tv Power Lunch CNBC September 13, 2012 1:00pm-2:00pm EDT
and everything that's going to go out and buy. >> i like the financials. >> catch more "fast" at 5:00 p.m. tonight. "power lunch" picks the ball up and continues our fed coverage right now. big ben bernanke making his move. chips on the table. the fed is going to spend $40 billion of those chips every month to buy mortgage backed securities until the job market shows some signs of improving. will it be enough to satisfy wall street? what kind of political may hhem will it create? check out the 10-year note. spiked on the news about a half-an-hour ago. there it is, the 10-year note at 1.80%. that's way up from where it was a couple of months ago. now we talked a little bit
about the politics. this is a decision that comes smack in the middle of a very contentious political season. fed's independence on the table. we're going to have one of the most powerful republicans on the hill when it comes to monetary policy and fiscal stuff. first though to the floor of the nyse. sue herera, take it away. >> this is where it's all happening, ty. we have a triple-digit advance in the dow jones industrial arch. we are up 112 points on the dow. that is the high of the trading session. the dow now hitting levels not seen since december of '07. the s&p is up almost a full percent. we are at 1,450. significant from a technical sta standpoint because that surpasses some of the optimistic technical forecasts by some of the big names on wall street. we need to hold this level for the bulls. nasdaq composite is up almost a full percent, almost 30 points to the up side. we're seeing levels in the nasdaq we haven't seen since 2000. we had a big spike in the gold
market after the announcement, then it retraced a little bit, and it is off to the races again. up $26, that's 1.5% on gold. in terms of brent crude, we are down just a fraction on the trading session. so you know the fed made its move. our senior economics reporter steve leisman is handicapping it live for us in washington. steve, it was an extraordinarily strong statement by the fed today. do you agree or no? >> i completely agree, sue. i think while the amount that was specified is what the market expected, i think the language is more than the market expected. it's very open-ended. i want to go through some of the language in it that tells you, all right, we're doing this now, but that is not necessarily it. first, as you all know by now, $40 billion monthly of mortgage-backed securities. i think there is a political element to that. we'll talk about that in a second. it will be reviewed in the coming months. but more is possible if the labor market does not improve
substantially. what more? more can include other assets, not just mbs or more mbs. finally, this is really important -- the fed will remain ez "for a considerable time after the economic recovery strengthens." now we need to talk about that. that comes directly from an academic paper delivered at jackson hole by michael woodford. what's happening here is the federal reserve is changing what we call its reaction function. how it will react with policy to incoming data. essentially what the fed is saying is we're going to kind of ignore incoming better data and we're going to stick to our guns of remaining easy. that's a huge change for a central bank. maybe a huge change in central bank history. finally, the guidance extended to mid-2015. one more thing. the politics of this, if you concentrate on mortgage-backed securities, how does anybody step forward and say, you know what? i'm not in favor of lowering people's mortgages. that's maybe why one aspect of the policy right there. >> that's fascinating, things that they are talking about down
here are just what you said. that is politically it does give the fed a little bit of cover to some extent because they are talking about the mortgage-backed issue. but also the use of the word "significantly" and that phrase where they said they would be accommodative well past the time when the economy starts to recover. that's all the buzz down here on the florida, steve. thanks so much. >> it's a big clang. it is a theoretical change. it is out there in the theory. as far as i can tell, never been used in practice where essentially the fed is saying, and this is where the debate's going to be -- is the fed saying that if the recovery is not in place and inflation is above 2%, will the fed remain easy. in other words, is it loosening up on its inflation target and that's going to be a big question the market's going to start debating right now. >> steve, thanks so much. we'll see you throughout the day here on cnbc. now today is also an auction day but because the fed was timed at 12:15, then keep in
mind we still have the statement and then we have the news conference, the 30-year auction was moved up to accommodate that. let's get to rick santelli in the mix. i know fed wants long-term interest rates to go down but we saw a spike in the ten-year today. how did the auction do, rick? >> even though the fed controls a good chunk of the treasury market, what they want and what they get is still determined by the guys behind me. it was a 30-year bond auction. if you bought into it you are really hurting right now. but of course settlement isn't for a few so we'll have to say. i saw 2s get up to 25 basis points but that's not the real story. as you go down the curve the moves are bigger. 5-year, i saw 74 basis points. even though that's interesting, that only comps back about three weeks. winner of big movement is the 30-year bond. there's your steepening. it is because we're nervous about reflation, according to
