watch. a little more than 30 points away from it right now. key milestone. key psychological. last time we saw these major levels, 16,000, back towards last fall. seven months before. with that, we'll wrap it up. carl, over to you for "squawk alley." we do have breaking news. janet yellen getting ready to speak at the imf. hampton pearson in washington. hampton? >> yeah. nothing in fed chair janet yellen's prepared remarks ar future rate hikes, much of the focus in her speech to the imf focuses on the limits of monetary policy when it comes to overall financial stability. she points out low rates over a long period of time can create incentives to take on risk, and that overall monetary policy has powerful effects on that risk taking. what led up to the crisis, the fed chair makes an argument tighter monetary policy alone at that time would have been, in her words a blunt tool, and not

have averted the financial crisis. looking at the here and now, much of the speech talks about best macrocredential policies. things like increasing capital reserve requirements, stress tests, derivative, the best ways for markets to address overall financial stability worldwide. there is a note of caution to investors. the fed chair expressing her concern they may underappreciate the potential for future volatility, and in that vein, she calls on regulators to complete efforts to enhance system resilience worldwide, whether fully implementing the basel 3 reforms or unfinished work here in the u.s.'sof course, there will be a q&a led by imf boss christine lagarde at the conclusion of her prepared remarks. back to you. >> thank you so much for that, hampton pearson. interesting headlines from yellen to the markets now, the dow relatively quiet session. up 12 points. we are, of course, keeping 17,000 in our sights.

s&p 1975. bring in art carbon, director of floor operations and kayla tausche here as well. what did you make of the headlines, first of all? >> well, i think the market is a little cautionary phase today. that adp number surprised everybody. initially the market a bit more solid dear until they saw the midyear went up about 2.6 and now debating what will a good number tomorrow do to the ten year and do to the fed and fed policy? while we think yellen, we have to drag yelling and screaming into moving things up early, the markets really cautious about it. >> some suggested that adp is another sign, the fed is behind, and that a hike is coming sooner than we think. do you agree? >> i think they're having some credibility problems after they dismissed the inflationary pressure as being mostly noise.

that started to go away. this number, i think, will get people anxious again. it will be interesting. hampton told us what is in the prepared remarks, but she will be questioned by lagarde after this. so unless she throws only softballs, we could get a surprise there. >> regarding a rate hike, is there any date at this point, given our current data, you think would be too soon? that the market wouldn't stomach it well? >> well, i think the market is nervous about that. i think it's -- it worries about the fed's credibility, and the timing, but at the same time it knows its no smarter than the fed is. so it's not really sure where things are going. so i think if it suddenly began to look like they were going to move quickly, what they've got to do before they move is kind of condition the market. they're going to have to explain to the patient what's going to happen here, and then they'll get a better result. anything that is quick could be a problem.

either side. >> i love this headline. that investors in her view may underappreciate the potential for future volatility. that's only coming 52 days after we've moved 1% on the s&p. >> yeah. it's -- it's not quite irrational exuberance but interesting to note the fed who is contributing very heavily to all of this is suddenly saying, let's be careful out there. >> it's fun tny to see the bank decrying the lack of volatility. then when you actually get it, you don't appreciate it for what it is. >> absolutely. that's why we'll get back into that debate about complacency again. you know? how much of did is allowing risk to creep up on us without paying careful attention. >> art, thank you for that. we'll see what the afternoon brings us, as you said. >> i'm off tomorrow. i wish everyone have a fifth on the fourth. >> we will. art carbon, thanks a lot. joining us at post nine,

senior columnist and jon fortt doing duty out west in silicon valley this morning. jon, good to see you, and mike, you as welling. your thoughts here at 1976, broadly speaking? >> seems the markets are happy to be where it is. i don't think the yellen headlines are scary. she again declined the opportunity to see the markets are getting silly. very aware of that situation. overconfident financial markets are the reason the fed feels compelled to tell a different story or change policy. they didn't want it last year, don't want it this year and her talking about re lation and capital levels at banks exactly what the market wants hear. what's your next act in terms of the bullish argument taking it higher from here? it's kind of a rest period. >> just two weeks ago she was saying the fed still has concerns about the strength of the economy. there are still points of weakness and various pressure points with regard to the consumer. how do you square that circle? >> i think that's exactly the

