on hold...until halloween. the federal reserve says the economy is leveling out...and plans an exit strategy by late october. what it means for investors and interest rates. plus, new car incentives dry up as the government's cash for clunkers program continues...why there may be fewer *new cars to choose from and less of a deal for buyers. and, why americans shouldn't expect a big pay raise anytime soon..what workers think about companies pulling back pay hikes.... welcome aboard a few phrases you will be hearing through the next half hour for the next few weeks love linda l. and stabilization ruby that seems to be the big message that the markets are want to hear in the federal reserve is willing to deliver. talking about another federal reserve is continuing to save inflation remains subdued with all the money the

government has doled out over the past year rising inflation and a potential concern in the future but for now remains in check and will see if the numbers confirm that we get to a flash in numbers at the consumer level on friday. also that the latest on consumerists with wal- mart numbers could be more important in the retail sales figures to get a gauge of how the consumers have been handling things. the federal reserve is becoming a little more optimstic about the economy.. although it did not say anything about actually being in a recovery.. in fact.. "...economic activity is leveling out." "...likely to remain weak for a time..." the fomc committee said it appears that economic activity is leveling out... but it's still likely to remain weak for a time... perhaps until later this year. in the meantime the federal reserve said it will continue buying longer term government bonds until the end of october... it's the first time they've mentioned a specific ending date for that program. the fed is now in the process of buying 300 billion dollars in

treasury securities... in an effort to keep overall market interest rates low... and to help improve the credit markets. that program has been under fire since it was announced... back in march - and yeilds went up anyways.. from 3 to almost 4% today. the fed also kept short term interest rates close to zero as expected and those rates will likely remain low for an extended period. later in the show we'll talk more about the the fed's exit plan...and what that may mean for investors come this fall. ben bernanke has only three more scheduled interest rate meetings left before his current term as fed chairman is due to expire. bob chirinko is a professor at university of illinois at chicago. so how would you grade the chairman does far? very good but not perfect. he has made few mistakes over his three- year tenure but he had a very challenging times. he's done an absolutely up excellent job. was that the top of it in a

state list? lehman brothers. budding member of the failed. the second when he was a little slow to pick up on the problems that were happening with the economy is softening and french markets were becoming unglued. the famous phrase is expected to be well contained in the spring of 07 he was a little slow on the forecasting is a tough business he could've been quicker on that. take a look at the chairman's was a man he was appointed back in february of 2006 that chairman expires in june mary of next year and he can still be a board member for another decade is it possible for him not to be care but a board member? it was time for him to probably move on if you know want to be cheered and sang would be true here any position that i have held or any organization with a head of the organization leaves your she is lead us one step around. procurements million one become

the senior vice president all of a sudden. take a look at the big criticism of his stewardship which is the huge expansion of the federal reserve policy don duva years when he took over as $860 billion know better than twice that almost three times that one. earlier in this year. this is what critics are going to point to before president makes a decision. i see it as a problem we have to look back at at the historical some portion that he found himself in a year or so ago and it was a wonderful thing. my high marks is for doing that. in the two trillion now isn't a problem the problem is how did it get back into a hundred billion or even below? it's all uncharted territory but we have a message with some like this before but there was a true a year ago and he has done well and moving the economy thwart in having the fed assist the economy where it needs. you work with the chairman you know if he's interested in serving again? in the most powerful economic country in the world is not

tempted. during the great recession right? we appreciated the for your insight. professor at the university of illinois at chicago. if you head out to buy a car these days... you'll see fewer incentives today compared to 4 months ago - thanks to the cash for clunkers program that's created more immediate demand. you'll remember 4 months ago - car makers were practically giving cars away.. but today they are paring back the extra "cash back" offers.. because the cash for clunkers program is helping to bring in more customers. for example, last march , the average manufacturer incentive was $3,169. in july - that amount fell - to $2,735 - a 14 percent drop.. and the 4th consecutive month in which incentives have fallen.. according to edmunds.com possibly instead 2500 dollar rebate.. 1500 dollar.. or instead of 3250/ there's 2500 in lieu of special financing..

