it out of the tank. we don't want to look but can't afford not to. stock markets wracking up brue l losses around the world. randi kaye will pick it up from there. >> yeah, take a look right now. we will show you the dow. it's down 291 points. so we turn to the man himself, ali velshi, to tell us what on earth is going on? we snapped an eight-day losing streak yesterday and now this. why? >> it's a strange day. the dow to 90 or so is an improvement. we were down substantially more than that. this is the italian job, randi. we had the greece problem and then we moved into our debt ceiling problems and in the middle, italy showed up. italy has very serious problems and there are fears of default in italy. the head of the european central

bank, their equivalent of ben bernanke gave a speech had morning and they said their economic growth is slowing, and traders took it as a note to say things are more serious than we thought. you combine that with the fact that the japanese central bank intervened to prop the yen up, and there's a fear that everybody is doing badly and nobody is there to pick up the slack. basically is that what is happening. money is coming out of the stocks. when you see that happening, it comes out of commodities or gold. people are taking their money out of the stock market and gold, and oil, and this is the jitters of people taking their money out and putting it in their mattresses. >> and let's bring in the assistant editor of a financial

magazine. a drop in two weeks, and why is the fear taking hold right now? >> i think a lot of it today is what ali said, the turmoil in europe that is suddenly worse than we thought. there was a feeling the ecb was going to rescue things and that went up in the air and the market is so jittery, there's a lot of reaction and overreaction. the whole turmoil over the debt ceiling affected the markets late in the game. it didn't really start to show until just a few days before the deadline, but boy did it show as soon as it did. at the same time it was a one-two punch. we had bad economic data that game out. gdp for the second quarter was low, and the first quarter was resized downward. we had poor auto sales figures. so across almost all segments and all of the economic indicators that we look at, we're getting revisions downward

and pretty gloomy news. the markets are already so jittery, you know, it is just piling on top of that already. >> usually, what happens is generally investors are sophisticated enough that this is not doing well enough so i will put my money here, and what is happening right now, there is so much uncertainty -- let's not read this to mean everything is bad, but there is so much uncertainty as to where the next shoe will drop, people are taking their money they would normally shift into other piles, and they are taking it out. there's a lot of cash piling up. companies have been doing this for the last couple years and now you are seeing global investors doing it. we should caution, this doesn't necessarily mean something bad is happening. it means investors -- smart investors, global investors, they do not know where the logical place to put money is at

this point. would you say that's a fair way to put it? >> yeah, i think that's a good way to put it. you never want to make an emotional move. the institutional investor are trying to figure out where the safe watermark is. don't forget. we thought we were going to have a relief rally after the debt ceiling was solved. that doesn't happen and things are out of whack. >> is this correction territory? >> yeah, it is. every single day for the last five or six days we have seen the market do something other than what it did in the morning. we're not expecting the jobs report for july to be good. i would not expect this big of a reaction to that. yesterday we had a rough market if you recall, and when you were on air, late afternoon, things started to turn around. and the market turned upward. there are investors sitting around and thinking let's see where it goes and then i will

get in. go back to 2008 and 2009, these are what the markets are looking like. a lot of volume and tall tivola. >> what is your advice to those sitting at home? for retirement investors, you sit tight and don't panic, and does that still hold now? >> that always holds in a crisis. when you think of the people that pulled their money out in 2008, they missed a huge rally. if you talk about making dramatic changes, you have to be right twice, at the very moment you pull it ourt, and when you put it back in otherwise you risk big losses. as hard as it is, it's always just a sit on your hands, and don't do anything drastic. >> ali, you mentioned the jobs report coming out tomorrow. what is your gut on that? >> the consensus is that we

created 75,000 jobs in july, and there's nothing that suggests that, where people are hiring, and we are seeing more laying off in terms of announcements than hiring. i don't expect it would be better than that. it's not good enough, but it will be what it is. one of the reasons we focus on this is because we have the screen for the dow. the bigger activity today is going on in bond markets, and look at that percentage number. it's off 2.5%. that's a lot for a day. let's keep it in perspective. it's a jittery market and there may be buying opportunities and a lot of companies making money, particularly those that make money on global consumers. we have been reporting on the earnings every day. hopefully that will offset the jobs report, but pay attention tomorrow morning at 8:30 eastern. >> we will. we will continue to watch the markets and check back with both of you in 55 minutes or so. thank you both. we will continue to monitor

the situation unfolding at virginia tech right now. the campus remains under lockdown. people are still being told to stay indoors after summer camp students reported seeing a man with what could have been a handgun. that was around 9:00 a.m. this morning. police held a press conference a short time ago to say so far there have not been anybody matching the description that students gave them. when we have an update we will bring it to you. a missouri law bans teachers with becoming friends with students on facebook. on the red hills of georgia, the sons of former slaves and the sons of former slave owners will be able to sit down together at the table of brotherhood. i have a dream today! [ male announcer ] chevrolet is honored to celebrate the unveiling of the washington, d.c.,

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a new missouri bill bands friendships between teachers and students. the law was created to prevent inappropriate relationships. critics denounced the measure as a violation of freedom of speech and removes an educational tool. the sponsor of the bill, jane cunningham, he joins me from st. louis. and joining us from the phone, randy turner, he opposed the bill. why did you think that this bill was necessary? >> because the ap did -- the association press did a national investigation several years ago revealing that there was six times more prevalent than the priest hood scandal sexual misconduct among teachers in our public schools. and in missouri, we found that

missouri is the 11th worth state in the nation for educators losing their license for sexual misconduct. it has become prevalent enough that our department of educational officials call it passinging of trash meaning educators moving from one district to another because it's not disclosed what they were dismissed for. >> tell us what type of friendships are approved here by the bill? >> all of them. that was not correct information that you gave. in fact, the actual language of the bill says that we do not prohibit those types of inner actions on facebook or any other social networking, the only thing the bill prohibits is in there is hidden communication between a educator and student, and we want to make it appropriate for third parties can monitor it. >> how can you make sure it's

always monitored? >> that's up to the local school districts. we're allowing local school districts to make their own policy and decide with their own personnel what makes best for them and how they monitor and police it. >> i want to bring in the eighth grade teacher i mentioned a moment ago. mr. turner, how do you feel about the bill? >> it's a poorly written bill, at least the part of the bill that concerns facebook. there is much of the bill that i do not have a problem with. i don't see stronger sanctions against passing the tras. i think that's important. and it's important for every school district to come up with a policy regarding social networking. but what i see with this wording in the facebook part of the bill, i see it as kind of demonizing public teachers, public school teachers and saying that students need to be on the lookout for them, and the

sad thing is i don't see how this bill, that part of it, actually protects anyone. if you think about it, any teacher -- and believe me, good classroom teachers want these people out of the classrooms as much as -- more than anybody else, because they bring shame on our whole profession. if a teacher is going to cross the line and have an illegal relationship with a teenager, with a minor or child, why would this teacher follow this law? the only people who would be having to change the way the do things and be willing to do things are ones that are law abiding teachers. >> would you say it might be a violation of freedom of speech as others suggested? >> no, because -- the bill by the way, does not mention the word "facebook", and we do not deny any communication and it's

