Hurricane irma is a category 4 sthoorm cou storm. The path is still you unseuncer puerto rico and florida are areas of interest. Here are the big corporate stories. United technologies buying Rockwell Collins for 23 billion. Under the deal, rockwell Share Holders will receive 140 per share in cash and stock. Thats an 18 premium to the Closing Price on august 3rd. The Companies Say the Aerospace Systems segment would be combined to create collins Aerospace Systems which would save 5 billion by the fourth year of completion greg hayes will join our colleagues on squawk on the street later this morning that happens at 9 30 a. M. Eastern time. Lego announced plans to lay off 8 of its work force lego reporting a 5 drop in revenue for the first half of the year the company said most of the 1400 job cut also happen s wille end of 2017. And Rovio Entertainment is planning an ipo. The mobile games studio will list shares in helsinki in a move looking to boost growth the Company Finally returned to profit in 2016 following the angry birds s 3d movie. There will be a share issue of about 35 million. A check on the Global Markets, see if thats part of the problem today with the u. S. Markets which indicated lower. Japan, not good there. Down almost 0. 5 points or so the hang seng and shanghai eking out gains. European equities, germany doing best there spain down lets look at the dollar saw that earlier dollar has not continued to drop precipitously. We had 1. 20 last week when you were out, sorkin crude is not story maybe rbob is. Paid a lot for gas killed me it was like back over 3 was it . Above 3 for premium it was. Do you have a car this weekend did you have any elasticity . I drove i went to the station a few times. Selfservice zip car you have a car now. Im a proud leaser of a vehicle. Nonetheless, when you have three kids in the car. Yeah. Youre not even looking at the price. Youre just trying to keep your head above water self serve, too did you do the credit card in there. Im cheap, i try do the debit card, then theyll take more, depends what station youre at cash is cheaper many times. You pay cash, you can get 10 cents cheaper. Did you not know that . I did not know that. I thought that was the same thing with the debit card . Theres the debit price and the credit price. I think its cash youre sick i had gotten a cold im at tail end of a cold. I can hear it in your voice i will try to project its the end of a cold i want to tell you, i know you always think im crazy about the cold drugs out. I know. I took a zicam, i think it helped really . Did you do clear and zicam alike . Theres no cure for rhino virus yet. I think it helped i want to think that every week, we are talking about this im trying to figure this out well have Nicholas Burns on former ambassador. Its daunting. If you think about it, theres many countries that are fully nuclear capable, Hydrogen Bombs, tipped missiles, everything. If you were this guy, this crazy guy, you would be saying everybody else has t whats the problem with why you are saying i cant were saying every time you test something, you cannot do this, i know hes over there sitting there who are you to say that north korea thats what hes saying right it is the big guy yo politic ge story. North korea tested again on sunday today south koreas press is reporting that the north was observed moving a rocket that appeared to be an icbm and they may test another missile now that they did the nuclear test this could be fired towards the sher sherry chang is joining us from seoul, south korea. Thats what we are getting from the intelligence service. I think north korea thinks they want to keep testing to get to the level they want to be in order to win that recognition as a Nuclear State as these sanctions keep squeezing in. And we just had the u. N. Security Council Emergency meeting overnight talking about what we can put in this round of sanctions. Many are actually questioning the effectiveness of these sanctions to begin with these days and in the meantime, where i am here in south korea, a lot of phone calls that the korean president made, south korean made with World Leaders such as u. S. President trump overnight and is trying to brief up its own defense in the face of these missile tests as well as the latest nuclear test by north kor korea. So one agreement that came out of that phone call between the leaders of south korea and the u. S. Is that theyll do away with the restrictions on south koreas missile payload capabilities, and trying to draw this paint a picture of National Security, sending a message to north korea as well as the south Korean People joe . Thank you, chery. Well revisit this story all morning trying to get more insight. Appreciate your time thank you. For more response on the u. S. Response to north korea and other top political stories, we want to get to eamon javers in washington reporter its a difficult diplomatic position for the United States as you heard from south korea. The United States responding in a variety of ways. U. N. Ambassador nikki haley saying the North Koreans are begging for war. We also heard from the secretary of defense who issued a starn warni stern warning to the north koreas any threat to the United States and its territories including guam or our allies will be met with a massive military response, a response both effective and overwhelming. The president taking to twitter over the weekend firing off a couple tweets, one aimed at south korea and its leadership saying south korea is finding, as i have told hem, their talk of appeasement with north korea will not work. They only understand one thing the president also saying there may be a trade option here the president tweeting out that the United States is considering stopping all trade with any country doing business with north korea. That presumably includes china, a huge trade partner of the United States that would be politically difficult for the president to do. Hes meeting with the National Security council this morning at 10 00. We expect maybe some more details on the u. S. Response later on today on do t on the domestic front. Some resolution here from the president on the socalled dreamers thats the deferred action for childhood arrivals, Obama Era Program that allowed undocumented immigrants brought in as children to stay in the United States. The president expected, we are told hes leaning towards making a decision to end that program but with a sixmonth deadline for actually ending it so well see what he comes up with today that provoked some response from some on capitol hill, including paul ryan who said this, i dont think President Trump should do that i think this is something that congress has to fix. Corporate leaders weighing in on this in favor of the dreamers and against the program. Tim cook saying 250 of my apple coworkers are dreamers i stand with them. They deserve our respect as equals and a solution rooted in american values. So we expect that well hear some more detail from the president or his team later today on exactly what hes decided here but a difficult political decision for the president to make today eamon javers in washington this morning, thank you very much talk to you soon we do have a couple of things that are just moving. Stocks to watch, tronc, the publish everyone of the tribute and Los Angeles Times is buying the really iconic the iconic New York Daily News absolutely. Definitely is couldnt sell it for a dollar last time. Couldnt sell it for the price of a single issue. No cash is changing hands. Tronc is assuming all the operating costs and debts and will acquire the Printing Press in new jersey. The daily news was once the largest circulating newspaper but has faded as readers shift online and i look at the jumble. Thats all i use it for. For tronc tronc, say it tronc. The stock is doing better tronc theres two pieces it gives them a National Platform for the two times. They owned the l. A. Times, Chicago Tribune, never had a piece of new york. Theres something there. They get a piece of real estate. This is like beachfront property overlook the southern tip of man hhattan the plant where they make this thing, 25 acres that zuckerberg owned. They get part of that. They wont need that land much longer because Printing Presses will become obsolete potentially and this is sad for some of these other markets, but they own the hartford current in connecticut, the allentown morning call theyll stop printing those locally, print them all in new jersey and ship them synergies some synergies here the liabilityliabilities, pensi liabilities about 30 million, 0 40 million. Theres been some reports around those anybodiey numbers even though we say this is a cashless transaction, theres some money i cant tell who writes their gossip theres page six and then they never got its like burger king fries compared to mcdonalds you should you know how i write a column, you should write a gossip column for the new daily news for the tronc. I dont know anything sure you do no, i dont i learn a lot from you during the commercial break you do. You know what im saying, you dont immediately open that to see who right how about the docovers do you think the last year and a half theres another story which is zuckermans political influence in this city and country, hes been able to use this publication for a long time to have he couldnt sell it for a dollar people loved his political you know, couldnt sell it for the price of what one my first journalism job was at the New York Daily News you should have picked it up. I dont want that thing lets get back to the markets. Steve shakutto and shri kumar. Where are we in terms of the markets. North korea is an unknown but one that the markets are willing to look through. We have a full plate of events starting this week with the ecb meeting. Theres a lot going on, melissa. The equities, i believe, are pricedperfection theres very little that can go wrong. North korea is one more uncertainty that the markets could have done without. On the bond market, the tenyear yield has been moving downward we have a slight drop today. I think were headed down there also the safe havens are doing well the other part of your question, Congress Comes back today after the summer break they have to raise the debt limit, provide Hurricane Relief for texas. Thats a lot to do in the midst of uncertain uncertainties. I cant see the markets holding up with these uncertainties. We have the fed meeting, expected normalization of the balance sheet. Every single central bank in the world seems to be meeting in september, including the ecb what are the land mines youre looking out for . I think the major one is what happens in terms of corporate issuance at the end of the summer period that went into a lull. We had a few blockbuster deals now we will see that calendar fill in. Especially where Interest Rates are, spreads are, the lack of volume theres a great increase of savings. Looking for a place to be invested if these deals can come, attractive spreads and attractive rates, you will see a bit more of the confidence develop in terms of the equity market and the markets in general. Still a lot of liquidity and savings, and money that needs to be put to work thats the driving motivation Going Forward into the month of september. Central banks will be trying to bank away from accommodation theyve been trying to do that for over a year. Well over a year i think, you know, the fed will take the step at the september meeting to announce the beginning of the normalization so its as simple as a good corporate issuance calendar . How theyre received. Okay. Whether these deals come aggressively priced, the spreads continue to narrow, whether we see the amount of bids we see coming in for these offerings, well see how much savings there is out there how much money has to be put to work thats driving this market its not just share buybacks, not just m a activity, its money that needs to be put to work thats why the corporate issuance calendar is so important. Youve been calling for a tenyear yield thats even lower from here. Where do you see it at this point going into the final quarter. I still see that happening it was 2. 65 in the middle of december with the trump euphoria, were down to 2. 14 t i think as the spread between the two and tenyear narrows further, my expectation is the tenyear will go below 10 you have seen all those people the last three years calling for to go to 3 , we will not see that any time in the future. We will leave it there. Thank you very much. Thank you coming up, houston residents cleaning up from Hurricane Harvey and tall lig the damage well get updates after the break. And amtrak completing critical repairs at penn station. Well talk to the companys new coceo, Richard Anderson not richard dean anderson, could mcfigiver not help amtrak . With a stick of gum. Exactly also the former ceo of delta air lines. Well be right back. Kevin, meet your father. Kevin Kevin Kevin KevinKevin Kevin KevinKevin Kevin Kevin trusted advice for life. Kevin, hows your mom . Life well planned. See what a Raymond JamesFinancial Advisor can do for you. We, the people, are tired of being surprised with extra monthly fees. We want hd. And every box and dvr. All included. Because we dont like surprises. Yeah. Like changing up the celebrity at the end to someone more handsome. And talented. Really. And british. Switch from cable to directv. Get 4 rooms with hd, dvr, and every box included for 25 a month. Call 1800directv. Welcome back to squawk box. Residents of houston are working to clean up from Hurricane HarveyMorgan Brennan is there right now reporting on the automotive losses from the storm. We start with scott cohn monitoring the toxic tem cchemil aspect of it. Over the weekend, arkema chemical torched the remaining chemicals at its plant, with the risk of explosions gone, early yesterday morning they lifted the Evacuation Order thats just the start. Behind me is one of 41 Super Fund Sites throughout the storm zone this one just on the edge of houston. Well show you more of it after daybreak its 58 acres, theres neighborhoods within a few hundred yards. So what happens when you dump 27 trillion gallons of water on some of the most toxic waste sites in america thats what the epa and state officials are trying to figure out. They are saying 28 sites appear to be fine, the other 13, thats an open question but officials insist theyre on the case weve been working on all of the important issues since before landfall up to today. We have over 200 people working in this in the south texas area from corpus to port arthur