your forecast for gdp growth this year. >> so i'd say certainly the analysis that we've done, and we did spend a lot of time discussing weather and how it's affected businesses and households in various parts of the country, certainly weather has played an important role in weakening economic activity in q1. it's not the only factor that is at work in most projections for growth in the first quarter are weak. it's an important factor. it's not the only factor, but i would say it's likely in the view of most of the committee to the begin to wash out in the second quarter, and we can even see some rebound. now, i would say -- i know what we've said about weather is a little bit complicated and confusing, so, you know, let me just say between december and

january the committee saw data that led it to be quite a bit more optimistic about the economic outlook. so i would say incoming data since january when our statement sounded quite an optimistic tone partly down due to weather and partly down because we probably overdid the optimism inform january, so in some sense our views have moved around here a little bit, but if we take december to march, committee's views are largely unchanged.

>> you've served on the fed previously. i'm wondering now in the past few weeks as chairwoman, what's been different about being on the fed and your responsibilities as chair compared to being just a board of governor member? >> well, thanks. i feel i'm very lucky that i've had a lot of fed experience to draw on as i approach this role because it's complicated and now in many ways i feel the buck stops with me in terms of management of the fomc and responsibility to assure that the federal reserve makes progress on its goals of getting the economy back on track and making progress on our financial stability and regulation objectives. so i feel that weight of responsibility keenly in the new role i have, and i am very

committed to making sure that i provide the leadership that's necessary for the federal reserve system to move forward on these goals. but in terms of the conduct of business, it's pretty much the same as usual. i'm not envisioning nor have there been so far any radical changes in how the federal reserve does its business, and that includes operating the fomc. >> robin harding from ""the financial times."" madam chair given the new guidance doesn't give any information about how you will trade off your unemployment and inflation objectives, doesn't actually give us any information, how will you trade off the risk of higher inflation versus faster progress on unemployment as you get closer to full employment? thank you.

>> so i'd say so far we haven't had that trade-off to make because inflation is running well below our objective, and by any measure there remains substantial slack in the labor market. so trade-offs and worrying about doing more or less because we have conflicting objectives, this really has not been an element in our discussions about how to be conducting policy now. as we get closer to meeting our goals, it could become -- it could become an element, and i would say that we've given guidance in the statement, and we gave perhaps more guidance in our so-called consensus statement or statement of longer run goals in monetary policy strategies that we've now reaffirmed for three years in a

row, that the committee would take a balanced approach in situations where our objectives conflict and we're faced with trade-offs between inflation and unemployment. when we first put our thresholds into effect, we envisioned the possible situation where such a trade-off could arise. where we might face a situation where unemployment was quite high, namely over 6.5%, and inflation might be drifting close to 2% or even a little bit above 2%. and our threshold base guidance gave some more concrete indication that we would tolerate inflation running a little bit over 2% with unemployment sufficiently high before moving the federal funds rate off zero, and to the extent that that concrete guidance is

useful, i don't believe that's a situation that we're likely -- if i thought that that was the situation we were likely to encounter in the next several years, we probably would have revised our forward guide nenan a different way. we revised it as we did because it doesn't seem like a situation that's at all likely. but i would point you to the statement, the final statement in this statement that says that the fomc does not see this guidance as indicating any change in our policy intentions, and i would include how we would make trade-offs between our inflation and employment objectives if we were to face that situation.

>> ann with reuters. first, i just wanted a quick clarification. you said that something would happen by next fall and we are on a path until next fall. i was unclear if you were speaking of rate hikes or if you were speaking -- >> i simply meant to say that if we continued to reduce the pace of our asset purchases in the manner that we have in measured steps, that the program would be winding down next fall. >> in this coming fall you mean, not the fall of next year. >> yes, this coming fall. >> to be clear. just wanted to be clear about that. once you do wind down the bond buying program, could you tell us how long of a gap we could expect before the rate hikes do begin? >> so the language that we used in this statement is

considerable period. so -- you know, this is the kind of term, it's hard to define, but, you know, probably means something on the order of around six months, that type of thing, but it depends what the statement is saying, it depends what conditions are like. we need to see where the labor market is. how close are we to our full employment goal? that will be a complicated assessment, not just based on a single statistic. and how rapidly are we moving toward it? are we really close and moving fast? or are we getting closer but moving very as low as slowly? >> and then what the statement emphasizes and this is the same language we used in december and january, we used the language especially if inflation is

running below our 2% objective. inflation matters here, too. and our general principle tries to capture that notion. if we have a substantial shortfall in inflation, if inflation is persistently running below our 2% objective, that is a very good reason to hold the funds rate at its present range for longer. >> the committee's vice chairman bill dudley said recently if the economy decided it was going to grow 5% for the economy decided they it wouldn't grow at all those would be the kind of change that is would warrant the changing of tapering. there's a lot of research showing that short-term unemployment seems to be responsible for the level of inflation and that long-term unemployment seems relatively uncorrelated. is that the fed's view at this

point. is that one reason you expect inflation to rebound in the next couple years? >> so i think the numbers you cited would be extremes in terms of defining what we'd need to see. i wouldn't go to such extremes. i guess the way i would put it is this, there are two conditions for the committee to decide to have continue tapering the pace of purchases. the first is that we need to assess that the labor market continues to be on the mend and we feel reasonably satisfied that the outlook is for further improvement in the labor market that will get us back to our maximum employment objective, and, second of all, we need to see now coming back to inflation again, inflation is low, and

it's been running well below our objective, and we need to see evidence that leaves us feeling satisfied that inflation will move up over time, that we believe the evidence is consistent with its moving up over time. if the committee no longer feels comfortable making such assessments, so if there is enough change in the data we're seeing about the economy that it no longer seems reasonable or convincing to make those two separate assessments, then the case has been made to change the pace of asset purchases and to deviate from the current plan. so 5%, 1%, those are very extreme numbers, but i would want to feel confident in making those two statements about the labor market and inflation. with respect to the issue of

short-term unemployment and its being more relevant for inflation and a better measure of the labor market, i've seen research along those lines. i think it would be tremendously premature to adopt any notion that says that that is an accurate read on either how inflation is determined or what constitutes slack in the labor market. so i think this is something our committee will be looking at, especially as unemployment goes down and other labor market indicators hopefully simultaneously improve. we'll be looking at a broad range of indicators. we're looking to see progress on many different dimensions where we see slack in the economy, but i wouldn't endorse and i certainly don't think our committee would endorse the judgment of the research that you cited.

>> jeff kerns from bloomberg news. you have spoken in the past about thinking back to march of last year of how you supplement your view of the labor market beyond unemployment with other gauges like quit rates and layoffs and thing like that. how is your dashboard evolved in the past few months in terms both of the -- which indicators you like to watch most and also in terms of the quality of data that you think, whether it's positive, negative, that you're getting from these indicators? thank you. >> so i have talked in the past about indicators i like to watch or i think that are relevant in assessing the labor market. in addition to the standard unemployment rate, certainly look at broader measures of unemployment. i mention ed 06 in my statement.

5% of the labor force working part-time on an involuntary basis, that's an exceptionally high number relative to the measured unemployment rate, and so to my mind it's a form of slack that is -- adds to what we see in the normal unemployment rate and is unusually large. however, it is coming down as well as u-3. it's moving in the right direction and has moved even more recently than u-3. of course, i was discouraged in morni marginally attached workers. the sheer can be immensely high and can be stubborn in bringing down. that's something i watch closely. again, that remains exceptionally high but it has come down from something like 45% to high 30s, but that's

certainly in my dashboard. labor force participation. i do think most research suggests that due to demographic factors, labor force participation will be coming down, and there has been a downward trend now for a number of years. but i think there is also a cyclical component in the fact that labor force participation is depressed, and so it may be that as the economy begins to strengthen, we could see labor force participation flatten out for a time as discouraged workers start moving back into the labor market, and so that's something i'm watching closely, and the committee will have to watch. there are different views on this within the committee, and it's hard to know definitively what part of labor force participation is structural

versus cyclical. so it's something to watch closely. i have also mentioned in the past measures of labor market turnover. you mentioned quits. remarkably large share of workers quit their jobs every month. usually going directly into another job, and i take the quit rate many ways as a sign of the health of the economy. when workers are scared, they won't be able to get other jobs, they show a reduced willingness to quit their jobs. now, quit rates now are below normal pre-recession levels, but on the other hand, they have come up over time, and so we've seen improvement. the job opening rate has also come up. the hires rate, however, remains extremely depressed, and i take that as a sign of weaker labor

