Second. Simon is at the ny sze, but we begin with the man that wall street and investors all over the world were waiting to hear from. Ben bernanke testifying before the House Committee on financial services. The tenyear reacted this morning to that. Right now it is down below the 2. 5 mark. Were at 2. 493 . Thats significant. Weve not seen that in some time. Senior economics reporter Steve Liesman joins me with some of the details on what mr. Bernanke said. Probably a dovish bent to bernanke in that hes saying fed policy is not on a preset course. Most of the economists who commented on this say they think the fed is on track to tapener september but a big issue is how much fiscal policy drags on the economy. Bernanke came back to that several times. Heres what he said in his prepared testimony. The risk remains that tight fiscal policy will restrain Economic Growth over the next few quarters by more than we currently expect or that the debate concerning other fiscal policy issues such as the status of the debt ceiling will evolve in a way that could hamper the recovery. A lot of talk about that and what would happen or could happen to the economy if the congress does not raise the debt ceiling in september or later this or later in the fall. A lot of questions about fannie mae and freddie mac. There are some bills in congress. Also questions about banking and banking reform. He was also asked about Interest Rates and higher Interest Rates and what the potential sources of those whether were and whether or not there was concern. There have been three reasons for it. The first is that the Economic News has been a little better. For example, there was a pretty strong labor Market Report that cause yields to go up as investors became more optimistic. Second partor is probably that some excessively risky or leveraged positions unwound in the last month or two as the Federal Reserve communicated about policy plans. Bernanke went on to say that the tightening associated with those higher rates is not welcome but said hes monitoring the Mortgage Market to see what the impact of higher rates is on housing. Ultimately the feds forecast is for the pickup in the economy to happen in the second half of this year. If that doesnt happen, thats when the issue of tapering in september will be on track. Simon, well be following the july data very closely. Okay. And obviously see what he says tomorrow and with the beige book this afternoon. Lets check in with the equity market action. Bob pisani is here with me. Steady as she goes essentially. And who would have thought the move in the markets would have been from bernankes written testimony but not the q a. Everyone was quiet and thinking that the republicans might come out swinging. Didnt really half. Take a look at Dow Jones Industrial average. As simon said, steady as she goes here. Not a lot of volatility. All the movement came in the bond market as they released mr. Bernankes testimony, the written testimony at 8 30 a. M. , almost a ten basis point drop in the yield and thats quite significant and thats what people felt mr. Bernanke wanted to accomplish. The delivering alpha conference coming on all day today. Jim chanos, noted short seller, put up caterpillar as a new short. Caterpillar dropped on the news. That was 45 minutes ago and leon cooperman came out with some picks of his own including some quality growth stocks. Theres caterpillar dropping and put up lee cooperments, express scripts and qualcomm and then he had growth with high income situations mentions arbor really and atlas resource partners. Those stocks moving also on his comments. Sue, back to you. In his testimony today mr. Bernanke said the fed will start tapering this year but is not on a preset course to do so. What does this do . We welcome back Richard Magadan of jpmorgan private bank. Good to see you again, richard. Great to see you. You know, talk to me about the tapering versus tightening argument thats going on on wall street. Sure. How do you view it, and how is it influencing where you put your money to work . Its funny i was going to kid you by saying the reality is Interest Rates are going up. Markets are already tightening, and believe it or not, bernanke is doing a brilliant job navigating deleveraging on one side. We saw athe lot of that in may and june which people have forgotten about and signalling to people we think rates are going high. So far low end is low, credit is still cheap. Highend rates are going up, and we expect it to be a gradual stepup over the next year, year and a half. You still like the United States. Yes. Probably better than anything else around the world. Is that a correct assumption . With the passport and paying taxes, yes. Weve been over the u. S. Market now for 18, 24 months. That was very controversial in january. I think people were looking a lot more into europe. We should talk about japan at some point, but the u. S. Is still leading the recovery and probably the most market and the one we own the most assets in. Japan. Yeah. You made a very interesting call on japan when no one else was interested in japan. Yeah. I would argue that mr. Abe has put in place quite a successful well, maybe not successful, but an aggressive and an interesting strategy going forward. Yes. Theres an election this sunday. Yes . What do you want to see happen . I think we know what happens. Hes likely to get the majority in the upper house of the diet and will have a majority in congress. The trick is what does he do with that . From the teams view we really had a view that structurally japan has been a currency trade so far. Thats got a benefit into earnings. Valuations are cheap so that will keep equity markets supported, but we want to see structural reform. What we dont want to see are consumption taxes going up, and i think the markets