on the response. Reporter how effective that will be remains to be seen as they try to get to these sites in some cases where theres still floodwaters, putting divers in the water to make sure that the seals that they put over these Hazardous Waste sites did hold they tell us there will be another update on all of those sites later today. Thank you right now we want to get over to Morgan Brennan good morning. As the cleanup efforts get underway in houston, its still too early to know the damage to homes and businesses, but the auto picture is taking shape the early estimates were 500,000 to 1 million vehicles damaged from this storm. We saw 200,000 vehicles damaged in katrina, 250,000 from super storm sandy. Were talking some very big numbers here its not just personal vehicles. We are seeing an impact on Car Dealerships. Dealerships like this one. This is clear lake infinity. It saw nearly 4 feet of water flood its lot seeping into brandnew cars us as a deerlship, shdealer about 4 million in unused inventory. Since we opened doors opened back up, cars have been rolling in every moment of the day as you heard there, the car dealership is taking in damaged cars from leasees. This is an infinity q 50 this is whats happening to all the cars all the interior and carpeting it being pulled out. You can still see some water in here before the mold sets in theyre watching to see how far up the water came in the cars if it hits the seat track, where you move the seat back and forth, thats where the electronics and circuitry is it has to get that high and youre looking at most likely a total loss so the insurers have said about three quarters of the cars they assessed are total losses. Thats expected to climb into the billions of dollars. Those are losses that will fall on to the Insurance Companies, like state farm, farmers, Berkshire Hathaway and all state which are the biggest insurers here in texas market you might be wondering in houston, a big driving city, how people will be getting around . Were seeing spikes in demand from rental car companies. Some folks saying theyre on waiting lists. And Car Dealerships are saying theyre seeing an uptick in demand for cars, pespecially big cars okay. Thank you. Coming up, amtraks summer of hell in new york is officially over. Well speak with amtraks coceo Richard Anderson as we go to break, a look at last weeks s p 500 winners and losers where the heart beats warm and true, thats texas. Where we always welcome you, thats texas. Where we always find a way, thats texas. Aggressive styling, so you can break away from everyone else. The bold lexus is. Experience amazing. For tech advice. Dell Small Business advisor with one phone call, i get products that suit my needs and i get back to business. Youre searching for something. Whoooo. Like the perfect deal. On the perfect hotel. So wouldnt it be perfect if. There was a single site. Where you could find the. Right hotel for you at the best price . There is. Because tripadvisor now compares. Prices from over 200 booking. Sites. To save you up to 30 . On the hotel you want. Trust this birds words. Tripadvisor. The latest reviews. The lowest prices. Welcome back, youre watching squawk box live from the Nasdaq Market site in times square welcome back to squawk box this morning were playing this music for a reason well tell you why in just a minute look at u. S. Equity futures this hour see how theyre setting themselves up for the day, especially given the north korea news over the weekend. Dow jones off about 66 points. S p looking to open off 10 points the nasdaq opening off 17 points new yorks transportation summer of hell is finally over amtrak announcing it completed its Infrastructure Renewal Program at penn station in manhattan. It was on time and on budget now its looking to the next set of challenges which are many with some revamped leadership. Joining us, a familiar face to squawk box viewers, Richard Anderson not richard dean anderson, but all the skills the new president and ceo of amtrak we said amtrak could use some skills duct tape and gum paper clip. We dont use duct tape or gum. You cant always a match box, too you were at delta, did very well youre doing this for free with the other member of the show, whit he was a longtime ceo of Norfolk Southern you must be patriots to try to fix this thing. Lets talk about the revamp of penn station itwas a big local story in new york city on budget and on time are not usually words associated with amtrak actually the organization has deep skills around railroading its a credit to whit, a track guy from norfolk soruthern they ordered the materials in advanced, pulled a crew together, worked aroundtheclock its a Great Success story theres so much more infrastructure work that needs to be done on the system, that it proves we can get this work done on time and on budget, and do a good job for our Rail Partners at the Long Island Railroad and new jersey transit. So, this is the beginning. We have more work to do in penn station, upstairs and downstairs, for that matter up and down the northern corridor which we talked about is you cover the cost of the northern corridor and you make money, amtrak does. You had remember the transportation secretary, we had him on he said all of amtrak is profitable thats not the case. I dont know if he knew, this was in the last administration, but the northern corridor i would much rather go to d. C. , i dont care if it takes me 2 1 2, 3 hours, i like riding on trains its much more predictable. Its very quick. Theres no lines like at airports, theres no cabs out to airports, you end up in the center of the city we are making new investments to replace the acela, so well end up with half hour service between washington and new york, and Hourly Service between new york and boston. When will that happen. Were three years out trains are being manufactured as we speak will they go faster we want them go faster. A lot of the issues around fast and america have to do with the fact that unlike europe, we share rails with freights. The freights run a different railroad than a high speed rail. Is that the problem or is it that the track is not as straight as it is thats part of it. We can just take property the way other countries do back to your point, the northeast corridor is growing a a year we own and really operate all the northeast corridor at amtrak the second piece is Long Distance thats where the losses are. The third piece, which is important, which ill call the high density state supported route system, a great Public Service and essentially breaks even that would be lines like milwaukee to chicago, detroit to chicago. Thats really where the longterm opportunity is to provide Better Service for communities and more dense corridors. As you upgrade acela, will we see fare increases will those be used to subsidize other less profitable areas . No the fast act, Congress Passed a law a few years back that segments this business in my mind into three pieces, state supported Long Distance, and the northeast corridor and we report now and were really working hard to report and operate the way a publicly listed company on nasdaq would report we want to have transparency to the losses and the profits, because we Want Congress to have confidence in how we run this business is there ever a moment in which this whole thing will be break even or profitable across the board . Should we expect that . Should we consider it a utility in a different way thats a good question, a fundamental question set aside capital, but just on a pure operating cost basis, this year well have the lowest subsidy in its history so were we are grounding down costs revenues will be in at about 3 . But longterm i think we can get to break even on an operating basis, and then the question becomes the capital cost of the infrastructure is there any train system abroad we always hear about these fantastic train systems in europe, asia that actually make money. When you include the capital costs. No, they tend to be publicly subsidized they are great systems in europe we all traveled them significantly. Same in japan. Right those systems all have some form of subsidy the interesting thing is if you look at transportation in the United States, its all subsidized so aviation, when i was in the aviation business, we counted on 16 billion a year to fund the faa from the general fund. The highway administration, the fuel taxes never cover the costs of highways. Think about keeping the mississippi waterway navigate nl as a nation we have deep subsidies for transportation whether its highways, waterways, airports. Amtrak has aer subsidy than all of these. All these proposed systems between orlando, ft. Lauderdale, a those all private . Have you figured out hyperloop yet . Before we get to liner lo hy, we have a bridge in baltimore that was dedicated when u. S. Grant was president. Theres a few more things to get done before hyperloop. It will be interesting to see how the private rail works down in florida i dont know why it will be better than maybe they will, because its private but its the natureof the business. The tif thing ough thing is a capital intensive business laying six football fields of track and 1,000 tons of rocks to put under the track, its a really capital intensive business fares, our average fare is below 100 the acela is more expensive than airfare well, its competitive to the airfare, many main many instanct will be below. But knowing the logistics of it, and the flux costs, would you be long Hyperloop One and the Boring Company and what elon news sk doing the musk is doing there . We talk about this im wonder how long realistic it is i dont think its realistic now. Im glad there are people like that who dream about that. Im focused on bridges and tunnels that are 100 years old and need Real Infrastructure investment, number one number two, im probably too much of an eeld school indold l industriali industrialist. I look at cash flow, operating margin, i dont understand always how those companies, you know, can have real huge losses and just its not for moving people, does it still make sense you were at delta, you know that what i always come back to, on a track, you mentioned a bridge, you have to worry about every square inch of every track along the entire route when youre up in a plane, you might hit turbulence, but the integrity of what youre traveling across doesnt have to be perfect its daunting to run on rail horrific things can happen with a barge hitting a bridge and moves it a quarter inch or an inch, you get a derailment why move people that way the difference is, though, when you have a mechanical problem, youre on the ground. Right thats true. That speaks to you, does it not, andrew do you have a take on the Airline Industry now no. Im a train guy now. I know. But as somebody watching whats going on, watched Warren Buffett get into all the airlines, do you look at that and say thats a bullish sign are you bullish on the airlines . Candidly, when i i had to sort of make a clean break so i dont even read numbers anymore. I havent looked at Free Cash Flow or the usual metrics on any of the industry. Even outside of those metrics, luke at the expansion of the middle eastern airlines, which many u. S. Airlines say this is unfair, theyre being subsidied by middle eastern states, governments, its not a level playing field. How do we compete . Should the u. S. Government do something more about it. Let me answer it a different way which is where the all the returns are being made all the returns are being made domestically and transatlantic when i say domestically, i include Central America and mexico thats where all the returns are being made now that youre not in the Airline Industry, how do you feel about competition in the Airline Industry its hyper competitive. Go to the d. O. T. Database and prices have come down airfares. Airfares have come down what do you think . Im starting to think its more competitive than i thought. There was a moment at which prices had shot up even over time, you look at over time, over a decade no, no were supposed to be talking about trains lets stick with trains what have train fares down in relationship to airfares airfares have come down, what about train fares . Average train fare across amtrak 80 its aen affordable way to travel you still think the xm bank trump will fund that you keep pulling me back in like pacino, pulling you back in we dont have any bank issues at the railroad. What about all those emirates we dont worry about them those are lebeau questions. Yeah. Tell phil to hang in there those are not amtrak questions okay. All right. Im happy to answer amtrak questions. You im sold if im going to d. C. , i would much rather you still what are you going about the wifi on the acela . Thats a reasonable question that is a reasonable question you asked that about hotel rooms, too. If youre a road warrior, all you care about these days are wifi were making an investment from d. C. To philly, its an expensive investment we would like to have verizon and at t step up and make those Infrastructure Investments well make the investments in the track. They dont want to do that. Is there not enough money no, those Companies Put so much money in cap ecapex. What held them back so far. I think its cadence. Were making a big investment to get a big chunk of it done were hoping that will kick off a process here where we can get wifi across the northeast corridor thats strong you will fix everything with the infrastructure before we have 300mileperhour trains, i guess . What id like to do is have us be a high Service Organization the employees are capable at amtrak dedicated, professional. We want to be noted for customer service, reliability, on time, courteous services we will make Big Investments in refurbishing ining our fleet, 5 billion at a minimum into replacing track, tie, make the investments that will benefit our customers. No chewing gum Holding Together the track i never did mcgiver type stuff. Youre Richard Anderson whats your middle name hale. His is dean im done. Dont leave yet dont leave yet no, the cram wiamera will cau running out of here. Wick will be on today. Wick moorman, thats at 1 00 p. M. Coming up next, well talk about americas response to north koreas test over the weekend. Well talk to Nicholas Burns at the top of the hour. And New York TimesForeign Affairs columnist tom freedmiedn will join us then honor of medal recipient colonel jack jacobs. Liberty mutual stood with me when i was too busy with the kids to get a repair estimate. I just snapped a photo and got an estimate in 24 hours. My