market. but most of these measures, although they don't paint the identical extent of improvement, if you ask about my dashboard, the dial on virtually all of those things is moving in a direction of improvement. the final thing i'd mention is wages, and wage growth has really been very low. i know there is perhaps one isolated measure of wage growth that suggests some uptick, but most measures of wage increase are running at very low levels. in fact, with productivity growth we have and 2% inflation, one would probably expect to see on an ongoing basis something between perhaps 3% and 4% wage inflation would be normal. wage inflation has been running at 2%. so not only is it depressed

signaling weakness in the labor market, but it is certainly not flashing. an increase in it might signal some tightening or meaningful pressures on inflation at least over time, and i would say we're not seeing that. >> madam chair, wyatt andrews from cbs. for tens of millions of american the recovery is an awful long time coming. may we know your thoughts on why the recovery is so slow and why the economy is not creating more jobs. >> i think the short answer is that we've lived through a devastating financial crisis that has taken an exceptional toll on the economy in many different ways from housing to leaving a huge number of

homeowners with mortgages, living in homes with mortgages that are under water. has had a highly negative effect on their credit ratings and their ability to access credit. has left businesses with very cautious attitudes that we see in business investment spending that is very restrained. on top of that, we've had weakness in the global economy, and we've had a very tight fiscal policy at home after stimulus at the onset of the recession, we've had a good deal of fiscal consolidation in the united states, and at a time when fiscal policy normally in the past would have been serving to create jobs, fiscal policy from that standpoint has served

as a headwind to the recovery and especially at the federal level, but also at state and local levels as well, and so we have had a disappointing recovery, and monetary policy has tried to do what we can to offset that, but, you know, the linkages aren't as strong and aren't as quick as we might ideally like them to be. >> thank you. i'd like to take you back to last summer when there were hints -- the fed made hints they were going to taper and long-term interest rates spiked, mortgage rates rose. what lessons -- looking back at that period, what lessons have you learned from it and are you confident that you won't repeat that -- those mistakes again? >> well, i think there were quite a number of things

happening at that time. i think it's probably true that monetary policy may have played a role in touching off that market reaction, but i think the market reaction was exacerbated by the fact that we had a very significant unwinding of carry trades and other leveraged positions that investors had taken perhaps thinking that the level of volatility was exceptionally low, perhaps lower than was safe for them to have assumed. but we certainly saw -- now, in some ways the fact that interest rates have come up somewhat, although it has had a negative effect on the recovery and that's evident in housing in the slowdown in housing, perhaps it's diminished some financial

instability risk that may have been associated with these carry trades and speculative activities that were unwinding during that time. a lesson is that we will try, and we were trying then, but we will continue to try to communicate as clearly as we possibly can about how we will conduct monetary policy and to be as steady and determined and transparent as we can to provide as much clarity is reasonably certain given the economic developments in the economy are themselves uncertain, but we will try as hard as we can not to be a source of instability here. >> thank you. madam chair, rebecca jarvis, abc

news. one of the drivers last spring and summer of home prices and home sales was that sense that interest rates were going up, that they were spiking, and now a year later we're looking essentially at a flat interest rate picture as far as home buyers are concerned. so is there any sense on your committee that staying at this level loses its punch the longer we remain here and if i'm a buyer and i'm thinking about going out and buying a home, why should i do that today as opposed to waiting a few more years or even months before interest rates then do go up? >> well, i think the level of interest rates remains low by historic levels, and the level of household formation is very depressed, has been very depressed for some time. there are a lot of kids who are shacking up with their families and probably would like to be going out and acquiring places of their own whether it's an

apartment or a home. there's a lot of demographic potential there for new household formation that would ultimately generate new construction either single or multifamily, and the level of rates i think does matter, and the fact that they're low now i think is something that should serve as a stimulus to people coming back into the housing market, and where we've not yet seen a pickup after the lull -- after interest rates went up last summer, i do expect housing activity to begin to expand more rapidly later on. i don't think it's only the expectation that i have to move now or things will be more expensive later that spurs those decisions.

>> kate davidson from politico. much has been made about the fact that you and your predecessor agreed on many policies, you shared a lot of the same policy views. can you tell us one way in which your chairmanship will be than ben bernanke's? >> well, i think we are committed to exactly the same set of goals, and, you know, as i indicated, my goal, and i will, you know, throw myself into this as wholeheartedly as i can, is to make rapid progress, as rapid progress as we possibly can in getting this recovery back on track and putting americans back to work and into jobs and in moving inflation

back up to levels that are at the committee's target of 2%. my predecessor was also devoted to that. strengthening the financial system is a work in progress, and he made large inroads in strengthening the financial system. i just say there's more work to be done, have a long to-do list. i would absolutely -- it's high priority for me to see further work done in addressing too big to fail. we have a to-do list of things we want to accomplish, and in assessing threats to financial stability because neither one of us and no one wants to live through a financial crisis like the last one, and we want to be extremely cognizant of emerging threats to the financial system.

so i haven't answered your question by saying that i will be different, but i think he had a very good agenda, and it's one i shared. it's why i came to washington to be vice chair, and it's the agenda i expect to continue pursuing. >> madam chair, peter barnes of fox business. hi. wanted to talk about international developments and the crisis in the ukraine. is the crisis a headwind for the u.s. economy? are there risks to the u.s. economy and the u.s. banking system directly and indirectly, and did the russians move $100 billion in u.s. treasury securities out of the united states in the last couple weeks to avoid u.s. sanctions? those are those foreign securities are held by the fed. thank you. >> so let me start with the last piece of your question first. i'm sorry, movements in cu

custodial accounts at the new york fed are something i'm not in a position to be able to comment about, but in terms of the situation in ukraine and russia, it's something that we're monitoring very closely. we discussed in our meeting the direct trade linkages or exposures of the u.s. banking system to the ukraine and russia are not large. we're not seeing meaningful impacts now, but obviously there are geopolitical risks here that it's very important for us to be attentive to and to keep our eye on, and we're not seeing broader global financial repercussions, but if this were to escalate, that would certainly be something that would be on our radar screen, but we're not seeing that now and are

monitoring closely. >> victoria from dow jones news wires. you've spoken about how unemployment is more than just statistics to you. and i wanted to ask when you make that statement, who do you have in mind and what do you do, if anything, to keep in touch with that kind of human side of the impact of the economic crisis and slow recovery that we've had? >> well, i'd be surprised if anyone in this room doesn't know someone who has been touched by the crisis by unemployment, by difficulties in getting jobs, and that is true of me and my family and friends i think as it is probably for many of you. i talk to a broad range of business contacts and try to

stay in touch with what's happening with real people in the economy. we have -- do a lot of work in community development in the fed and have groups come to talk to us and explain to us how their communities have been affected by the economic situation and by the housing crisis. when i was in san francisco, you know, we had programs there. we worked very closely, particularly in low-income communities that have been very badly affected to design programs that could potentially be helpful. tried to study what kinds of programs can be most effective to try to understand what kinds of advice we could give to those in the community development lending field to help.

so i do try to listen to people that represent communities that are experiencing the worst of the crisis and stay in touch with it that way. >> thank you. >> the fed chair janet yellen completing her first news conference as chair of the federal reserve and while it may have been sedate and quiet in the room at the federal reserve building in washington, d.c., it was anything but on wall street. we've had quite a sell-off in the last half hour or so. welcome. this is "the closing bell." i'm bill griffeth along with kelly evans. and there's one statement we're going to call back again that she made about the time line that may or may not occur between the time when they finish the tapering and when they begin the interest rate increase and there was a lot of

confusion about what she said but the market sold off anyway. >> this will be a very interesting case, bill. we actually -- we live in a world where there's algorithmic trades geared to every word that comes out of her mouth. if she says a considerable period of time is six months -- >> or that type of thing, she said. >> with regard to the end of qe and the start of raising rates, that you should all know is why we saw markets down at one point almost 200 points although they are now bouncing back to some extent. in fact, let's discuss this now with the guests joining us. our panel of experts to break it all down. matthew slaughter from dartmouth, college, diane selanne, mark olson, david zervos and our own steve liesman will join us shortly. he among the journalists asking the fed chair questions just now and getting to a different camera point. david, i want to start with you. mistake here for her to talk about a six-month period of time? >> i think -- i don't know if

i'd go mistake, but it's definitely a bit of a mess up. i don't think you want to be that precise about this time. you could have said 6 to 12 months. you could have been a little more -- given it a little bit more -- a little less precision, and i think the market is going to settle in on it. here is the deal. we know it's done in october. that's when the taper is over -- >> when the taper ends. >> and then we've got rate expectations kind of starting to build for april, may of next year. that's not in the market. the market was definitely pushed three to six months later than that, and i think that's -- you have seen that repricing. all the eurodollar futures moved. everybody moved their expectations up by 25. it's not a huge impact. >> but a noticeable one. >> diane, our read here was it was a pretty kind of casual statement she made on how long it would be before they would think about raising rates. as kel why i said, she said it would be a considerable period.