the traders, and you heard bill gross say it. that got up to one whisker shy of 3%. we haven't been up there since about the second week of may. 30-year's really going down, yield's going up. >> do we hit 3% today? >> i saw 2.9999% trade. so, yes, virtually we came close but i didn't see the exact print. if you look at 10s minus 2s, it's steepened. everybody i know's in that trade. they're happy. they were all long gold. they're happy. last chart, dlarn dec dollar in. down about .25%. intraday low was the lowest level since about the 4th of may. >> rick, thank you. let's talk to jim -- i know you'd like to be out there with rick today but you're here with us and we're glad for that. what do you make of this move by the fed and how do you invest behind it? >> well, it's huge. the open-ended aspect to it is enormous. that is the only way they could
probably not disappoint considering everything that was built in. i am long gold and silver. they are my two biggest positions and i'm glad of that. what worries me right now, s&p has been up between 9% and 13%. that's okay but that's not great. we're still in the infant stage of this reaction. we have hours left to go. if the stock market starts to turn, i'll be worried. because if this disappoints and we don't see a catalyst going forward, because this was the catalyst. i actually have a package that gets long the vxx if volatility starts to spike and i worry -- remember, the vxx has a decay factor but it is a short-term play. if you're willing to look at it as that, it is not a bad idea. >> the stock markets are higher. gold up $27 an ounce. you're happy there. jim, we'll be back with you in a minute. now in theory the fed is independent, nonpolitical. theory in reality rarely sync up and especially not in an election year. our chief washington correspondent john harwood has that part of the story. john, i have to think that
today's decision is sure to rile up the so-called sound money folks, right? >> no question about it. we'll hear from larry kudlow about it tonight, our friend, on his show at 7:00 on cnbc. but i think this is mostly an intramural argument among republicans on economics. this is not something ha is going to have a broader political ramification. the other swing voter in a place like ohio or florida or colorado might know who ben bernanke is, might have heard his name. has no idea what the fed is doing. this is a question of what is the economic effect in the near term. and if you get a bounce in the market and if there is some felt improvement in the economy, that's going to help obama. but my guess is that given how baked in to the cake negative attitudes about the economy are, how badly people are feeling, how weak the job market is, it's not likely to have much short term impact -- except in the market. that will cheer some investors but i doubt it is going to have
a major political kick to it. >> john harwood, thank you very much. sue, down to you. the question that everybody's talking about -- whether or not this latest round, and a very significant round, of kwaun tate ef easing is the right move. let's talk about that with a michigan republican, member of the house financial services committee and the subcommittee that oversees monetary affairs. congressman, welcome. pleasure to have you here. >> thanks for having me on. >> this is basically open-ended accommodation by the fed that will continue, they say, even after the economic recovery gains a little bit of steam. it is pretty much unprecedented. what's your reaction to it? >> yeah, absolutely. when they moved that into mid-2015 for their target, it just seems to me that having artificially low interest rates once again underscores the bad economic policies we've seen coming out of this administration and uncertainly
that's out there. >> do you view it as a political move by the federal reserve or not? >> i take them as their word that they're non-political. but again, i think the fact that they have to do this or feel that they have to do this is just again underscoring what is wrong with our economy and the problems that have been put in place. the uncertainty in the business community really is what's causing this, i believe. rick santelli's right, it is really going to be those bond traders behind them that are going to determine whether this is going to work or not and i have my doubts. >> what do you think the fed should have done? >> obviously, as it was pointed out in the "wall street journal" a couple days ago but senator graham and the economist from california as well, there are ramifications that we aren't really even baking into this and calculating into this. so i'm not sure that taking an interest rate from 3.5% to 3.25% or 3.25% to 3.15% is going to
determine whether someone feels good about their situation and the economy and whether they're able to go buy that house. that's really not the situation. it's about that uncertainty that's out there. >> do you worse or better about the fed offeri ining mortgage bd securities in its program? >> it's six of one, half dozen of the other in many ways. it doesn't make me feel substantially better somehow. i still have a lot of concerns about this quantitative easing at all levels and i think as was pointed out, maybe the average voter doesn't know who ben bernanke is or what the federal reserve is doing, but they do know what that means in the economy when it comes to the uncertainty and that feeling that they're getting from their employers as well. they feel frustrated with the tax and regulatory policies that are coming out and uncertainty that's being created -- >> that brings us to the fiscal cliff. the conversation is suddenly