appropriate so third parties can monitor it. >> does it target teachers? >> i don't believe so. i would say, no, it doesn't, because we have found problems with teachers, counsellors, and coachers and superintendents, and they have all lost their licenses of those who have been found guilty. so i don't think, no, it doesn't. we're trying to find perpetrators no matter where they are in the school personnel. >> a lot of people communicate on facebook. what does it mean between teachers and students? >> what worries me. there are a lot of things we will still be able to do, if i am understanding the rulings here. we would still be able to have what we call fan pages where communication can be on the wall, and everybody will be able to see it. there's no problem with that on most things. but when you have a student who has a problem, or a student who is even having trouble working on an assignment, that student

often times is not going to want to reveal to the whole world that he or she is having a problem with the assignment. if i could mention something -- >> just very quickly. >> she mentioned the bill does not mention facebook, no, but one of the reasons why people called it the facebook bill is it's obviously the most permanent social networking site now and being used effectively, and in a good educational manner by teachers all over the state of missouri. >> all right. senator -- >> and we encourage that aproposeutness to continue. and will tiger woods be the superstar of old or have injuries done him in? of financial security from new york life. we've been protecting families for over 166 years. new york life. the company you keep.

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well, he's back. love him or hate him, golf star tiger woods making his return to professional golf at this hour. and ted is there in akron, ohio. when he is expected to tee off exactly? >> reporter: 1:40. he just arrived to the course 15 or 20 minutes ago and is headed over to the practice range. we had a camera there as he arrived at the course. if you had any question about whether the people here are cheering him on or not, take a quick listen at his reception.

[ cheering ] >> reporter: like i say, love him or hate him, he is fantastic for the game of golf. the pga is very pleased he is back here and competing after having to take a bit of a break. in may he walked off the course with physical problems, and now he says physically he is ready to go. we will see how he does this weekend and from here on out. >> i am curious and i am sure a lot of folks are curious about how he will do with his new caddie as well? >> steve williams was his caddie for 12 years, and we don't know the details but something happened between them and their relationship broke down.

tiger fired williams, and that is absolutely another level of drama here, because williams is working for another golfer, and he will be out here, so they will be face-to-face. they are teeing off near the same time today. so another layer of drama with the whole tiger woods saga, and we have rory who won the u.s. open, and he is here as well. big crowds here and bigger ratings this weekend if tiger does well. the folks at the pga and cbs are pleased tiger is back. >> any sense on how the players feel about his return? >> reporter: they are happy, because they like what he brings to the game of golf. you bring tiger into the mix, especially with what he has been through in the past couple of years, and you have nongolf fans tuning into watch. the players get that, and whether or not they like playing

against him is another thing, but they understand he brings something to the game. >> let us know how he does. thank you. >> reporter: you got it. tropical storm emily made landfall in haiti where thousands are still living in temporary housing. ♪ this is our pool. ♪ our fireworks. ♪ and our slip and slide. you have your idea of summer fun, and we have ours. now during the summer event get an exceptionally engineered mercedes-benz for an exceptional price. but hurry, this offer ends august 31st.

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port-au-prince right now? >> right now, so far so good. quiet. today has been declared a national holiday, or a holiday to keep people at home. and the streets are quiet. it's not raining yet. it's cloudy, so so far so good. >> are people taking precautions? is there a sense of panic or calm there? >> right now, calm. [ inaudible ] people went to stock up on food and water and nothing has happened. it's 12:25 local time and it's fairly quiet. >> the question is when will emily show herself on u.s. shores. meteorologist, chad meyers, tracking the tropical storm from the severe weather center. chad, what do you see? >> it may not hit the u.s. at

all, and it may travel along the florida coastline for hours and hours. and still all the scenarios still within the cone. the storm right there. that's the center of what is emily. 50 miles per hour, and what we are worried about for today, all of this wind as it comes around the storm will come in to port-au-prince from the north. there is a huge mountain chain there. the rain will pileup on the mountain, and then all of a sudden it will start to run downhill. remember, they cut down most of the trees in haiti and used it for charcoal and cooking. and so when you start to see that, you will also see mudslides happening at the same time. here is what it looks like here. this is what the radar should look like. and the computer can look at the satellite and say what are the big thick clouds. the clouds getting into port-au-prince, and then eventually running into the bahamas. i know it's hard to see, but somewhere in there is where the

forecast center would be as it gets close to the u.s. for now, at least, there is not a u.s. landfall, although it will be very close because the u.s. is still well within the cone, that cone all the way from the keys all the way to the east of the bahamas. the rain will be heavy in haiti and heavy in port-au-prince and then in the dr, and then that's quantanamo right there, and then a turn to the right. if it doesn't turn in time, it hits miami, and if it turns early it doesn't come anywhere near us, and it could degrade the coast for 70-mile-per-hour winds for miles and miles, and that's where the most damage could be from ft. lauderdale and into cape canaveral. all of that still two days away. just a reminder, we are expecting a press conference from virginia, a virginia tech press conference, actually. that should be coming up in a few minutes. that's because students this

morning there attending a camp there at virginia tech said they saw a white male with a gun covered with a cloth. as you know, that is the site of the 2008 shooting massacre. the campus was in lockdown, and they will talk about if they had any luck finding a suspect. the eagle flies at dawn. the monkey eats custard. price-line ne-go-ti-a-tor. so, you've been double crossed by other travel sites and now you want to try the real deal. yes, is it true that name your own price... ...got even easier? affirmative. we'll show you other people's winning hotel bids. so i'll know how much to bid... ...and save up to 60% i'm in i know the lady in leather travels on three wheels.

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it penetrates deep to block pain signals for hours of relief. capzasin-hp. take the pain out of arthritis. let's check out some of the news and other headlines you may have missed. despite a deal to settle the debt ceiling crisis the dow jones is taking a nosedive. you can see there it's down about 283 points. they say investors are running toward low-risk options and away from stocks. the s&p was down 41 points and the nasdaq was down 91 points at one point. police in virginia have released this sketch of a man they say could be carrying a handgun right now on the campus of virginia tech. three students say they saw a person that looked like this just after 9:00 this morning carrying what looked like a gun. the campus is now on lockdown as teams search for the possible

gunman. so far police have not been able to find a person matching the description. the university issued an alert saying where he was spotted, next to the deadliest shooting that left 33 people dead. about 12,000 united nations peacekeepers are there to help with food and tents. right now rain is falling 90 miles south of port-au-prince. emily may hit florida by saturday. so far, no watches have actually been posted. after one death and 76 case of sickness, cargill is recalling 36 million pounds of fresh and frozen turkey. the corporation is trying to figure out where the

contamination is. they say other turkey products at the plant are not affected. today the president turns 50. people have noted that mr. obama has more gray hair since he took office. you have noticed? he did not wish for the latest poll numbers, and the ceiling debt deal did not help him in florida, and he did have a good time in chicago yesterday having a fund-raising event in florida. >> and i do turn 50 tomorrow, and when i wake up i will have an e-mail from aarp, asking me to call president obama and ask him to protect medicare. we will let you know what is happening at the campus of virginia tech. we are expecting a press

conference a few minutes from now. this is a live picture there from the campus. we're waiting for university officials who have been searching for a possible gunman on the campus. students there are attending camp there at virginia tech alerted authorities to that. that news conference is expected soon. that was the site of the 2007 shooting massacre. we will bring that press conference to you live as soon as it happens. didn't like high school. and then i met my teacher, mr. mccooey, and that click happened. i would never have even thought about going into the engineering field if it wasn't for these ap classes, these teachers and them helping me realize that this is a major calling in my life. ♪ i didn't always know that i would like math, but now i think it'll change my life. [ martin luther king jr. ] i still have a dream that one day on the red hills of georgia, the sons of former slaves