maybe six months or that type of thing. now suddenly six months is set in stone. she's learning what it means to be fed chair, doesn't she? >> exactly. and i think that's the point here is that it's really hard to communicate clearly when, you know, you say something off the cuff, it's taken literally even if you mean it figuratively. it could be six months every time they say considerable period and you keep adding it on as well. it really is a difficult thing. she's trying to say there's a window. she could have said six to 12 months. the market trades off those literal words and it gets into the difficulty of moving away from thresholds and why lakota perhaps dissented, of course, is because he would like to see a lower unemployment threshold because he thinks that's more specific. markets like numbers, not nuances. when they hear a number, they trade off it. >> what's so interesting about this, mark, is this number comes as they have just taken one away with us with regard to the unemployment rate. so going into that press conference, there were a lot of people already a little confused saying, well, if that's not the

target anymore, then what is? that's probably one reason why it had as much impact as it did. >> keep in mind that six months from now we will still be tapering, and six months from now we will probably have added an additional $300 billion worth of stimulus into the system. so she's saying the six months after that period of time is the time in which they may start looking at it. and so we're talking about a year from now. so that is a considerable period of time. i am a little surprised that she did arctticulate it, but you ha to give her credit. that is a considerable period. >> professor slaughter, let me get you in here as well. what's your read -- essentially what they're saying is you know what? things are getting better. we're confident enough to end the taper in six months, and we're actually thinking about raising rates. do you see them hitting their targets down the road?

i mean, are you as optimistic about the economy as she seems to be? >> i am, and i think the challenge for janet yellen and her colleagues at the fed is as the improvement happens, they're not quite sure how quickly the improvement hill wap and where it comes. yeah, she took away the unemployment rate as the single indicator. it's not that it's infective, but she did state very clearly it's insufficient. she talked about having a dashboard with a large number of labor market indicators, quit rates, long-term unemployment, higher rates, wages. the open question i think janet yellen tried to articulate and did in many parts of the press conference was we will need to wait for the data, and we're not quite sure how fast we'll get towards maximum employment. >> so, david, here is what i want to know. we've known the trading paradigm coming up to this point. you had a federal reserve that was going to accommodate a policy to the extent they could, an economy that was hopefully recovering but if not you had that backstop. what is the new paradigm here? how do you trade this market?

>> well, i don't think it's that different. i mean, the dots were also a big issue. we didn't say dots but dots came up in the beginning of this and then everybody got focused on six months. the dots showed about a 25 basis point increase for their end of 2016 forecast for the funds rate. so, again, i think it's all settling on this idea of -- i can't remember who said it earlier -- that people have more confidence in the economy. on the fomc, in this room, in this market, in this world people are getting more confident and we have to live with some higher rates as that confidence builds. the question is how do you thread the needle with slightly higher rates and still allow the economy to sort of lift off the way you want it to? and i think that's the art of central banking and that's going to be a really difficult challenge for janet yellen, but i'm pretty confident they're actually going to get it done and i think that's risk assets sell-offs are still buying opportunities. >> okay. it's not exactly instant replay but we now have the videotape of what she said.

so that is the issue, this is the statement she made that caused the sell-off. should it? listen, let's decide. >> the committee has endorsed the view that it anticipates it will be a considerable period after the asset purchase program ends before it will be appropriate to begin to raise rates, and, of course, on our present path, well, that's not utterly preset, we will be looking at next fall. >> so that was actually to be clear a different piece of the tape. >> that wasn't quite it. >> that was a piece of the tape that caused confusion initially. when she said next fall she meant this fall. >> let's bring steve liesman in -- >> but it's not the end of qe.

it's the end of the growth of qe3, and so i think -- so when the fed looks at that information, they are modeling it within a certain time frame, and i think janet yellen gave us a picture of what that time frame was. >> they're talking about governor olson, is making the last $10 billion purchase this fall sometime. >> very important distinction. >> and, steve -- >> i want to bring steve into it. >> steve got her to actually say this would be a long glide path, and i think that's one of the more important statements she made. steve questioned her on that and she's really important. >> steve agrees with you. let me ask you first a color question. did you in the room have any notion that what she had said about a time frame between the end of qe and the beginning of interest rate increases had the impact on the markets that it did? you guys had no notion, did you? >> none at all, but i don't

understand why it would. if you think about what she said and if you think about when qe would end, qe will end in january of '15 because they'll make the last decision in december to take the last $15 billion off. january plus six is july. the average for the fed forecast for when the fed will hike rates is the third quarter of 2015. what she just told us was right in the middle of the third quarter. six months out there. there is no new information in that in the sense that that is exactly what the market predicted. perhaps hearing it spooked the market, but this is an interesting case. if you are selling stocks today or bonds because you believe janet yellen is more hawkish than you thought previously, i think you're making a mistake here because it strikes me there is almost no possibility janet yellen is more hawkish than you thought. if anything that statement in there with the notion about the glide path, that the glide path will be shallower, that we're not going to go back to a 4% long run funds rate even when we

get back to a normal unemployment rate and normal inflation rate, that's very dovish and new information in my book. >> and, steve, that was a very important clarification, but it's not -- and i think that will be one of the key issues here, but as difficult a time as we've come out of, the fact that we have a slow recovery is not news either. >> david, you were shaking your head a little bit. >> steve -- >> she said after -- >> david, go ahead. >> i was going to say i think there is a little bit of new information. the 2016 -- end of 2016 forecast for the funds rate, the mean, went up about 25 basis points from around 2 to 2.25%. >> yeah but -- >> i think you're stretching it out a little bit because most people's expectation was that they were going to finish this around the october meeting. it might go all the way to the end of the year, but i think people were still fiddling with the idea that buy october that would be the end and then -- >> do the math. i'd like to respond to both those -- >> the 10 or the 15, you have to

decide. >> right. you got to do a 10 or a 5. fair enough. >> the market was kind of half and half. call it november for a mid. >> okay. but the point being is that you are still going to get towards the end of the year before they started hiking rates, before they endedq e, and the notion there would be -- what she said specifically was follow the statement, not the dots. the statement is where policy comes from. the dots are a forecast and a sense of where things are going to go, but the movement of the dot from 16 to 15 is a very -- she said that very specifically for first time, by the way. juneau what, steve? i 100% agree with you and i think you're right when you say people are making a mistake if they don't think janet yellen is dovi dovish, but we're also trying to figure out why the fed did what they did. >> to the extent that any geopolitical headlines could have been responsible for anything that happened. the market is largely geared

toward perhaps. just to get the 30,000 foot view here, this does now hinge on a really strong jobs number, does it not, for march in order for this all to work? >> i don't think so, kelly. i'm not sure why. i mean, it seems like they have plenty of flexibility now. they've gotten rid of that 6.5%. so she doesn't have to move if they get there or even make a statement. they gave us this three-part thing that h thing. i don't think there's any kind of it has to happen this way or that way. it's going to happen the way it's going to happen. yellen and the fed just like bernanke and the fed will react to the incoming information and react the way it seems appropriate relative to the economy. >> governor olson, how do you think she did in this news conference? >> i think -- we saw two of her great strengths. one of her great strengths is interpreting data. on the question of job growth,

on the question of employment, remember her dashboard had about five different categories that she was looking at, as matt slaughter suggested. her wheelhouse is interpreting fed data, and that's when she was best. the other part where she did real well i think was the question at the end, how does it affect real people. she empathizes very well and so i think that's the janet yellen we'll see for a while. >> i think that's right. i agree with you, mark, 100%. >> matthew slaughter? >> i agree. one of the real strengths of janet yellen we saw, she's an academic, by training, by disposition, by heart. there were a number of weedy questions about how much long term versus short term unemployment affects inflation, she answered them in a precise manner saying there are some things we know. there's a lot of things we don't know, and i think one of the broader messages she conveyed very well in the press conference was the world going forward is going to be hopefully an improving world, but that means we're a lot less clear

about what's the right next policy step at what point. one of the things the fed and others are trying to grapple with is how strong will the labor market get in this new world we're in. >> i think she answered that question very gently. she could have been much more severe in terms of her intr interpretation. >> diane, i'm going to ask you to write the headline as we go out. what was the headline from the news conference. >> janet yellen stays the course. that's the most important thing fa financial markets have to take from this. she ended it on a strong note. >> all right. thank you all, appreciate your thoughts and your comments on what has been an eventful couple of hours it turned out to be. we're coming back with more reaction to chair yellen's news conference. >> and we'll bring you to the market close which is only about