point. the fed would prefer to keep attention on those things. in other words, the economy, the real economy still needs help. therefore, if people say we're late because of an upside surprising adp, that's not the conversation that she wants people to have. and so she wants to wait until there's really irrefutable evidence that a lot of the slack in the economy is being taken up. that's the reez for change. i don't think they want overconfidence, excessive risktaking, yield-chasing kind of activity in the financial markets to be the reason they feel they have to change the narrative. >> we do have a lot of actively managed funds way behind. right? half way through the year. best start to the year in a few years. >> sure. >> cap ex, m & a on fire. what's to prevent a manager from saying, i better do something? try to catch up? >> if they have the influence, probably don't. a question where they go with that. i honestly think the m & a story is, it will be perverse if it didn't stay or get busier, because it just seems all the ingredients had been in place for so long and finally it seems

you have that competitive deal dynamic and people use it or lose it type mentality with the cash. that's going to happen, with stock, too. many of the companies, at all-time highs. >> exactly. that's right. so cash is actually a lesser component of deals lately. in terms of cap ex, kind of steady. it's increasing but i don't think that's going to be kind of the thing that pulls us really heavily to new highs. seems like i think that it's been over anticipated, i think. cap ex in a boom phase. it's going to be a help, not a big one. >> a good point. moving on to tech news this morning. google, you might have heard, making a big bet or music buying an app that competes with pandora and others, making a play lists of recommended songs. the deal is worth $39 million. for now, google is not planning immediate changes to song set but may incorporate the service into google play and even youtube. jon, once again, talking curation here as if it's the

future. >> yeah. it's kind of an itty-bitty bet, when you measure in google bet sizes, and $39 million, perhaps sizes what apple's investment in the beats music segment of its deal might be worth, but it's interesting. you've got a music discovery problem now. now that music is sort of out in the ether, service, engagement is the coin of the realm. how long can you keep people listening? how much do they want to listen? the longer they listen the more willing they are likely to hear ads, more likely to buy songs or then subscribe. a lot of competitors out there. pandora doing alga rhythmic. spotify that's doing crowd sourced curation and then this expert curation movement going, cirrsea sirries xm sirries in the leap. will pandora maintain its

investment or a human curated service? i think a question whether human curation can scale. when you go international, are there enough humans good enough to do it well? >> curation but also identification. i see it as a kpter to the likes of shazam, leading a consumer to the google play store to actually buy music down the line. i don't know if you use songs, i don't think many wom accuse me of being an early adopter of many things but i love this app. context clues popped up from where you are. those who use the app will know what you do is basically deke i your activity and it chooses music for that activity. a powerful tool to know whether you're driving, working out, cleaning your house. i started seeing swiffer ads pop up during times when they say, hey, are you cleaning your house right now? it's interesting that this could potentially be a money-making tool, if it isn't already and something to integrate with

youtube, google play and spur downloads and purchases, too. >> yeah. i agree with that. though i question, you know, scale wise how many people will be listening to music and specifically tying into services, songs at any moment exactly what they're doing and will advertisers be able to monetize that at that instant? not quite as good as web search, which shows intent that way. but it is an interesting effort to, again, increase engagement, get more signal in the noise and figure out how to monetize music, because these free services, at least at the base case, that's not going to be enough to support a business model. you've got to get people to download a song or subscribe to some sort of monthly or annual service to bring in revenue. otherwise, it's not clear what the business is. >> twitter, business is larger than your actual business. more on that later. and t-mobile, alleging the company knowingly totaled fake

charges totaling hundreds of millions of dollars but customer consent. placing unauthorized charges for third party phones as far back at 2009 and made it difficult for customers to detect the charges. in a statement, ledger said, we've seen the complaint and found it unfounded and without merit, but nonetheless, "usa today" puts it on the front page, above the fold, feds accuse t-mobile are adding bogus fees. jon, your take? overplayed or not? >> i think maybe overplayed. i mean, all of us who looked at a cell phone bill know there are all kinds of charges on there that are probably bogus. i think the u.s. government had a fee for a long time that we figured out was going nowhere. i think this is unlikely to hurt t-mobile specifically, because everybody has looked at their cell bills with suspicion. probably has more to do with how quickly they wee spond and bring at&t and verizon and sprint