are going to debate that as well postelection. We heard from mr. Moynihan of bank of america this morning saying that they are strategically trying to take market share from european banks. Yes. Do you find opportunities in europe at this point . They still have a lot of structural issues. They do, and its funny the banks probably have the biggest structural issues so not being cute. It isnt hard to take market share right now. True, very true. Because they have Bigger Capital issues to deal with. We are seeing opportunity in europe. Weve been underweight europe last year and this year. The team is doing a ton of work in terms of looking at individual sectors right now because i think they are unique stories in europe. Were trying to put together the equivalent of a Recovery Fund in europe where we can be very specific in individual newspapers and then sectors but its not a market that i would still say to go out and buy as a broad market. Very quickly on china. The direct inflow of money from big multinationals into china is something you highlighted in your note to clients today. Yes. And you think that indicates a longer term commitment to the country. Whats funny is the longer term commitment hasnt changed. Whats surprised us and markets is how aggressive this administration is being in reform and i could make parallels on what the issues did for the deleveraging that weve seen in long bonds last month. Inflows into china are very consistent strategically. What no one is talking about and its even more interesting, we had 62 billion come in in fdi in china. Foreign direct investment. Yes, and thats the equivalent of about a 5 increase year on year. It was a 20 increase in june which is what got the headlines around it. What no one is looking at is the investment leaving china, and weve seen an increase in Something Like 30 of directed investment outside of china into broader asia, into europe and into the u. S. Interesting. So trn is converging and evolving. Its going to be bumpy. Its going to be aggressive, but its good for the region. Richard magadi madigan, plea spend time with you again. Delivering alpha, may be the best lineup in Financial News history. Lots of questions for you but first the highlights from delivering alpha so far today. Going forward, well measure our progress in weeks and months, not in years, and much of our remaining work will be completed in the next five months. Let me repeat. By the end of this year, the core elements of the dodd frank act will be substantially in place. I dont think anyone is too big to indiet. No one is too big to jail. I think, an ive been saying this for years, you know, theres enough moral hazard in the industry, and if you give people a blank check and you tell people that they have a get out of jail free card because of their size or because of their interconnectedness to the economy as an absolute matter, thats a very dangerous thing and we should never do it and we dont do it. Im only up about 17 so if you take out my exorbitant fee im lagging a mindless index called the s p 500. I wouldnt be surprised personally if the market got into a corrective mode or went sideways for a while. All in all i think that caterpillar, while an amazing american Success Story down through the decades is going to be facing a series of super commodity headwinds, that i dont think its supporters really appreciate. And ty joins us now with a lot more. Ty, its been fascinating, some of the rather provocative comments that we heard earlier this morning to some of the rather interesting investment ideas that basically scott wapner had on his show. And you got a few of them there and a sampling from leon cooperman. If you want to be where the newsmakers are making news, you want to be here today because that is the kind of morning that weve had. This place was buzzing like a forest full of krikdacicadas. Right now its more like crickets. Why dont you turn and show how ive cleared the room. They are all having lunch right now and listening to john paulson, Carl Quintanilla will be interviewing him in a few minutes. Let me go through the highlights, treasury secretary jack lew, third year in a row for delivering alpha and third year in a row that the treasury secretary is here taking questions from our Steve Liesman. My takeaway is what was in the clip. Anybody who thinks dodd frank will not get done and be enforced he got it wrong. He put a timetable on it just as mr. Bernanke has been putting timetable on when hes going to draw back or taper those asset purchases. He said by the end of the year, dodd frank, dont get any ideas you wont be able to avoid, it dont get an idea that much will be repealed. Its not happening. Its the law of the land. Moving on to Preet Bharara, you heard what he said, no one was too big to jail and he was very careful and had some criticism of the press, specifically with respect to all the speculation thats been going on on what the District Attorney the u. S. Attorney might or might not do with respect to receive cohen and s. A. C. Capital. He said dont let the number of a date on a calendar, specif specifically the lapsing of a stat stat fool you. There are lots of ways that he can find to go after wrongdoers, and he said if youve done something wrong in your past, your past is going to catch up with you eventually. It was a big shot across the bow, and basically a cautionary note. Moving on quickly to some of those best ideas. You heard lee copperman talk about how he thought maybe the market would move sideways, maybe a little bit of a pullback. He had ten predictions last year. All ten of them came to pass. Hes looking for lower returns in the market over the ensuing 12 months. Roughly 5 to 8 . Jim chanos who you just heard from. He said short caterpillar. Why . Because he says the global super cycle in mining