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it's hard to define, but, you know, probably means something on the order of around six months or that type of thing. >> that is what got the market cooking today. that was the comment from chairman janet yellen of the federal reserve when asked after you're finished with quantitative easing, when you're finished with the bond buying program, how long before the fed starts thinking about raising interest rates? and she actually put in a period of time in there. >> at the session lows which were right around that time, the dow was off about 200 points. the extent it was yellen, some other geopolitical things, we have to keep a close eye. we recovered about half of that ground but we're still off 92 as markets digest what she meant and what that time frame is. >> joining us now is a man who has been highly critical of fed policy anyway, he doesn't even like the quantitative easing program. he's probably the most famous director of office of management

budget director, david stockman. david, we want to get to your view of policy, but what do you think of what the fed is doing right now and, you know, their gradually working their way out of the quantitative easing and letting the markets do their thing right now. >> well, you know, bill, i'm off the page. this whole taper kabuki dance is a farce really. it will end up in a gong show, a cacophony at the fed, confusion in the markets, and calamity in the economy. they never should have painted themselves so deep into this qe corner in the first place because the whole predicate is false. we didn't know zero interest rates for seven years because we're already at peak debt. forcing more credit into the economy didn't work. it just encouraged gambling on wall street, fiscal irresponsibility in washington. the private credit channel of monetary transmission is busted. i mean, look at business.

it's borrowing hand over fist. total business debt is up from $11 trillion at the 207 peak to $13.5 trillion today, but it's all gone into stock buybacks, lbos. by contrast real tp & e is $100 billion or 8% lower than it was at the peak in 2007. >> why did the unemployment rate fall? >> well, the economy is creeping forward on its own momentum from the bottom. you know, the liquidation of inventory and labor ended by mid june 2008, but if you look at the path and take out, you know, the fluctuations that are in the seasonal maladjustments and take out the inventories that have stopped and started, you've been growing at 2% in final real gdp sales every year on a year-over-year basis since 2009. it was 1.9% last year. 2.5% the year before.

1.8% the year before that. so the economy is basically struggling on its own momentum, and it's not going to grow any faster, and what the fed is doing is simply exploiting the one channel that works, which i call the bubble channel, the carry trade channel. it's lflooding the financial markets with cheap overnight carry and repo and that's causing a massive inflation of financial assets. it is totally wrong headed. >> it's the question i often ask, but there, of course, is no answer, but what do you think the economy would be doing if there had been no quantitative easing program by the federal reserve? if they had just let the chips fall where they may after the financial crisis of 2008? >> the main street economy would be growing at 2% a year just like i described, but you wouldn't be having this massive bubble emerging inflating in wall street. you wouldn't have the russell

2000 at 85 times trailing earnings. you wouldn't have, you know, junk bonds outstanding at $2 trillion. you wouldn't have covenant light and levered recap deals going on all over the place. you wouldn't have had all the speculation in housing from the hedge funds and the lbo funds that are now -- >> you don't think we would have had a deeper recession? >> no. i think this had nothing to do with the recession. for the first six months after the crisis, credit continued to contract ain the household sectr because we were way overleveraged from a 10 or 15-year binge. the only household credit spending now is ninja loans to students and subcar loans to buyers. the economy is only grow on the income it's producing. it's time for the fed to recognize we're not going to borrow our way to prosperity. >> david, some of those gages are starting to move in the right direction.

average hourly earnings are picking up. the labor market is a little tighter. what is your likeliest assessment of what happens now. >> i think if the fed would only get out of the way, we would continue to struggle, and the economy still has a long way to go to deleverage. you know, the households still have $12 trillion of debt. they're still leveraged at 180% of wage and salary. that's double what it has been historically. so we're not close to out of the woods, and what the fed is doing is just creating the next financial crisis, massive bubble all over the world that are a great danger to the continuation of this slow creeping recovery. >> david, good to talk to you. thanks for your time. >> okay. thank you. >> talk to you soon. david stockman joining us on the phone. kelly is heading off to get ready for the second hour of "the closing bell." we're going to do the interview now, right? okay. joining me, quincy crosby, greg

sarian, and bob pisani. a confusing day i guess is the best way we put this. markets sold off on some off the cuff comment from fed chair yellen, and we're all taking it as the new paradigm now. >> this is as if this were a deposition, and she is stuck with these words. this too shall pass because the data will continue to change. she will not be boxed in. the market always wants to be there first. so regardless, this is going to change, and we're going to see this many times over before we get to that six-month gap, mark my words. but one thing i think is clear, you keep rates low for a long, long time, you're going to have bubbles, and we all know that, and she knows that. it's not just -- >> but you don't think we're at the bubble yet? >> probably not yet but it could keep going. >> all right. greg, what do you think? >> we believe we're still in a fundamentally slow growth economy. really goldilocks economy. for every two or three good

reports we see a weak one. she told us she's going to be supportive and accommodative. the risk on the tables is will rates move up higher sooner if economic data continues to accelerate? that's a risk the market didn't have a week ago which could cause volatility. >> do you think that would hurt the economy if the rates have to have a swifter rise in rates? >> i think the market is a leading indicator. i think the market would react adversely if she hints about rate increases before the market anticipates. >> steve liesman got her to admit it would be a slow glide path. >> it was such a great debut until the six-month comment. whether it's march of next year when rates go up or june of next year or july, higher rates are coming. and i think that's a good thing. they feel confident enough in the economy to say somewhere down the road we're going to start raising rates. let's hope that the economic data continues to improve. let's hope we get rid of qe

entirely. let's hope that rates -- we should be higher if the economy is better. i view this as not a negative. i understand why the markets short term are reacting but down 100, i'll take that. >> we were down 200 and it was just like that. are you taking money off the table? is that what you're alluding to here? >> no, we've just been very cautious. we're worried about downside risk and we have been for the last six, seven months. downside risk is important, but we are continuing to invest, and we're going for quality across the board. even if that means that yield is not as great. we're not getting married to any part. i mean, this still is very much a trader's market. >> yes, it is. >> it is. and you saw that today. >> give me a sector you think is quality right now. >> i think right now you're going to see many of the good financials, believe it or not, are going to get a bid as the yield curve steepens. >> the financials did very well today. >> even though the yield curve flattened. the prospects of higher rates raised the banks.

>> the financials did well. what do you like here, greg? >> we still like the biotech sector. it's far outperformed the s&p so far this year. ipos in the first quarter are up 20% versus the first quarter of 2013. that's a 20-year record high. large pharma has a great ap tied for life science companies with great ideas. we like biotech and small cap. activity will trickle into technology. >> if this higher rate trend actually holds, i'm not sure it will, be careful -- did you see what happened to utilities to reits. reits were down over 2%. those interest rate sensitive groups immediately tanked. if they hold on to the higher rate concepts, it will affect them. >> somebody said to me the sell-off was nothing more than high frequency noise, this was an algorithm that was listening for certain words she might say. when they heard them it sold automatically. >> i think comments like that are, frankly, silly. there have been sell-offs long

before there were high frequency trading. there was good reason for traders to listen to what yellen was saying. when she said six months, i popped up. they never give us those kind of moments. that was a tradeable moment. >> i was going to say that was a freudian slip on her part. there's no doubt about it. she might be happy the market is selling you have a little bit because she's concerned about bubbles. you know she is. >> i think -- i was saying earlier, i think she learned what it means to be fed chair. every word is parsed. ben bernanke did the same thing last spring when he started talking about raising rates maybe as early as last september, and we got that huge sell-off in the market. >> everything sold off. >> volatility will be much greater this year. >> overall, it was a very good first press conference. if you will notice when she read the statement, she looked up at several times as if she was partly ad libbing it. she was trying to look more conversational.

