all right. look at our top stories right now. the reign of pope benedict xvi is over. now cardinals are making their way to the vatican to choose a new leader of the catholic church. and the first in a series of meetings begins monday, but there is no word yet on when the papal conclave will take place. back in the u.s., the financially troubled city of detroit is about to get a helping hand. republican governor rick snyder is appointing an emergency manager to run the city. that manager will have the power to cut spending including

salaries of elected officials and throw out contracts and labor agreements. i'll be back at 2:00 eastern time with all the latest breaking headlines here in the "cnn newsroom." during that hour, we'll tell you what some alert passengers did when their bus driver passed out at the wheel. at 3:00 p.m., a prize westminster show dog dies. and more on reports that he was poisoned. at 4:00 eastern, an 8-year-old is shot, gang violence is suspected. next, the forced budget cuts that were never supposed to happen are now the law. so what comes next? ali velshi is live from washington for a special live e e edition of "your money." e edition of "your money." i'm fredricka whitfield. -- captions by vitac -- www.vitac.com

washington's forced spending cuts now have the force of law behind them. i'm ali velshi. there's broad consensus over the long term the government needs a plan to reduce its debt. is this the way to do it? another deadline, another failure in washington by your elected officials. failure to put your prosperity above their ideology and partisan political interests. someone even said the word [ bleep ]. >> we should not have to move a third wheel before the senate gets off their [ bleep ] and begins to do something. >> and by senate, he meant democrats. but boss reid tossed the lame hot potato right back. >> he should understand who is sitting on their posterior. we're doing our best to pass something. >> all this while your financial future hangs in the balance. the forced cuts could cost $750,000. in a weak economy that's barely growing, a lot of smart people

say this so-called sequester is stupid. >> adverse effects to jobs and incomes, a slower recovery will lead to less actual deficit reduction in the short run for any given set of fiscal actions. >> republicans say democrats in the administration are fear mongering. the cults amount to less than 3% of the entire federal budget. but without reforming costly and growing entitlements like social security, medicare, and medicaid, the cuts will be much bigger to some departments p. >> what the sequester does is it uses a meat cleaver approach to gut critical investment s in things like education and national security. >> but apparently you don't care all that much. a new poll shows almost half of you aren't following this boring but important sequel to a bad movie you've seen too many times. i get it. trust me. i'd rather be reporting on something else, too. this one supposed to happen. >> this sequester will not happen.

>> i told you it wasn't supposed to happen. it happened. now what? >> you can cut less than 3% without all these awful consequences. >> my kids and i could go and find $83 billion out of a $4 trillion budget. >> republicans say it would not be all that bad. with the u.s. economy growing at an annual rate of, well, just a smidge, these sloppy, potentially dangerous cults are a sadistic and perverse experiment that could go terribly wrong, costing america prosperity and jobs. if you get a kick out of the drama, the government gets another chance do trip up the economy in less than a month, when the continuing resolution expires. for what it's worth, both president obama and house speaker john boehner say they are really, really going to try to avoid that. >> i did lay out that the house is going to move a continuing resolution next week to fund the government past march 27th. and i'm hope that feel we won't

have to deal with the threat of a government shutdown while we're dealing with the sequester at the same time. the house will act next week. >> william cohen has served as secretary of defense in president clinton's democratic administration. as a republican, he previously served in both houses of congress, and now heads the cohen group, a consulting group that counts defense contractors among its clients. david gergen served to four presidents. he's a cnn political analyst and professor and director of center for public leadership at harvard's kennedy school. those resumes, these two guests, could probably solve this mess by themselves, with help from jeenl sahadi, a cnn writer with cnn money. she's making sense of the insanity. no where you know writing smarter, more important pieces on these spending cuts. secretary cohen, good to see you. let me start with you. is% cuts roughly across the

defense department. there are some people who say that is a silver lining, particularly some democrats who say we would never have been able to negotiate those kind of cults. what's your take on the defense cuts? >> they may see it as a silver klining but it's a really black cloud hack over the defense department. i think you can make rational, responsible cuts. i think they have to be made and will be made if congress can find a way to sit down and resolve it responsibly. but right now the way the across-the-board cuts, the president has xemed our military in terps of our fighting forces. so personnel have been exempted. that means the entire cut of some $45 billion in the next six months come out of what we call o & m, operation and maintenance, slowdowns to repairs, no repair to aircraft, no real reduction in depot maintenance. and it will also have a reduction in procurement.