Insurance Company definitely doesnt have that. You can leave worry behind when liberty stands with you™ Liberty Mutual insurance. Tmobile announces zero down for all. Now, get the whole family the hottest smartphone brands like Samsung Galaxy for zero down. Plus, get 4 unlimited lines for 40 bucks a month, taxes and fees included. More reasons why tmobile is americas best unlimited network. Time for the executive edge. We start off with stocks to watch. Joe jimenez will stock down early next year from novartis. He oversaw the expiration of several patents and increased scrutiny of drug prices. A phase three trial shows its drug for ms significantly reduces relapses in children and teens. The World Trade Organization is reversing an earlier ruling that boeing received an unfair tax credit for its newest aircraft the decision overturns a ruling which ban ned rtpaial and the n oil and gas prices stay tuned. When this bell rings. It starts a chain reaction. Thats heard throughout the connected business world. At t Network Security helps protect business, from the largest Financial Markets to the smallest transactions, by sensing cyberattacks in near real time and automatically deploying countermeasures. Keeping the world of business connected and protected. Thats the power of and. Flexshares etfs are built around the Way Investors think. With objectives like building capital for the future, managing Portfolio Risk and liquidity and generating income. Thats real etf innovation. Flexshares. Built by investors, for investors. Before investing consider the Funds Investment objectives, risks, charges and expenses. Go to flexshares. Com for a prospectus containing this information. Read it carefully. For tech advice. Dell Small Business advisor with one phone call, i get products that suit my needs and i get back to business. Welcome back to squawk box. Hurricane harvey shut down refineries across the gulf coast. Lets get an update on the efforts to get production back online Jackie Deangelis joins us now with more. Quite a different picture from last week. Good morning, melissa i actually thought more would be up and running today its taking a little longer than expected obviously havoc caused by harvey on a human level but also on the energy front and things just starting to get back on track. Heres where we stand right now. A little more than 2 Million Barrels a day of texas Refining Capacity is still offline. The major refineries working on getting these operations back up, fire damage still a big issue. Meantime the downed portion of the Colonial Pipeline getting shipments back up from houston today. The government responding to all of this by loaning a little more than 5 Million Barrels from the ftr. You still have crude prices under 50 a barrel the explanation is you cant refine as much product, you dont need as much crude oil, so supplies will build. And on wednesdays inventory report that comes from the department of energy, well likely see that in the number. Finally, retail gas prices hitting a 2year high from all of this. The National Average 2. 65 according to aaa thats from 2. 35 a month ago and 2. 20 from this time last year so consumers definitely feeling harveys impact. Analysts also suspecting it could take several weeks to resume fully that means another 20 cents possibly at the pump and of course this is the time of year that you expect prices to go down after labor day thats when the driving demand drops off and on top of all of this, of course, we have eyes on a couple of new formations storm formations, as well. Irma. Well 2 Million Barrels a day thats about 11 of total u. S. Capacity exactly so its not as bad as it could have been. But still something to watch jackie, thank you all right all right coming up, first day of school for your kids . First day of school is on friday friday . Why start on friday i dont know. Daughter its the first day of her last year of high school. And so my son its his first day of his first year of high school of high school. Coming up i know. Are you all right can you read can you they just grow up they do really fast im watching you, same thing happened with you day in and day out. You get better and better at this all my kids are growing up anyway, come back, a lot more seniors, that is north korea thmbsar cos rns when we return burst pipes and water damage. Soon, Insurance Companies wont pay for damages. That is, not if they can help prevent damages from happening in the first place. At cognizant, were turning the industry known for processing claims into one focused on prevention with predictive analytics, helping them proactively protect the things that matter most. Get ready, because were helping leading companies see it and see it throughwith digital. People dont invest in stocks and bonds. They dont invest in alternatives or municipal strategies. What people really invest in is what they hope to get out of life. But helping them get there means you cant approach investing from just one point of view. Because its only when you collaborate and crosspollinate many points of view that Something Wonderful can happen. Those people might just get what they want out of life. Or they could get even more. What they want out of life. Wherwhere we always welcome you, thats texas. Exas. Where we always find a way, thats texas. Developing story at this hour, u. N. Ambassador Nikki Haley Says north korea is, in her words, begging for war ooze tensions escalate, what youll need to know about the market reaction, and Everything Else, just minutes away. The cleanup from Hurricane Harvey is just begun meanwhile, another major hurricane churns in the atlantic florida could be in its crosshairs the latest straight ahead. Plus an Aerospace Mega merger United Technologies is buying Rockwell Collins for 23 billion. Details coming up as the second hour of squawk box begins right now. Live from the beating heart of business, new york city, this is squawk box. Good morning, welcome back to squawk box right here on cnbc were live at the Nasdaq Marketsite in times square im Andrew Ross Sorkin along with joe kernen and melissa lee. Take a look at the futures this morning. They are down in part on some of the worries about whats happened in north korea over the weekend. And some other news, as well well talk about it in a moment. But the dow looks like its going to open off about 70 points down. Nasdaq looking to open down about 15 points off. And the s p 500 looking to open off by about 10 points want to get you caught up on some of the headlines making news at this hour. Consumers are getting hit hard at the pump in the wake of Hurricane Harvey but theres some signs the big increase could be slowing down. Gasoline futures fell more than 3 yesterday, and down again this morning retail price the retail price was up only 0. 1 yesterday according to aaafter jumping by more than 20 cents after harvey hit texas. Also another hurricane threatening the u. S. Hurricane irma now a category 4 storm. Its led florida and puerto rico to declare a state of emergency. Its about two days away from hitting the Virgin Islands and puerto rico. Also new development out in the proxy battle over Board Membership at Procter Gamble former chief executive officer john pepper has has released a letter to employees and retirees urging them to vote against giving a board seat to activist investor trian pepper says the Consumer Product giant has the right ceo and the right strategy for future growth so nelson peltz getting a little knock there. Well see whether it has an impact well weve got an Aerospace Mega deal to talk about this morning. United technologies buying Rockwell Collins for 23 billion. Phil lebeau joins us now with more a deal that seems like its been long in coming, phil it has been and most people expected it to go through and now youve got the Largest Aerospace supplier, if you will, buying the fourth largest, with United Technologies buying Rockwell Collins and this is a huge deal. When you add in the debt from Rockwell Collins, its a 30 billion deal 23 billion in terms of equity value. 140 a share thats what Rockwell Collins shareholders will be receiving just under 94 per share in cash and then a little over 46 in United Technologies stock. When you look at Rockwell Collins, how much of a premium have they received on this deal . 18 . If you go back to when this deal first started coming out in the press, in early august, since then, it was just under 120 a share. Since then and when you add in where its going to be going out at, its about an 18 premium. The real value in Rockwell Collins for United Technologies is the avianics business the brains of the plane, if you will their margins are up close to 20 in excess of what United Technologies has in its Aerospace Division theyre going to form whats known as Collins Aerospace thats basically put together United TechnologiesAerospace Division along with Rockwell Collins. The ceo of Rockwell Collins will be the quo of Collins Aerospace. Coo david getland will come from United Technologies to be the chief operating officer. United technologies expects at least 500 million in synergies, not just 500, 500 million in synergies by 2021. Year four of the deal. Some people are already raising the question, theyre going to be so strong in aerospace, will they eventually have to split off that part of the business from the rest of United Technologies in announcing the deal yesterday ceo of United Technologies says once we have completed the integration of Rockwell Collins and made progress towards reducing leverage back to historical levels, we will have an opportunity to explore a full range of Strategic Options for utc. You dont want to miss greg hayes talking about this deal and what the future is for United Technologies with Rockwell Collins hes coming up later this morning. Squawk on the street at 9 30 jim cramer, david faber, they will be sitting down and talking with him and again greg hayes first on cnbc coming up a little bit later on this morning on squawk on the street. What does this do for boeing, phil i mean boeing recently writes that theyre going to start their own avionics unit. Its going to put pressure on them boeing and airbus have been squeezing their suppliers. As you would expect. And the suppliers, they need to have strength. And become bigger, if you will and thats the value in this for United Technologies. It can go back at boeing and fight off boeing with the technology and the products that they have, the brains of the plane. So its not going to stop boeing from forming, you know, the Avionics Division and trying to expand into that area. But United Technologies with Rockwell Collins, a very formidable supplier when it comes to those avionics. All right, phil thanks well check back with you later. Phil lebeau. And u. S. Ambassador nikki haley telling the u. N. Security council that Even Stronger sanctions against north korea are needed following a weekend test of a Nuclear Weapon joining us now ambassador Nicolas Burns formerunder secretary of state for Political Affairs and a Harvard Kennedy schoolprofessor, also cnbc contributor. So the options right now are either economic or military, i guess, those are still on the table. But you think it will continue to be economics, mr. Ambassador, and will that bear fruit i think that the Trump Administration has to focus on economic issues. They did the right thing on sunday, when secretary mattis came out and threatened massive retaliation if north korea actually attacks south korea, japan, guam, or the United States forces in east asia youve got to practice that deterrence and relearn the lessons of the cold war. I thought it was a smart thing to do. But right now, there are no good military options, beyond defense, and so you see the Trump Administration talking about a variety of economic options from cutting off all trade with any Country Trading with north korea, which does not seem to be something that they can seriously consider i think where they need to go is secondary sanctions, to look at companies, chinese companies, for instance, that are cheating on the Current International sanctions, and make examples of them thats probably going to be a more fruitful way to go forward. And then, connect the dots. What would that today . That would eventually lead to the leadership in china get back to them and then they can action sounds like youre still thinking that china could do more then, the leadership well, china can certainly do a lot more than theyve done to date you know, chinese trade with north korea has actually expanded quite significantly over the past seven months and so, china has a lot of responsibilities here. Ultimately, the chinese have leverage and theyre the only country that could actually probably move the North Koreans towards a freeze of their Nuclear Weapons program, which is the shortterm objective here, and so that connection between beijing and washington is critical Henry Kissinger wrote a couple of weeks ago in the wall street journal, he thought ultimately that there had to be a drug venture, my words not his, between china and the United States to coerce the North Koreans to a safer place and a more restrained place along this continuum. Are we convinced that china is as i mean, they have an interest in north korea not obtaining Nuclear Power to the same extent that we do do they care i think they do theyre frustrated by kim jongun. Theyve never invited him to beijing. They do not want to see a war on the Korean Peninsula china trades with south korea and japan and it prides with that the chinese prefer the status quo to a situation where the north korean regime could be so weakened that it could possibly collapse thats why this idea of an oil embargo thats being floated this morning, i think the chinese will reject that out of hand because they could see that as fundamentally weakening north korea, and what do the chaens fear they fear refugees from north korea into china they also fear the creation of a united Korean Peninsula aaligne with the United States that is a greater threat to china than the Current Nuclear program of kim jongun you point out that any sanctions that, you know, are levied against north korea are totally different than iran or Something Like that, because theyre not a participant in the Global Economy its a herm it nation. And my kid actually asked me and i said he doesnt care about his people hes never going to be hungry, or lacking anything in life. Do economic sanctions hurt anyone but his people . They certainly hurt his people i think what hes about, what his father and grandfather are about, is