ben bernanke never did that. >> thank you, folks. >> thanks very much. >> bob, we'll see you later. so we come to the close of this first day of janet yellen's term as fed chair. maybe a few more fireworks in the market than she might have anticipated. the dow down 115 after having been down 200 points at one point. stay tuned now as we continue to figure out what she meant by six months. it's the second hour of "the closing bell" with kelly evans and company. i'll see you tomorrow, kell. >> thank you, bill. welcome to "the closing bell." i'm kelly evans. here is how we're finishing. a down day on wall street. janet yellen in her first press conference as fed chair may have had something to do with that. the dow jones industrial's average off 112 points. nasdaq off 25. the s&p shedding 11 points to 1860 there. keeping an eye on gold, that's down. what's happening across the interest rate space and what does that tell you about the next move in markets? let's get to another special hour of "the closing bell" with our panel today.

cnbc contributor stephanie link, nathan bachrach from simply money advisers, sara eisen and sharon epperson and also with us for more on today's events, michael borman, the ceo of franklin square and our very own rick santelli. welcome to all of you. rick, since we haven't heard from you in a couple hours since the fed's statement first hit, what you do you make of janet yellen's press conference? >> you know, i thought she did a very good job, but to me it's not -- i have to admit, i'm not looking for poise. i'm not looking for the empathy. all those are fine qualities. i'm just there for the steak and potatoes, okay? and with regard to that avenue, i really don't think we learned a lot more. forward guidance or forecasts a couple years down the road would be like talking to a horse track handicapper telling you who is going to place two years from now in a race. i don't think anybody has that kind of vision. i do think that the market -- i think the market said it all. flattening yield curve.

holy cow, it was huge, and there was a lot of selling before the stateme statement, really made me skraven my head. >> stephanie, what do you make of it? how significant is it she's talking about a shorter time frame if you take those words for exactly what they mean literally six months or something like that with regard to starting to raise interest rates here? >> i think that it's their actions that we have to pay attention to and they're tapers again this month. that's because the economy is getting better. we have seen over the last two weeks a lot better data. ism, pmis, the nonfarm payroll number that was supposed to be horrible, it wasn't. capacity utilization, i could go on and on. it's not perfect. there are still weak pockets in the economy but we are getting out of the weather issue. i think we can snap back. the fed sees we are on a trajectory of getting better growth, and i will take better growth and higher rates anyday.

>> so will the financials and some of the insurance names. sharon? juke see this idea we're getting a little bit better in the fact that the fear trade you saw a big sell-off in what is known as the fear trade which is gold. gold selling off 30 bucks. that lets you know a lot of folks are watching what this will mean if we saw the slow rise in short-term rates, what that will mean for precious metals. it's interesting to watch the dollar. what that has done for emerging markets. look at the reaction there in the eem versus the spy and kind of the sell-off we saw there in emerging markets. also something a lot of folks are watching, particularly the financial advisers i talk to are always like diversify and put that in there and now we're looking -- >> sara, there's plenty of things that are happening and especially before anything happened with the fed this afternoon, there was a lot of talk about the situation in china and how serious it might be and just how much the currency there might devalue and what that could do to a lot of trades and a lot of the way the system is structured, cause some

spillover effect, et cetera. would you, looking at the action today, attribute this to everything that the fed has told us, has done in its statement, has come out of that press conference from janet yellen? >> if you look at the interpretation of janet yellen, it's clear that higher interest rates are on the table. whether they're coming anytime soon or not, whether there's been any change or not, it was always viewed as something very, very, very far away. if you look at some of the headlines, the headlines in "the financial times," fed points to earlier interest rate raises. all of a sudden this is some reality. it's not a panic. it means things are a little better and janet yellen did focus a lot of her attention on explaining it's going to be measured, it's going to be easy, it's going to be fine, but, yes, now that the tapering is pretty much on track, interest rate rises are on the horizon. >> they're going to be data dependent. if the data doesn't warrant them to increase interest rates or continuing to taper, they're not going to do it, and that's very, very clear. >> i would say the only snapback

i saw today was that the hawks who have really been kept in check by bernanke got a chance to snap back today on janet yellen and say, really, now that ben is out of here, let me tell you, i think what janet is going to do, let's not forget one thing, she grew up in brooklyn 50 years ago. you want to mess with her, fine. i'm not going to mess with her. i'm really clear about that. you know the expression, what if they threw a party and nobody showed up? what if unemployment went down and inflation didn't show up? i think the whole deal is going to get rethought and when they're talking about 215, 216, good luck on that. >> michael foreman, i don't know if you heard david stockman last hour making comments about how dissatisfied he is with the whole policy of quantitative easing in the first place and he pointed to the corporate sector and said they're levered to the hilt. there's going to be an unsustainable situation. there's nothing fundamentally strong here and this is all going to be pinned on the fed down the road. what would your response be to all of that?

>> my view is there's certainly a lot of uncertainty in the markets right now. we're very defensive in our approach. certainly there's a case to be made for rising interest rates in the future. we all know at some point rates are going to go up. at this point we see rates staying low for a while, so we're defensive. we're very cautious. we think there is some growth in the economy, but we're not taking risk, and our biggest concern right now is risk isn't priced into the market, so we're in the credit markets. yields have gotten very, very narrow, and if you look at some of the other asset classes like equities, we're concerned there are asset bubbles out there. we think it's time for investors to be cautious. we are prepared for some volatility, and we're going to look very careful at the kind of investments we make in light of the potential climate going forward. >> so that being the case, maybe you can explain to viewers here who may be wondering why is it so significant what was said and done out of the fed today? >> i don't know if there was anything that significant other than the six-month comment which i think is surprised everybody.

i think in our view it's kind of more of the same, but at some point as some of the speakers said, the rates have to rise and you never know when that's going to happen. it's on you before you know it and all of a sudden you're in an inflationary economy. >> better they rise on a better economy than they rise on a better spike in inflation. >> but what will happen to the bondholders? i think what was telegraphed today was you better start thinking about getting out of bonds. i like flot, i like bkln, i like usdo, anything that will be based on a strong dollar or defensive on rising interest rates. >> as logical as that seems -- >> and higher -- >> as logical as interest rates rising seems, i'm sorry, there is still one counter tina that everybody keeps avoiding. it's impossible to say what fair value is for anything, including stocks, considering all the fed programs. there's no real true price discovery. if stocks get walloped 20%, the

only rates that would be raised would be in another country because the buying of treasuries would be unbelievable. i'm not saying that's going to happen, but it's definitely got to be a consideration. >> and we're still the best looking pig in the slop house, rick. i'm going to tell you. >> i'm totally in agreement with that, but the problem is relative value economies don't deliver jobs and they don't take care of the work that needs to be done. that's the problem with a relative value economy. >> michael? >> we agree as well. we don't know exactly what the case is going to be. we've got to look at both sides of the story, but certainly we don't see a short-term catalyst for rates, but at some point rates go up and people get hurt in the bond market. so we're defensive. we're cautious. we look at companies -- >> and then on the equity side if you think that rates are going up, the two sectors that are most correlated to higher interest rates, financials and industrials. so those are the sectors that actually did a little better today in a down market. >> we want to bring guy adami into this conversation.

your reaction to all of this? what's the trade here? >> well, they're flying by the seat of their pants. you guys can yell at me when i'm done just let me get this out. it is clear to me that they really have no idea how this whole thing ends, and they're literally just licking their finger and putting it up in the air. that's my view. what's the problem with that? we've empowered other central banks to act as irresponsibly as we're acting now. what's going on in japan is absolute madness. what david stockman said should be put on a loop and played over and over again. he's the voice of reason. i think rates go lower. i'm between rick santelli and david stockman but i just don't understand with what i just heard over the last hour how any of this can end well. >> okay. sara, you want to respond. >> i have a question for you, guy. why is it so hard to believe that the fed couldn't engineer some sort of soft landing here for this recovery and for normalization of interest rates? >> maybe they can. maybe -- i'm confident that

they're immensely smarter than me. i'm also confident they're academic wonks and they're not in the real world. i think everything they do and say works in the textbook. i don't think it necessarily works in real life. it's -- >> but this is real life. everything that's happened over the last four or five years has -- if anything -- >> the fed has never been good at making a forecast anyway. >> they have no idea what the exit strategy is, and i think if you slapped a lie detector on them, they have no idea how this things is going to end. >> that's an interesting point. >> a lot of folks want to know where does that leave me as an individual investor, as someone who has a large portion of my 401(k) -- >> you know, it's a great question. ask questions, push back. don't have blind faith in an overaccommodative fed that everybody has had. that's been the trade, but, again, blind faith, i said it before, great band, lousy way to live life. >> but the markets have had a great run on this blind faith. i don't think it is just blind faith. i think it is because you have seen a little bit better earnings, a little bit better

economic data, and the valuations up until this point have been reasonable. >> and the point is it's all been little. and now people are looking for big because that's what they've seen. expectations have to get a lot more realistic. i'm saying pick your spots and find the sectors that will benefit from higher interest rates. >> i'll take etfs. >> i think people have to temper their expectations, particularly after what we saw today in terms of what we're going to see going forward with stock gains. they are looking at 401(k) statements a statements, ira statements expecting that's going to happen again. >> do rates matter right here? we've seen investors upset about lower rates, higher rates, lower rates again, higher rates just over the last couple months. we know we're in the middle of a credit cycle. it's the role that credit funds are playing.