may have gone back a tad.. but it's still dramatic... especially if you're buying under cash for clunker.. that compensates that tremendously car salesman dan calandriello says in some cases, you can still walk in with a clunker and walk out with a new car.. for about 10-thousand dollars... after the incentives and government rebate. that is if you can find the car you're looking for dealerships across the country are seeing their inventories of small cars wiped out.. one ford dealership outside of chicago completely sold out of the new escape suvs... a few used ones are still sitting on the lot. and this pontiac dealer... has 3 new cars.. waiting to be picked up after they were sold to customers through the cash for clunkers program... they have just 2 similar cars left. dealers say it's now very difficult to locate fuel efficient cars that people would want to buy under the program. i can search inventory of any dealer in us.. we'll do whatever it takes.. we've gone

to nebraska .. or minnesota for a car.. whatever it takes to satisfy customer that's what we'll do edmunds.com says it's already starting to see interest in the program going down - the website reports that online purchase activity has declined by 15% since the peak of the cash for clunkers program at the end of july. the good news about the housing market...and there is some...is that the second quarter was better than the first quarter. 39 states registered an increase in home sales quarter over quarter (reveals) with the national increase coming in at 3-point-8 percent, according to the national association of realtors. still perspective counts as the pace is almost three percent below a year earlier. and prices keep dropping in most neighborhoods as foreclosures and short sales account for more than a third of existing home sales in the second quarter. the national median price of an existing single family home stood at just over $174-thousand...down

more than 15 and a half percent from a year ago. how so you put all the stuff together we have an talking about clash for koppers the federal reserve talking about it at home prices you have dave bahoric at the cme group may have the s and p at the thousand was going on? we keep the beat goes on we have the same rhythm the last five or six trading sessions. ec institutions coming in in the morning and they do their business we flatten out midday in the brine how your at the end of the day. trying to hang on to the 10 handle this in the market mission at day's end for the last five or six trading sessions. put your ear to the floor would be here are what our troops telling about this market direction we see taken off since july. you know real trader paul,? keep it clean bill. is a g rated show. my peers are very squad raided very

irritated having a difficult time making money and having a difficult time understanding the marketplace the price the values that are being treated in the environment that it is sand. with lightning? a lot of my guys are saying we shouldn't be in the panhandle we should be lowered in a go ahead and try to sell it and it come out having a bad day. you want to put a price on hello they think it ought to be? we should be in the mid 8870 maybe that maybe a fair price you have so much for government intervention in the market right now and in my mind the month for on the way in which the administration was transparency and clarity t i see nothing but mud old borders in for a sculpture with a swarm sholes medicare we don't have an answer for their wheat come out

with a 200 rounds per gallon vehicle over the weekend if dense i seem to be the only one irritated in this country for last 25 years at the gasoline consumer has been held hostage to the '80s and automotive people gave you a box with four wilson said here it is. we have to leave this debate for another time. there's more to it. appreciate the true trader paul and dave bahoric traded news. c o m at the cme group. have a great day. still to come why a pay raise may not be in your immediate future...what average americans have to say about employers cutting back. but first...insight from two market pros on everything from the stock market to the federal reserve...that's next.

the economy may be leveling out, according to the federal reserve, but it still plans on spending hundreds of billions of dollars in government and housing bonds. todd colvin is with mf global at the cme group and dan deming is with stutland equities at the chicago board options exchange. guys welcome to the program taught the federal reserve trying to signal trying to play down any fear about the economy

taking of the legwork? i don't think so. i think there will be done to give us a positive statement and if you go back to in 2006 when chairman was taking the reins the word they use less transparency at this last eight men with they didn't do was give us a transparent look of what they're rethinking because they want to show positive about the show the economy recovering and i think right now they are up and air air gonna give the october reading down the road september and october readings to tell us exactly that and i know it'll have an of clarity. how about the lack of clarity house that plane and options pricing the think? keep the volatility the vicks is holding a round 25 with to see over the last three or four days one or have 42% is indicating based on the big six that this is valued at 25 volatility so right now there pricing in the possibility of

movement but we are at the high end of the range and will see if we can hold here. continue to see buying interest developed and pushing the volatility will work how about the exit strategy in the federal reserve trying to put a line in the sand, honing it will be finished. my guess is that you may not be a big believer. at this point i said before not even they know what they're going to do when october rolls around in a stock the treasury buying that's been more than one a consumer to buy agencies in mortgages in their not even when the test of liquidity measures that have been in place over the last 18 months or so. this is still a very sensitive area in the talk about real-estate and commercial will estate is going to be another bubble when the the possible net that they need to have out there. how about that band is there another shoe out there? as a potential definitely down the road here the material tools are coming the next bear so and that could be another pool that the fed is going to have to worry about and may be