that will have a major impact on our readiness. not a responsible way to legislate, taking 13% across the board. it doesn't match up resources with our responsibilities because the president has articulated a structure and a policy for shifting resources to the gulf and to the asia-pacific region. now the question is all of these other countries looking at us saying great philosophy, great strategy, where's the money. >> where's the money. david gergen, it's interesting. i think a lot of people agree with the secretary that across the board less than precise way of doing it doesn't work. republicans have suggested legislation that would allow the president to decide how to apply cuts to different agencies and it seems to be a pow they're the president isn't interested in. why would republicans be offering that to the president and why wouldn't the president want the authority to direct those cuts? >> one of great mysteries. everybody agrees this is a

stupid and dangerous way to cut a budget, especially in the defense area. a pentagon comptroller says within a year two-thirds of combat troops would be at unacceptable level of readiness. they've done wit a sense of what's important, what's not essential, cut the nonessentials. why doesn't the president accept it? why are the republicans pushing it? well, obviously, the republicans are worried that there will be screens by doing it across-the-board way, people are going to scream, things will happen, like we have long lines in airports, that will bring enormous pressure on the republicans to give up and give the president the tax increases he wants. on the other hand, from the president's point of view, if you accept this more as a smarter way of doing this, i

think the president has been right to try to find a bet ware to do this but wrong in refusing to accept this more flexible way of cutting. >> jean sahadi, you write about four myths -- there are probably 60 -- one, the world would be different today. two, president obama alone is to blame for this. three, that it's not hard to cut $85 billion from the budget. four, that the cults will hurt badly or they won't matter at all. let's hone in on how easy it is to cut $85 billion out of a massive $3.5 trillion budget. south carolina goc nor, you heard her, nikki haley, said my kids could come up with those cuts. >> well, that's good. she's got smart kids. a lot of people could come up with the cuts if we were cutting $3.5 trillion. we're not. we're cutting half a year's funding for the smallest part of the bunl e, primarily on the discretionary side.

it accounts for a little more than a third of all spending. and we're asking them to do it fast. i agree with david, if the president had more flexibility in how he makes those cuts, they could be smarter cults but in terms of the timing could they be that smart if you only have seven months to enact them? i don't know what the erps of the republicans' proposal are, but cutting over seven months is a short period of time to do so in a prioritized way. >> i would encourage our viewers to read the stuff you're writing on this because there are a lot of myths out there. better to be fully informed. jean is a hi ha sahadi, thanks . the u.s. spends as much on defense as the next ten can countries combined. will these cults harm america's military superiority? llergy mud. you know who you are. you can part a crowd, without saying a word... if you have yet to master the quiet sneeze... you stash tissues like a squirrel stashes nuts... well muddlers, muddle no more.

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welcome to a special "your money" from washington, d.c. i'm here, most of congress isn't, though. the drama is gone, the sequester went into effect friday night.

but we could all see this moment coming 18 months ago. a white-knuckled drama played out not in day or hours but month after interminable month. to understand you who he we got here, back to the summer of 2011. >> two years away from the date when the united states may not be able to pay all its bills. congress bitterly divided over the debt ceiling. republicans demanding $2.5 trillion in spending cuts p. >> no one wants the united states to defall on our obligations but we won't see real economic growth without a serious plan to deal with our deficit. >> every american is being held hostage by the republican majority. >> the fight goes right up to the deadline. but late on sunday, july 31st -- >> i want to northern plains that the leaders of both parties in both chambers have reached an agreement. >> a deal has been reached in the debt ceiling debate.