there's a lot going on here, guy, that i guess for those who would point to the fed and say this is all about the fed and they've totally manipulated markets, frankly, this might be part of a much broader move which, granted, still could end very poorly in a couple years' time if it goes vertical before it goes down. >> i might be 100% wrong. my point is this, if they figured out how to manage through their financial engineering how to sort of avoid all the pitfalls or all the bad consequences that we should be facing, then we'll never have another downturn again if you think about it, and i'm of the belief there has to be some consequences for these actions and as far as i can tell, up until now there have been none. other than the fact that our dollar is getting crushed, it would be a lot worse except globally central banks are doing the exact same thing we're doing here. it's a global race to zero that can't end well. >> as soon as the central banks start disagreeing that's when you run to the fall out shelter. >> maybe. look what's going on in japan.

doing three times what we're going here. it's reckless. >> look at the price of copper. it's used as collateral in china. what worries me is the average chinese person who bought three houses and used copper at collateral because they'll take it at a bank. i think that's what that commodity is telling us. >> when you have all that capital created by central banks going into an area where they say, hey, we know interest rates are low but in china we'll hypothesize some type of investment to give you better return. that's what the fed -- the shysters out there overcompensate for what the fed's overcompensated for and then they blame the fiscal side of the government. you know, the whole thing is one giant circle. >> sara, quick last word. >> you have to be watching fixed income and foreign exchange. they're the market leaders right now. you watch the stronger dollar and you watch what's happening with treasuries. reaction to the data to see if

it's any panic. it matters the speed at which the move -- how far ahead is the fed going to fall behind when it comes to interest rates. you watch the speed of the ten-year yield move which we did see go up. the strong dollar which broke the correlation dollar/yen and the u.s. stock market, another thing i would be watching. >> thanks, everybody. >> rates certainly matter. if you're a retiree living on a fixed income and you're trying to generate enough yield to support a lifestyle. with the rates as low as they are, certainly rates are very significant in the market. >> thanks, guys. the panel sticks around with me. you can catch guy adami with the "fast money" crew at 5:00 p.m. we have breaking news on ebay. jon fortt joins us. >> the tennis match between icahn and ebay continues. they have been pushing to separate the pay pal. icahn said maybe spin off 20%. it had echoes of what emc did.

let me read you some of the most important parts here. ebay says a partial separation of pay pal is not a new idea. we're glad to see mr. icahn now seems to agree that a full separation of pay pal is not a good idea. our board regularly evaluates ogess for the company looking for ways to accelerate growth and deliver shareholder value. we're fully committed to always acting in the boston long-term interests of shareholders. in the end they say not now to a partial spinoff. in the future we will continue to evaluate all strategic options. so basically it sounds like they're coming together a bit but ebay is saying while this isn't a new idea, we're not going to spin off pay pal in the very near future, kelly. >> all right, jon. another chapter. thanks very much. up next, former fed governor

randy kroszner joins me to offer thoughts on janet yellen. and a big announcement from starbucks just moments ago. jim kram ser getting new information from howard schultz. ? then we gave each person a ribbon to show how many years that amount might last. i was trying to, like, pull it a little further. [ woman ] got me to 70 years old. i'm going to have to rethink this thing. it's hard to imagine how much we'll need for a retirement that could last 30 years or more. so maybe we need to approach things differently, if we want to be ready for a longer retirement. ♪ if we want to be ready for a longer retirement. i just ah woke up today and i said i need something sportier. annnd done. ok maxwell, just need to ah contact your insurance company with the vin number. oh, i just did it. with my geico app. vin # is up to the loaded. ok well then jerry here will take you through all of the features then. why don't weeeeeeeeeeee go out to the car.

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the language that we used in the statement is considerable period, so, you know, this is the kind of term, it's hard to define, but, you know, probably means something on the order of around six months or that type of thing. >> well, it may have been a clause, part of a broader sentence, but referring to a considerable period of time as six months, that was janet yellen, the fed chair, at her first press conference. joining me now is randy kroszner, a pkroszner and jan hatsous hatzius. you know it's been a long day when i'm so excited about this.

randy, first to you, was that the most significant part of this news conference? >> well, certainly one piece was the change in the language to say farewell to the 6.5% unemployment threshold, but to try to argue that's not a change in policy. and then i think giving a little bit more specificity about what considerable period meant was a little bit of a surprise to markets, but i think you have to put it in the context of the other qualifications she said. it could be around that but it's going to depend on the data. it's not a promise that once the tapering stops, six months later you have a promise you're going to get rates rising. it's going to depend on the economic situation. >> jan, how much did this pull forward what markets were already expecting to happen with regard to the end of the taper and the end of the qe purchases and the first potential rate hike? >> i think no news on the end of the taper, but i think it was a bit of a pull forward in terms

of the first rate hike. she said around -- it was a halting clause, but i don't think it was an accident, and it's consistent, i think, with what they showed in the dots and the summary of economic projectio projections, which also was a little more hawkish than what you had previously. she says it goes -- it can go back and forth. it's not -- these indications are not as tight and as perhaps definitive as what is put into the statement, but at the margin it was more hawkish i think. >> what's interesting as well is people looking through the statement and trying to think through the policy changes can't quite figure out what to focus on now. so the unemployment target, the 6.5%, jan, was dropped altogether from the statement. where does that leave people? how do we know when these changes are going to happen? >> i think that is one reason why the dots are even more important when you don't have the quantitative guidance, and the dropping of the threshold of the severe downgrading of the threshold, that wasn't a surprise. i don't think anybody was really shocked by that, but i think

when you no longer have quantitative guidance for a variety of reasons, the dots become very important, and maybe a little more important than they're comfortable with at times. >> randy, so, you know, where does that leave, you know, the public, for example, a lot of economists if they have these fed forecasts which are imperfect themselves to focus on. in the meantime with each incoming data point, how do you think of the relative importance of it? >> i think the goal was to try to not change market expectations. i think they said that in the statement and i think janet said it herself. i think as we were discussing putting a little more specificity on what considerable period means has moved up expectations -- has moved up expectations a bit, but i don't think, as i said before, i don't think this is a promise it's going to be six months. i mean, that's a rough estimate. you could see from the fed's own projections they were expecting -- most of the fed

members expecting the rates to go up to about 1% or so by the end of next year. they're not going to do that just in one meeting. so it's going to take a few meetings. so sort of starting around the middle of next year, sometime in the second quarter is not that far off from what they said before. >> and, jan, i don't know if you heard guy adami last block or david stockman last hour raising concerns that run deep by fed policy generally speaking and saying at this point there is no exit strategy. they're making it up as they go along. what should we be looking for as far as the sequence? is there a certain order of ending the purchases, raising the things like the interest on excess reserves? how relevant is the funds rate even given the size of the balance sheet? what happens now? what are the next steps? >> i mean, i think it's the end of the purchases and, you know, probably in october, maybe disease, someti december, sometimes in the fourth quarter, unless there are big surprises, and then the next step would probably be a hike in

the interest rate on excess reserves. how exactly that's going to be done and what the instruments are and what the role of the funds rate is i think a little less clear, but to me that's more of a technical detail. i think the important point is that rates are going to be normalized before, well, well, well before the balance sheet is normalized. sales of securities are not really on the agenda. so i think that is the main exit. and to me that is the right way to go about this. >> although, randy, that certainly raises some questions about what happens when the fed tries to do that. you know, what happens if they try to raise rates with still a balance sheet that's that large. >> sure, obviously this is something that we've never done before. but the tools are in place to do it, and the fed has been experiment with so-called reverse repurchase agreements that can allow the balance sheet to be at around $4 trillion but not cause inflation. so there certainly will be some bumps along the way, but i think the fomc is krevery much commit

to making this as smooth as possible. one thing i wanted to add in to what jan had said is one of the things they may do is allow the balance sheet to start to decline naturally. so as some of the securities start to mature, they wouldn't replace them and repurchase them. they might allow the mortgage-backed securities to run off as the mortgages are repaid, and so you might see a decline on the balance sheet very gingerly, very gradually, and you might also see some of the rate rises coming in the middle of next year. >> all right. that time frame will be so important now for markets. thank you both for joining us to explain a little bit about everything that's happened today. appreciate it. now an announcement from starbucks. jim cramer is live in seattle with the latest news. th the lati can quickly understand my charts, and spend more time trading. their quick trade bar lets my account follow me online so i can react in real-time.