survival of this mafia family that runs north korea thats the ultimate goal here. He obviously looks at iran, he looks at saddam hussein, he looks at Moammar Gadhafi and he judges that having Nuclear Weapons is a better way to maintain his familys control of north korea. So thats the highest value for him. Thats why hes putting the great majority of his countrys Economic Resources into the development of Nuclear Weapons but, with the way i asked the question, will any economic sanctions really it also made me think, the way you deal with the mafia, i dont know. I mean, it seems like divorce is the only way and economic sanctions arent going to bear the type of fruit youre talking about. Well, economic sanctions, i mean some economic sanctions could be very injurious to north korea to what he cares about which is getting enough resources, capital and technology together, to continue to develop a Hydrogen Bomb to continue on the engineering sphere to engineer an icbm with a Nuclear Warhead on top that could reach the western part of the United States. Hes not there yet but hes heading towards it. So i do think we have some leverage here. I dont see it happening without some kind of indepth understanding with the chinese and thats where the Trump Administration has not yet gone. And it probably needs to head there in the next few months ambassador, this assumes a completely rational conversation, and rational leaders at play. Dare i ask, whats the possibility that a consortium of countries come together and find a way to literally take him out . Well, you know, i think that you have to look at that option. But the options not good if that implies the use of military force. Because, the use of military force by the United States to take out kim jongun could lead to a catastrophic war by conventional means, nuclear means, between the two south korea and north korea. There are 30 Million People living in the greater seoul region its one of the largest cities in the world there is no option where the United States could lightly undertake a military mission with that potential cost to human life and so despite the fact that were warning of massive retaliation, and are right to do so, offensive operations carry with them extraordinary risk to human life that no sensible and sane leader can undertake lightly. That leaves you with these economic options it leaves you with this very difficult conversation that President Trump, like president obama and president george w. Bush are having with the chinese leadership i think thats where the key to this probably is over the short and midterm so we talked actually i guess it was off camera, but a lot of Different Countries have are fully nuclear in terms of their capabilities. And is it possible that kim jongun thinks that this is within his rights, as the leader of north korea, to join that club and i mean i just wonder if that is eventually going to be where he gets to with, you know, theres nothing we can do about it i mean if all were going to do is keep talking with economic sanctions. And he thinks hes if he doesnt attack anyone he thinks hes perfectly justified in being able to do it, doesnt he . He apparently does. Theres no indication that hes mad or irrational. Theres every indication this is a rational series of moves to protect his regime and he believes that thats the best way to ensure his livelihood and his familys livelihood into the future i dont think that we can, in the shortterm, the next three to five years, convince the North Koreans to give up all of their Nuclear Weapons. Right, right. Theyre not going to do that. So it leaves you with very unsatisfactory options, and compromise and you dont want to do that in the face of such, you know, such a negative regime but it may be the only options left for the United States. Because the bottom line, he still knows what general mattis says is true and if he ever used it offensively, that that would be the last thing that he ever did. Thats right. And frankly, at this stage, i think the Trump Administration was right to go back to those First Principles of deterrence, of defense, and of making sure he understands that there is that the United States is going to protect south korea i thought the only place for the Trump Administration did not do well over the last couple of days, was the statements by President Trump basically accusing south korea of appeasement, and also saying that hes threatening to end the Free Trade Agreement between south korea and the United States this is a time when you actually want to show a lot of strength with south korea in support of south korea, and japan, that presents that helps you Deter North Korea in the future. So i hope the president just wont repeat those two statements because they played very badly in a place where we need to be very tightly integrated, thats south korea ambassador, do you think in five years, or ten years, well be living in a world where this regime has the capabilities to strike the United States with a Hydrogen Bomb . Its very possible. Theyve always been ahead of the curve in making progress on their Nuclear Program. Theyve exceeded expectations. And im afraid that they may have that capability thats going to be a real moment of decision for the United States, whether or not we allow that to happen, given Everything Else weve talked about in this interview, with a very poor military options that we have. All right that would be frightening. Maybe pretty close already so we should be frightened right now. Ambassador burns, thanks for your time this morning thank you okay, coming up, Hurricane Harveys path of destruction, the impact of flood ravaged texas, and updates straight ahead. And then tom friedman is going to join us to talk geopolitics and more plus former International Trade commissioner dean pinkert is going to be here to talk nafta stay tuned this is not a cloud. This is a tomato tracked from farm to table on a blockchain, helping keep shoppers safe. This is a financial Transaction Secure from hacks and threats others cant see. This is a skyscraper whose elevators use iot data and ai to help thousands get to work safely and efficiently. This is not the cloud you know. This is the ibm cloud. The ibm cloud is the cloud for enterprise. Yours. Hey, im the internet cloud for terprise. I know a bunch of people who would love that. The internet loves what youre doing. So build a better website in under an hour with. Gocentral from godaddy. The internet is waiting. Start for free today at godaddy. Welcome back to squawk box. Hurricane harvey dumped a massive amount of water on some of the most toxic waste sites in the country, some of them not far from neighborhoods and sensitive waterways and Officials Say they dont know yet what the impact is going to be scott cohn is in houston now with that story. Scott . Andrew, this is one of those sites behind me, it is a huge 58 acre site that was once a Processing Plant for the defunct rio Chemical Company its one of 41 epa superfund sites in the storm zone, including about a dozen in the houston area alone storage covered concrete pits back there are goodies like methylen chloride and ethel benze benzene, nasty stuff and not far away from that entire neighborhoods that flooded for the first time at least in neighbors memory around here. Also new subdivisions that back right up to the site the epa declared the site safe more than a decade ago that means that the waste is all contained. Residents we spoke to not terribly worried but then again were talking about a 1,000 year flood not something that has crossed my mind, actually. Honestly i havent even thought about the brio site. Theres just a lot going on nobody thats going through it right now, the cleanup and the demolition is really, you know, too much about that sort of thing. The home builder disclosed it, and reassured us that it wasnt even really on the top of the list as far as dangers go. Now that the hurricane hit, it is a concern now, the epa says it has checked out 28 of the 41 sites this one included. They appear to be fine theyre still working on figuring out the situation with the remaining 13, some of which are still partially underwater as houston and the general area down here continue to try and dig out, and contain any toxic results. Guys all right, scott, thank you scott cohn in houston for us lets focus on Energy Prices in the wake of ha are very. Joining us now is jon kylduff, cnbc contributor were already seeing the impacts this morning of wti as well as gasoline futures wondering what you see, 11 of u. S. Total Refining Capacity still offline at this point . Yeah, but theyre doing a good job in coming back. Theyre coming back fairly rapidly. Much more quickly than a lot of folks had anticipated. Kind of on track with what i thought, maybe a little slower but look, weve seen rbob gasoline get hit hard. It went over 2 a gallon on that expiring contract last week. Now were back down to where we were right before Harvey Crude Oil is picking up because supplies there are getting a little tight not all the onshore production has come back on but there is a flotilla coming our way. Its easy to watch the Commodity Markets in that the price spike is attracting barrels with relief from all over the world for gasoline, for crude oil. Were going to get through this. Unfortunately i think theres another round of this same sort of price gyration looming here with irma. But irmas not going to right now we dont know where its going to hit. I can tell you the latest updates are having this thing track much more westerly, and into to be hitting the gulf of mexico. This is thursday but there was a hope the jet stream would pick it up and carry it back out. The very latest that i was looking at on the weather radar and projections do now have it going into the gulf and making landfall in sort of that alabama what are the implications first of all, much more direct hit on u. S. Offshore gulf of mexico oil and Gas Production if its a monster cat five the way rita was, youll have some structural damage to those offshore platforms, and to the pipelines underneath them. Much more Lasting Impact it wont be the quick, buy the rumor, sell the news sort of situation we had with harvey also, too, what refineries werent hit by harvey will be hit by irma. So, needs to be closely watched. But the projections are going in a bad direction, not a good one. Terms of what you see for wti, were at the point now where its upin the 47 range. Are we hitting the ceiling for this trade at this point oh, i would think so, yes i think we ticked over 48 just as i was coming on here. But this is about it some of the anxiety youre seeing, some of the Short Covering that had to go on in the aftermath or the runup to harvey is unwinding now. Thats part of it. It was a linked trade. Were buying rbob gas and selling crude oil on the refining spread to sort of lack in a virtual refinery for yourself now thats unwinding thats why youre seeing that. But look, all through august, there was significant yawnward pressure on crude oil prices the month would have been a much worse looking number on a percentage basis if it wasnt for the hurricane hitting in those last several weeks after katrina thats right. I called the katrina thats crazy. Katrina we know the anniversary, so that was august, and rita came september 18th and it was a cat five monster cat5 and rita did much more damage to the u. S. Offshore production than katrina did also did much more damage its a replay 100 . Maybe not though. Again, joe, the projections are looking worse. But were seeing it before its crazy it really is. Theres also another small formation down in the southern gulf of mexico that could be retracing harveys steps, too. So if you think if you believe that the projections are true, would you buy gasoline yes yes, you got to get longer planning spread again. John, thank you thank you guys. Coming up, columnist and author tom friedman is going to be our guest were going to talk north korea and this weekends big event at the library of Congress Check out the futures at this hour we are in the red this morning 63 points off for the dow, s p 500 off about 8 points well talk all about that in just a moment. 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Im living that yacht life, life, life top speed fifty knots life on the caribbean seas its a champagne and models potpourri on my yacht made of cuban mahogany, gany, gany, gany, gany watch this dont get mad bell mnemonic get e trade and get invested good morning, welcome back to squawk box here on cnbc were live at the Nasdaq Marketsite in times square among the stories front and center, Congress Returns from its summer break today lawmakers will have plenty to keep them busy including avoiding a Government Shutdown raising the debt limit and passing a hurricane aid bill the New York Daily News has got a new owner. Trum tronc has bought the news from zuckerman. He had sought 200 million when he first put the paper up for sale 2. 