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we have been watching the dow and the markets as they have been sinking today. many of you at home have been watching it with us. there you see it there, the ugly pitcher. the dow down about 300 points, and it was down at noon today about 350 or so so it's a little bit of an up tick, but not much. the debt problem spreads from greece to spain to italy. really, you look at the picture here at home despite the deal to settle the debt ceiling crisis, it's still taking a nosedive. total fear of the market. and investors are certainly running towards low-risk options apparently with the big selloff and away from stocks. we will continue to keep an eye on that as well. we're also watching and waiting for a press conference on the campus of virginia tech, the site of the 2007 shooting massacre, which took the lives of 33 people. we also know that just a little after 9:00 this morning, that a few of the students there

attending camp on the campus actually spotted somebody who they thought was holding a gun. they thought it was covered in some kind of cloth. police put out a sketch of who this person might be. the campus is still on lockdown. they have not picked up anybody that resembles the suspect or anybody at all. the search goes on for that person. apparently, a white male described as 6'0", and said to be walking in the direction of the volleyball court, and this person has not been found. we will bring that press conference to you as soon as we get it. a teenager held for 10 hours with a bomb strapped to her neck. turns out the bomb was fake.

imagine if you can the shear terror of having a bomb strapped around your neck for ten hours. it happened to a australian teenager. the bomb turned out to be a fake and the people who did it still on the run. >> reporter: ten agonizing hours are shown on the tortured faces of her parents. >> we want to thank all of the people last night that did an extraordinary job helping out beautiful daughter. >> the daughter a victim of his multimillion dollar success. she was attacked by masked men that strapped what she was told was a remote-controlled bomb to her neck. >> there was a letter attached to this device and a note that

made certain demands. >> reporter: as investigations began, bomb disposal experts worked tireless to free madeline held hostage by the device inside her home. >> she wanted to thank the officers who spent many long hours sitting with her showing little regard for their own personal safety in her immediate vicinity last night. they were an incredible comfort during a horrific ordeal. >> madeline's private school, trial exams are suspended and counseling there.

>> and she wanted to say thank you to a wonderful group of friends from her school and teachers from her school who were just incredibly supportive, in particular, a few of her school friends were standing at the end of our street for about seven or eight hours wishing her well. >> the wealthy community left reeling wondering how the horrified deal could have unfolded on their street. the president celebrates his 50th birthday in stril while taking in re-election cash. dai. new citracal slow release... continuously releases calcium plus d for the efficient absorption my body needs. citracal.

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the first lady is throwing president obama a 50th birthday party. wolf blitzer joins us. >> i was not invited. 5-0, a big number. the president is turning 50 years old. he has just turned 50 years old. in the rose garden, the party will take place. he was in chicago last night for two major fund-raising events, including a huge one, about 2,400 people at the event, and jennifer hudson there singing happy birthday to the president. and he said he could avoid another self inflicted wound, and we don't have time to play

the partisan games. he said we have too much work to do over the next several weeks. i hope congress is focused on making sure the economy is working. that was one of the fund-raising events. he had a smaller one, a dinner for 100 guests, 100 people attended that one. the republican national committee not wasting anytime going after the president, taking a jab at him saying with 9.2% unemployment, he could work on creating jobs, but i suppose the white house is thinking he should pick the part of his job that he really likes. obviously they are suggesting he likes to go out and fund-raising and campaigning. and he has a lot of work to do if he wants to get re-elected. in florida, a battleground state, a state he carried and

beat mccain in 2008, and the poll shows only 44% of the voters in florida approve of the job he is doing, and 51% disapprove. not encouraging. florida will be a key battleground state. the week of august 15th, he is going on the bus tour throughout the midwest, and as you know he will try and score points in other key battleground states. i suppose he will inbound pennsylvania, ohio, and a few others that he will desperately need if he wants to get re-elected in november of 2012. >> a big race. >> yeah, already exciting. nice to see you. in today's q & a, we are talking about investing in the face of uncertainty. some experts say pay yourself first, and some say use a roth ira instead of a traditional ira, and make extra payments

with your tax refunds on your mortgage, and so what is the best way to make sure your retirement in safe. we look at how on invest in uncertain times. >> quest means business and so do i. we're here together in the "cnn newsroom" and around the world. richard is on the national mall in washington, d.c. watching the spectacle, what is the u.s. debt debate. as we do every week, we're here to talk business, travel and innovation and nothing is off limits. today we're talking about investing in the face of uncertainty, richard. >> and that is the problem, because in this market, with so many issues, we had a viewer question that said where does

the small money go? how do you invest in the uncertain times? it's a question from ong jun wee. should we look towards asia? ali, you have 60 questions on where does the smart money go. >> richard, diverse indication typically means investing in stock, bonds and cash and throw in so-called emerging markets. these days it's different. fur not global, you are not diversified. being global doesn't mean having a british accent and jetting around the world in first class like you do, and it means understanding and participating in global growth. china is growing economically at a rate that is several times that of the united states, and so is india. richard, even africa's growth is

faster than the u.s. growth right now, and that creates huge demand for goods, services and infrastructure. if you invest in multinational companies in the united states and in europe and great britain, you will have some exposure, but the part is directive exposure with names you can't even pronounce, richard. you have to get into asia and other places. >> thank you. >> i got double beeped. >> typical. typical. give him an inch and he will take the whole mull. once again, i have to point out that you got half the answer, but you are not all the way there. yes, a decent investment strategy does require that you have a balanced portfolio. a bit of this, and a bit of that, and a bit of the other.

and, yes, it requires to have defensive stocks, and cyclicals, and counter cyclicals, because you want to make sure that when things move you're in a position to take advantage of them. but, this is the core point. only a fool makes their investments and goes to sleep. you have to manage your move a bit here and a bit there. you have to read the business pages of the major newspapers and invest in some of those companies that ali can't even talk about. ultimately though what you have to do is be prepared to take a little bit of risk. why? because it's with risk what comes the best rewards. we can all look upon money and go to sleep for a rainy day, but who wants to do that in the long run? >> i have to say i agree with you, you're right. you can't put it on autopilot. all right, rich. time to separate the men from

the boys. >> here we go. the voice joins us to make sure we know where we are. >> thank you, richard. thank you, aly. welcome, gentlemen. let's get right to the game. what is the world's oldest recognized stock exchange? is it, a, amsterdam, b, london, c, new york or, d, rome? richard. >> i'm going to take a guess on this with amsterdam. >> that is correct, richard, very good. it was established in 1602, and the first shares were should in a shipping company. richard, you're up 1-0 as we go to question number two. which industry that is the top three companies on cnn money.com's list of worst long-term investments? is it, a, paper products, b,

brewing, c, airlines or, d, farming? ali. >> i'm going to go with airlines which haven't been profitable since the wright brothers. >> that would be wrong. richard? >> i'm going to go with farming. >> also incorrect. >> it's paper products. >> no, it is all wrong. brewing is the right answer. huh. >> really. the top three are all on the top of the list. google and mcdonald's are the best investments. now to question number three. ali, you still have a chance here. what do people across the globe spend more money on? is it, a, lottery tickets, b, casino gambling, c, sports betting or, d, self-help books.