under suspicion, too. i don't think that will be too hard. >> i don't know how closely you follow t-mobile and how that fits into the regulatory discussion. >> it is counter to their new image. right? as being the friend of the cell phone user and subscriber. i don't know it really is going to change the story in terms. business proposition. in terms of the merger with sprint, it's interesting. -- i can't handy cap prospects for it. to me, seems short sighted to say, no, you can't create a strong number three. that would somehow be anti-competitive. i remember in 1998, i looked back at this. all this drama as mci and worldcom were going to merge. oh, no. a big long distance provider. we have to be aware what the product is tomorrow. not just a cell service. >> with relation to this specific case, the irony is so great given this is the single player in this base who has said we're going to eliminate fees. for the feds to actually fine, whether it's worth filing a lawsuit of this scale or not, you were charging customers for

horoscope texts, for celebrity news, that they weren't even asking for. to balance that against where they're trying to eliminate fees, i find it hard to believe that the company in going line by line to try and figure where they could nix fees didn't find this before washington did. >> it's not clear when it started and whether it was kind of allowing these bottom feeders to piggyback on their subscriber base and platform. it's not new management policy, is my point. who knows if it isn't something that didn't get to the top of the priority list when it should have. >> jon, stephenson was on, at&t, on "squawk box" this morning and talked about that original complaint, when the t-mobile deal did not happen and that in his view, regulators were insistent there be a fourth player. >> yeah. and convenient, of course, competitively for him to say that now. i'm not at all surprised about this particular t-mobile case, because the back end systems of these carriers are under so much stress as they try to adapt to

so many different changes in the billing structure. they're trying to bill in some cases for subscription music services now to add all sorts of things into the bill. they have in some cases antiquated systems, trying to change over think systems to adopt for new ways to charge for data and so all kinds of complicated things happening here. i've had to call at&t about my bill many times. when i travel internationally, things like that. things get added or don't get added. so not at all surprised there are things like this that pop up that are questionable. >> finally, keeping our eye on gopro. stock is down. finally after jumping 100% since its ipo last week. we talked a lot about the allocation, mike, razor thin, and precious since then. what do you make of said to? >> today seems a little bit over overdo or kind of, you know, minor buyers remorse. i don't know how to play this. one of those things i let sit out there and kind of from a spectator's point of view. to me, to bet against a company or a stock like this, you have

to kind of really know what's behind the buying. honestly, i don't know. i know what the bull story is. i get it. but it seems to me like there was some other force behind this buying, than just evaluating the company, what it is today and maybe a decent probability of what it becomes. >> always a couple milestones for companies after they go public, be it lockup periods expiring, be it short interest actually opening up. remember, it's usually a couple days after the first trade borrowing actually becomes available. not right away. could well be investors are getting their first crack at attempting to borough. bulls and bears on this stock and very vocal. if there are any that want big short positions you have to believe they might be out there today. >> would not be surprising. i think the whole game, seemed a little stale, the low float kind of highly coveted ipo, those betting against it, i know for a fact were nervous, because you know what one of those was?

open table. first came public, like this soo doomed -- you never know what a thing is going to become. i always think the business of the ipo, if it's going to be successful, nerve are the ultimate business and you can't figure it out on day one. >> many wait until they see the first public quarter of earnings before deciding one way or the other. you got a thesis and want to act on it, no time like the present. >> nice to strap a gopro camera to the stock chart. a really fun video. right? >> look like that eagle. >> a ski slope. q is -- q4 good for the company. how it shaped up a year ago. it's going to be january, probably before we get really solid data on this company's growth and there's a lot to happen between now and then. alibaba, ipo, we question how that will effect the newer issues and the holiday season from the likes of google, apple, samsung, lots of new devices it hadding the market, probably will affect this stock, also we want a check on the markets.

we have our tech discussion, leave it there. the dow's up about five points right now. the s&p at 1974. the nasdaq slipping slightly down by just about 2 points. of course, were e did see a better than expected adp report this morning, but markets are nervous waiting to hear what janet yellen will say in a q&a with the imf leaders in a few moments. meanwhile, in the markets specific, stock specific space, shares of delta slips after reporting lower than expected international yields. lower business demand to latin america, because of the world cup. delta currently the biggest loser on the s&p. quite a sharp decline on that chart. down nearly 5% just today. on the other side of the trade, constellation brands rallying because first quarter earning and revenue beat estimates. the company raising its full year outlook on improvement in its beer business. the ceo of constellation brands will be on "closing bell" this afternoon starting at 3:00 p.m.