shifting down here on the floor of the notion from the fact that now we know what the fed is going to do, we don't know what congress is going to do and they're facing the fiscal cliff. how close to that cliff is congress going to take the country and the markets? >> yeah. well i think a lot of it is depend on whether or not the president is going to take us up to that cliff or not. he's been very hard and strident on his language about absolutely wanting to have that tax increase. i think we've seen some of the actions out of the senate. i impacts on small business owners on estate taxes and some of those things are just going to be huge. we need to solve this. i happen to agree with bill clinton, at least the bill clinton from a couple of months ago when he said, hey, we shouldn't be raising taxes on anybody right now at this point in the economy. i wholeheartedly agree. >> congressman, thank you for spending time with us. we also want to quickly run
through the home builders now that the fed has made its move. they along with the broader market are up. now mortgages and housing are both front and center as we've been talking just in the past few minutes but now let's pivot a little bit because a flood of new foreclosures may be about to hit the market, especially in states that have not seen so many foreclosures before. the question then -- what does it mean for the value of your house or the price of one? you might be considering buying. diana olick is live in d.c. >> reporter: hi, tyler. you're right, the foreclosure backlog in august really started to move. that's so healthy because so many investors are waiting in the wings to buy these and have been complaining about low supplies. latest numbers from realtytrack,
new jersey, new york, maryland, illinois and pennsylvania lead where these cases have been locked up in courts but are now moving. so much so, in fact, that illinois posted the nation's highest foreclosure rate in august, first time since realty track began reporting that in january of '05. the activity in these so-called judicial states are now surpassing the old stand-byes of california, arizona and nevada where activity is actually falling. back to investors, if you are looking to get in, you are going to see more of that supply come to the market. if you are looking to rent this out as an investment, you want to know what markets will be best and those are going to be the markets where it is actually more expensive to buy than to rent. where the cost of renting is largely cheaper than buying so you'll have a lot more customers in that case. the top markets where home affordability is the lowest are honolulu, hawaii, san francisco, new york city, san jose, california and los angeles. that all according to
trulia.com. it does give people more purchasing power when the rates stay low. the question is how much lower will they go because as of now, those low rates are not producing the type of mofrt applications that we would like to see. >> indeed, diana, very good point. thank you. two big names in defense and aerospace getting hammered today over worries that a merger may make the new company just too big to manage. can bae and eads fly? phil lebeau is back in chicago and joins us with details. hi, phil. >> hi, sue. a lot of skepticism out there. let's start with eads. the stock down 10% today. it was hammered basically from the start in europe. it's not as bad but similar with bae systems, down about 6% on the day. the questions that are coming out of europe primarily today follow a couple of analysts over there who have cut their ratings
for bae and eads basically on skepticism that this deal is going to produce the benefits that many people have initially thought. the analysts are concerned about the complex ownership structure. you've got france, you've got germany, and now you'll have britain brought into the ownership structure of a joint company. that accommodation is aimed at greater access to u.s. defense market. even some analysts here are saying maybe there aren't the synergies initially thought. >> there's not a lot of new things to gain for an eads. it's a little hard to see how they're going to kind of make the kind of returns in a u.s. market to warrant all the costs involved in this merger. >> let's look at the other defense stocks. you aren't seeing a whole lot of movement today. perhaps that's a reflection that a lot of people are saying, you know what, tyler? if this is the beginning of the consolidation game, we'd expect these stocks to all move higher. a lot of people are saying not so fast. there are a lot of hurdles that need to be cleared before we see
bae and eads get together. remember that proposal for a soda ban, big drink sews today, in new york city? a vote was just taken in the big apple and we will have the result for you coming up. swallow hard. another day, another attack on an american embassy, this time in yemen. we'll take you inside the compound next. and jane wells in l.a. big changes for anyone who uses amazon in your state, jane. >> tyler, $100 spent on amazon today will be about $109 starting saturday as the retailer starts collecting sales taxes. california needs money. up until now, customers were supposed to pay online sales taxes to the state directly. how many have been doing that? the answer after the break.