ali. >> i'm going to go with sports betting. >> that is, ali. sports bet being accounts for $350 billion in both legal and illegal betting, $100 billion more than lotteries. tied. i've saved face. finally. on my own turf i couldn't lose to you. >> so a score draw which is probably better than either the europeans or the american economy can do at the moment. that's it for "q&a" this week. join us each week and, of course, send us your questions. ali? >> and we'll be in "q&a" 2:00 p.m. eastern time. keep the questions come on our blogs. tell us each week what you want us to talk about. rich, see you next week. >> i'll see you next week when i'm back in london.

>> and we'll see ali again in just a few minutes. he'll join us february at the top of the hour to talk more about the dow which is now down, as we look at the big board there, 326 points. not a good day on wall street. but before that, scientists have found a way to create new life. i'm not talking about humans but an alien life form. it is a first of its game, and we will explain it coming up. while energy developement comes with some risk, north america's natural gas producers are committed to safely and responsibly providing decades of cleaner burning energy for our country, drilling thousands of feet below fresh water sources within self contained well systems and using state of the art monitoring technologies, rigorous practices help ensure our operations are safe and clean for our communities and the environment we are america's natural gas. you've done racy go daddy commercials before.

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>> it's alive. it's alive. it's alive. it's alive! it's alive. >> it's alive. no, i don't do this as well as he does, but it is alive. a new science project is trying to recreate that frankenstein spark by creating a new form of life from scratch. dr. jerald joyce, a professor at the scripps research institute is one of those scientists pushing the boundaries trying to synthesize life using a himble of liquid. you have our attention now, doctor. how do we or you, i should say, create new life? >> hi, randi, well, what we don't do is go borrowing parts from the mortuary. the game here is not to make

life from existing life, not to try to make another biology using parts from our biology but to try to make a biology from scratch and that means from chemistry because when our life form began on this planet it came out of chemistry so that's the goal of research in the laboratory is to starting with chemicals, non-biological components, build something that we would consider to be alive. >> so it starts with what? they have to self-reproduce? is that where it begins? >> so what it life all about? a key part of it is, of course, self-reprocushiduction and the parents need to make progeny. we have molecules that can self-reproduce, produce copies of themselves and those copies produce copies and so on and so on and it's transferring and carrying genetic information down the generations, and that's also what's new in the laboratory. it's now possible for the self-producing molecules to

transmit self-regeneration to their progeny. >> what can a second form of life mean for us? why is this important? why should we care about this? >> well, you know, right now it's pretty low bit content and i wouldn't call what we or others have done yet truly alive because it's not really evolving much yet, but the key is to understand how life works, it works through darwinian evolution, and to have a system, a chemical system in the laboratory that also undergoes darwinian evolution, and that's what can happen now, so then you say what will it involve next, and that's what's going on in the laboratory, to try to give the system more capability to evolve more complex functions, including some things that might have applications. so how can it help us in the future? >> well, you know, here we have little molecules, and i can -- they are not much to look at, but i can give you a sense here, little test tubes of molecules, and as i say, there's not much to see but we track them with little fluorescent probes.

on the left it's the before and on the right the after. but the afters keep breeding and making more and more copies, so what you have is kind of an amplification engine, something that can make more and more copies. now if that engine is triggered by some event in the environment, say the presence of a chemical or a drug or a metabolite -- >> it's fascinating. we're out of time. doctor, we appreciate it and best of luck with it. thank you. >> very good. for what it's worth, a new hour means we're that much closer to the closing bell on wall street. if you have an i.r.a. or 401(k) or stock portfolio of any size, the day can't end soon enough. really right now, take a look at it here with us, the dow is down 329 point, and if we can't change, it at least we can try to understand what is going on. thus we turn to my colleague ali

velshi in new york. he's cnn's chief business correspondent as well. you look very business as well and let us say hello to lee gallagher, the assistant managing editor of "fortune" magazine. yesterday we snapped the eight-day blue chip losing streak, thought this was a good thing. ali, why this? why is this happening? >> beat is just by a smudge yesterday. the dow and the s&p didn't close much higher. we're down 3% on the s&p 500. that's going to reflect in your i.r.a. and 401(k), a little less on the dow. here's the irony. you're looking of the three major market that we usually track, the nasdaq is down the least. here's what happened. two major central banks tried to intervene to help their economy. started with japan where the government went in to buy the yen off the international market to try to prop up the currency, make the yen worth more. that has failed. the yen is now 2% lower than when it started, and then in europe the central bank there decided that it is going to buy

bonds back, put more money into the system. that had the effect of worrying investors who now think that things are that serious or that much more serious, so what basically is happening is investors around the world are doing the equivalent, as i told you last hour, of taking their money and putting it in their collective mattress. the money coming out of the stock market. typically you see it going into commodities, oil, gold. things like that. that's not happening today. oil is down, gold is down and stocks are down. basically people saying not quite sure what's going on in the world. going to take my money and hold on to it. >> ali and lee, take a will be at this graphic. i want to show you what's happened in europe. in fact, europe was slammed much worse than we were today. take a look at the stocks, the highlights there, madrid, london, paris, millan, frankfurt, again varks all clge% lower and milan, closed down 5%. lee, are selloffs contagious? >> one thing we've learned this

year is they absolutely are contagious. think back to may of 2010 when the debt crisis in europe first reared its head. that's exabilitily what happened. it spooked global markets and it's happening again. as ali pointed out, the ecb intervened suddenly. this once expected so any time the market is sort of surprised by something, let alone what it perceives to be as emergency intervention, it's going to, you know, freak out a little bit and that's what's happening. we're already so jittery, i think that our problems here in the u.s. with the debt ceiling negotiation that really was pushed to the brink unnerved markets on a global level because of what it said about, you know, america's credit rating and our perception as the grounding force, so there's a lot of things happening. >> yeah. ali, leigh just mentioned the debt ceiling there. we didn't default. why aren't investors happy about that? >> if you notice, the world markets weren't reacting to the whole debt debate until very close to when it looked like it could actually happen. in other words, most people were

betting that the u.s. would pass this bill and increase the debt ceiling and then sort of the friday before we got this very bad reading on gdp. the growth in our economy, and what's happened as we've recommend deed and dealt with the debt ceiling, we started to get economic reports that were saying that our economic situation here in the u.s. is a little uncertain so we've gone from the greek debt situation, to the u.s. debt issue ant italian issue. no relief from some piece of bad news somewhere in the world and we're basically an intertwined world. if someone is not doing particularly well it's got to have investors worry. china is doing particularly well. india is doing particularly well and between the two of them this is a big part of the world. this is not the whole picture. it is the stock market. it is alarming. it's not the end of the world. >> is it a correction, leigh, is that what we're seeing here? >> well, we're headed in that direction. it's really hard to predict what would happen. we thought there would be a relief rally, us a made the point.