5 years ago and roqku going public. They are seeking to raise 1 00 million. Roku is still unprofitable, losing nearly 43 million last year and about 244 million since it was founded in 2002 okay lets talk geopolitics and more tom friedman, New York Times columnist, and author of the New York Times bestseller thank you for being late. This weekend, our Nations Capital played host to the library of Congress National book festival bringing together some top authors from world literacy tom was part of that tom was also on a recent trip just getting back from iraq. Air bases in iraq and afghanistan, and in the persian gulf but before we do that, tom, i need to get your take on north korea, and where this is all headed and what we should do about it well, you know, obviously its a problem i heard the conversation this morning with nick. There are a couple of pillars i cling to as i think about this story. Number one, the north korean regime is led by a dynasty that is now three generations old there arent a lot of dynasties on the planet today that have managed to rule for that long. And what that tells me is that this family is not suicidal. Theyre homicidal. But theyre not suicidal so, you know, obviously anything can happen but the chances of them initiating military action that they know would end up with their family and regime being vaporized, i think is very low the second pillar i hold to is that the ideal solution here is one that probably only china could engineer, and that is a coup detat that would remove kim jongun, the leader of north korea, and his immediate confederates, keep the regime together, but put in place there a group of people that are ready to reverse their Nuclear Program and missile threat that would be the ideal solution, for china and for us unfortunately, the bad news is, hes figured that out, as well which is why he killed the two closest people around him to china, his uncle and his halfbrother but in the meantime, i think weve got the Trump Administration has got it really right. Keep ratcheting up the military pressure, and much more importantly, the economic pressure and i think signaling to china that, you know, we are, you know, if this threat continues, were going to consider transferring back tactical Nuclear Weapons to south korea south korea turn on its Radar Systems now. Those systems cover chinese air space. The chinese do not like that in fact, they put a soft economic boycott on south korea for turning on those missile systems. But the chinese have to understand, you cant have it both ways. You cant say were not going to do anything and at the same time you americans cannot increase your defensive capabilities here, which, by the way, cover our air space. So i think ratcheting up the pressure on china is the right thing to do. Tom, let me ask you this, though, investors, and the military complex, always all trying to assess and put percentages on whats going to happen and what may happen the wrong way or the right way how do you assess it well, you know, its what they say on those stock tips, past performance isnt a good to future, you know, earnings or whatever so, all we can do, andrew, is look backwards, and the backwards story is that this regime has been consistently dedicated to Nuclear Weapons, we believe, and this may be to preserve its survival. They see that as its Life Insurance in a postsaddam hussein, postlibya world where regimes that give up their Nuclear Weapons, like rogue regimes like north koreas lost power. So if thats the case, i still believe, im not blass say about this, because the chance of miscalculation is enormous when youre dealing with such an opaque regime, but i cant say im restless sleeping at night if this guy is going to bomb south korea. Because that would be suicidal and everything tells us that this three generation dynasty is homicidal, not suicidal. And does the war of words matter and given that youve now spent a lot of time with the military just recently, how do you feel about both President Trump and the people around him . I think, you know, the president s gotten quite frisky with his tweets and whatnot. But a little crazy doesnt hurt when youre dealing with north korea. And china. So, i really have a problem with that theyve got to know that were not entirely the only rational actor here so i think, you know, keeping them a little on edge, particularly chinese i think are much more important andrew is the fact that we transferred these are technical things but theyre very important to china, we now have a surface an antimissile system, you know, going live in south korea that course chinas air space china does not like that russia doesnt like it and so, i think, you know, simply saying to both of them, you know, the old saying if youre in a poker game you dont know who the sucker is, its probably you not going to be us we can play this game, as well hey, tom, if we, in a few years, are living in a world where north korea and kim jongun, has a you heard me ask nicolas. I heard you before, yeah. Could we be living in a world and is that okay, could we sleep at night if kim jongun has the capability to put a Hydrogen Bomb on the mainland of the United States . Will we be living in that world . And is that okay i sort of lean your direction, joe, which is dont like it. We lived 50 years under threat of russian throughout the cold war, those nukes are still pointed at us. By the way, remember, joe, when china acquired Intercontinental Ballistic Missiles under mao and we thought mao was crazy, that was really freaky, we learned to live with it dont like this. Theres one thing i would introduce into the discussion, you know, we reported in the New York Times, andrew knows this, we reported it obliquely for reasons of National Security, you may have notice there was a spate of missile tests out of north korea where the missiles went up and straight down. There is, how do i put this, there is suggestion that the u. S. Government has the Technical Capability now through cyber antimissile defenses, to turn those missiles, you know, from going up to going down. We are working on systems, actually, that turn missiles to go up, and then go down back to the launch pad now because we havent actually deployed any of these in a war, i think people havent caught up with where antimissile Cyber Defense has gone and again, i wouldnt rely on any of this. Im not saying we should be blithe about it at all, but i have a feeling weve got some stuff in our arsenal that we dont want to show the North Koreans, because we want to save it for when we really do need it not waste it on their tests. But weve shown them enough, there was a spate of missiles that went up and straight down and that wasnt just because of their motor problems so you think its us holding back at this point in terms of using that technology, as opposed to we just dont have it ready yet and therefore thats why were not using it on these particular tests andrew, im guessing here i think theres a Little Machine going on here where you dont want them to know exactly what youve got so you dont want to be using it all the time, but we may need it. And having spent nine days with the u. S. Air force now in the middle east, and seeing some of the Amazing Technology our airmen and women there are deploying, i wouldnt be surprised, let me put it that way, if weve got weve got stuff in the holster nothing to be blase about, but theres stuff there. You just got back from some air force bases both in iraq and afghanistan and along the persian gulf just your takeaway from that experience well, theres two big takeaways that i that surprised me, one less, one more in iraq, we left in 2011 when they couldnt work out a deal for a legal structure for american troops to stay. In the ensuing three years isis emerged. And the Iraqi Government in 2014 came back to us basically and begged us to come back in different context. It was very striking in talking to marines, and airmen who have actually done multiple tours of duty in iraq, andrew, 2003, 2008, and now today, is how they describe it, and how totally different it is. In a sense in essence what happened was we invaded iraq in 2003 we took the place down from the top down were the ones who actually took saddams statue down, and we did it in alliance with exiles who thad very dodgy legitimacy at home. One of the negative byproducts of leaving in 2011 was the emergence of isis. One of the positive byproducts is we drew a line under that whole experience and weve come back now, by invitation of iraqis, working with the iraqi army, and in a situation where were using conventional air power, unconventional ground forces, that are advising iraqi. Iraq is doing all the fighting against isis its also forced iraq to come together more sunni, shiites, kurds, to win this war i have no idea what happens the morning after isis is defeated im pretty confident they will be defeated certainly in iraq. But the point is we have a much more legitimate presence there, and you feel it very much. You talk to soldiers who have been there before. They literally will tell you its a different country the contrast with afghanistan is stark. You know, we slept in the green zone in baghdad when i was there, where the American Embassy is, no shells, quiet, no one wearing flak jackets in kabul in Bagram Air Base we were kept up all night by the microphone saying take cover, another incoming rocket. These were small rockets, no one was threatened by them but we do not have a sustainable, legitimate presence in afghanistan, and 4,000 or 5,000 more troops is not going to make a difference i still believe our choices in afghanistan are lose early, lose late, lose big or lose small tom, before we let you go, dont know if you want to weigh in on this dreamers situation today. A lot of companies have come out over the weekend against what they think President Trump is going to do. Is there a way to thread the needle here . Well, you know, i go back to the original immigration compromise, andrew, and the group of eight and we need a strategic immigration policy by the way, id happily give trump his wall my view on immigration, is id build a very high wall. I believe a country has to control its borders. Im for a high wall with a big gate assure americans that you can control the borders, and then have a rational immigration policy that can attract the high iq risk takers that have made this country and sal convalley in particular what it is and also the high energy, lower skilled workers, and do it in a rational way we need a compromise we cannot keep trying to plug the dike with these different solutions. I should note, tom, you spent the weekend, 2017 library of Congress National book festival. What was that . It was great fun. Its, you know, first of all, it was a wonderful gathering of the community in washington, left, right and center we dont have enough of these things there was a spectacular list of authors of all across the range fiction, nonfiction, kid books, and i participated in the first one that was organized by laura bush, and this one now is in the convention center, we have amazing audiences, reading is alive and well in the Nations Capital, thank god. Okay. And thank you, tom pleasure. Always good to see you. Good to be with you guys. Coming up, former International Trade commissioner dean pinkert on nafta negotiations then later were going to talk to selfproclaimed wizard, mark grant well talk securities chief strategist the futures at this hour improved, not really down over 60 on the dow. Down 7 on the s p. 11 on the nasdaq stay tuned squawk box will beig bk. Rhtac because, when you really, really want to be there, but you cant. At cognizant, were helping todays leading Media Companies create more immersive ways to experience entertainment with new Digital Systems and technologies. Get ready, because were helping leading companies see it and see it throughwith digital. Wherwhere we always welcome you, thats texas. Exas. Where we always find a way, thats texas. The latest round of nafta talks now under way. Joining us with a rundown of what to expect, dean pinkert partner at Hughes HubbardInternational Trade practice, former commissioner of the u. S. International trade commission id really like to know, dean, what are we supposed to expect after all the rhetoric leading up to this well, i dont think we can expect breakthroughs today when they wrap up today for the second round, i think that theres going to be a kind of consolidation of tech, particularly on ecommerce but the real breakthroughs should start end of september in ottawa really . So the the well is not poisoned at this point theres still going to be when all is said and done, this was all posturing, and theres going to be something tangible that might actually be a benefit to everyone involved well, i certainly hope so i have a lot of confidence in bob lighthighser and his team at the trade represent tifs office. During the time that i was commissioner at the International Trade commission we saw Bob Lighthiser file a number of cases and he was always very adept at pursuing the interest of his client now his client is the Trump Administration and i expect that the aggressive trade agenda of the administration will be pursued aggressively, and very jointly by this group of trade lawyers and trade experts. So is there a way where everyone can walk away with something . Or is there going to be a loser somewhere . Well, i think there are going to be tradeoffs. But the administration has made it clear that on rules of origin, on trade remedies, and on any factors that may affect the trade balance theyre going to pursue their agenda canada and mexico have also indicated that they have asked for this negotiation so, maybe there are some trade ops that will occur. I certainly am optimistic that its not going to reach an end point where congress and the Trump Administration seek to pursue some sort of ending of nafta. I dont think thats very likely we talk about that. You point that out the media loves to talk about a nafta withdrawal but you dont think the technocrats that are in the trenches, thats not even talked about or isnt seen as something that actually has much of a chance of happening . Is that true i dont expect it to happen one of the things that folks need to understand about this is that the administration, of course, has a lot of control over whether were in or out of an executive agreement but these are executive, legislative agreements, and theres nafta implementing legislation thats on the books from congress. And in order to pursue a complete withdrawal, congress would have to be on board with the administration and i think congress is watching very closely to make sure that u. S. Interests are taken to account in the negotiation, that canada, mexico are flexible. And theyll be watching for that and so, so long as everybody is pursuing an updated agreement on ecommerce and other things, which have balanced components so that they protect, for example, Internet Service providers, i think that everything is going to come out okay i have a lot of confidence in this team. Are we if canada turned out to be just as tough a situation as mexico . Theyre asking for some things that were not ready to do, as well, right . Well, i noticed just the other day there was discussion a canadian proposal to strengthen u. S. Labor law protections for unions i think that would be a tough sell in washington. But, certainly all sides have their requests the u. S. Has concerns about trade recommend canmedies and t to apply trade remedies to canada, mexico thats going to be an issue in these negotiations so, i think there are just going to be a lot of tradeoffs, and, of course, on ecommerce, as i suggested earlier, i think maybe a conflict of interest on that so, the tradeoffs will really begin in late september. And well know well be done when . Well know everything to know by when well, the goal is to complete the negotiation by the end of the year you know, youve got the mexican elections coming up next year. They want to get in ahead of that i think that its possible that negotiations could bleed over into next year but thats not the goal okay. Were going to have tax reform were going to setting this north korean thing and were going to get nafta done by the end of the year. Thats a good schedule, dean thanks well see. Okay. Hope springs we ternal. Thank you. Well have you back to talk about it coming up when we return stocks to watch ahead of the open on wall street. Plus the latest on the north korean threat. And then how insurers are preparing for harvey claims, and what this means for the industry wevgoa t tk oue t lotoalabt. Squawk returns in a moment ah, dinner. Throughout history, the one meal when we come together, break bread, share our day and connect as a family. [ bloop, clicking ] and connect, as a family. Just, uh one second voice guy. [ bloop ] huh . Hey . I paused it. Bam, family time. So how is everyone . Find your awesome with xfinity xfi and change the way you wifi. Take a look at some stocks to watch this morning. Oracle was rated outperform at credit suisse. That firm says the market is underappreciating the power of Oracles Technology and its opportunities in Cloud Based Services shares of Delphi Automotive on the rise a wall street journal article focuses on this companys potential as a takeover candidate to complete the spinoff of its power train group. And Industrial Adhesives maker hb fuller is buying another company in its industry. Royal adhesives and sealants for about 1. 