eastern and of course jane wells covering the beer trade for us on cnbc all day today. coming up, seems like a good time to go public. next, why the second quarter was one of the best quarters for ipos over the past few years. in a few minutes from now, the first ladies of finance. janet yellen and christiane lagarde face-off. the two most powerful women in the global economy taking stage together for the first time. we'll take you there live as soon as it happens. the dow is up three points. you're watching "squawk alley." [ male announcer ] some come here to build something smarter. ♪ some come here to build something stronger. others come to build something faster... something safer... something greener. something the whole world can share. people come to boeing to do many different things. but it's always about the very thing we do best.

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oevg every 50% of the companies going public over the last five years are venture backed. so there's a tremendous amount of innovation, going on in not only silicon valley but all areas where innovation takes place around the world and those technologies will be quite disruptive to existing technologies and industries. that was stuart bernstein, global held of the goldman sachs venture capital coverage group on this program last week. today a new look how hot the vc backed market is. according to new data from the national venture capital association, 2q saw 28 offers, marking it one of the strongest quarters in recent years. joining us to dig into the number, bobby franklin is the

president and ceo of the national venture capital association and joins us today from washington, d.c. great to you have back, bobby. good morning. >> carl, thanks for having me. >> what explains the strength here? is this all biotech and life sciences? >> well, clearly that's a big part of the story, the second quarter saw over half of the venture backed ipos in the life science sector. i think it's strong markets, which you all have been talking about here on the show today, but i also think the folks behind me in the capitol deserve a little bit of credit. a couple of years ago when they pass add jobs act, and it helped some of those companies who are ready and -- ready to go public and go to an ipo market, to be able to do things like confidential filing and test the waters, and make sure that they're right to go. >> we went through a bit of a scare there, and who knows if it's over or not, but beginning in march, things got crowded. market got tight. some people pulled their plans, which are now beginning to resurface, reports say. do you think that period is

truly over? >> well, we hope so. we hope so for the entire entrepreneurial ecosystem, because when there's a strong ipo market, when there's a strong exit opportunity, then you can take those returns. you can give them back to your lps and start the cycle over. that virtuous cycle of innovation. >> bobby, how do you define venture capital in this day and age? we're seeing late-stage investors like wellington and black rocket and we're seeing private equity firms like tgp being especially active and companies like comcast, google, intel, corporate arms investing as well. i'm wondering, when you falk about venture capital are you talking about specific firms that have this as their sole purpose or all money chasing innovation at this point? >> we're talking all of the venture money that's chasing. you raise a great point. so much more activity now in court venture. we have the crowd funding and things just starting to emerge. you see the angel groups being

organized. so, really, everything from the seed stage and the first investment to that exit is starting to be harder toe def d. we look at it, the firms that are specifically for investing in the entrepreneurial ecosystem and those entrepreneurs that they back. >> bobby, you know -- >> hey, bobby -- >> yes? >> bobby, i was on sand hill road yesterday trying to take vcs temperature how they were feeling after gopro, which went up quite a bit for a few days, given things seemed to cool off a few months ago. people were telling me, volatility not so great when you're looking to take companies public. nice to see a little bit more consistency one way or the other over the coming weeks. are you hearing something similar or are people excited after seeing a high-profile issue like gopro do so well in the early days?

>> we're hearing what you heard from members, so many on sand hill road that they would like to see the companies that make it into the markets continue to do well. it certainly helps. we've got about, right now, about 52 companies that have publicly filed that are sitting in the pipeline and ready to go. so what happens to the ones that go before them does make an impact on whether the next companies take the, make the decision to take the plunge, and go on the public markets, and we certainly hope that there is some stability there. i think that for so many company, it's a different question over what it is for them in particular, but obviously, that stable, once they get on to the public markets, that stable ability to stay on that road helps. >> bobby, please come back. sometime in q3. we'll see where we stand there. thanks again. >> thank you. dominic chu, a market flash. >> carl, cheshg out what's happening with webmd shares.

stock moving higher after steve nicholas raised rating on the health information provider to a buy from a prior hold and slammed a $60 price target sayisay current estimates for advertising growth end of the year conservative. see the stock just off session highs, up about 4.5%, up about 33%, carl, for the year. back to you. >> all right. thanks, dom. up next, one major cloud services company considering going the dell route taking itself private. we'll tell you which one and why. plus, waiting for that conversation between the two most powerful women in the world of finance. christine lagarde, janet yellen, about to take -- actually, yellen has taken the staige. t stage. the q&a we'll bring to you when it happens. to treat symptoms of bph, like needing to go frequently. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure.