we didn't default, and you would think there would be a collective sigh of relief and then we have this. it's unclear. ali made some great points. this is not the story everywhere in the world. not even the story everywhere in the u.s. if you look at what's happening in silicon valley and, you know, the tech boom that we're seeing out there, it's a completely different story. you know, apple can't even in china can't build enough stores that are big enough to satisfy all the consumers over there, so we're really seeing a bifurcated picture and i agree with ali. the stock market is not the whole story, tend to be the most psychologically sensitive part of the story. it's important not to get too caught up in this, even though we're headed towards a correction. >> even if investors are so uncertain and worried, ali, how do investors get back to that happy place? how do we get there? >> somebody will be buying stocks the next day and after the big, big downturns in 2008 in september and october, there were people who were buying it.

if there weren't any buyers you'd see a collapse in the market. you'd see 300 points and 500 points and more. it definitely starts to worry you when you see these kinds of numbers, but the fact is there's a floor. as we've been talking all afternoon and we're still largely not worse than we were at some point. our low on the dow was 11,523. we're at 11,539. we're getting there but somebody is buying stocks. somebody thinks there's value in this today. that's why we know it's not as bad as it is. this is not something we like to see, haven't seen it for a lange time. remember back a couple years ago we were seeing numbers of this magnitude daily in both directions. this is volatility at its best. you need a steel stomach to be in this market. >> you sure do. appreciate both of you coming on chatting about that. thank you. >> thanks, randi. >> and we'll keep an eye on those numbers there. yesterday we told you about the story of a homeless man allegedly beaten to death by cops in fullerton, california. kelly thomas was heard begging, screaming in fact for his

father, and thomas' dad is making sure that you never forget his son. in about ten minutes ron thomas joins us to talk about his son's life, his death and the investigation surrounding the case. coming up, the new defense secretary leon panetta will speak. we are taking his comments live so don't go anywhere. and 36 million pounds of ground turkey recalled. there is fear the meat may be contaminated with salmonella. that story after the break. sorry buddy. even with bath tissue. that's why i buy new charmin basic. it's very reasonably priced. and it holds up so much better than the leading competitive brand. new charmin basic has a duraflex texture... that's soft and durable. plus, it's two times stronger when wet versus the leading competitive brand. new charmin basic works for my bottom line. and my bottom. we all go. why not enjoy the go with new charmin basic?

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contaminated with salmonella bacteria. outbreaks have been found in 27 states, 78 people have fallen ill, and one person has died. the centers for disease control and prevention estimates one in american in six gets sick from food every year. that's 48 million people. an estimated 128,000 are hospitalized over something they ate, and 3,000 die. joining me now from seattle is attorney general bill marler. bill has been litigating food-borne illness cases since 1993. thanks for coming on the show. what do you think is to blame for this salmonella outbreak in the ground turky? >> well, i think, you know, there's blame to go around a lot. one is clearly kargil had a systemic problem in its plant that dates back to early march to the present. you know, that's why they are recalling 36 million pounds but also, you know, a bunch of blame

really lies on food safety inspection service, part of the usda. they have an inspector in that plant, and, in fact, government policy allows for salmonella to be in ground turkey. e. coli is against the law to be in a ground product, but the government frankly allows salmonella to get into the marketplace and that's one of the things that really needs to change. >> i want to make sure i heard you correctly. you're saying the government allows salmonella to be in ground turkey. why? >> well, it's been a -- sort of an agreement with industry for 50 years. the only bacteria in meat that is against the law to be there is hamburger. if hamburger is found -- if e. coli is found in a hamburger product or a ground turkey product, it cannot be shipped, but kargil frankly did nothing wrong if e. coli -- if

salmonella was in that ground turkey. they can ship it. the only time they need to recall it is if it poisons and kills people, and that's government policy. it's a strange quirk in usda fsis rules. >> how well trained are these inspectors looking at these plants supposedly trying to keep us safe? >> fsis has an amazing cadre of great inspectors. the problem is that these bugs, salmonella, e. coli, campylobacter, not something you can see, taste or smell. you have to test for it and have a zero tolerance for it. it really should be that pathogenic bacteria, similar to the e. coli 104 found in europe that killed 50 people and sickened 4,000, those bugs should simply be against the law to be in our food product, and a quirk is that those sorts of bugs are allowed in our meat supply, but on the other side of the government, at the fda side,

if the same bug was found in spinach or lettuce, it would be pulled from the market, whether people got sick or not. >> so the rules aren't as tight at the usda, you're saying? >> correct. >> so what is the answer? we just have about 30 seconds left. what is the answer? how can we prevent 50 million people from getting sick? >> well, i think, you know, consumers need to do a better job of making sure they wash their hands and cook their products and wash their products thoroughly. in many respects they are the last line of defense, and i'm talking restaurants and months an dads. but industry needs to do a better job and government needs to do a better job of oversight and setting the bar. we need so say zero tolerance for pathogenic bacteria that can kill our kids and that's what industry needs to step up to do. >> all right. appreciate your time, bill marler. certainly some very interesting insight there. good information.

thank you very much. and we'll be right back and when we do get back, we'll bring you a live report from texas. our gary tuchman is standing by. covering the warren jeffs trial. warren jeffs has rested his case. he's been representing himself. we'll hear today's highlights from gary tuchman in just a moment. we'll be right back. the sons of former slaves and the sons of former slave owners will be able to sit down together at the table of brotherhood. i have a dream today! [ male announcer ] chevrolet is honored to celebrate the unveiling of the washington, d.c., martin luther king jr. memorial. take your seat at the table on august 28th.

jurors in the warren jeffs sexual assault trial are beginning to deliberate polygamous secretary leader warren jeffs after resting his case a day after prosecutors played an audio tape of him allegedly having sex with a 12-year-old girl. we want to go straight to st. angelo, texas, where gary tuchman just stepped out of court and has the very latest for us. jeffs just began his defense

yesterday, rested his case this morning. what exactly was his defense since it was so brief? >> reporter: well, first of all, randi, i would say this is the single strangest day i've ever spent in a courtroom in my career. warren jeffs' defense is that this is a violation of religious principles. not saying anything about the sex, not denying it, but he says his religion is being tampered with. called one witness to the standier. the witness continued today, a fellow member of his church and they talked about the book of mormon and the religion together, and it sounded like a sunday school class and then he rested. time for closing arguments, and that was the weirdest part of this trial which just happened. the prosecution gave 22 minutes of closing arguments. said this is not a case against religion but a case against warren jeffs and warren jeffs was asked to give his closing argument, randi, and he stood up and didn't talk and five minutes went by and he didn't talk. he was silent. everyone in the courtroom, 200 people in there totally quiet. you could hear a pin drop as they say in that proverbial saying. 10 minutes went by, 10 minutes,