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welcome back. if you have been watching cnbc at all today, you know our jim cramer is out in seattle where he attended the annual shareholder meeting. he has spoke ton ceo howard schultz. can we first ask you about your reaction to markets today, to janet yellen's press conference, to just the prospect of the fed raising rates here becoming more and more visible on the horizon? >> kellen, i'm so old school. i actually am from the kind of vision that when things get better, stocks can go higher. i know there's a new school of thought which is interest rates never go up and that's the only

way stocks go higher. at a certain point, we don't want endless multiple expansion. what yellen said is we may have a better sales environment, may have more earnings, economy may be doing better, rates tend to go higher and we'll make -- we're not going to get in the way of it if it happens. kelly, that's called the business cycle, and those who don't think it happens, they should get out of the stock market. they should go into cds. cds are great for them, great for them. >> jim, what's interesting though, and you raise this point, you know, the business cycle typically doesn't end when the federal reserve begins to raise rates. it takes a couple years for that to happen. it takes a couple years, by the way, after that point, and i know it's always a danger using any past experience to extrapolate into the present here, but it's not necessarily lights out when they make the first rate hike. >> thank you. but you know what? that's called rationality, kelly. it really has no place.

there's no place in the discourse that happens between 2:00 and 3:00 in the afternoon. that's what i was thinking today. i keep thinking that at a certain point we have to get off life support. at a certain point we have to get into some pt here, right? we need some sort of therapy, and that therapy comes from the patient getting out of the bed. you know, if you want the patient to be in the bed forever and be on life support, i got to tell you something. you shouldn't really be in stocks because the way stocks only go up is sales get better and profits get better. what they've been able to do is buy back a lot of stocks, increase dividends. but in order to get the stock market out of the treadmill we discovered in 2014, business has to start getting better. let's stop freaking out and fearing that. you and i both know that if the economy doesn't get better, ultimately this rally is probably on its last legs. you have to hope it gets better. >> it goes back to the point you raised at the top about how you want to see the market rise on not price expansion, in other

words multiple expansion, but on earnings growth and also the issue if you want to point to goldman's work or others where you talk about we're probably approaching peak profit margins, not that they're going to shrink, but they're going to stop growing. which means if you want to see prices keep growing, you have to see that top line, that economic, that revenue growth. >> how many people can you fire to make the profit? how much supply chain rationalization can you have? how much internet cloud business that you bring in to fire people in human resources? i mean, i don't know how many trees are left to cut down in that field. i think it's time revenue growth gains and then we have real profits. i'm not saying we shouldn't be up to where we are. i'm just saying if you notice in 2014 we don't go anywhere, one of the reasons we don't go anywhere is because people keep expecting eventually we have higher profits. well, janet yellen joined the bandwagon today saying that when she recognizes the obvious and we get hurt tells me there has

to be a new group of buyers that come in and these other buys who are saying i like these stocks because they're better than bonds, they out to go take a powder. they should hide themselves in the two-year. go in the two-year. they'll love you. >> what is happens with starbucks today? >> all right. starbucks is the kind of thing that you talk about where they're being able to do 5% growth in america, okay? since the stock did 5% growth, it got hit down 10%. and why was that? because people want 5%, 6%, 7% growth. in order to get 7% growth at this point without raising prices, they need more traffic, they need more business. if yellen raises rates because they get more traffic and business, i still want to own the stock. they did talk today about an initiative, i'm going to call it the oprah winfrey initiative, she probably will be one of the ultimate cnbc 25 people. she gets my vote. she's teaming up with howard to sell tea. they made this acquisition of

satis tea va tea vanna. if oprah winfrey can identify with tea and schultz can identify with winfrey, tea will no longer be an asterisk. >> drinking plenty of tea here ourselves to keep that business going. jim, thanks very much for your time this afternoon. i know it's been a long day for you and it's still not over yet. >> never for you, kelly. >> thank you. be sure to tune into a special edition of "mad money" tonight. jim is sitting down not with only howard schultz but also blake nordstrom, president of nordstrom, zillow ceo, spencer rascoff and the ceo of elt jsea genetics. we have some news on s.e.c. capital. kate kelly has the story. >> kelly, in a dramatic move intended to improve compliance s.e.c. has hireded cia backed

data miner pallen tier to better monitor it's own employees. they explained the firm's desire to take the data they already have and better connect the dots in order to ward off future misconducts. palantir has already conducted a pilot program and based on the results of that, it's been hired full time. this is only sac's latest move to reign in errant workers after a slew of insider trading convictions and a $1.2 billion justice department settlement that ended its life as a public hedge fund. they will be renamed point 72 and the firm will invest only founder steve cohen and employee money plus that of some cohen family members. pal lantir is adding sac to a client roster that includes the fbi, jpmorgan, and morgan stan

lay. >> thanks very much. >> we've heard from a lot of folks on how yellen did today. we want to hear from you. tweet us how you think the new fed chair fared in her first post meeting press conference. @cnbcclosingbell is how to reach us. ch us. ♪ ♪ [ male announcer ] you're watching one of the biggest financial services companies in the country at work.

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welcome back. let's head out to cnbc headquarters get a quick check on today's big movers for us. dominic chu, what can you tell us? >> here is what's happening overall. if you look at shares of apparel and accessories company guess, they're taking a hit in the afterhours session so far. now, the company reported better than expected profits and sales in its fiscal fourth quarter but it's a forecast of a 5 to 9 cent loss that has shares down. ceo paul marciano says he expects to see continued sales pressure in more develops businesses, especially in company-owned stores in north america and in europe. during the course of the day we did see insurers on the move. take a look at names like united health care, wellpoint, humanhu aetna. they're rallying due to an obama administration estimation of 5

million obamacare enrollees. here is another stunning ipo trading debut. this one courtesy of cloud computing payroll and personnel management company paylocity. it's up 40% after selling 7 million shares at 17 bucks a piece. both shares sold and the offering price were higher than expected. kelly, a lot of movement in some individual names, some real green in an otherwise saep ea o red. >> thanks very much. let's bring in greg mcbride from bank rate.com. it's great to see you. does this mean the end of low borrowing rates for american households and companies? >> well, not yet, kelly. i think what the fed did today was what was expected. they continued to stair step the tapering process by another $10 billion and pledged to keep the short-term rates unchanged. i think the message to consumers and businesses is 2014 could be your last hurrah to pay down that variable rate debt. things like credit cards, home

equity lines of credit, student lobes while you have this tailwind. come 2015, 2016, then rates are going to start to move up, you will have a head wind. now is the time to make headway on that variable rate debt. >> sharon? >> what about the retirees out there looking for some type of safe haven. maybe they have a lot of money in cds, fixed income investments, what can they expect? >> more of the same, unfortunately. it's been a brutal environment for savers and anybody hunkering down in safe haven investments and not just recently but for the last five years. unfortunately, that's not going to change anytime soon. even when it does, even when interest rates start to go up, that's only the one barometer you're going to have to watch. you will have to keep an eye on inflation. if the fed has to chase inflation, higher interest rates are not, it won't be better. >> what happens to housing affordability if yellen gets rates to come up? >> i think the long-term rates is where the risk comes in.

if we see a jump in long-term rates like last year, if we saw something like that again this year, i think it really brings housing affordability into the question. could definitely be a headwind to the housing market but short of that, i think the combination of home prices and mortgage rates where they are, we're not at an affordability issue now american say for the first time home buyer who is pretty tight with cash. >> my prediction housing affordability goes down in march. >> what is the level of rates that it has to get to that really chokes off the consumer? because i would say 3% to 4% on the ten-year is really not going to be that damaging. sure, it's not as low as it has been but it's not the levels we had seen many years ago, a couple -- maybe 10, 15 years ago. so what is that level that really scares investors or consumers rather in your opinion? >> from an investors' standpoint, if you saw the ten-year treasury yield get above 3.5%, 4%, if you saw fixed rate mortgages, 30-year fixed

rate mortgages get above 5.5%, then i start to see a notable retraction in terms of people's willingness to take the plunge into home ownership and same thing on the corporate borrowing side. >> we're not even there and demand has been somewhat weak. something to keep an eye on. a lot of things. thanks very much for some context there around today's big moves. appreciate it, greg mcraid from bankrate.com. a heartbreaking scene at a news conference for the missing malaysian airliner. we'll have the latest details on this story when we come right back. back. [ male announcer ] this is joe woods' first day of work. and his new boss told him two things -- cook what you love, and save your money. joe doesn't know it yet, but he'll work his way up from busser to waiter to chef before opening a restaurant specializing in fish and game from the great northwest. he'll start investing early, he'll find some good people to help guide him, and he'll set money aside from his first day of work to his last, which isn't rocket science. it's just common sense.