right now you're looking at a live picture right near the u.s. embassy in cairo, egypt. the crowds are gathering again tonight. it is unclear whether this rally is peaceful or whether it might turn violent or has turned violent. but the most serious flash point of the day was found at the u.s. embassy in yemen. external security was overpowered and protesters made it on to the embassy grounds. once inside, it was literally a madhouse. yemenis destroyed property, including the american flag. behind bulletproof glass american security guards had their own guns drawn.
you will u.s. personnel, however, have been accounted for. ty, over to you. thank you, sue. amazon caved in the end. orders from california will start being taxed this weekend. jane wells found people stocking up as if it were armageddon, including jane wells. she's live in l.a. jane? >> california says it loses more than $1 billion a year in online sales taxes. this new law it should be able to recoup 25% for that. >> i'm going to get a bunch of this. >> many californians, me, are stocking up on supplies before being forced to pay taxes starting saturday. amazon decided to stop fighting the tax man and instead go all-in this california, its largest state market. building distribution centers could argue savings and transportation costs these centers will bring may eventually offset any price discounting amazon may engage in this california to keep market share. what other companies are watching this move? >> obviously i think ebay has been more against sales taxes.
it is a little different for ebay. most of the time they're not the merchant of record. they're more of a marketplace. so there's a debate whether ebay's really responsible for collecting taxes versus the owner who's selling through ebay. >> overstock.com is severing relations with california. amazon tells us sales have not been impacted in the six states where it already collects taxes. will californians shop less if their bills suddenly jump more than 8% due to taxes? we asked shoppers buying tax-free on amazon this week, everything from appliances for a new home to gifts. >> it would depend. if i got free shipping, then i may just order on amazon just for the convenience of not having to go to the store. >> the two-day free shipping is my thing. if they take that away, then i'll have to consider. >> they plan to spend the money
they save on sales taxes for a nursery. . >> jane, thank you very much. new york city's board of health approving that controversial man on large sugary drinks today. unless blocked for legal reasons, mayor michael bloomberg's ban goes into effect in six months from today. here's what will be impacted. sodas bigger than 16 ounces, energy drinks, and pre-sweetened iced teas. not on the banned list -- fruit juices, dairy drinks like milk shakes, alcoholic beverages, and no-calorie diet sodas. brian schactman joins us with a market flash. you can still have your milkshake. >> milkshake is what i keyed on. it is only good if it is more than 16 ounces. we're looking at pot ash.
pot ash of volume heavy on a pretty heavy volume day. >> thanks, brian. mobile versus the pc guys. analysts are really weighing in on this fight today. is it a zero sum game and which side should your money be bet on? that's next. before the break, five big movers on this thursday, september 13, 2012, with the dow jones industrial average now up 119 points, its high of the day. $37 up on gold. 1.33% gain in coca-cola. walt disney is up better than 1% as well. like it's a small horse is frowned upon in this establishment! luckily though, ya know, i conceal this bad boy underneath my blanket just so i can get on e-trade. check my investment portfolio, research stocks... wait, why are you taking... oh, i see...solitary.