>> a last-minute deal to raise the debt ceiling through the 2012 presidential elections. >> agonizing. we all were up late last nigh, eshg mails flying at midnight. >> congress agrees to about a trillion in cuts and the creation of a bipartisan supercommittee. it job to find another $1.5 trillion in cuts. crucially, if the super committee fail, then indiscriminate, across-the-board forced spending cuts would kick in in 2013. the geeky word for it in congress -- the sequester. relief in washington. >> you may have notice if you look outside that the cloud of uncertainty has been lifted. >> but the good cheer does not last long. september 2011, the supercommittee begins work. >> i approach our tas wk a profound sense of urgency, high hopes and realistic expectations. >> the weeks drag on, bargaining intense, and in late november the super committee wraps up

work without a deal. >> we have to keep fighting to find a fair and balanced solution. and that was the challenge that dwilded us p. >> a disappointed president obama urges lawmakers to do what the super committee could not do. >> good afternoon. although congress has not come to an agreement yet, nothing prevents them from coming up with an agreement in the days ahead. >> back then the deadline for forced budget cuts seemed far away, but the clock was ticking, and as i warned more than a year and half ago -- they don't come to a deal, then those automatic cuts could be very haphazard. they're automatic. may not be the best thing for the economy. now those cults ats are upon us. former secretary of defense bill coen and david gergen back with me. david, that's the best. we have the budget to deal with, at least the continuing resolution that substitutes for a budget ahead of us as well as the debt ceiling debate. we do not expect any so-called grand bargain.

we expect less dysfunction. a lesson in anything that's happen sod far that might guide us? >> i'm not sure there are many good lessons because no one has won or lost on this last round. i think it just continues slogging through. i think if there was a silver lining yesterday it was that both sides in effect declared a truce through the remainder of this fiscal year until this september. and that is that they both agreed to the continuing resolution to keep the government going until cement would be passed without making it an occasion to revisit the sequester. and that will be helpful. if they could add this one thing to that continuation, to the cr as it's called, it would be to give the president more flexibility and have him in a calmer moment sign it. it is irspobsabresponsible for

washington to make the public pawns, make them feel maximum disruption and hardship in their lives when this could be done in a wiser way. >> for our viewers who don't know about the budgeting process and the crs, i'll explain that later in detail. bill, let me ask you this. discretionary defense spending. you described it well earlier. faces a 13% cut over the next seven months. the u.s. spends 4.7% of its total economic output on the military, almost double the average of 2.6% across developed nations. even chuck hagel, the new defense secretary, is not so much concerned about the scope of the cuts but more about the arbitrary approach to them. listen to what he said. >> leadership of the pentagon, all of us, have to two serious concerns. first, the abrumt and arbitrary

cuts imposed by sequester, and second, the lack of budget management and plaexability. >> david just talked about flexibility. you mentioned that earlier. what are the ways in which we can cut the defense budget smartly? >> ali, the big question is not so much how much we spend in defense but how you spend it. so can you spend it consistent with your policy and your strategy? that's really the challenge. so looking at the defense budget, don't look just at the top line. that's coming down. but rather the growth from within. where is the growth coming from? personnel costs to be sure. if you look at our personnel costs, they are a third of the budget and you're looking at the growth, for example, of health care. when i was at the pentagon, the health care bill was $19 billion. i think it's $52 billion now and growing. if you were looking at the costs of retirement and the policies toward retirement, they continue to expand. the sort of entitlement programs on a different level, those have to be addressed.

they're trying to attract the best and the brightest in the army, want to pay them well, give them retirement benefits, give them health care. those all add up to a major part of the budget. then there is procurement. procure aircraft and ships and other types of equipment. we are the best in the world at this. we'll start cutting back somewhat on that and try to tailor our procurement to meet the threats of the future. we're going to see less of a land-base capability, lighter footprint, faster deployable force, more on drones and other types of information technology where we have an advantage. you're going to see a shift of that to not only the middle east but to the asia-pacific region. you can make serious and substantial reductions if you do it in a way that's consistent with fulfilling that policy. right now we're cutting it irrespective of what the policy is so you'll have people who are furloughed, piles who can't train, forces who can't train. therefore, you have people, for example, in afghanistan, our men