58 billion. Royal adhesive is currently owned by private equity Firm American securities. Okay coming up when we return the latest on the north korea bomb test over the weekend, and implications for the international community. Also the markets plus more on the mega deal of the morning. United technologies buying Rockwell Collins for 23 billion. And then a big week for the markets from politics to big data points. Hilltop security strategist mark grant is going to join us. Mequawk box returns in a mont i count on my dell Small Business advisor for tech advice. With one phone call, i get products that suit my needs and i get back to business. So thats the idea. What do you think . Hate to play devils advocate but. I kind of feel like its a game changer. I wouldnt go that far. Are you there . Hes probably on mute. Yeah. Gary wont like it. Why . Because hes gary. phone ringing what . Keep going yeah. laughs voice on phone its not millennial enough. There are a lot of ways to say no. Thank you so much. Thank you so were doing it. Yes start saying yes to your companys best ideas. Let us help with money and knowhow, so you can get business done. American express open. In tensioning rising. North korea reportedly moving a Ballistic Missile towards its west coast his abusive use of missiles and his Nuclear Threat show that he is begging for war. The latest from the white house, straight ahead. Sky high aviation deal United Technologies buys Rockwell Collins for 23 billion. In one of the Largest Aerospace tieups ever plus the aftermath of Hurricane Harvey insurers on the ground assessing damage to homes and businesses in houston. Well take you there live as the final hour of squawk box begins right now live from the most powerful city in the world, new york, this is squawk box. Good morning and welcome back to squawk box here on cnbc live from the Nasdaq Marketsite in times square, im joe kernen along with Andrew Ross Sorkin, and melissa lee, becky is off today. And the futures are lower. Which might be expected, given it has dictated some trading in the last six weeks or so, and im talking about news out of north korea. Very unsettling. 60 points. And 2 , 3 , nothing like that what the average is. Kind of unsettling down 56. 5. The s p down almost 7. The nasdaq indicated down about 11 europe didnt look any worse for the wear didnt move anywhere fractional moves, germany doing better than the other bourses. But really, hasnt changed and the dollar, the dollar has not up to 1. 20 on the euro. Now you can see its about 1. 19. Well see which way this finally breaks out really the new sort of normal, which is up somewhere around 1. 17 to 1. 20 well see whether it heads above, euro heads above 1. 20 or whether we pull back where it was a couple months ago. Okay a lot of news on this Tuesday Morning after labor day. Heres whats happening at this hour jet enginemaker United Technologies agreed to buy aircraft part manufacturer Rockwell Collins the transactions price tag 23 billion. Under the deal rockwell shareholders will be receiving 140 per share in cash and stocks, thats an 18 premium to rockwells Closing Price on august 3rd the day before the deal rumors first broke. Weve been talking about this transaction possibly coming up for the past week. The Companies SayRockwell Collins and utss Aerospace Systems segment will be combined to create a new Business Unit collins Aerospace Systems expected to save more than 500 million by the fourth year after its completion and uts holding a Conference Call literally i believe as we speak. And then later this morning the Ceo Greg Hayes who i think is on that call is going to join squawk on the street to talk about it its a cnbc exclusive and you can watch him at 9 30 eastern time another deal to tell you about is tronc, the publisher of Chicago Tribune and Los Angeles Times, buying the New York Daily News no cash changing hands on this deal tronc has agreed to assume all operating cost and debt and will acquire the papers Printing Press in new jersey. Along with the pension liabilities. The daily news was once the nations largest circulating newspaper but has faded as the readers shift online we should say its a homecoming of sorts the paper was founded by the tribune company. You know all papers are dealing with a shift to online right its not the only problem not the only problem. Not the only problem. But could give tronc a little bit of a lift this morning tronc tronc as it gains a national footprint. Tronc given that it now has the Chicago Tribune, l. A. Times and now new york and all the other newspapers and we talked about the savings theyre going to get by shutting down, or at least changing how theyre going to be printing from their other papers consolidating the hartford current and allentown papers, theyre going to ship them tronc versus godzilla because those two, that would be a you know its a little fake city and Everything Else who do you lose your money on . Godzilla or tronc . Who do you think godzilla. You dont play along with the tronc. You think tronc is fine. You think, hey, whomever they paid to come up with that its a terrible corporate name for sure. I think. Well, the worst ever. Im not you dont care about tronc . Tronc with a lower case t by the way. Did you see the original tronc or did you see the sequel when the news came out a lot of people wrote troncd. Got troncd okay alphabets google unit could be hit with a record fine by the European Commission later this month. According to the sunday times, the case involves allegedly anticompetitive moves involving the tech giants android smartphone software. The Eu Commission previously fined google for doctoring search results to favor its Price ComparisonShopping Services no word yet on what that fine may look like. Political news, President Trump expected to end pro he tekzs for dreamers with a sixmonth delay to give congressional leaders a time to act. This is deferred action for Childhood Arrivals Program or daca which shields young immigrants brought into the u. S. Illegally. Many tech leaders have been outspoken in support of keeping the program in place over the weekend apple ceo tim cook tweeting the following, he writes 250 of my apple coworkers are dreamers, i stand with them. They deserve our respect as equals, and a solution rooted in american values. Attorney general Jeff Sessions will make an announcement on daca later today microsoft also mosting a lengthy piece on linked in that i read also tensions with north korea escalating or have been moving on this morning the nation conducting its sixth nuclear test over the weekend. The white house reiterating that all options are on the table to address the threat we want to get to eamon javers with more on that story. Eamon . Yes, good morning, andrew its a very difficult diplomatic situation for the United States today in the wake of north koreas test of its biggest Nuclear Weapon yet over the weekend, nikkei haley the u. S. Ambassador to the United Nations put it in fairly stark terms, at the United Nations over the weekend, talking about the north Korean Leader kim jongun. Heres what she said his abusive use of missiles, and his Nuclear Threat, show that he is begging for war war is never something the United States wants. We dont want it now but our countrys patience is not unlimited. We will defend our allies, and our territory. Meanwhile the president taking to twitter to criticize both south korea and north korea in different terms on south korea the president said the following said south koreas finding, as i have told them, that their talk of appeasement with north korea will not work. They only understand one thing then he proposed a possible trade solution to this standoff saying the United States is considering, in addition to other options, stopping all trade with any country doing business with north korea. Of course, one of the biggest countries doing business with north korea is china, and thats also one of the biggest countries doing business with the United States, total trade embargo with china looks to be politically impossible but the president s going to be meeting with his National Security team today at 10 00 at the white house. So well wait and see throughout the day whether we get any more indications here of what the Trump Administrations position is Going Forward with north korea. Okay. I want to thank you, eamon we should just mention President Trump just tweeting about the dream act. Congress, get ready to do your job. Daca there you have that. For more on the north korean threat joining us right now is retired colonel jack jacobs, military analyst for msnbc good morning to you, sir good morning. Help us try to think through this you saw what happened over the weekend. You saw the war of words whats your assessment of where we are and not a very good place we procrastinated and china has, too, for so long that now north korea is in a position to threaten the United States directly there are no good military options. Everything that we can possibly use will either be ineffective we dont know where all the stuff is its scattered we only see it when were getting ready to fire. So, that wont work. We wont be able to emasculate the Nuclear Capability of delivering capability. Any surgical strike, even if its successful, will be met with violence from china chinas already warned us not to do anything preemptively also, by the way, have warned north korea not to do anything preemptively, and therein lies maybe a path to success. But, no good military options at all. Colonel, tom friedman was on just in the last hour and he speculates to some degree perhaps we have technology that we havent used yet. Perhaps you remember some of the earlier tests where some of these missiles went up in the air and quickly went down, there was speculation that we were behind that technologically. But that we have not used some of that technology on some of these latest tests do you think thats accurate yeah, we do have a good offensive capability our defenses are lousy but we have good offensive capability the North Koreans have managed to set up some defenses after the last cyber attempt theyre also very good at offensive cyber capability but, in any case, we dont want to use it too early, or preempt orly i dont think we want to use any cyber capability against missile tests. Only against actual attacks. So i think thats off the table. You talked about possible retaliation from china if we were to do something preemptively therefore, what do we need to do to get china on board with us . Well, we could squeeze china. You know we havent used any of the our capabilities, economic capabilities to the extent that we could we put some small sanctions on some chinese institutions and some north korean institutions but theres a lot of head room here all roads to north korea lead through china. And so squeezing china economically, selective institutions, china economically, may be able to get their attention. Right were not going to be able to sit down with north korea, do anything unless we have china on board, and thats what it takes. Colonel its a question weve asked virtually all guests this morning. As investors are watching you speak about this, how do you assess the risk from their vantage point, not necessarily in terms of numbers, but people are always trying to put percentages on sort of things going right or wrong yeah, well, i think the risk of war with north korea is extremely low. I dont think were going to do anything silly north koreas not going to do anything silly the biggest danger, really, is if north korea launches a test and the test goes awry a missile lands on on tokyo, for example, thats going to be a real danger. The actual the possibility of actual conflict either conventional or otherwise with north korea is very, very low. We have a capability of convention, of eliminating north korea do you anticipate us having this conversation for years . Meaning that this is that this intense period that were going through right now is just going to continue unabated well, for awhile, until they get the complete capability to strike the United States with a Nuclear Tipped Missile which is not far off. And then what well i think were working really hard to get these guys to the table. Were going to have to accept the fact that north korea has nucleartipped Intercontinental Ballistic Missiles theyre almost there now what we have to do is increase our cyber capability our defense capability locally. That means antimissile missiles, and the rest so that our our defense is credibility. But trying to eliminate north korea from the from the roster of nation states, with offensive Nuclear Capability, that is that to coin the to use the the cliche, that horse has already pulled colonel jacobs, thank you this morning scary stuff. But appreciate your perspective. As always. All right coming up, north korea just one of two big threats to the market mark grant is going to join us, maybe there are others, and just talked overall about whats going on here in stocks and bonds right after the break. And later, a long, painful summer for hollywood theater chains need a big hit. One might be coming this weekend. Well tell you what it is. Stay tuned youre watching squawk box on cnbc your brain is an amazing thing. But as you