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welcome back to "power lunch." breaking news. there is a report out of reuters on the wires that the ford board of directors are meeting today. we know a ceo succession is on the agenda. according to the report, one possibility they are considering is moving ceo allen mullally when he is done with being ceo, which is not defined at this point, but when he is done, tyler, moving him into the role of non-executive chairman. again, that is the report according to sources -- according to reuters. as you look at shares of ford, the thing to keep in mind -- when this ceo succession does take place, they're trying to do an orderly transition from ael leb mullally lmullally.
that is the report at this hour. it will be interesting to see how this plays out over the next weeks and months. >> thank you, phil lebeau with that story. time to analyze this. we have a special edition here. we'll talk a little bit about mobile devices versus the traditional desktop personal computer or the laptop. iphone5 fails to disappoint. now city h citi has cited increasing declines in pc sales. let's start with apple. wall street pretty much impressed with yesterday's iphone5 unveiling. bernstein boosted the price target to $800 on the stock raising estimates for unit sales saying it favors the iphone5, a faster and wider rollout, apple's found a way to satisfactorily procure the supply. do you like this call favorable to apple? >> yes, i do.
i like apple. what's not to like? i think there is a worry about all these animal lis getting all geeked out over a rollout and it is pretty impressive. but people still have to buy the product and it is expensive. there's data plans that are going to be expensive as well. however, i do think people are going to buy it and i do think it is a good call. $800 might be a little high for me but i have no problem with with it in principle. >> i don't like the new pin, the new connecter. >> flip side of the coin. citi issuing downgrades and slashing targets. micro, intel, marvel, on concern personal computers do not look optimistic. semis mixed on the session today. year to date, all are in the med. there you see the year-to-date numbers. i guess what they're arguing here is that as the world moves mobile, this is going to hurt the likes of these who are more tied to the desktop.
>> the market has already hurt these. this call right now smacks of unsportsmanlike conduct. intel has not been destroyed to the same level as amd. there's still a need for intel mixed processor. amd has another issue, and that's their stronger and more heavily resourced big brother intel. my guess is intel will effectively get into this mobile space. >> you like the call on apple, you don't buy the calls against these pc or chipmakers. >> exactly. >> all right, jim. thank you. we have a big rally in the gold market. prices are closing right now. sharon epperson is track being the action from the nymex and the fed delivered, not only for equities but also for the gold market. up almost$40 now? >> almost up $55 from the lows of the session. sue, the last 90 minutes has been incredible in the gold
market. extreme price moves here as traders try to figure out what the fed is going to say. see what they say, digest it, then figure out what to do next and to figure out what to do next is buy, to go long, at least for now, until we hear what ben bernanke has to say at 2:15. we already saw $150 price move in gold in the last month based on the expectation of more qe. we hear it is actually happening and gold continues to rally here to a high today of $1,775 an ounce. we are seeing extreme buying and length in the gold etf market as well. that momentum as well as the momentum across the board in the metal space is the reason why traders say it appears that this rally will continue perhaps to the $1,800 level. we'll see if we take february's high right below that mark and really get to $1,800 an ounce for gold in the coming days. >> sharon, thank you very much. the fed really delivering quite
a rally here on wall street. we're up almost 150 points on the dow jones industrial average. bob pisani joins me on the nyse floor. steve leisman and i were talking earlier about the strength of the statement, the use of the word significant improvement in the labor market. basically an open ended accommodation. >> it is open-ended. to be ended only until the labor market improves significantly. this is what everybody wanted, that open-ended commitment. this is what the bulls wanted. we moved ten points on the s&p 500. we are at a new multi-year high on that but a lot of significant sectors did better than others. material stocks were strong. financial stocks like bank of america are particularly strong. why would that be? well, a company like bank of mortgage, they own the mortgage backed securities that the federal reserve are going to be buying. you think they're not happy about that? there are other smaller companies we could talk about in the next half-hour.