and women over there, they may not be able to be replaced by the people who are training because they won't be trained up to that level. so it's a serious miscalculation, it's irresponsible, and there is a responsible way and the defense budget will come down. it has to be done in a serious and rational way. >> david? >> can i just add to that, we've had two defense tesecretaries first clas in a row, panetta, who's worked hard to put in place $500 billion of cuts in the pentagon budget. but they warned at the time, do not go much beyond this. and here the congress and white house are mind lessly imposing another a 500 or more. that is clearly going to be a reduction at our heart power, our capacity to project force. but there is also something you know and bill coen knows better than any of us, something called soft power. america's attractiveness and

capacity to lead because other wants to follow and be social securitied with the united states. you'll have a government that is leaderless and our soft power slips away from us. >> the secretary said that off camera. good point. thank you for making it. david gergen, william cohen. gentlem gentlemen, thanks to both youf. the federal budget needs to go on a diet. both parties agree on that. but they're focusing ong things like public broadcasting instead of social security, medicare, and medicaid. i may not be the first guy you to go for diet advice, but here in washington i'm one of those folks people better to listen to on that. i know what you're thinking... transit fares! as in the 37 billion transit fares we help collect each year.

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the federal government needs to lose some weight. both sides agree on that. and these forced budget cuts now in effect won't reduce the debt. reason that the big entitlements, social security, medicare, and medicaid -- that would be the belly -- take up about 43% of budget. that's where the fat is. and the budget will continue to gain weight over the next few years and decades as americans get older and health care gets more expensive. but your politicians don't have the will to cut from those areas. they're pretending not to see the growing bloat in their belly that is preventing them from seeing their own feet. so they argue about things like big bird and public broadcasting. back in august of 2011 republicans and democrats agreed to give themselves half a year to come up with a sensible diet plan. they failed. so they gave themselves another year. nothing happened. now by law the u.s. needs to cut off budgetary body parts to shed $85 billion over the next seven months. i'm talking about things like cutting food inspectors and reducing hours at national parks

instead of making smart cuts. agencies are cutting off fingers and toes and knocking out teeth to lose weight. those little cuts don't add up to much, less than 3% of what the government spends each year, but they do affect performance. take a couple toes off your feet and see how that works. the part of the budget with the biggest cuts have been hit in the last few years. agencies don't have a ton of flexibility. as much as there's this whole saw about how the government is full of waste, it sure is. but it still amounts to cutting hair and toenails when it comes to the budget. programs that are effective are subject to the same cults than the ones that aren't. under the sequester, we need to cut fingers off both hands. the bottom line is it's an incredibly stupid way to lose weight. ken rogoff is an expert on financial cree seize. nancy cook is an economic and political consultant.

and christine romans is host of "your bottom line." people think it's an old saw we're talking about, entitlements, medicare, medicaid, social security. they do need to be changed and reformed. health care is at the top of the list. >> yeah. i think that members of both parties think that's the case. it's just question of how quickly that happens. right? a lot of the house republicans think that should happen in the next year, that health care costs are out of control. a lot of democrats think you can wait a couple year, let the economy get back on its feet more and make those cults at the end of the next decade. >> that does seem to be -- nancy's outlined it well. i think you've said many times why not come up with a program that says don't tuttcut things now, cut them more later on? why have we not been able to agree on that?