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in case you missed it, tech crunch reporting enterprise com

company rack space considering taking itself private. the company wants to turn away from public market accountability and focus on developing its core business. it's apparently negotiating with a private equity firm to borrow capital for the deal and could make an official announcement as soon as this week. shares of rackspace well into the green on this news. carl, a highly competitive market, competing with the likes of sales force, you name it. everyone is wanting to get into the cloud and when you're a company, that's a middle market company like rackspace, trying to figure where to go from here, perhaps that is the best move. you soo e that stock up 7% there. the market thinks that is a good move. >> as rule is that proven a solid strategy, mike? >> i think it's a solid strategy, if you feel like strategically from a business perspective you have to either shrink the business or really reinvest in it. so if you don't want to pretend every single quarter you're a double-digit grower business next quarter, which you have to do as a public company. i thought that was private

equity code code, you don't have to be in the glare of wall street. pretend you're not as muches a growth business tomorrow as you might be. competing with large pieces of other large companies. right? ibm and all the rest. could it be might be easier to do what they feel they need to do. >> jon? >> not only those. don't forget, google, microsoft, amazon. some pieces of the business touch, asher, amazons cloud services, et cetera. extremely capital intensive. going private raises questions for me about how much debt will they take on to continue to compete in that sort of entir environme environment, if they go private or pivot and be more of a services and software-led company? i don't know. if one of these big giants wants to hold rackspace's head under water as a private company, they could do that. >> a lot of times these leaks happen because the company actually wants to get bought by a strategic and are waiting for one to come out of the woodwork.

we'll see here. >> fresh meat. meantime, 11:30 on the east coast. markets closing in the uk and across europe. generally mixed there today pulling back from earlier gains. by the way, uk home prices surpassing their peak from 2007. auto sector, one of the big gainers after auto sales earlier in the we'll. bmw, daimler two of the best performers. and one of the biggest losers, oil, delivering first half revenue and profit in line with expectations. in housing, home builder presimmons seeing gains earlier, now dipping into the red after highlighting a strong first half. when we come back, awaiting that conversation between christine lagarde and janet yellen. when that q&a begins, we'll bring it to you live. thank you colonel. thank you daddy. military families are uniquely thankful for many things, the legacy of usaa auto insurance can be one of them.

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stocks edging higher awaiting dow's 17000. the big jobs report tomorrow instead of friday, of course. bring in scott rand, senior equity adviser, talking a where we are. scott, good you again. >> good morning, carl. >> a long stretch, without a major move either way in the s&p. will that last for long? >> we've been grinding higher, carl and i think probably will in the near term. i'm not a trader. more of a positioning strategist. i think for me this market feels like it wants to move higher

probably still into august. to be honest, you and i have talked about this before. i'd love to see some sort of a pullback. i don't think it's going to be because there's a stumble in the u.s. economy, despite what happens in the first quarter. i think it's going to need to be some sort of event thing. maybe when we hear the chinese second quarter growth number, in ten days or so. maybe something in the middle east, but i don't think the market's going to get tripped up from that modest growth environment that's going on here in the u.s. i think it's going to be something other than that, if we have a pullback. >> scott, mike santelli here. look back at the way the first half unfolded. the market amazingly held together, with big, stable stocks hanging out there near the highs. even as other stuff sold out heavily down below. especially yelled you see the russell 2000 small cap move trying to catch up. growth year stuff working again. do up see those guys taking the