20 minutes, 30-minute time limit. at 24 minutes warren jeffs uttered only four words of his closing argument and he said i am at peace. he turned around at glared at the prosecutors and appeared to glare at the jurors and then sat down. his closing arguments came to an end and the jury went out 30 minutes ago to begin its deliberations >> that does sound like one of the strangest days in a court root how did the jury react? they left pretty quickly, but was there any reaction on their faces? >> some of the jurors looked freaked. this has been a very strange trial. warren jeffs has talked at times, other times he doesn't talk. pauses a lot. his followers would say he stops talking because he's listening to what god is talking to him. he's a prophet, the closest man on earth to god and when the jury is done they will say this is a weird experience but they looked freaked when he started staring at them after being quiet and not saying anything, standing there in a complete

quiet courtroom. >> gary, certainly a front row seat to a strange day in history. gary tuchman in st. angelo, texas. gary, as always, thank you. strangers recorded his son screaming for him over and over again as police officers allegedly beat him to death. he says his son's last moments haunt him now. in just three minutes we'll talk to kelly thomas' dad about his son's life and about his senseless death. one day i'm on p of the world... the next i'm saying... i have this thing called psoriatic arthritis. i had some intense pain. it progressively got worse. my rheumatologist told me about enbrel. i'm surprised how quickly my symptoms have been managed. [ male announcer ] because enbrel suppresses your immune system, it may lower your ability to fight infections. serious, sometimes fatal events including infections, tuberculosis, lymphoma, other cancers, and nervous system and blood disorders have occurred. before starting enbrel, your doctor should test you for tuberculosis and discuss whether you've been to a region where certain fungal infections are common. don't start enbrel if you have an infection like the flu.

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the fbi and orange county district attorney's office are now investigating the chief of staff at the d.a.'s office and told us yesterday this in the process of interviewing 100 witnesses. so brings us back to our question. who is kelly thomas? by most accounts thomas was a known figure on the streets of fullerton, california. he was homeless. he was also schizophrenic. he's also a son and a brother. on july 5th fullerton police responded to reports of a man trying to break into cars near a bus station. now before i go any further, i have to warn you, the picture i'm about to show you is very graphic. witnesses say what began with a search of thomas' backpack ended with this. take a look here with me. that's kelly thomas before he was allegedly beaten and tased by six fullerton police officers, and that other picture there, that's what he looked like after it, bloodied and bruised, and as you can see barely recognizable. thomas fell into a coma and died from those injuries five days

later. crowds of strangers saw what happened, recording what they could with their phones and with surveillance cameras nearby. >> then all the cops came and hog tied him. please, god, please, dad. >> you may not have been able to make that out there at the very end, but kelly thomas was screaming for his dad, a former orange county sheriff's deputy. ron thomas joins me now from orange, california. first, ron, let me say how sorry we are for the loss of your son. just unimaginable what happened here. you just heard the recording of your son screaming for you, screaming for dad. what runs through your mind as you hear that? >> quite honestly i -- i turn

the volume down. i couldn't listen to it again. it's horrifying, of course. it cuts right through me. i hear it all day. i hear it all night. i probably will the rest of my life. >> ron. we did reach out to the fullerton police department for this story and after initially agreeing to do an interview with us and then cancelled. instead, they gave us a brief statement from police chief michael sellers saying this was tragic for our community. we're in the midst of an investigation. ron, hundreds of people protested, as i'm sure you're aware, outside the fullerton police department over the weekend. hundreds more packed into city hall. one officer was put on leave days after your son's beating, but the other five were just placed on administrative leave on tuesday. is that enough for you, and if not, what will be enough for you? >> well, what has happened is i had a one-on-one meeting with the chief, mike sellers and one

of the captains, kevin hamilton. i requested it. they granted it. a private closed-door meeting. i pointed out some things that i thought were very relevant, things that were on my mind to them, questions they couldn't answer because of the investigation. i knew that going in there, but whether they would say it or not, an hour after i did that, all of these officers were taken off of duty and put on administrative paid leave. >> these aren't officers, as you say. you've actually described them as rogue cops. what do you mean by that? >> well, that's exactly right. when i use the term police officer, i mean it with respect. these were a band of gang members literally, rogue cops, and i mean that to point out that the good men and women of the fullerton police department as a whole, they are great

officers. this is a band of rogue cops that were thinking they were above the law, took it into their own hands under color of authority and brutally beat my son to death. >> how did you learn about what happened to your son? >> i had a call about 3:30 in the morning from my daughter. her mother had just called her, and obviously it was a very frantic phone call, and i went immediately to the hospital. >> you're a man of the law yourself. when you look at what these officers allegedly did, tell me how you feel knowing that you've been on the street yourself. >> yeah. i felt totally betrayed, even though i didn't know these -- these thugs, these murderers. i didn't know them, but i felt totally betrayed that this was from law enforcement. i still have several law enforcement friends, personal,

close friends. the protest in front of the police station just last saturday, several active officers were there, in their street clothes and let me know who they were, where they were from, and actually held up signs protesting but, of course, i didn't tell the media or anybody else that those are cops, didn't want to do that for them, but this is a great show of solidarity, and law enforcement knows that this was just so wrong. >> we talk quite a bit here about your son's death, but i'm interested in his life. how did he end up on the street? >> i'm glad you asked that. kelly was just a normal kid. he was a great kid all through school. everybody loved him. even until the day he died, everybody just loved him, that kind of person. it wasn't until he was in his early 20s that he started showing peculiar behaviors, hygiene slipping, wanted to

sleep on the floor instead of in his bed, just unusual behaviors, and finally he was arrested, i'm not sure what it was for, maybe vagrancy or one of the charges some law enforcement agencies feel are needed, but i got him psychiatric evaluation out of that. i asked the judge to get him into the county program, and he granted it, and only at that time did we learn about schizophrenia and that kelly had it. >> and was he getting treatment? >> he was getting treatment. once on the medications he was fine. it made him tired. he didn't like that part of it, but he was fine. he even held a couple of different jobs. he joined the california department of forestry, the cdf for a short period, and it was a short period because he went off his medications, and then the behaviors started coming back and they let him go. he was in and out of board and cares where they monitor medications, fed him, of course,

he had his own room, a very structured program, and he was fine. the vicious cycle of schizophrenia is though when they are on the medication they don't see a reason. kelly would always tell me, i feel fine, i don't need the medication, and could i never convince him that, look, you're okay because of the medication. he would go off of them, and the he would wander, and it would start all over again. >> from what i understand, you have not brought a claim against the city in your son's case, but yet the city or at least an attorney for the city did try to settle with you. can you tell us what happened there? >> yeah. i haven't -- i haven't fil yet. i'm certaiy going to. i've been extremely vocal as a voice for my son, and i didn't want interference from attorneys saying i don't want you saying that. we'll speak for you. the people have been extremely vocal for kelly, but it's time now that i seek legal assistance