>> well, i guess the problem is if you say we're going to do a lot of spending now and don't worry about the budget consequences because in ten years we'll tighten our bell, nobody believes it. there's a feeling you need to do a little tightening now or at least put on the table what those cults are going to be. higher ages for social security retirement, maybe means testing more for some of the old-age entit entitlements. put it on the table. say it's coming in ten years but say it now and give credibility to what you're doing. but neither side wants to take blame. >> credibility is key. but for some reasons businesses in the market seem to have factored in endless government inaction. used to seeing those situations go down to the last minute. how long before business starts feeling the effects of these forced budget cuts in a big way? >> if you look at forced cuts, if you're a defense contractor, already people watching the stocks of those companies

closely. but bottom line, the overall market, the stock market measures performance of these individual companies, and these companies seem to be -- they're going to do okay despite this. who's going to be hurt? people. people aren't going to get jobs. people aren't going to have services, especially, for example, low-income kids in schools and some of these furloughs. the market is telling us it has disconnected itself from washington, that washington is, you know, acting like a child, and they're looking just at the bottom line. they've got an awful lot of money sitting on the sidelines. these companies are doing as much as they can with the workforce they've got. many of these companies make 45% or half of their revenue from overseas. the stock market is a proxy for overall growth in the world, not washington in action. >> we're going to talk a lot more about the stock market and how you invest in this climb, make money and safe from losing money in a little while. nobody thought forced spending

cuts would happen but they did. most likely your world is still the same today as it was yesterday. washington's next completely avoidable crisis will hit you hard no matter who you are after march 27th. target is in sight. yes, dad, i see him. now pour some chloroform into a white rag and.... no. hi. i understand you're looking for a hotel with a pool. with priceline express deals, you can save big and get exactly what you need. do i have to bid? use the stun gun. he's giving you lip. no! he's just asking a question. no bidding. awesome. get the grappling hook to... dad, i... no? ok. dad: you excited for youyeah.st day? ♪ dad: you'll be fine, ok? girl: ok. dad: you look so pretty. ♪ i'm overprotective.

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for more information including cost support options, call 1-888-xarelto or visit goxarelto.com. all of these made-up deadlines and manufactured crises are symptoms of the same illness plaguing washington. almost four years without a budget and nowhere near getting one. there have been political stunls to make it seem like budget were being presented to congress and failing. but those so-called bunl es were skeleton vergs put forward for up-or-down votes which is not how budge es do or should get passed. they are and should be a compromise. if members of congress were willing to reach across the aisle, agreeing on a budget would look something like this. by law the president is required to submit a budget proposal to congress before the fist monday in february. once it gets to congress, committees in the house and senate work to hammer out a more

detailed budget resolution. that's supposed to be done by april 15th. that budget resolution must be agreed to by both sides, the house and the senate. it puts spending caps and revenue floors in place for the year. from there, various committees work together on bills that lay out exactly how much money goes to which agencies and departments. the problem is congress has been operating on funding bills devised years ago. they're able to get around patsdsing a new budget every year by using something called a continuing budget resolution. you heard david gergen say a cr, continuing resolution. basically an extension of the old appropriations bills. the most recent continuing resolution is set to expire on march 27th. congress fails to do something about it, we are looking at a possible full government shutdown. i want to bring back my panel. ken rogoff, you are not give on the hysterics. jean sahadi said the forced budget cuts are neither

catastrophic nor particularly beneficial. at some point does this dysfunction, the political dysfunction in washington, actually hurt the economy or not really? >> oh, it definitely does hurt the economy. it hurts it write right away but not dramatically in a crisis kind of way that can energize everyone to do something. it's hurting people who are vulnerable, could be hurting our defense a year or two from now. it's sort of a slow burn that makes it hard to feel it right away. that said, ali, i think each of the individual agencies, although they're trying very hard to minimize effect on the public, the fact is, if people are really mad about the national parks later, they're really mad about air traffic, then those agencies are going to get protected more next time. we're putting needles in the economy and seeing where it hurts. >> nancy, you're worried we have

another debt ceiling debate. it might work itself out. i might not. but you're worried that is one of those things in that crisis fashion that could be disastrous to the economy. >> absolutely. i don't think either party has the appetite for a shutdown. what they're gearing up for is the debt ceiling fight and this will hit in july and august. very similar to what happened in the summer of 2011. it will be like deja vu all over again. the republicans are going to try to use that to extract deeper spending cults they want to see and changes to entitlement programs. >> the last time this happened there was a big warning interest rates would spike and they didn't. slowly been going up. but they didn't spike. are you worried at some point people become less tolerant of america's misbehavior? >> i think that's true. i think wall street and the business community is use todd washington following this predictable script but ultimately reaching a resolution.

