In the ek change of gunfire, one officer was shot. He was wearing a bulletproof vest. Apparently his injuries are nonlifethreatening. The other officer was hurt by glass shrapnel in the shootout. He has been taken to a hospital. The elizabeth mayor says that he was shot in the leg, but video that we have seen and pictures that we have seen and you are looking at the suspect right there laying on the ground in front of that green car, indicate that he may have been hit in the arm. Were not sure were trying to confirm that, but we do know that he has been shot. He is in custody. He is in a hospital. Two officers hurt, nonlifethreatening injuries. He, of course, rahami is suspected in the weekend series of bombings that took place not only in new york city, but also in new jersey. Police do believe that those are linked at this point. It is not certain whether or not he had any help, any other accomplices. Reuters is reporting that a family friend said that he traveled to he, rahami, traveled to afghanistan a short while ago. About a year ago. We should note that parts of his extended family are from afghanistan as well. Thats according to reuters. Thats what we know at this hour. We will get more as the new York City Police department and the fbi and atf plan to hold a News Conference. Well monitor that for you scott. Back to you. Thanks for that. Markets, as you know, havent been reacting directly to the news over the weekend or this latest news of the arrest of the suspect, but stocks are just about at the highs of the day. Theres the Dow Jones Industrial average. Up 107 points this hour. The s p and nasdaq are decidedly positive as well. Weve got the gang all here today. Jim levinthal, joe terra nova, sarat. With us from los angeles is kevin oleary. He lets try and pivot from what happened over the weekend and the news of the arrest to the news of the week when it comes to investors, the market, and i know what all of you are focused on as well. What do you expect this week . I expect hawkish language. I think some of the rise in financials in the last couple of weeks, whether you want to stay with the financials or not, well get into that in a minute, but i think some of the appreciation is atrit outable to the fact that we expect the Federal Reserve not to do anything at this meeting, but to talk about what they are going to do and indicate to the markets that they will be doing something in december. Let me also just say i think it was very surprising last night when you turned on the screen at 6 00 and you saw the s p eight handles higher. I think thats just indicative of the environment thats so difficult to understand right now. You would have expected or understood if the market had a more negative view. Especially hearing the price action last week and where we went out on friday. It was an ugly day. Kevin oleary, i know you are with us from l. A. Thanks for being here today. What do you expect . What are you doing in advance of what the fed may or may not do come middle of the week . So im trimming financials. I kind of agree with joe. This will be the if we dont get i assume no rate hike in september, but i think baked in is 25 basis points in december. If that doesnt appear, it will be the fifth head fake in this cycle. Those that are long with anticipation and its finally tied for financials to perform, they are going to lose 4 to 10 . Just like they did four times in a row. It just may be that were in a perpetual low Interest Rate environment, and this is a sector that is just going to continue to fibulate. Its a nasty little sector. I wouldnt be long here. You could really lose some money. Yeah. Theres some interesting trades to think about, jim, when you look at what the fed may or may not do, and financials have been kind of the place to be if you thought rates were going to go up and maybe now is the time to worry about that trade in case they dont move at all. Well, i think if you are in financials because you are expecting a rate hike on wednesday, you have got the wrong trade on. I dont completely agree with kevin. I do think that financials have had a very nice run off of the february lows, and they may have a little more in them. I just dont think that anybody right now is pricing in a rate hike on wednesday, so if it doesnt happen, im not sure i see that 4 selloff in the xlf. The big deal of whether it is going to happen or not, lets bring in former fed insider Richard Fisher. He, of course, the former president of the Federal Reserve bank of dallas. Richard, its great to have you on the halftime show. Welcome. Thanks. Let me get your opinion here. Whats going to happen this week . Does the fed move or not . I think joe nailed it. Theyll probably change the language. With regard to the footballs. One of the problems with the policy that theyve pursued is theyve been gutting the banks, the Net Interest Margins are nil. Insurance companies. State pension funds. Other forms of savings formats are really beginning to feel threatened and are in need of some relief. Having said all that, i do expect them to continue to emphasize the fact theyre going to reinvest the system open market account portfolio. They have 1. 1 trillion maturing between 2016 and 2019. The real key to monetary accommodation is what do they do when they roll over the portfolio and reinvest, and the fact that they have 35 of all treasuries beyond a fiveyear maturity, they have a lot to play with. Maybe richard they need to rethink the whole thing as former fed chair ben bernanke wrote in his most recent log. Maybe as he said you cant go home again. Maybe they need to rethink the entire exit strategy. They were talking about how much damage theyve done to the Insurance Companies and the banks. We saw an article in the big german newspaper last week about the threat to their Insurance Industry here. These are the savings media that most of the people, 90 in the united states, that have some money in the bank, look to, and for financial security. On the one hand i think theyre looking at the wrong place, by the way, at the fomc, the federal committee. They have their blinders on, focused