lead here or still a battle of large over small and steady over mown meant um? -- momentum? >> mike, if i thought we would see 3, 3.5 gdp growth consistently over the next 24 hours, i think it would be mid and small caps that take the lead. i don't think that's going to be the case. i think we're still in this slow growth mode. you know, we have a 2.4% gdp number out there. we've had it out there since last summer. that might be a little lofty, given what happened in the first quarter. even next year, i still think you'll see growth, 2.5, 2.6, something like that. that's a large cap market, at least in my opinion. i don't think we're going to see a really small midcaps step up and take the lead. i think the market's going to be more of a grinding out in a slow environment, and money's going to flow to shows large caps with better balance sheets, more products. international exposure, that kind of thing. >> you know, consumption, at least for q2 continues to be a

question mark, scott. we have earnings warnings from owens corning and dupont. enough of those pile up and people are not going to want to give q2 a pass. might have done for q1, but not the next quarter? >> if we would have another quarter, whether a surprise gdp, bad gdp number, or a bad earnings season, i think people would not give it a pass, but i think, really, our earnings estimate is 7% growth for this year. i think we're going to get there. i think this next quarter and really the next several quarters are only going to confirm that we're in this modest growth environment. you know, we're not going to have 15% earnings growth. we're not going to have, you know, a negative 10% in terms of earnings. it's going to be somewhere in that 5%, 6%, 7% kind of range. i think the chances of falling out of that range, that tight range, is pretty limited at this point in the cycle. so i don't think earnings will do anything other than confirm

we're in a slow environment. good enough to justify where the market is right now. >> right. a much better clue about earnings in a few days. scott, good to see you again. have a great fourth. >> all right, guys. >> scott wren, talking markets. move over ronald reagan. behind the white house petition to rename washington's national airport, and you might already know who they're thinking about. first, rick santelli what are you watching today? >> well, we're watching today's number with adp, and it's remarkably similar to the non-number, the number before last. 282. this one 281. we're going to discuss how the sequential weakness or strength in the government job the data could give you clues which way interest rates and stocks may go tomorrow morning at 8:30 eastern. we'll talk about that, after the break. ship, you'll find the works! it's a complete checkup of the services your vehicle needs. so prepare your car for any road trip by taking it to an expert ford technician.

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straight ahead on the "halftime report," carl, melissa, thanks. and seema mody, what's going on at the nasdaq? >> how quickly a story can change. looking at nasdaq losing steam here, and that's primarily due to some of yesterday's big gainers, pairing gains in today's trade. paychecks, alumina and tesla weighing on the nasdaq. tesla one of the leaders in june gaining about 17%. hit the casino stocks. specifically those that have exposure to macao, asia's gambling hot spot. despite a disappointing read, credit suisse put out a bullish note seeing it as a great entry point. mgm, top pick. and movers on radar, apple and focus. aft and lastly, gopro. we toned see this with stocks that move up so much.

at some point they have to pair gains. we're seeing that in today's trade. gopro down about 10%. back to you. >> seema, i'll take it from there. talking to traders talking about gopro and its move today and asking if borrow was available today. yes, it is, but insanely expensive. so xpexive y iveexpensive you he stock is going to zero. 90% you would pay to borough th -- borrow that pay. a lot of people wouldn't feel comfortable making that bet. especially, mike, saying a lot of people don't want to get on the rock side of a that can move quickly in the other direction. >> you didn't see it going into the mid-40s in the first place, ask, what's the thesis from here? it's a keep your hands often, not really a bet against it. i'm sure the puts are active. even that will be expensive. >> we'll watch that closely. meantime, in case you missed it this morning. tim howard, american hero.

might be topping president reagan. the team usa goalie, you probably know, 16 saves last night in that heroic performance as the u.s. was knocked out of the world cup. no honor of his efforts, a white house petition to rename washington's reagan national airport to tim howard national airport. "whereas tim howard has shown himself to about national treasure," the petition begins, 4,000 signatures. 100,000 needed for an official white house response. there's no american being talked about more right now than tim howard i. love on twitter. when there's a hash tag, things he could save. neiman brother -- >> bambi, the titanic. >> imagine if they won the game? >> imagine. i know. >> the only thing they couldn't save -- the game yesterday. >> absolutely. over to the cme group this morning and get to the santelli exchange. hey, rick. >> good morning, carl.