so the problem becomes if that script is broken and we don't reach a resolution on something like the debt ceiling. >> christine, nobody thought the forced spending cults would happen. how likely do you think we are to either have this government shutdown or as nancy talks about a terrible damaging debate over the debt ceiling again? >> you know what, i didn't think we'd see the sequester. i think no up with did. back in august of 2011, well, they have the sequester so for sure they'll figure something out and they didn't. you can't predict what washington is or isn't going to do. one important point here we need to make. when we say washington, there's congress and then there's the fed. can you imagine what we bead talking about in terms of business climate, in terms of overall economy if you didn't have the fed pumping billions of dollars into the economy every single month? in a way, the fed is sort of like, to use a phrase tim geithner used, the foam on the runway. the fed has been putting all of

this money into the system. if it weren't for the fed, if it would be more urgent right now. >> very good point. ken, you were the former chief economist for the international monetary fund. it's lost on most people who are mad about government spending how much of the fed has had in propping up this economy many times greater than the role of congress. >> sloi, but also in propping up the marks because the interest rates are zero ant people done know where to put their money. it's cushioning things. but i think, you know, the government certainly is pulling out. with or without the sequester, that's hurting. >> ken, stay with us. nancy, good to see you.

christine, stay where you are. no action in washington. plenty of action on wall street with stocks nearing all-time highs. why is that happening? what specifically should you do about it? [ male announcer ] at his current pace, bob will retire when he's 153, which would be fine if bob were a vampire. but he's not. ♪ he's an architect with two kids and a mortgage. luckily, he found someone who gave him a fresh perspective on his portfolio. and with some planning and effort, hopefully bob can retire at a more appropriate age.

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the dow jones industrial index has been bumping up against record highs all week. i don't get carried away with market records. they're like weather records. but you can't ignore the trend or the enthusiasm we've witnessed. mutual funds where most of you put your money through 401(k) plans saw that you are biggest inflows ever last month. despite the real or imagined threats to our economy, investors do not seem too scared but maybe they should be. ben bernanke issued this warning

on tuesday. >> given the moderate underlying pace of economic growth this near-term burden on the economy is significant. moreover, besides having adverse e fengs on jobs and incomes, a slower recovery would lead to desz reduction in the short run for any given set of fiscal actions. >> christine romans and ken rogoff are back with me. >> 2012 was gangbusters for the market, 2013 off to a stronger start. mutual fund inflows in january back with a vengeance. $81 billion moving into the market. $81 billion went into the market. low interest rates with no end in sight courtesy of the fed and ben bernanke consistently strong corporate profits, a weak dollar have retail investors diving back into the market. consumer confidence came back better than expected for february. you have to wonder if it's based on reality.

the fundamentals of the economy still have some cracks. the latest estimate of gdp growth was anemic in the fourth quarter. 0.1% not a good performance. because the housing market's recovering, people might be feeling wealthier. consumers are spending more, saving less. we have to ask the question, are we skating on thin ice? >> good question. the one thing that just today out, that drop in personal income in february. the biggest in 20 years. kind of alarming. we did have the higher payroll taxes that came into effect with the fiscal cliff discussions. we had higher gas prices eating into our wallets in january and february. what else might be at play there? >> well, i think people are seeing their housing well go up, as christine said, and the storm's gone up, and that's influencing spending, too.