due some fund raising over the next six months. it's a tough call right now it's hard to say yes to-say the dollar came under heavy pressure and some indication that the expectation of rates may not be going up any time soon. the heavy crude down to your respective markets at the cme group with fixed-income the federal reserve may be thinking things are leveling off contain to buy bond interest rates have been moving against the fed haven't they? you can really point that to one area and that supply issuance yesterday we get a pen your option and it seemed to go very well 2.94 bid to cover the market didn't like it because it didn't have that teeth in it the 65% indirect bid from the central banks around the world. morgan our expectations as little high we are going to be having these options for years and years and offered yesterday was a record 10 your option at 23 billion is gonna keep going

up. that means that for every one by your there are two and half of the bias that wanted to purchase but couldn't because there wasn't enough how about you as you look at volatility in at we markets? it'll be interesting to get some big retailers, now what are we so good activity in the last few days call buying going on in the 4550 strike area and actually yesterday's of them rolled fell from august to september. i think expectation of the retail is parody some even though the consumer may not be much a person on board. we may not see volatility contained but elevated because i think there is still uncertainty out there as far as potential for this market to fall off. 666 in the s&p 500. although parts of los over at the cboe in the cme group we have top globin but mfn open. online items with kids heading back to

school, and parents looking for ways to save money...on our website...an expert tells you where the back to school bargains are. plus, the government's troubled asset relief program is in some trouble, itself...we'll tell you why. and...general motors goes against the grain by unveiling its new product lineup early...is it enough to pique interest?...you can catch these stories and more on our website, firstbusinessx.com. and still to come.... why you shouldn't expect a big pay raise this year or even next year... and apparently few people are....

don't get high hopes for a big pay raise in 20-10. salary increases will average less than three percent....and it comes after meager pay hikes averaging below two percent this year. a hewitt associates survey finds companies expecting to increase base salaries just two- point-7 percent in 20-10. employees with the potential of variable pay...or bonuses...may fare better with average increases there approaching 12 percent. so how to separate yourself from the pack and go for a bigger pay day? it would not hury to learn some additional skill sets, try to get included in special projects thats where you can get recognized. those are the opportunities that stretch people that allow organizations especially management to see whether or not you as an individual can be a high potential and can show high performance. the will among rank-and-file employees to negotiate a bigger individual raises also seems flagging given an unemployment rate hovering just below 10 percent. "if it means that other people would lose their jobs, i wouldn't be for it"

"we just have to fight the storm. instead of worrying about pay raises, we just need to hold onto our jobs." "with the job market the way it is, although i'm not in favor of low increases, there really isn't much you can do about it." the hewitt survey finds the best odds for higher pay raises in the energy and food industries. so if pay hikes will be limited, how are we spending our money? turns out, we're still spending a lot on housing and transportation. the most up to date data available is from 2007, when the average american spent just under $50-thousand a year and here's how that spending broke down. just over a third of it went to housing, rent or mortgages. 18 percent was spent on transportation. on average, we spent 12 percent of our money on food....both at the grocery store and eating out. just over 10 percent on insurance and retirement. the rest was spent on everything from health care to clothing and entertainment.

what's ahead for government bonds now that the federal reserve will end its buying spree of treasury securities at the end of october. we will take a look at the parks, and up next.

taking a look at prices of new bonds we get more clarity from the federal reserve program of buying treasury securities and taking a look at the offense is having on the door for me bonds t and t. was down 1% yesterday. and this follows the price of those bonds of this moves down

interest rates moving higher if it took a look at this on the chart to talking about long- term obligations 202530 your ious action is " a pattern is getting tighter and tighter range first it was 96 down to 90 been 95 down to 1989 he is in x stopped it seems like one of pop one way or the other take a look at the big picture in going back several years to the 2003 t o t is really managing tough to stay above $84 a share right now been around 91 will see if some of the buyers here scary little bit and will see if there is more selling pressure. if steel tools down that means interest rates are moving up drop was a line comments at first business x. c o m the enola site for we want to see you online and back here next time. thanks for watching your reply.