on the two criteria. Employment. If you were in the room this week i hear you saying you would not vote to raise rates, even a quarter point at this meeting. I would advocate raising rates. I dont think it does much damage in the economy. It also gives breathing room to those key Financial Institutions that we need to be prosperous. I dont think theyll do it. I would have argued this quite a bit because as eric rozengrin, a dovish character but a good man. He is beginning to talk about the fact that we have sustained this financial double. Theres another aspect. Thats a byproduct of zero Interest Rates and negative Interest Rates in the case of japan and germany and elsewhere. It doesnt work. Weve been entertaining and hearing from some of the biggest investors in the world who say look with all due respect to views like yours, the market is not ready. Nor is the economy ready. Weve heard it from scott minor to guggenheim yet again today with a series of tweets that says the market is not expecting a rate increase in september. Youve heard from ray dalio at our own delivering alpha. You heard from timothy geithner. I think joe hit it right in his first comment, and thats to expect language to hopefully firm up and appoint the way to the end of the week, and i think thats about as much as you can expect. At this juncture, if i were in their shoes at this juncture, i would be supporting that. I dont think they have much of a choice. Its josh brown. Ed, who is a strategist here on the street and a noted fet watcher, said over the weekend that the u. S. Dollar being up 19 since the beginning of 2014 is the equivalent of a 200 basis point rate hike in terms of its affect on the economy. Do you buy that . Have we had a tightening in all but deed . We think of it in terms of market, youre right. Since we import more than we export and consume more, its a plus. That voice you heard trying to get in on the conversation was kevin oleary from shark tank, of course. Our resident shark who says the market is ready for a hike. I know you say theyre not. Maybe you guys can duke it out by settling. I wanted to ask richard. He uses the words gutting the institutions, but i look at it not just on the fact that they cant make money with the Interest Rates where theyre at, but we dont talk enough about the regulatory vooimt environment, which is extremely punitive. This is where the hardworking middle income this is where they look to to harbor their savings and feel safe and were gutting those institutions with policy regulation. The guys have to put money to work. All of the aum that you have. What do you do when you listen to comments from Richard Fisher and kevin oleary . I think the fed would say, hey, at this point lets not do it now. What i would be interested to ask a question is do you think that maybe after the elections they could go . They dont have to wait until december. You have a period of time where you indicate now you become hawkish like joe said and you can do it and you can set the tone from there. Does anybody at the desk think theyre going to go . If they do, you would be totally caught by surprise. Everything, everything in that environment is going down. Bonds, commodities. I think that would be the best, and that could happen. They do it. They reassert themselves. They stop talking about it afterward. We have a 10 corruption. I hope they do. Richard, do you think the fed is too dependent on how the market reacts or what the market wants the fed to do. Thats been the narrative for months. I think the you have a reverse. The market is too dependent on the fed. We dont have strong earnings. We have modest growth. Economic growth. Its fed, fed, fed, central bank, central bank, central bank. Agree. This is the problem. These low rates and zero Interest Rates have underwritten a massive pricing of the market relative to underlying value, and i think its the other way around. Not the way you stated. I mean, you know, look, im not surprised you maybe would take that opinion, but respectfully when the fed has said that theyre thinking about doing it or at least led us to believe if the market has had a fit or a tantrum, the fed has backed off. I worry about that. We talked about that while i was there. You mention 10 . We talk about 10 to 30 . Does it affect the real economy. We had a correction. No real impact. We had a correction in 1987. We had a correction at dotcom. No real impact. Weve had serious reversals. 37, for example. Its a year you always hear about. This is a debate that takes place at the table. You can have a correction that does an enormous amount of harm, and thats a judgment call theyll have to make. How many people in the room need to be disenters, if you will, or against the crowd. Is she a Voting Member . Shes always a Voting Member. Shes a g. The governors are Voting Members. The president s alternate nature. Shes not going to go for a hike. How many would it take . Well, typically other than when paul volcker was there, the recent chairs have really sort of gagged at three. Two is all theyll tolerate. If it gets to three, its very awkward for the chair. It undermines their position of authority and leadership. I dont think any chair really wants to have three disents, but i cant imagine them having three disenters on this. The markets have lost, i dont know, half their gains since we begin this conversation, richard. Im not responsible for the rest of the panel. And you. Well send you abill. Maybe the suggestion that the language is going to change if nothing else and its going to set us up for a hike this year that the market perhaps doesnt like and is never going to come to grips with. By the way, i dont think they would do an interim move between the november 1k3 2 meeting and december member. Imagine if they called a sudden press conference. It would be upsetting. It would lead to great volatility. You have to wait for the december meeting. If they dont move in september. Well have on to see what they contain. In 2007 youre in the room. You warned all of them about the Housing Market and the environment. If you were in the room right now, what would