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liberty mutual insurance. responsibility. what's your policy? welcome back. so the search for the missing malaysia air flight is in its 12th day now. investigators still have no idea what really happened to the plane, and meanwhile emotions are bubbling over with the families of the missing passengers. keir simmons is in ckuala lumpu with the latest. >> reporter: dramatic news from here. officials now say that the simulator that they took from the pilot's house has had some files deleted. they are now looking to try to establish what those files might have contained. the fbi now even involved in looking at the pilot and the co-pilot's computer. but before that announcement, distressing scenes when families came, relatives came to the room where the press were being briefed to try, they said, to speak to the media, to try to find out information. they were taken away by officials. they even had a sign which was

taken by officials which said, we want to know information, and they were dragged away. one mother of one son wailing in pain as she was taken and saying, i want my son back. finally, the relatives were taken to another room and they did leave the hotel without talking to journalists, but they made their point clear, that they simply are not being told enough in their view. they don't know where the plane is. they don't know why it was flown in the way it was. they don't know who was involved, but then it appears neither do the investigators. back to you. >> that's keir simmons with the latest. i want to bring in nbc's special correspondent and aviation specialist robert hager. >> hi, kelly. >> bob, thank you so much for your time. you have covered this beat for decades and it seems as though yesterday there were perhaps these theories about the plane running out of fuel, deliberately turning around. where is the evidence pointing now, in your opinion? >> i don't see running out of fuel deliberately turning around, anything like that.

there just is not a lot of evidence, and the one piece that did seem crucial about somebody in the cockpit having programmed in this errant left turn before they calmly signed off the air waves, even that is in some doubt now because of what officials in malaysia said. they sort of left it ambiguously. we don't know that for sure. what we have here is nothing very positive at all, and because the search is so difficult for wreckage or finding the black boxes, which could be conclusive, i think the best hopes would be the probes not private lives of the pilot and co-pilot. >> i guess that's why authorities are spending so much time. in the case of something deliberate, don't you find it unusual that there's no communication left from some individual or group that might have been involved as to yes this was done and here's why? >> yeah, that's unusual. there are so many things that are unusual. suppose you wanted to commit

suicide or make some kind of political statement by taking the plane over and killing everyone aboard and yourself. wouldn't you take it over right away after you cut the communications? why would you fly it on for 7 1/2 hours? nothing makes sense. i mean, you can say, yeah, the finger kind of tends to look -- you want to focus anyway on the cockpit and the two people there, one of the two, but nothing makes any sense actually. >> and, bob, it makes it so hard to speculate as well, but as we saw from those images, the families involved here, i don't understand -- i don't know what they must be going through, and what these governments involved as well. yesterday on the show we were talking about to what extent do you keep funding the search and rescue effort but also how can you ever back away? >> no, i think they will eventually back away from that because that costs a lot of money and it's tying up security assets so various mill tears are going to get antsy about that. as for the families, that's agonizing for them, and so long as there's that shred of hope -- now, i don't think there's any

chance in the world that that plane is sitting on some jungle runway or anything, just couldn't hide a 777. so i think it's -- that plane is gone. destr destroyed. but so long as the families have that one little sliver of hope, you know they're going to hold onto it. it's just awful for them. it really is. >> yeah. robert hager, thank you so much again. >> thank you, kelly. >> some perspective on this crazy story. what's burning up cnbc.com? we'll get you "the hot list" next and we want to know your thoughts about janet yellen's first news conference as fed chair. your tweets coming in fast and furious. best thoughts just after this @cnbcclosingbell. we'll be right back. 'll be righ. there's a new form of innovation taking shape.

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welcome back. so, so much news today. what is clicking to the top of our website? allen wastler joins us with "the hot list." allen? >> it was all about the fed, all about the website this afternoon. all our readers were hyperventilating. people are trying to figure out what happened. we're leading with an exclusive piece for us by mohammed

explaining what he sees are the three key factors in how the market reacted to the fed. it's fascinating. people are eating it up. they're eating up another commentary piece we have, about how the obama budget proposal can affect their 401(k)s. 401(k), people dive into any story that's the headline. this is a fascinating read. anybody who has that savings plan should take a look at it. finally, we have an interview with the ceo of noodles and company. he tells his diners, don't bother tipping the wait staff. he pays them enough. and he would rather that his weight staff focus on doing a good job all the time. people love that story, too. >> isn't the point of tipping the incentive to make them do a good job? >> he's trying to respect you from the get-go. it's an interesting conversation. and you should go through the comments on this story. this story, over 100,000 people have read it already. people have strong views, pro

and con. >> can you tell where geographically people are reading the yellen story? is it global, especially as we shift towards the asian session? >> it's all over north america. but i'm seeing it shift right now to the asia market. we have a big audience in asia, especially with the expats there that work for a lot of banks. and they're diving in. >> i think i know a few of them. thanks, allen. a lot of stuff to check out on the website. how do you think janet yellen did in his first news conference as fed chair? we'll light up your responses when we come back. ♪

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welcome back. so, we've been asking, what did you think of janet yellen's first press conference earlier today? it looks like yellen just popped the putin rally. i think she did a good job of conveying what she wanted to say. after much consideration i've come to the conclusion that yellen and her predecessors are just winging it. i think he's been talking to guy adami. >> janet yellen did a good job. and when you think back to the early days of ben bernanke, when he gave press conferences, he was a little unsure.

janet yellen sounded very confident in explaining it. the key question is going to be how the market reacts. and also, the emerging market story is going to be interesting to watch the election. >> let's talk about the -- it comes down to labor market and inflation and how those pan out. can we whip around? >> i think greg made a very good point. folks need to realize that eventually we're going to see short-term rates go up. what does that mean for everyday life? what did you invest in? a lot of people need to be paying down the credit card debt. any variable rates, now is the time to do it. you're not going to see rates like you have right now. >> and interesting to see what happens, with the chinese karn currency, as well. >> it's been a shaky, vulnerable time for emerging markets. the question is, higher rates -- the prospect, now that it's out there. what does it mean for the rest of the world? the u.s. maybe can handle it because our economy is better.

and relatively speaking, i don't know the analogy you used, nathan. it was a good one. the cleanest dirty shirt? >> nicest pig in the slop house. >> tonight, you have lennar in terms of earnings. let's hear what they have to say. >> that was a big move today, those shares. >> the stock's pulled back a little bit on the yellen commentary. and i was say that also, you're looking at data. u.s. data. initial claims and existing home sales and leading indicators. >> 315,000 was the number last week. incredibly low. it points to strength in the labor market. >> i think we're going to see about 330 this time coming around. averages somewhere between 320 and 330. i think yellen learned -- that chair's a little different than the vice chair chair. really. >> i also want to point out, you're watching this, as well. niking earnings are out tomorrow. and that's a good global benchmark. western europe has been a bright

spot for them. >> thank you so much for your time this afternoon. great panel. and "fast money" is coming up in a few moments. melissa lee joins us with a preview. >> hey, kelly. all about yellen today. but there might actually be a bigger concern amongst institutional investors on the street. we'll get into that and what the traders think about that a little later on in the show. >> i like it. over to you guys. breaking news here. a big sell-off on the street, following the fed announcement. the s&p 500 tanking over 1% a session low. ending the day down on just under 12 points. our traders tonight are tim seymour, josh brown, tim nathan and guy adami. marking janet yellen's news conference as fed chair, her words sent shock waves when she suggested interest rate hikes would happen about six months after qe ends. >> the language we use in the statement is considerable, period. so, i -- you know, this is the kind of term, it's hard