this itb is at a new high here. that's a significant move for that. we also had high-yield bond fund moving up. traders have been front running the fed buying these high-yield bond funds assuming the fed would extend the terms where they would keep interest rates low. they did that to mid-2015. people are reaching for yield. it's been big, big vl um in thein the last week or so. the etfs heavily in the treasuries area. really bonds in general. particularly treasuries were down today. the question is what will get people out of their bond fund where they've been for the last three years perfectly ensconced, happy, low volatility, not much of a return. what will get them out of there and into stocks? put up a six-month of tlt. the important thing is it is only at a four-month low. think you have to see these bond funds go down a lot more in the
next month or two months for people to sit up and say, now i'm really worried. >> if it is an open-ended accommodation though, the implication is that -- >> that's my point. i'm saying technical levels will have to get a little further down. >> it is going to be interesting to see how this all plays out because we haven't incorporated europe's problems into all of this yet. brian schactman has a market flash. >> look at the intraday chart on disney. touching another all-time high at $52.67. has not really partaken of this fomc rally. they did say everything for the fall looks very good for us but they also pointed out they are taking a $50 million write dourn in their film unit. this is not carter. they say it is about work they
have discontinued. either way walt disney hit an all-time high, then pulled back a little bit. back to you. to the nasdaq where we have a very significant percentage gain in that tech heavy index and the vix is plummeting as traders move into those equities. hi. >> take a look at the nasdaq, trading near a 12-year high but that's not the only catalyst. apple unveiling that new iphone5 which is leaner, meaner and faster. wall street putting out a lot of bullish notes this morning. goldman sachs raising their price target on the stock in the anticipation the iphone5 will drive earnings higher in the december quarter. it is also talking about some of the derivative plays. nuance communications is said to be behind the siri application. yesterday apple talked about the siri enhancement. nuance outperformed in trade
today. pandora -- there were reports last week stating apple would enter the online radio streaming space. we heard none of that kred. so pandora getting a little bit of a rally in today's trade. reacting to the fed, the dow at a five-year high. the nasdaq, a decade high. we'll hit the floor after the break to see how the traders are playing it. up your game. up the ante. and if you stumble, you get back up. up isn't easy, and we ought to know. we're in the business of up. everyday delta flies a quarter of million people while investing billions improving everything from booking to baggage claim. we're raising the bar on flying and tomorrow we will up it yet again.
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our next guest was mildly surprised he says about the fed's decision to launch qe3. the question is did they get it right. bob michael is the global chief investment officer for jpmorgan asset management's global fixed income and currency group. so why were you mildly surprised? what surprised you? >> i think the exclusive focus on mortgages was a pleasant surprise. i think beforehand there had been a lot of speculation they might either do nothing and just extend the language of when they would raise interest rates to 2015. >> what should we read into the fact that the purchases are going to exclusively be mortgages, not long term treasuries, not anything else, apparently?