get older, it naturally begins to change, causing a lack of sharpness, or even trouble with recall. Thankfully, the breakthrough in prevagen helps your brain and actually improves memory. The secret is an ingredient originally discovered. In jellyfish. In clinical trials, prevagen has been shown to improve shortterm memory. Prevagen. The name to remember. Wherwhere we always welcome you, thats texas. Exas. Where we always find a way, thats texas. Welcome back to squawk box. An update on Hurricane Irma has now been upgraded to a category 5 storm. Its currently approaching puerto rico and the environmenten islands, and is seen as likely at this point to hit florida, which is already declared a state of emergency. Governor rick scott, we just had John Killduff who is an oil guy, i dont know whether hes a weather guy, but he says the gulf is threatened what ive seen so far, st. Kitts, all these islands in the caribbean and maybe the keys it would have to go south and then up. I guess hes saying it has a slightly more westerly trajectory, that way it could hit some of the refineries that had escaped harvey right right. Which would be worse. Yes for the oil well, you know, youre talking about oil and i guess we are with cnbc but you know, florida, in the past, has had some horrific events down there, obviously i think one was named after you, wasnt it . Yep the worst one i remember that andrew. Lets get back to the markets. Joining us now, mark grant, chief strategist at Hilltop Securities the head line, mark, it just said Global Markets sort of just not doing a lot on korea, and i think thats thats sort of like sums up what were seeing, right . Its hard to go up, its not really going down that much. But its sort of a its unsettling, isnt it joe, i think that a lot of people, i watch your show all the time, i think a lot of people think the most salient point of where the markets are where they are people have come on cnbc and squawk box, and said, the price earning multiples dont support, and were going to have a correction, and for bonds they said were going to be at 3 on the 10year. And thats all been wrong, and the reason is that the Central Banks now have 19 trillion dollars in assets. Theyre adding 300 billion a month. The economy of those assets is the same size approximately as the United States and china, and they keep growing it and thats driving equity prices up, and bond yields down and i think thats the most salient point for the market and with inflation so low, theres no reason to think thats going to change any time soon there not only inflation being so low, joe, the Central Banks behavior isnt going to be changing any time soon so basically youre looking at a year from now were going to be 22. 6 trillion in assets and unless we have a major blowup with north korea, or argentina, which i think are the two most dangerous places right now, were just going to keep continuing equities higher, bond yields lower fed governor Lyle Brainerd is making some comments this morning at the Economic Club of new york, mark, and he essentially says inflation is so low, it is so weak right now, that perhaps the fed should slow down even further when it comes to Interest Rates. This is a market that barely believed that what happened in december i would think that gives tremendous support for equity valuations to remain exactly where they are here, or even go higher potentially well, thats right. It could even go higher, and as i said, what the Central Banks are doing are driving the markets, our own central bank, of course, is talking about a return to normalcy, which i find to be honest ridiculous, because when you have 19 trillion dollars in assets, which has never happened before ever, in the central bank globally, what is normalcy . Theres no normalcy here this is a whole different world. Mark, if, in terms of, you know, in terms of tax reform, deregulation, global synchronous recovery that were seeing in the economy, i understand your liquidity argument there, but eventually that was supposed to allow central bankers to pass the baton to the underlying economies. I mean there are good things happening in places in terms of economic underpinnings, arent there . Or not well, there are lets look at what globally, for a moment so if you take europe, versus the United States, and for, you know, 30, 40 years, we have lower Interest Rates in europe now, because what the ecb is doing, the only countries in europe with higher Interest Rates than the United States are portugal and greece. I mean that makes no economic sense, but it makes a lot of sense when you consider what the ecb has done, which is keep growing and growing their balance sheet, which means that they can support their social programs because of such low Interest Rates and i just dont see this changing any time soon of course, joe, you or lots of people, when is it going to stop and whats going to happen when it does, which is a legitimate, good question. But i just dont see it changing any day soon, any time soon. So this meeting with the ecb this week, mark, on september 7th, you dont think that were going to get any sort of information on tapering . You dont think that draghi is going to come out and talk about the euro, which is going to put upward pressure on the u. S. Dollar, which could then impact our market is that is that not on your radar as an impact you know, ill be listening to him and hell be saying stuff, and will i believe what hes saying very much . I tend to watch what people do, and so i dont think hes going to say much thats going to impact anything. And my expectations of him doing something that will impact anything are pretty close to zero where is your where are you down there Fort Lauderdale get ready naples well, what i did was last night i called irma and i told her we werent home and to please go away turning north the jet stream was supposed to take it but it didnt happen anyway, mark, well keep an eye on this for you, and you know, just be aware, i guess, at this point. Thank you very much, joe, appreciate it. All right thanks coming up when we return, not so hot summer for hollywood. But a very creepy clown could the boost the box office nee lte y what we mean. E brakes looked at . Oh yeah. No. At cognizant, were helping todays leading manufacturers make things that think and do automatically. Imagine that, a world of new Digital Products and services all working together for you. Can i borrow the car when its back . Get ready, because were helping leading companies see it and see it throughwith digital. People dont invest in stocks and bonds. They dont invest in alternatives or municipal strategies. What people really invest in is what they hope to get out of life. But helping them get there means you cant approach investing from just one point of view. Because its only when you collaborate and crosspollinate many points of view that Something Wonderful can happen. Those people might just get what they want out of life. Or they could get even more. Welcome back to squawk box. A flop at the box office, it is called, well the entire summer Julia Boorstin puts the wraps on what well call a blockbuster season, julia. Well, over Labor Day Weekend there was not a single new wide release, bringing the north American Box Office for the Labor Day Weekend down about 25 from last year it was the worst labor day in almost two decades, ending what was the Worst Summer Box Office since 2006 dragging the yeartodate total down over 6 according to contour. Now hopes are high for a turnaround in september. This is typically the slowest month of the year. This upcoming weekends debut of stephen kings it from Warner Brothers generating the highest presales ever for a horror film or a september release the launch of it says he believes a bottom has been achieved in terms of a box office the theater chains are in need of a hit so far this year, shares are down 57 , regals are off 25 and sin mark shares are down expectations are particularly high for the fourth quarter. Tried and true marvel is followed by Warner Brothers highly anticipated justice movie and then theres disney stars wars the last jedi which is coming out in december so lots of hopes for a turnaround back over to you lets hope so for their sakes. Julia boorstin in los angeles. Coming up congress is back in session today with a very packed agenda, avoiding a shutdown, raising the debt ceiling and a tax code overhaul. Well talk about whats at stake for the trump economy. Hey, hows it going . Um. Who are you . Im val. The orange money retirement squirrel from voya. I represent the money you save for the future. See . Were putting away acorns to show the importance of being organized. Thats smart. Whos he . Hes the green money you can spend now. Whats up . Oh you know, gonna pay some bills, maybe buy a new tennis racket. Tennis racket for a squirrel . Hes got a killer backhand. When its time to get organized for retirement, its time to get voya. Good morning, welcome back to squawk box right here on cnbc were live at the Nasdaq Marketsite in times square among the stories front and center at this hour, fed governor Lyle Brainerd saying that the fed should be cautious about raising Interest Rates until policymakers are confident of reaching the 2 inflation target in comments prepared for the delivery to the Economic Club of new york, brainard says the fed needs to overcome a quote persistent failure to reach that target do we think thats moving stocks a little bit this morning . Something to watch. Marginally. Theyre down more now light day on earnings we have one company of note out with numbers, after the closing bell hewlettpackard enterprise expected to report quarterly profits 26 Cents Per Share is expected on revenue of about 7. 5 billion. Also dutch toymaker lego, we love legos, planning to lay off 8 of its workforce. That follows a 5 drop in sales for the first half of the year lego currently employs more than 18,000 workers i dont think theyve ever had a down quarter im surprised, given given the contribution from the sorkin family, how its even possible that they had a tough quarter. Hard to compete with the apple device you know techniques, the technique version making motors you dont just wait for the company to send you that you pay for them so much for legos and lego robotics. Have you been to lego land . Weve been to lego land in florida. However the boys desperately want to go to the one in san diego. San diego, correct san diego or l. A. San diego but not exactly but closer to san diego. Yeah. All right tensions with north korea rising the north was observed moving a rocket that appeared to be an icbm nbc news chief Foreign CorrespondentRichard Engel is now live in seoul, and he joins us richard. Its good to see you its been awhile good day it has been awhile. You dont talk, you dont call, you dont write. We used to talk all the time now we have to be discussing nuclear war to get me on the show its a bad sign. So, the situation here is quite serious. And it could develop over the next couple of days. South korea expects that fully expects that north korea could carry out another Ballistic Missile test the day to watch is saturday local time that is a major holiday in north korea. Generally they have carried out shows of force at times to coincide with major holidays if they do carry out another Ballistic Missile test, what to watch is the direction that it takes. When they fired it over japan, that was an escalation if they fire it out to sea, probably not so much if they fire it in the direction of guam, thats an important thing, because the u. S. In that case might try to shoot it down. North korea would probably love that because then things escalate even further and ratchet up even higher so we could have a very important few days in this very tense environment. Yes well, nobody knows were back to the mad. And thats every guest weve had on today has said i dont mean that kim jongun is mad, or insane, back to the mutually destruction. Exactly, and that of all the things he likes, he were not were not. He likes to be alive, though, doesnt he and if he were to go too far, wouldnt his own wouldnt that be an existential threat to his regime, and his country, if he were to make an offensive move oh, if he were to make an offensive move, if he were to launch a weapon, a Nuclear Weapon at the u. S. Territory, defense secretary mattis just said yesterday that that would be the end of north korea, and that threat ive been told by numerous sources is absolutely credible the u. S. Would absolutely do this, and would not hesitate but going back to what you were just saying, the issue here, and this is why its so complex, is that we are not necessarily in a mad state. You go back to the cold war. The soviet union had so many capable Nuclear Weapons, so did the United States, both sides clearly knew that if they escalated, they would be mutually assured of destroying each other, and in theory that kept the peace, and in practice it kept the peace. But what were having now in north korea is a country that has proven it has Nuclear Weapons, proven it has some icbms, and has proven that or it claims that it can put the two together but the program is still somewhat in its infancy. So there could be that temptation, and i know there is that temptation, among some military planners in the u. S. , to decide, can we strike first is there still a window to act now . Im told the u. S. Wants to solve this crisis diplomatically, that that is the first option, they want to go through china, absolutely but that they do see that they still have a window to act not a mutually assured destruction scenario that there could be a window six months, a year, two years, unclear, that if they needed to act, it would be a horrible consequence, there would be a lot of deaths here in seoul. There would even be a lot of deaths among u. S. Military personnel in this country. But that there is still a window, one that is closing, and that is why i think this situation is so delicate because were going to see, i think over the next several months, these two tracks a push toward diplomacy, but an increasingly hard calculation by military planners that if they had to act, how can they do it before you enter that situation of mad, where the north Korean Program is truly irreversible. Right well thats the question we finally came to with a lot of the guests earlier, richard, was that there may come a time where we know that there is a an icbm capability pointed, Hydrogen Bomb, pointed at the United States, from north korea, five years in now, where we are in that position, and your