carl, a lot of people on the floor really liked your chart this morning with regard to the balance sheet and the level of equities. there's been so many variations of similar charts, and the reason i bring it up, of course, corporate profits. you can overlay lots of things. we all know the dynamic. right now we have, of course, janet yellen, head chairperson of the federal reserve and we have ms. lagarde, head of the imf and briefly we'll hear their q&a. one of the ish a ysues has alwa been selective hearing when it comes to things they're paying attention to. any parent knows what selective hearing is. try to talk to your 10-year-old when a favorite program is on tv and whisper silently, want to go out and have ice cream, they can hear that. inflation and deflation, definitely selective hearing. i think ms. lagarde would use a magnifying glass of size of idaho to hold up to see if she could find a smidgen of deflation. anybody who wants to truly see

what deflation looks like, read the great books from the 1930s and the depression. back to ed today's number, adp, strong. expectation of tomorrow's number, i did work from january to may, here's the bls numbers. when i find it interesting, the last look was very similar, 282. the main number dropped to 217. i think the sequential notion, how it stacks up to the 280 and two teens significant, also the bigger question, i remember screening in 2009, it's all about jobs, jobs, jobs! i'm not sure if that is all the case right now. it might be policy, policy, policy! it might be more important. if we look at the number that came out 217, as you see, on the 6, and since then, the high yield has been on the 17. the low yield on the 26. 265 to 252. i'm a bit surprised that we're kind of hovering in the middle

right now, considering how strong adp was. the point, i'll tie it all together. i was just hand add report of reuters, a poll, saying they have now picked our current president as the worst president since world war ii with his predecessor, very close to the second worst, almost a tie. you mentioned ronald reagan and the airport and a name change. he was named the best. what's the point of mentioning that? because i think when it comes to jobs, jobs, jobs, if there isn't some policy to address the issues, it might be kind of like, you know, spitting in the wind, so to speak. so tomorrow we want to pay close attention, if the number is sequentially higher than 217 and don't trade above 265, it means bond trading isn't what it used to be in the face of strong data. back to you. >> rick, good point. rick santelli at the santelli exchange. meantime, 1974, cashing in a suggestion that this area around here might be some resistance for the bulls, even when they do have the ball.

although they are within 2% of s&p 2000, which would be another big number. >> yeah. the round numbers are the issue. i think the thing to look at, some of the short term trader sentiment indicators, agents overheated. >> with all that, i believe the q&a between lagarde and yellen has begun. in parallel, different circumstances, and i would like to maybe following the stradivarius analogy of michelle, to stay loyal to -- a man today, what would you say? would you say that macro credential tools are second fiddle to the main stradivarius of monetary policy? or would you say that depending on circumstances, macro credentialal toos brk the -- and have to deal with the issues as a first line of defense? >> well, i think my main theme is macrocredential policy should

be the main line of defense, and i think the efforts that we're engaged in in the united states but all countries coordinating through -- through basel, the efforts we're taking globally, strengthen the resilience of the financial system. more capital, higher quality capital. higher liquidity buffers, stronger and -- arrangements for central clearing of derivatives that reduce interconnectedness among systemically important financial institutions. strengthening of the archite architecture of the payments and clearing system dealing with risks we see in areas like

triparty repo. all of these efforts, and particularly focusing on the resilience of the most systemically important firms through surcharges and other measures, higher leverage ratios, i see this as the core step that we need to take in the united states and globally to create a safer and sounder financial system, and if we're able to do that, reducing, also, the reliance on whole sale funding, if the system experiences shocks, it will be better able to deal with it. i would also put resolution planning which we're engaging in actively, among those measures, and, you know, as i mentioned, i think cyclical policies and sector-specific policies that we're seeing many emerging

markets take are steps that can be used particularly when we see problems developing in housing, or a particular sector. these are really promising. i don't think we yet understand how they work. when they can be effective, how we should use them. i hope this will be an area for the imf and for us of active research so we can better deploy those tools, capital countercyclical capital charges, but i think importantly, of not taking monetary policy totally off the table as a measure to be used when financial skiexciserse developing, because they have their limitations and there may be times when monetary policy does need to be adjusted or deployed, or to lean against the wind.