and commodities is coming to an end. People may not see it yet, but it is here, and he thinks that caterpillar is overexposed there. A couple of other interesting ideas. Mark kingdon said go long japan, inc and likes toyota, Fuji Heavy Industries and mazda. Some of the top notes weve had during the day. An interesting session. Yet to come john paulson across the way, and later today, as scott was talking to you on the last program, we will hear from carl icahn. Ive given you pretty much all ive got, sue. The room is full of crickets. Im going to go where the cicadas are. Grab a little lunch because youll be really busy this afternoon and i want you to listen in on John Paulsons statements. Hes making those comments during lunch and a little later during this hour, Carl Quintanilla interviews investor john paulson. Mr. Paulson had a very interesting year. Thats an understatement. Some of it was very good. Parts of it were not so good. Well hear from him in about 30 minutes. Simon . Okay. Lets run through some. Other hours this lunchtime. Bank of america posting a 70 jump in its quarterly profit held by higher stock trading and lower expenses, importantly cost control a key issue. The stock is slightly higher on the day, as you can see, but up 24 so far this year. Kayla tausche has more on b of as big day. Kayla, over to you. Still Corporate News happening for you and we have it all for you. Bank of america, it cut more costs and released more loan loss reserves than expect the and also posted its first postcrisis quarter that didnt see the banks bottom line erased by pesky legal costs and managed to best its peers in some cases like mortgages and jpmorgan and citigroup, the ceo this morning said the pipeline is down only slightly and wont see the impact that its peers will. Trading another boost to earnings. The best quarter for Equities Trading in more than two years. Big hires paid off in cash equities and thompson attributed weakness to the end of june volatility as the market tried to interpret the fed. He later made comments saying it could take up to three years to make up some losses in the industry suffered in the recent bond route. There were some thorns in the quarter. The bank made less off interest than it did last quarter and revenue every quarter was down. Those issues are standard across the sector and its hard for banks to keep turning profits but for bank of america always bigger legacy challenges there, and at least on that front it seems the psychology of investors has finally shifted. Thank you very much. We should mention that Credit Card Companies are down this lunchtime. The European Commission says it will propose a limit of 0. 2 and 0. 3 on the fees that the banks charge to process debit card and credit card transactions. Sue, over to you. Two big numbers from the Housing Market out today. Starts dropping 9. 9 in june and Mortgage Applications fell last week. Diana olick is here to wrap it all up for us. Shes live in washington. Hey, sue. The starts were a surprise, the Mortgage Applications not much. Applications to buy a home were up 1 week to week and down 5 in the last four weeks. Refi applications were down 4 and down nearly 27 for the month, this as Mortgage Rates were unchanged, the average rate on the 30year fixed 4. 6 and it is down from the spike a few weeks ago but higher than the lows of early mau, and ironically rates moved lower as we got bad news on the Home Building front. And to that Housing Starts down 10 , driven mostly by a 26 drop in multifamily. Single family starts were essentially flat, down under 1 for the month but up 11. 5 from a year ago. Permits considered a more dependable stat were up just under 1 for Single Family and down nearly 23 for multifamily month to month suggesting lower starts and in the coming months ahead despite high demand. Well talk much more about the builders coming up on street signs and online well talk about how Housing Confidence is still high despite these cautionary numbers. Another reason that the bond market rallied today and the yields on the tenyear dipped 2. 5 . After the break, the heat is on, and its not just on the east coast thats getting the really hot weather. The forecast next. And more than 100,000 people in washington are on the brink of losing the Water Service in the midst of the heat wave. Theres big news out of washington just moments ago. Well take you there live momentarily. Meanwhile out west fire is the problem. A new round of wildfires forcing evacuations. Its quite literally a fast moving wall of fryar thats now burning through the golden state. Well take you there after the break. [ male announcer ] its time. Time to have new experiences with a familiar keyboard. To update our status without opening an app. To have all our messages in one place. To browse. And share. Faster than ever. Its time to do everything better than before. The new blackberry q10. Its time. Some absolutely incredible pictures coming out of california. That is a wildfire in the mountains just west of palm springs burning seven homes, sparking widespread owe vacations. Some 650 Fire Fighters are on the scene so far. Ten air tankers, 8 helicopters are helping to fight that fire, but its hot out there, too, and execs teamly dry, and clearly that is making it a very difficult situation. Simon . You know, sue, well get the Weather Forecast in a moment but first lets go to Prince Georges County right outside washington, d. C. Where 100,000 homes were on the brink of losing water right in the middle of this heat wave until something pretty unexpected happened. Tracee wilkins from wrctv joins us live in morningside just outside of washington. Welcome to the program. What is the breaking news here . Reporter well, whats breaking is that they were able to actually shut off a valve that had been stuck for the