>> i think it speaks to two things. i think first of all ben bernanke has talked a lot about how important the housing recovery is to the u.s. and this clearly targets housing. i think there's also a nod to congress and the administration here. they've talk about housing so you have to accept the politics of it. >> who's going to criticize them for trying to help the housing market. not republicans -- >> not me. >> -- per se, and not you. do you think they got it right? >> i think they did get it right. if i have a quibble, it's nitpicking. i might have done away with the front end of operation twist, as long as you're going to be in the asset purchasing market, why continue to sell treasuries. >> the front end of operation twist is the sale of short-term treasuries. compensated for by the purchase of long-term treasuries. right? >> exactly. >> do you think these policies of accommodation have generally worked, partly worked, not worked, and do you think this
move now is going to have somewhat of a desired effect? >> i think they've been essential. i think what the fed and the ecb, to a large extent, are doing now are trying to buy time. they understand the amount of deleveraging that has to go on on government and consumer balance sheets an they are providing the liquidity to do that. i think also down the road they want governments to step in and take more fiscal responsibility. >> so tell me how you're analyzing the markets right now. what if i am an owner of fixed income assets should i buy more of, what should i sell or buy less of? >> well, it's really a two-edged sword for a fixed income investor. on one hand we should be happy. we have another big buyer, fixed income security stepping in. we have guidance that interest rates will be zero until 2015. bond prices should continue to go up. on the other hand, we have clients that have objectives they have to meet. i think when you look at
institutional market and you look at pension funds and you look at insurance companies, they were all hoping for a back-up in yield and a widening of credit spread so they would have an opportunity to buy and it doesn't look like we're going to get that. when we return -- up next, what happens when you mixed pentagon technology with private money? we're going to hear from one man who thinks he has the answer and it could mean big bucs. not just for his investments. but maybe even for taxpayers. don't miss mr. bernanke's news conference. that starts in about 30 minutes from now and we will have all of it on street signs. h, hey alex. just picking up some, brochures, posters copies of my acceptance speech. great! it's always good to have a backup plan, in case i get hit by a meteor. wow, your hair looks great. didn't realize they did photoshop here. hey, good call on those mugs. can't let 'em see what you're drinking. you know, i'm glad we're both running a nice, clean race. no need to get nasty.
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signs. i'm going to give you one guess what we are going to be all over today. no prizes for a correct guess. yes, it is the fed. at the top of the hour the fed is releasing its revised economic forecast. you will get them first with us. then we'll debate whether or not qe3 will be a long-term boost to your money. and then at about 2:15 eastern time, big ben is going to be holding his news conference. we'll be carrying it live in its entirety when that happens. you have to tune in. this is must-watch television. back to you on "power lunch." the looming fiscal cliff includes some massive skweft tra sequestration, cuts in the defense budget. meantime, the pentagon has found a way. use some of the research and technologies developed by the defense department and license it in the private sector to build new businesses. joining us, chris silva, ceo of the private equity firm allied
mines. i want to make sure that i've got that right. fundamentally did i describe what you're going to be doing, working with the dod ? >> yes. >> you get access to certain patents, intellectual property with the army, r & d command, the navy and others. you go through and try and cherry-pick the ones that you think are going to need to new products with a commercial application? >> that's generally correct. for the first time dod labs and allied mines have developed a number of public-private partnerships that will license dod inventions and license them to a start-up company that's formed and funded by allies mines. we'll allocate $100 million to this initiative. >> how many companies do you figure you're going to start in year one? >> we expect to do 20 companies. we already created two companies. >> why do you think the dod pick
you? >> well, we've been at this for over five years now. we have a very unique process where we identify -- we form, fund, manage and build companies. we've been doing it at u.s. universities, over 40 universities in the united states and we've created over 20 companies to date and hundreds of jobs in those companies. >> a lot of people believe in this charged election season that business and the government can't work together, can't collaborate. i assume that this is an example that you would say belies that premise. >> we absolutely agree that the government and private equity can work together. there are many challenges that the dod is facing and they're coming up with solutions, technical solutions to that in cyber security, in wireless communications. those things have direct applications to the commercial marketplace and we can create companies around those and go to market here in the u.s. with them. >> give me some examples where in the past, defense oriented technologies or defense developed technologies have become a successful private