so to me it's not a first line of defense, but it is something that has to be actively in the mix. >> right. and if you are using your first line of defense, do you think that this is likely -- not now, but sort of in more -- in more calm, possibly, and more medium term times, would you -- would that help us get away from this zero lower bound environment in which monetary policy is within stock, without being negative about the stock, words i'm using, whether it is here or in the uk or in the euro area, we are faced with that issue. with the exploring of negative interest rates as is the case now by the ecb. do you believe that the sort of constant views of those macro credential tools are likely to move us out of that direction? >> so it is remarkable to see

how many countries have been affected by the zero lower band. it's something that for most of my career would have seemed, frankly, unimaginable. and often it has been the case that these episodes have occurred in the aftermath of a crisis that impacted the financial system, whether it's in japan or here in the united states. >> true, true. >> so, you know, i think it will be helpful, if we can strengthen the financial system, such huge adverse shocks are less likely. still, it is a real possibility, and, for example, the work that we've done with the standard kind of macro economic models we use inside the federal reserve looking at the incidence of shocks that have occurred. there is a real possibility, there remain as real possibility, that we could continue to be hit by the zero

lower band, and i think, you know, we've had recently many discussions of secular stagnation. >> yeah. >> or the notion that for some period of time, whether it's because of slower productivity growth, or head winds from the financial crisis, or demographic trends, that so-called equilibrium real interest rates may be at a lower level than we've seen historically, and that's one of the factors that i think will be important in determining how frequently a negative shock could push economies against the zero lower bound. so if it is correct that equilibrium low rates in the united states and globally may be lower going forward than they have been historically, i think we will have to worry about these episodes more often. and, you know, of course, often

there are other tools besides monetary policy and sometimes monetary policy bears the brunt. i mean, in recent years, it has born the brunt of responding. i think if countries had greater fiscal scope, if they had more room for the use of fiscal policy, then many countries, than many countries have now, there would be a larger tool kit that could be used to respond to the zero lower bound. >> well, the topic of the moment seems to include more structural reforms than fiscal space. although the situation is improving slightly. on the sort of tendential space, and around somewhere, has done similar work it one you're alluding to and you point to that direction as well. >> so that's -- >> let me take you one circle further.

you've beautifully demonstrated the efforts that have been undertaken from macro credential point of view in terms of the universe that you have under the jurisdiction, but this universe being restricted and well supervised as it is has generated the creation of parallel universes, and you know, i'm just thinking of the toolbox with all the attributes that you have, what can you do about the shadow banking at large? and, you know, i'm not giving it any dismissive connotations. it just happens that there have been development of alternative funding mechanisms and finance mechanisms that are outside the realm of central bankers. what can be done about them in order to make sure that there is no creation of significant risk threats out there, which are not

covered by macro credential t l tools. >> so i think you're pointing to something that is an enormous challenge, and we simply have to expect that when we draw regulatory boundaries and supervise intensely within them that there is the prospect that activities will move outside those boundaries. >> rightants a. >> and we won't be able to detect them, and if we can, we won't have adequate regulatory tools, and that is going to be a huge challenge to which i don't have a great answer. but as we think about tools that we can use to address systemic risk, i think it's particularly useful to focus on those that have the potential to control risks, not only among regulated institutions, but also more broadly, and that's one reason that in the speech i gave, i

mentioned -- margin requirements. >> yes. i heard. >> and, you know, limit the -- can serve to limit leverage, not only within the banking system but more broadly by any institution. >> use the clearing system? >> right. that would be borrowing, using short-term financing to take on leverage positions. because this is the type of tool that might have -- >> universal. >> more universal effect. i'll tell you, also, we have developed as many, you know, as you have, and as many central banks have, very active monitoring programs to try to be on the lookout for what will cause the next crisis. hopefully many, many years in the future, but -- >> we're both very -- >> i certainly hope so, but, you

know -- what are the new threats? and, you know, we're trying to look for those and to be attentive to them and, you know, particularly to look at the regulatory printer to see where threats are emerging, but this is a real challenge, i think, for all of us. >> yes. we share exactly the same concern and we try to -- because we look at the horizon, and we know where there could be the traditional risks based on history. but what i'm obsessed about is what do we not know from history and that will arise and that will be the risk of tomorrow? >> i think we have a much more active program of monitoring for those risks, and you know, thatten we did before the crisis. >> let me take you -- you've taken examples from canada, switzerland, and a few other countries. you know, i'd be remiss not to