on this. i do need an attorney for this, an i've been talking to some. the settlement came from an attorney representing the city. the city is now denying it. i do have the printed document of the entire offer. $900,000 to just walk away from it. of course, that's irrevokable. once you sign it the city is off completely. no more a liability. i found it a huge insult. didn't accept it. don't want it, so we're proceeding. >> have you had a chance to speak with the mayor, and if so, what was that conversation like? >> i spoke with the mayor twice. i've been to two city council meetings. the first one i introduced myself, spoke with him. he's a man of very few word and quite honestly babbles a lot, and i'm not trying to be funny here. doesn't hold good composure, should never be a mayor. that's my opinion. the last city council meeting he

was the same way, couldn't put his words together, hinging on insulting, degrading, not good at all, and i've got to tell you. two members of the city council at fullerton have come forward. they called kelly's mom and i, very compassionate, very caring. one of them, bruce whitaker and his wife linda, actually came to my son's service. i don't know this man from anybody. that's how compassionate they are, very caring, but the other city council members haven't said a word. the mayor, and i called him out on this at the last meet iing, d he hasn't called. he hasn't cared to call. i think he should get out there and call a press conference, he and the chief of police and try to calm fears in the city. they haven't done a thing to calm the people about this or to show their condolences to the family. >> well, we would certainly like to have the mayor come on and tell us what he feels about

this. but ron, i have to ask you. you certainly want to be a voice for your son. you have made this your mission now. but what about you? how do you and your wife get through this? >> well, honestly, kelly's mom and i divorced in '82, but i understand your question and that's okay. it's so tough, so, so tough. i haven't had the time to grieve as of yet, and it's coming, believe me. there are moments when i'm just right on the edge of losing it and crying and all that kind of stuff, but i need to stay strong. i'm in a fight here for my son, and that's what keeps me going. >> is this what he would have wanted you to be doing? >> you heard him cry. you heard him crying for me to save him. >> yeah. >> yeah. and -- and the toll you ask,

i've lost 15 pounds in the last 30 days, it's taken a heavy toll on me but i can't stop. i've got to seek justice. we need to prevail, and on the civil side of it, the monies are going into a foundation i've started in kelly's name to help out all the organizations that support the homeless, feed them, clothe them. these donations will be given in his name, and i feel very strongly about that. am i after a lot of money? yes, i am. i want the city to pay for what's happened. do i want the money? no. it's going to the foundation. that's what i need to do with this. >> i know that it will take possibly forever for you to wipe your son's last words from your memory, and certainly that horrific picture of him in the hospital room, but we wish you luck, ron, getting through this and we certainly appreciate you coming on and talking about it. i can't imagine how difficult it is for you right now so please

take care of yourself. >> thank you so much. >> thank you. and we'll be right back. at liberty mutual, we know how much you count on your car and how much the people in your life count on you.

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before jaws was squaring us in the water, predators and aliens were fighting it out in space, alfred hitchcock made us jump and scream in black and white. he has us watch neighbors commit murders through windows and gave a new meaning to psycho. you see here a clip from the classic universal studios film "birds" which was pretty frightening and behind the scenes the film legend also changed the way cinema was created. this week alfred hitchcock presents us a new film, a lost melodrama from 1924 called "the white shadow." it was discovered by researchers

who were combing through a new zealand film vault of all places. joining me now is frank stark, chief executive of the new zealand film archive who found the film, and david starrett, national society of film critics. tell us more about the film and how it was discovered. >> well, the film -- not all the film. it's only got three reels of probably six original lengths of the film. the first three reels so we get to sit up for the story and, unfortunately, it's a bit of a cliffhanger, we don't know quite where it goes after that. the film was probably shipped to new zealand in 1924, about the year it was made and would have been exhibited here, and then when it got to the end of its commercial life probably the instruction was to destroy it. it wasn't worth shipping all the way back to britain where it came from, but rather than destroy, it probably a

projectionist, mayor a distributor, worker, i don't know, thought it too good a film to throw away and he or she smuggled it out the back door and took it home and for the next year or so it got passed along between collectors. not sure what they did with it and in the 1980s one of the major collectors in the legalon, he died and he is grand son but them in the archives and we've looked at them ever since. we knew there was a case of american films and it wasn't a priority for us to be honest to do the research. we looked after it to make sure it was safe, and from time to time were entertained, school ears and researchers, film buffs, they can look through

that collection there and see what they can find. last year we searched this ground a lot and here it's his turn. >> let me bring david in here. why do you think the discovery of this film is so enormous in. >>ig having to do with alfred hitch come is important. >> i agree with you there. >> especially as an interview with his artist. this is not going to be a movie you'll get from netflix next month or anything but in terms of film mystery or film criticism it's a missing link. it allows us to see a piece that alfred hitchcock was not a director of, writing the scenario, designing the production. working along syd the editor and editing once the shot was fire and we get so see how he as a very one-game was of putting together how he wanted to use

the aim. outthe ideas down and rec noise them on film. important to note his evolution as an artist early, early on. >> an amazing discovery. i know hitchcock fans will be thrilled about that. nice to see you shortly. a your time, thank you. the in addition's new defep secretary is about to hold top spot at the south korea today. cnn's barbara starr joining us from the pentagon. with all the talk of debt, i'm sure that will be top of the subjects. >> with the dow falling more than 300 points alone, you'll explain everything to be front and the center and looking to so

if secretary paraanetta to be asked about whether he is plans is have defense cuts. pentagon officials and administration officials saying they would rather go after entitlements and tax cuts rather than take a bigger knife to the pentagon budget. a lot of talk that there would be layoffs from the military and forced separations by the troops and even cuts to health care pen fits for the troops who, of course, have been serving so long for the past teen years. we expect the secretary in the rom in two minute and will get the usual questions, al qaeda, afghanistan, pack continue and on days like said i can count on the fact about spending. randi in. >> not one to mince words, is

he? >> this is a secretary that is known for his salty talk. that's what they call it around here, and we'll see just how salty it gets when he enters the room and sit down with the chairman of the joint chiefs of staff, admiral mike mullen, who will be retiring in a few weeks. they talk about this. admiral was just in afghanistan. admiral mullen wanted to talk about the war and the troops wanted to talk about whether or not they would get paid when this was all going on a few days ago, an indicator of the massive concern in the u.s. trlt right now about where all of this is heading and what cuts they had be facing here. they have had unfettered spending for eight years and that won't condition. the troops want to know that they will get paid and that's what we are going to hear from the new secretary of defense >> do you think he's been in the's ear about this one. >> there has been a lot of talk

about that, but now it will shift back to capitol hill. lobbying to the pentagon. coming into the room now, so we'll sit down and hear what he has to say. >> good afternoon. >> this is my first press briefing here at the pentagon as secretary of defense, and let me begin by saying how important i think these briefings are and regular engagement with all of you, and i intend to continue this on a regular basis as did my predecessor, bob gates. as you know, i've just completed my first month as secretary. during that time i've had a chance to travel to the war zones to meet with the troops and the command eers there.