market products and tell me as you think about this intellectual property that the government owns, what do you think has the most promise now for the next gen products? >> dod labs had had long been a rich source of innovation and invention. from dod labs was invented gps, lithium and ion batteries, wireless communication, satellite communications. yet all those inventions weren't licensed to u.s. industry. rather, they leaked out over time. going forward in partnership with the dod labs, allied mines will license these technologies into start-ups that we form and fund and go to market with. there are certain areas that today have commercial applications that are right for opportunities. >> like what? >> cyber security. spectrum. wireless communication. advanced materials. power and power storage. >> so the government, the taxpayer then will get -- yes or no -- some license fee back from the revenue streams of the companies, should they be
successful? >> absolutely. absolutely. in fact, we expect to have a lot of money going back to dod labs as our companies become successful in going to the market lace. >> mr. silva, thanks so much and good luck to you. >> thank you. can the markets still be moved by the federal reserve? well, it is today. we are at the highs of the day. but that was the question in today's finance.yahoo! poll. dow jones up almost 1.25%, up 156 points. the nasdaq is up 1.33% outpacing the dow. it is up 41 points. russell 2000 is up 1 1/2. ♪
spol we asked do you think the market can still be moved over the long term by the federal reserve? 33% said yes. 53% said no. 14% said only with extreme measures. some would say these are extreme measures. let's see what's coming up on street signs right now. they are going to have the fed's statement and the minutes, and then later on the news conference. we are minutes away from the fed's economic outlook. we'll talk about the fact that the market is up basically almost 160 points. kenny, you said to me, this is just nuts. >> well, it is. what's it really admit? he admits the fact that he's adding unlimited amounts. without qualifying. we're really in tough shape. there's nothing good about the fact that he wants to add unlimited stimulus. so the market's celebrating
because the dollar's going to get trashed. equities, commodities, get ready for higher gas prices, higher food prices. not going to be good for anyone. there is a logical disconnect here that doesn't make sense. >> i've never seen a fed make a statement like that. the market's happy right now, as you said. jim, to kenny's point, if they are willing to that he that drastic a step, it might indicate to them anyway that we are on very shaky footing. >> there's no doubt about that. what could be more drastic a step. not only to say it is completely open-ended but even to say it is going to go on when they say drastic signs of a recovery. i'm not necessarily a bear for the stock market. i think the stock market is vul national for vulnerable. >> i think it is way up here in nothing other than stimulation.
i'm not real positive on the fundamentals. >> if you throw enough money, that money will find homes somewhere. i do like it finding homes in gold a little better than stocks, do. >> jim, did you do anything today, either in anticipation of this move or in reaction to it? >> yes. i did. the last couple days i have. i actually sold the long end because -- of the treasury spectrum? >> of the treasury curve because everything seemed too perfect. everyone was talking about you buy the long end because that's what the fed's going to buy or buy the long end because the stocks are going to get trashed if they don't do anything. so i did buy some volatility a little bit today, too, but i'm crushed on. but that's haej and it is a hedge for the next couple days. >> i just said, we should substitute the sherry cream for champagne sauce. that's what the market's saying. >> it is absolutely right. it is going to be frustrating but i think we'll hit our head
at 1,455. the countdown is on to ben bernanke at 2:15. we'll have it for you coming up. check out apple, up almost $14 a share today. wow. the economy needs manufacturing. machines, tools, people making stuff. companies have to invest in making things. infrastructure, construction, production. we need it now more than ever. chevron's putting more than $8 billion dollars back in the u.s. economy this year. in pipes, cement, steel, jobs, energy. we need to get the wheels turning. i'm proud of that. making real things... for real. ...that make a real difference. ♪
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strong rally in the dow jones industrial average in the wake of the fed's action today. we are up better than 1% on the dow or 147 points. up almost 1.25% in the nasdaq. and significantly, the russell 2000, broader based average, is up 1.33%. >> jim, we've talked about gold, long-dated treasuries but in the stock market your focus is? >> they're talking about the mortgage market. you have to like the home builders. i like hov. that will do it for "power lunch." street signs begins right now and the fed chief's news conference is straight ahead on cnbc. welcome to a special qe3, or maybe even 4 edition of street signs. the fed earlier today announced another round of easing. the dow and gold are