you be warning the Federal Reserve about . Well, what i was warning them about up until 2015 when i departed in march, which is we have excessive valuation relative or excessive pricing relative to pricing valuation and equities in bonds, and very importantly, in the way weve drichk down cap rates or they have driven down cap rates in the real estate area, generally speaking across the board, there was news today about how their investments are flowing into commercial real estate that the banks just wont touch. The banks have been dpfairly lenient on this front. I think theyve got to figure out a way to deflate this bubble without creating the kind of volatility and correction that comes back to bite the economy on the rearend. Im along the lines of what my dear friend said who was a late convert to my views, but i think he has it right. He may be he is making the front page of the journal. Money and investing section today. He questions how much of a dove he is remaining. He is a good guy, by the way. He came out through the regulatory and supervisory side. Yi appreciate the conversation. Its our maiden voyage. Im glad youre on the ship today. As an oel navy man, i aappreciate the analogy. Kevin, you know, part of this move in the market and maybe more substantive than some of the things that Richard Fisher had to say in this conversation about the fed, apple is losing a little bit of steam and maybe that is hurting the dow as well. The overall market was really coming down during our conversation. Weve been asking you, are you going to get back into the stock because its had this incredible run. Some say too far too fast. I just want you to get ready because were coming to you next. I want to find out if you want to get back into it or not. Thats a teaser there. There are shares. Our own steve weiss has been saying the stock was going to soar. Were going to see what he is doing next with his shares on the halftime report. Every great startup begins with a simple idea. But with growth comes complexity. Thats why so many innovators are on the ibm cloud. Like refinery 29, with nearly a billion views a year. Or runkeeper, a training app used by over 50 million runners. Or Game Developers whose popularity depends on launching new updates fast. Helping to keep a companys success uncomplicated thats what the ibm cloud is built for. Helping to keep a companys success uncomplicated my name is jamir dixon and im a locafor pg e. Rk fieldman most people in the community recognize the blue trucks as pg e. My truck is something new. Its an 811 truck. When you call 811, i come out to your house and i mark out our gas lines and our electric lines to make sure that you dont hit them when youre digging. 811 is a free service. Im passionate about it because every time i go on the street i think about my own kids. Theyre the reason that i want to protect our community and our environment, and if me driving a that truck means that somebody gets to go home safer, then ill drive it every day of the week. Together, were building a better california. Were back on the halftime report. Just had a conversation with Richard Fisher, who jo, josh, you think moved the market . I think so. It doesnt take much to move the market intraday these days. No one is trading in the middle of the day. At the margin you can move s p futures with an algarhythm thats programmed to pick up on speeches being given, certain cues being given by different fed officials. The jury is still out as to whether or not that actually works as a trading strategy, but in todays day and age theres a lot of it out there. This is man versus machine. Thats the conversation. Machine versus machine. Machine versus machine with man just standing in the corner like, help. Well, man reporting on it, i guess. Is that what you think this is . I think josh is very accurate and his naltsz analysis of whatn and how algas will work. Theyre intensify their attention. They know the liquidity is right now really not very many people are sitting at their desk willing to pick up the other side of that. You have an algo thats going to pick up on comments that are saying hawkishness, theyre saying valuation rich, then clearly youre going to see the type of s p future action that you have seen. Kevin, lets just say that Richard Fisher did move the market by suggesting that the language is going to become more hawkish with this meeting from janet yellin herself, and they are going to have a move in rates. You have made the argument that the market is ready for a hike. Wouldnt that suggest otherwise . I go back in history and look at fed hikes that are far more dramatic than this. It would be an extreme random outcome if they went more than 25 basis points. The reason youre moving rates is enhanced economic activity, which manifests itself to enhanced earnings just a year from now or maybe 18 months. It quickly resumes its climb higher. I dont think a fed hike is going to be a problem. The question is why are they doing it . Are they doing it just to show theyre still in control and then one and done . Thats not exciting. 25, even 50 bips doesnt change anything for financials. Financials are still the best way to trade fed hikes to the bull or bear side. Can you see nobody knows whats going to happen here. Everybody assumes its the worst is over, but the the return on assets for these banks are the worst ive ever seen in my investing lifetime. They are just brutally bad. Now on top of that, all the regulators hate them. Even the people hate them. Theyve been vilified. Im not excited about this sector, and i think at the end of the day you can outperform the market by being underweight financials, even during a rate hike because i dont think the earnings are increasingly going up with 25, even 50 bips. They used to be so big in the s p. Now theyre, like, in the dleague. I feel sorry for those guys. I have nobody on the other side of that. Im on the other side. I think using the terms banks and financials interchangeably presents a little bit of a misleading picture on whats going on. There are nonbank financials that are shooting the lights out in terms of e