.

• THIS WEEK ON 'THIS WEEK': Following President Obama's historic opening with Cuba, Sen. Marco Rubio, R-Florida, comes to "This Week" Sunday. And the powerhouse roundtable debates all the week's politics, with former Vermont Gov. Howard Dean, ABC News contributor and Weekly Standard editor Bill Kristol, ABC News contributor and Republican strategist Ana Navarro, and ABC News' Cokie Roberts. Be sure to use #ThisWeek when you tweet about the program. TUNE IN SUNDAY: http://abcnews.go.com/thisweek

ANALYSIS

ABC's RICK KLEIN: What's a war? What's terrorism? And what do you do about it? President Obama is logging on to a new kind of debate in confronting the Sony hacking affair, with the Justice Department moving toward outright blame of North Korea for an attack that's clearly illegal - and much closer to an outright act of terrorism, given the actions it ultimately brought about. The White House has labeled it a "national security matter," with Press Secretary Josh Earnest saying a "proportional response" was warranted. But that's for the president to figure out, with no clear set of precedents. Does the United States respond by hacking them back? Threatening to shut down a North Korean movie release (!)? It's very possible that, for as huge as this week's Cuba news was, the hacking incident could have more severe geopolitical implications.

WHAT WE'RE WATCHING

- OBAMA SURPRISED WITH 'CUBAN' CIGAR ON HISTORIC DAY FOR U.S.-CUBA RELATIONS. Turns out President Obama capped off Wednesday - a day that marked the dawn of a new relationship between the U.S. and Cuba - with what else: A cigar. And, according to the gift giver, it was a Cuban. ABC's ALI DUKAKIS reports, when a guest at one of two White House Hanukkah receptions handed one to Obama, he gave it a sniff. WATCH: http://abcn.ws/13hE2hq

-THE GINGRICHS' GUIDE TO SURVIVING A PRESIDENTIAL CAMPAIGN. As the wife of a former presidential candidate, Callista Gingrich has some advice for the spouses of 2016 presidential hopefuls. "Focus on the positive, try not to let the negativity get you down, because you really have to keep your [attention] on those issues that are most important to the future of this country. And some days that's a challenge," Gingrich said. "But just be open-minded and appreciate the moment." Gingrich, who is out with a new children's book, "From Sea to Shining Sea," said that part of staying positive means steering clear of reading the news if you're the subject of the report. "Probably avoid that," she told ABC's JEFF ZELENY, host of "The Fine Print," in a joint interview with her husband, Newt Gingrich. WATCH THE FULL INTERVIEW: http://yhoo.it/1v7C8Ye

THE BUZZ

2016 PRESIDENTIAL RACE: WHERE THINGS STAND. So, now that the midterm elections are over - in case you missed it, the GOP did pretty well - we can now focus on the 2016 presidential race. Get excited! ABC's SHUSHANNAH WALSHE breaks down the latest on the 2016 presidential race. http://abcn.ws/13hrpCO

NOTED - OBAMA: 'I HAVE A LOT OF DISAGREEMENTS' WITH JEB BUSH. In an exclusive interview on 'World News Tonight' with ABC's DAVID MUIR, President Obama says he "loves" the Bush family personally and that former Florida governor and possible 2016 presidential candidate Jeb Bush has "every right" to run in 2016. Obama made sure to praise his former secretary of state as well, adding that Hillary Clinton would make an "excellent president." http://abcn.ws/1DQtp6c

CUBAN EMBASSY EASY TO SET UP, CIGARS HARDER. What does the U.S. have to do in order to officially establish an embassy in Cuba? Not much more than change the sign on the door, ABC's ALI WEINBERG notes. But just because establishing an embassy is so casual doesn't mean it will happen quickly. All the changes that go into normalizing relations take a while to be implemented. So Americans looking to get their first legal Cohibas back to the states will still have to wait a few weeks. http://abcn.ws/1C49PS4

PHOTOS: WORLD LEADERS IMAGINED AS HIPSTERS. It's exactly as it sounds. See JFK, Winston Churchill and Vladimir Lenin in subculture garment. http://abcn.ws/1wIqqaV

5 SWEEPING CHANGES RECOMMENDED FOR SECRET SERVICE. A bipartisan, independent panel scrutinizing the U.S. Secret Service after a man with a small knife in his pocket jumped the perimeter fence and made it deep inside the White House is recommending sweeping changes at the agency. ABC's MIKE LEVINE reports on the panel's recommendations, which includes building a taller, "better" fence. http://abcn.ws/1zBwSQJ

WIKILEAKS RELEASES CIA REPORT ON HIGH VALUE TARGETING. Wikileaks has released a CIA document from 2009 analyzing the positive and negative effects of strikes against high value targets. The 18 page secret document is dated July 7, 2009 and is entitled "Best Practices in Counterinsurgency: Making High Value Targeting Operations an Effective Counterinsurgency Tool." According to ABC's LUIS MARTINEZ, the anti-secrecy Wikileaks posted the report on its website Thursday. A press release accompanying the release said the report was compiled by the CIA's Office of Transnational Issues and "weighs the pros and cons of killing "insurgent" leaders in assassination plots." http://abcn.ws/1z1O3Z3

3 SENIOR ISIS LEADERS KILLED IN US AIRSTRIKES IN IRAQ. Three senior ISIS leaders have been killed in recent weeks by U.S. airstrikes inside Iraq, including the terror group's right-hand man, the Pentagon confirmed. ABC's LUIS MARTINEZ reports that the news comes as the American commander leading the U.S. effort against ISIS in Iraq and Syria says coalition efforts are having a "significant impact" on the terror group's operations. http://abcn.ws/1wQsV9R

WHO'S TWEETING?

@PounderFile: Politico: Bill and Hillary Clinton's midterm travel expenses top $1.5 million http://politi.co/1DRoaDc

@ByronYork: Romney run still totally unlikely. But there are scenarios. 'I wouldn't say there is zero chance of it,' says one. http://ow.ly/Gap1S

@joshgerstein: Just heard farewell salute to @petermaercbs on CBS 8AM 'round-up.' Great WH colleague and pro. And to his mom & Obama, always just 'Pete

@danbalz: What Obama can do about Cuba, and how Congress can interfere http://wapo.st/1GZdHSr

@WestWingReport: On This Day. 1998: Bill Clinton was impeached; House charged him with lying under oath to a federal grand jury and obstructing justice