point is, i dont know, just some people are accepting that as inevitable if you dont accept that as inevitable, then maybe you have to talk about what you were just, you know, referring to i dont know whether the loss of life that you alluded to is something that is palatable to anyone, though which means we may be five years from now in a position where e the, once again, pointed at us by a crazy regime. Well and its not just its also a numbers factor if you have one or two or five icbms with some sort of Nuclear Weapons mounted on them, and they havent fully demonstrated that they can get them all the way to the u. S. , and have the missiles reenter, and explode properly, so this is they have an advanced Nuclear Program, but its still crude relative to what the United States or russia or other countries have but if youre talking about several years out, and they have hundreds of rockets with more advanced Nuclear Warheads on them, and they are hidden in hardened bunkers, and theyre on mobile launchers, and they have fuel, solid fuel ready to go, that is a scenario where the United States, frankly, u. S. Military planners, do not want to go. So how do you get out of it . If you ask this current white house, they want to put pressure on china to negotiate the way out. Ive been speaking to experts here in south korea, dont think thats going to work they dont think that china necessarily has that kind of leverage they think its a bit oldfashioned, or even a little imperialistic to think that the u. S. Can just dictate terms to china, and they think it will be better if there were some sort of direct talks to north korea russia has made it clear it doesnt support the u. S. Strategy on this Vladimir Putin just in his latest comments said that north korea is not going to give up its weapons, shows of force are only leading us to a more dangerous outcome. And that the solution is to back off from the brink, talk about it, give north korea reassurances that youre not going to destroy their regime, and maybe then there will be some room to negotiate because if you look at the other regimes that have given up their weapons in the past, like saddam husseins regime gadhafis regime, saddam was accused to have nukes, then you know, look what happened to those two leaders. So there are different approaches here. Right but if this escalates, and the u. S. Decides that that window is closing and it needs to act, it would be the people of seoul who would pay the price. Okay, richard you probably arent seeing this tweet. Weve got to say goodbye but you can listen this is the president tweeting two minutes ago, i am allowing japan and south korea to buy a substantially increased amount of highly sophisticated military equipment from the United States so thats just that was a daca tweet earlier, and this tweet on north korea just out about two minutes ago. Anyway, thanks to Richard Engel. We do want to take a check on the 10year treasury yield weve seen in just the past ten minutes or so dropping were now down at 2. 122 were also seeing the dollar extending losses against the japanese yen hitting a one week low against the yen, pretty much across the yield curve, the 2year yield also down significantly in just the past ten minutes. We did bring you some of those comments from fed governor Lyle Brainard saying that the inflation target simply has not yet been reached perhaps the fed should move a little bit more cautiously perhaps thats behind a further bid into bonds were not really sure right now. But were also seeing commensurately weakness in the u. S. Equity futures at this hour they have been down about 60 pretty much all morning. We saw that down about 70 on the Dow Jones Industrial average this is something were watching very closely, the 10year yield moving down to 2. 122 . Kind of stable here. And the Trump Administration reigniting the push for tax reform joining us now, austan goolsbee, professor at the university of Chicago School of business, and michael strain, director of Economic Policy studies and resident scholar at the American Enterprise institute austan, i dont democrats arent monolithic, obviously, and i dont know where you stand on this, but you saw it was a they made a big deal out of tim ryan, an up and comer from the great state of ohio, sort of saying maybe its not a 51 vote reconciliation deal for republicans, that maybe democrats in certain areas might get on board with tax reform are you on board do you think that party will be a cosfrer with the Trump Administration to some well, i dont think it will end up cosconspir for because i dont think the president or Mitch Mcconnell, neither one of them is talking about anything that would be remotely considered bipartisan in approach so i dont think in the end that its going to work but if they were willing to start with some bipartisan approach to help working people have bigger take home pay checks, not the majority to high income people, i bet there would be democrats that would be on board with that. You dont think that any theres no youre saying trickledown is never going to work, its not going to work again, you dont think that if you were able to get the conspirator economy to 3 , whether its repatriation or lower Corporate Taxes, if you take the leap of faith that that would increase growth dont you think that would help the people you just talked about austan . 3 growth would help, for sure but if you look at the growth rate its already in for the year around 2. 5 the unemployment rates 4. 3 , 4. 4 so how much faster do you think that growth is going to be i dont know. Thats why economists look at the you think republicans are going to you just think theyre wrong about the approach then . Or do you think that they go through all this stuff just to line the pockets of their buddies and their supporters thats really probably got some of both of those really . But i think its not that the that its the wrong approach, its that Mitch Mcconnell already identified he has no intention of trying to get any democratic votes okay. Theyre not even starting from a premise of well, should we go to the right or the left theyre shutting the front door and going through the back michael is there a way to help income inequality, a way to help wage growth from supply side growth policy or is it just a way to lower taxes on wealthy people . Well, i think theres certainly a way to help working people through tax policies that increase incentives for businesses to invest, and to help increase the Overall Economic growth rate and austan agreed with that when he said that 3 growth would help. I think that its important to be clear about what were talking about. I mean surely austan, and surely Many Democrats in the congress believe that the Corporate Tax rate is much too high, and hopefully there could be some bipartisan support for lowering the Corporate Tax rate if something that both republicans and democrats, many of those, agree on i think austans right that t the that senator mcconnell, and that the administration seems not to want to lead with a bipartisan approach. I think thats a mistake its important that whatever we do with tax rates be permanent if we have as a 10year temporary deal that would be that would be really a shame and the economic effects that were all hoping to see from a tax reform really require that what happened be permanent and in order to do that, it would be really helpful to not only be relying on republicans, given the size of the majority you guys just real quick put some numbers on where you think this is going to end were going to be talking to treasury secretaries next week, all three of us, i believe, joseph, at the bringing alpha conference, where do you think the actual rates, where do you think they land . What theyve said they want is for corporate to go down to 15 . Right no, no, i know what theyve said im asking you what you think is realistic . I think i think realistically, if you were going to take and try to do a bipartisan permanent approach, you could maybe get it to 25 but youd have to gore some oxes to do that because youve got to youve got to pay for that number if they just try to do a pure tax cut, i dont even know that they can get to 25 because its just going to be too expensive. Michael yeah, i agree i think 25 is right. If we do something thats permanent. I think either the more that the Congress Leans towards something temporary and loses a lot of revenue, the higher that rate goes but i think 25 is a good estimate for where we could get. And i think austans right its going to be hard to pay for that and thats why both parties need to have some fingerprints on whatever we do because, the way that we pay for those things is to curb deductions, and curb exclusions, and those deductions, and those tax exclusions have powerful political constituencies that need to be overcome. All right thank you both for joining us this morning austan goolsbee, michael strain. Thank you. When we return, harvey aftermath. Floodwaters receding texas residents preparing for a long, painfuand colyl st Recovery Process a live report from houston my dell Small Business advisor has gotten to know our business so well that is feels like hes a part of our team. With one phone call, he sets me up with tailored products and services. And when my advisor is focused on my tech, i can focus on my Small Business. A dell advisor can help you choose the right products with powerful intel® core™ processors. People dont invest in stocks and bonds. They dont invest in alternatives or municipal strategies. What people really invest in is what they hope to get out of life. But helping them get there means you cant approach investing from just one point of view. Because its only when you collaborate and crosspollinate many points of view that Something Wonderful can happen. Those people might just get what they want out of life. Or they could get even more. What they want out of life. Are you ok . What happened . Dad kinda walked into my swing. Huh . Dont you mean dad kind of ruined our hawaii fund . I thud go to the thothpital. There goes the airfair. I dont think Health Insurance will cover all. Of that. Buth my fathe without that cash from aflac we might have to choose between hawaii or your face. Hawaii what . Haha. Hawaii you might have less coverage than you think. Visit aflac. Com and keep your lifestyle healthy. Aflac the floodwaters receding in flooded houston neighborhoods after the devastating impact of Hurricane Harvey, insurers are heading into the field to assess the damage Morgan Brennan is live in houston. She joins us now with the latest morgan hey, melissa. Thats right so the early loss estimates from Hurricane Harvey are wide ranging, and for good reason this is complicated. Some of the damage is going to be covered and some is not. So take nell, an accountant who was forced from her home this home behind me last week due to the storm a home that is located just inside the beltway in my house, it looked like a river, but in my house it was up to four feet inside but outside part it was more probably five or six so nelby sa probably. She did lose four cars, covered by Farmers Insurance after the deductible farmers has had those cars towed to a salvage lot grant money for fr fema, any will do. She says shes lucky because she has contractors already in there working and they have sheet rock, which is in very short supply here in houston right now. This is just one home on one street, a street you can see is quickly getting crowded with ruined furniture and debris. Debris that is attracting stray dogs and is already starting to stink of mold as they wait for the trash collectors to come here this is the scenario that is playing out right now in so many parts of hughouston guys morgan, thank you Morgan Brennan in houston. Lets take a closer look at the insurers Life Property casualty and mortgage insurance sectors, randy, great to have you with us here is the question for investors. Are the damages going to be enough for insurers to raise premiums for the next season our answer to that is no. Total Economic Loss is going to be a lot higher. There are a lot of auto losses in that number for us, per the spot that morgan just did. So, youre talking about an industry that we estimated it being overcapitalized somewhere between 100 and 150 billion and capital is the supply for insurance. Theres just too much of it. You would need a much bigger event or series of events to change pricing in Property Casualty insurance overall. In terms of the auto losses, an estimate of almost 5 billion pretax auto related tacks. Where do you stand on that will consumers be reimbursed new car market prices and the value of the cars were dwindling extremely quickly. How will consumers be reimbursed in general for that extremely dwindling price of that auto are they going to get enough to actually upgrade their car or replace the car that they had . The Auto Component is very large, somewhere around 7 to 89 billion, unprecedented in auto losses for the event f you have comprehensive coverage, your car is covered. But, you know, its for the blue book value generally its a case by case basis. We estimate Something Like 400,000 cars will have insurance claims in this event. 400,000 cars. Randy, thank you for your time appreciate it. Randy binner. Thank you. When we return, elon musk is predicting world wariiut n i bot for the reasons you might think. 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Whats Critical Thinking like . A basketball costs 14. Whats team spirit worth . cheers whats it worth to talk to your mom . Whats the value of a walk in the woods . The value of capital is to create, not just wealth, but things that matter. Morgan stanley dont know if you caught this over the weekend. Elon musk taking to twitter over the weekend, giving a warning about artificial intelligence. Competition for ai superiority at National Level most likely cause a world war iii. He added that the war, quote, may be initiated not by the country leader bus one of the ais if it decides that a preemptive strike is most probable path to victory he says this, by the way, in context of worries about whats going on in north korea. He says i wouldnt worry about that i would worry about this. Reporter me too. Whether ai threatens his subsidies for his companies and thats why no, no, no. Why else has he got such a he has been on this for quite a while. Well talk more about elon musk and ai join us tomorrow for that conversation weve got to g squao. Squawk on the street begins right now. Good Tuesday Morning welcome to squawk on the street im Carl Quintanilla wit