but there's a question of if it's sustainable. can you have it all be a consumer-led recovery. businesses are holding back. they're making a lot of money but they're keeping it at the sidelines. >> let's take a look at the dow, christine. here's the dow's all-time high. take a look at this. here's friday's close. we're 108 points away. i'll have that for you in a second. there you go. all-time high, 14,198, october 2007. friday closes 14,089. 108 points to go. retail investors, most of us, tend to pile into marks when they are topping off. i'll talk about investments in the next block. how should people think or approach stock markets right now? >> i'm going to put my personal finance hat on and say you have to have a plan. if you're deciding what you want to do with stocks when you're 108 points from the high, come on. you could be chasing into fumes of the bull market or, you know, maybe there's another big leg to

go. but you have to have a plan way before markets are hitting highs. you have to be looking at the sectors. be careful about the sectors that could be sensitive to washington in action. that's important. you've got to be rebalancing and position for your annal, especially now. if we're going to have one, two, three years of brinksmanship in washington, you have to have a strong plan. don't you think? >> completely agree. good to see you as always. ken, always a pleasure. former chief economist at international monetary fund. professor at harvard. i'm hoping for those watching us this whole discussion is not esoteric. i hope you are investigation a way that allows you to take advantage of the market rally but if not, stick around. after we pay some bill, i'll explain how to protect your money and possibly even make some money. would you take it? well, there is. [ male announcer ] it's called ocuvite. a vitamin totally dedicated to your eyes, from the eye care experts at bausch + lomb.

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time to cue the hats and

confetti like we did back in 1999 when the dow hit 10,000. watch it. going to happen. right there. the stock market does seem disconnected from the broader economy. gains, your personal income, suffered its biggest drop in 20 years. i get tweets all the time from you asking me the same question. should i buy stocks now? i have some thoughts on it. but let's ask an investing pro. david kelly from jpmorgan funds. good to see you. the fed in keeping interest rates low, has made stocks disproportionately interesting. you think that lousy gdp number we got -- i thought there was an error on the chart. all the way on number -- by the it looks like an error on the

chart, 0.1%. you think things are going to get better and improve. if my viewers are not invested in stocks right now, should they be? >> yeah, i think they should be. they ought to have an appropriate strategy for where they are in life. i would say the overweight stocks and the underweight fixed income. the big elephant in the room is the fact that the federal reserve is sitting on interest rates. that means you can't make good long-term money on the bond market. that is pushing toward the stock market. that's really what's allowing the stock market to move forward here. >> let's talk about that. bonds are serving to not be a great investment at the moment. the yield is not -- as it goes up, the value of the bonds are going down. interest elsewhere is not keeping up with inflation. your home might be more than it was last year, but that's a slow and steady way to make money if it is a way to may money at

auchlt yall a tina market. what is the t.i.n.a. market? >> there is no alternative market. i think buying a house in the united states right now is great idea. i think that's part of a strategy. but you need to have liquid financial assets. have bonds in it but just be overweight stocks. >> you don't want to end up in a situation where you end up going in the same direction all the time. let's take a look at the dow. if you are fully invested in the dow, this is back a year. if you are fully invested in the dow or not just stocks, but the dow, should you be doing anything differently right now? >> no. if you got an appropriate amount of your wealth in stocks, you know, i think promote would be slightly overweight here, but i think you stick with it.

the main thing to recognize is, yes, you know, the stock market is aligned appropriately with earnings. stock -- the price of the stock really depends on earnings and interest rates. earnings are close to record highs and interest rates are close to record lows. . that's what's putting the legs on the market. thank's one-tenth of 1%. we'll see close to 3% in the first quarter. you average both of those, it's still a disappointing economy. it isn't disapoimtsing when it comes to earning as, which are pretty good and it's certainly not disappointing when it comes to interest rates that are so low it makes it more valuable. that's why i think people ought to be a little overweight stock. >> t.i.n.a. kelly's managing director of jpmorgan strategies. coming up. you know the rules, wait for that very slow family in front

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but the question then becomes the longer it goes on, at what point do we then have to start cutting back. >> transportation security administration will feel a slowed hit from the spending cuts that went into effect on friday. unless congress strikes a deal, john pistole says airlines will see their hours shortening in the coming weeks. to be fair, this forced austerity is no fault of the tsa. but this raises the question if private screening could be done, would it be done more efficiently. he says yes. it screens passengers at the largest and busiest, stefan, good to see you. u.s. homeland security janet napolitano says they'll have to put a hiring in place. the tsa's 50 thousand screeners could be furloughed for up to seven days.