i've had a chance to consult with a number of the ministers of defense. i hosted four of my counterparts at the pentagon. i've also begun visiting some of the key commands out there. i've visited north com last friday, and i'll be traveling to central artery com tomorrow and then to so com on monday, and i'll continue to do that on a regular basis. i've also had the privilege of visiting walter reed and meeting with our wounded warriors, and finally i've established i think a regular dialogue with congressional leaders up on the hill and have built a very close working relationship with the service chiefs and the service secretaries and meet with them on a weekly basis. i've been truly impressed with the expertise and professional of the department's senior leaders, and i'm proud that we're going to build on this

terrific team in the weeks ahead. we've just announced yesterday, the president announced, that he'll nominate ash carter to be my next deputy secretary of defense. and the senate confirmed general marty dempsey and admiral sandy winifeld to be the next chairman and vice chairman of the joint chiefs, along with some other posts that were approved, and i -- i'm very pleased that the senate was able to rapidly approve those nominations. i've had the honor of administering the oath of office to admiral winnifeld this morning. we'll have to confront a lot of the challenges that face this department and the nation as we lead our efforts to try to meet both our fiscal and our national security responsibilities.

that brings me to the debt ceiling agreement that was enacted this week and its impact on our national defense. as i said in the message to dod personnel yesterday, the reductions in the defense budget that wren acted as part of the debt ceiling agreement are largely in line with the civilian and military leaders of this department. what we were anticipating and preparing to implement. make no mistake about it, we will face some very tough challenges here as we try to meet those numbers, but those numbers are within the ballpark that we were discussing with both the president as well as with omb, and we have the

opportunity to make those decisions based on sound and balanced strategy and policy. and within -- and with the best advice that we can get from our service chiefs and from the service secretaries on how to proceed to build a strong defense, not only now, but in the future. thankfully so far this is a very different process than has so often been used in the past when there have been defense draw downs. where defense cuts were applied across the board, and the force as a result was israel owed out. it was left undersized. it was underfunded relative to the missions and responsibilities that this

country must fulfill, and that approach would be particularly harmful because we are a nation at war. we face a broad and growing range of security threats and challenges that our military must be prepared to confront, from terrorist networks, to rogue nations that are making efforts to attain a nuclear capability, to dealing with rising powers that always look at us to determine whether or not we will in fact maintain a strong defense here and throughout the world. it is that multitude of security challenges that makes me particularly concerned about the sequester mechanism that was contained in the debt ceiling

agreement. this mechanism, this kind of doomsday mechanism that was built into the agreement is designed so that it would only take effect if congress fails to enact further measures to reduce the deficit, but if it happened, and god willing that would not be the case, but if it did happen it would result in a further round of very dangerous cuts across the board, defense cuts that i believe would do real damage to our security, our troops and their families and our military's ability to protection the nation. it is an outcome that would be completely unacceptable to me as secretary of defense, to the president and i believe to our nation's leaders. most importantly it would be unacceptable to the american

people. the american people expect that our military will provide for their security. rather, they expect that we will always protect our core national security interests while meeting reasonable savings targets. as i've said before, we do not have to choose between fiscal discipline and national security. i recognize the resource limitations we face as a result of the size of the deficits that confront this country, but i also recognize that the department of defense has a responsibility to do its part in dealing with that, and we will do so, and we always have to remember those who are doing

their part for the defense of this nation, our men and women in uniform and their families. throughout this process i will be working closely with the leaders of this department, including the service chiefs, to ensure that we do not break faith with our troops and with their families. we have a volunteer force. that is the heart and soul of our military strength, and we have to do everything possible to protect that volunteer force. i have no higher responsibility as secretary of defense but to do everything i can to protect and support them. every decision i make will be made with them in mind. they put their lives on the line. too many have made the ultimate sacrifice on behalf of this

country. we owe it to them to do this right and to do this responsibly. >> thank you, mr. secretary. i would only add that the chiefs and i fully agree with you. we have no issue with the military budgets being held to account in these challenging times or with the need to make tough program desixes moving forward, and indeed we had long ago braced ourselves for a degrees in defense spending and have worked hard to ease some of that pressure by finding efficiencies where we can. we are gratified an agreement was struck to raise the debt ceiling, and we believe the terms of that deal are, at least in the near term, reasonable and fair with respect to future cuts. the cuts required by this agreement over the next ten years are certainly in keeping with the president's previous budgetary direction, and we're

already hard at work inside the comprehensive review process to find the requisite savings, but we also share your concerns about the devastating impact of further automatic cuts should the congress fail to enact additional deficit reduction measures. the defense department may represent 50% of the discretionary budget in this country, but there is nothing discretionary about the things we do every day for our fellow citizens. from the two wars we are fighting in iraq and afghanistan, to the support we provide our nato allies in libya, from disaster relief missions like those in haiti and japan, to the training and exercises and joint combined operations we conduct around the world, the u.s. military remains a linchpin to defending our national interests. to loosen that pen unnecessarily through capricious and

unnecessary cuts nearly double to those already in the offing puts at grave risk, in the only our ability to accomplish the missions that we've been assigned but those we've yet to be assigned as well. i just returned, as many of you know, from a trip to afghanistan and iraq, and i was struck by the degree to which the debt and the state of our economy preoccupied our troops. you probably saw the media coverage. there was hardly an engagement, large or small that i conducted, in which this issue was not raised. on the one hand i found it encouraging that the troops were informed and interested. on the other hand, i found it lamentable that they needed to be. our men and women down range have enough to worry about just getting the job done. they shouldn't also be concerned about whether or not they will be paid to do that job or whether or not their families will continue to get the support they need during long absences. we can do better than that as a military and as a nation. and i -- as i have said many

times our growing debt remains the single biggest threat to our national security. the military exists to eliminate or mitigate security threats so we will do our part in this regard, but we cannot allow that effort to go so far and cut so deep that it jeopardizes our ability to deal with the other very real and very serious threats we face around the world, and we cannot allow it to break the all volunteer force upon which whose backs we place the burden of national defense. a balanced approach is what the chiefs and i seek in sensible cuts are what we expect. we look forward to working with you, mr. secretary, as you lead the effort to make these difficult, critical decisions. thank you. >> mr. secretary, us a start now to look across the defense budget that's doubled over the past ten years, where would you see the best opportunities for

savings among big programs, among health care and all those other benefits? and mr. chairman, do you think that these cuts as they sort of progress will affect the pace and the drawdown in afghanistan as well as the number of troops and equipment and other resources that the u.s. can leave in iraq for beyond the end of the year? >> with regards to the first part of your question, we have, and it's ongoing, a comprehensive review to look at all areas of the -- of the defense budget and the service chiefs are looking at all of those areas and will ultimately make their recommendations as a part of this comprehensive review which i look -- which my goal is to be able to use that

comprehensive review to inform the decisions and strategies that we have to make, so that's going to be key to what decisions we make and what areas we look to for savings. >> from the standpoint of the true presence, if you will, in iraq and afghanistan and actually other places around the world, i don't think there's a decision now that isn't going to take cost into consideration. we have to do that. you said that our budget has doubled, a significant part of that, and rightfully so, as far as as i'm concerned, is the investment in our people and our families over the course of the last ten years, because of what and who they are and what we've asked them to do in fighting these two wars and the stress that they are under. i would argue with this strategic comprehensive umbrella that the secretary described that a balanced approach looking at obvious