And it is compelling. So, i also want to underscore that while investigators are gathering additional evidence on the ground, our understanding of what has already happened in syria is grounded in facts, informed by conscience and guided by common sense. Uncertainty about the possible military action against the Syrian Government is helping lift Oil Prices Near a fivemonth high. And also, some new numbers on the massive california rim wildfire that continues to burn out of control. Crews now have 20 of the fire contained. Thats the good news. But its still fanning out across the mountains in multiple directions, and the forecast calls for strong winds over the next couple of days, so that has some people anxious as well. In the meantime, im going to send it over to kayla with corporate headlines. Kayla . Hey, andrew, its a big morning for earnings, a lot of company news. Bill ackman has sold his stake in jcpenney after his campaign to overhaul the retailer failed. He sold approximately 18 of the company to citigroup. The wall street journal reports ackman sold his stake for 12. 90 a share, and of course, citigroup as an underwriter would then have the option to resell those shares. Also, best buy finder Richard Schultze plans to start selling his stake in the Company Later this year. A regulatory filing shows he informed the Electronics Chain about his plan, saying the move is part of his personal longterm strategy for asset diversification and liquidity. And best buy shares have, of course, been rising just about 100 in the last year. And in other investor news, dan loebs third point revealing its boosted its stake in sothebys to 5. 7 of the company. Third point says it would look to talk to management and the board. Of course, this is the second fund or active manager to take a stake in sothebys. Nelson peltzs Trian Management also did that in the Second Quarter, so certainly will be interesting to watch that stock. Ticker bid. Joe . Sothebys. Sothebys. Um, wow. I clearly mispronounced it. No, no. Youve got to can you lock your back sosothebys. I need some cotton balls. Long island lock jaw, or, yeah, theres a part, one particular part of long island where, the north shore up by piping rock. Do you know where im talking about . I know long island iced tea. Long island iced tea. I still have my buttons, my jcpenney buttons that bill ackman those will be worth something, dont you think . The buttons that he brought in that were going to turn the company around. Lehman brothers and other stuff. I had a new coke advertisement. Lets check on the markets this morning. Ugly. And i guess that has to do, again, with it was worse earlier, actually, but i guess it has to do with syria potentially, because the tenyear is suddenly behaving a little better. Oil is also problematic, thats like a tax on everyone else. After that durable goods order, we dont need any headwinds for the economy right now. Lets check out the tenyear, which is behaving a little bit better. That should have helped. And it did help initially yesterday, until you saw secretary kerry make those that was the best, i thought of he really sort of moved me on his did he . He did a little bit. He looked very diplomatic, statesmanslike. That was good. Anyway how could you not be, though, when youre talking about. I know, i know. Im not sure what to do. Im not sure what to do. We cant theres times when we say we cant police the entire world, but then i saw some of the testimonials from some of the children, just please, you know, please, president obama, help us, dont, you know, years from now i dont want to say, you know, you had a chance to do something and you didnt help. So, i dont know. I dont know what we do there. Going to check out the dollar quickly and then well go to the gold board, which, gold is back up above 1,400. The dollar hasnt seen a lot of interesting action recently so much. Were about 1. 33 on the euro, but theres gold, which is now close to see either in a bull market or close. Time for the Global Markets report. I may have been pronouncing this guys name wrong for a while. Ross westgate is standing by in london. Youve been there so long, are you french . Am i saying that wrong . No, but i went to france. Whens the last time i saw you . Maybe its because i was on vacation. I mean, you are a sight for sore eyes. Its been a while, hasnt it . Yeah, i just took like a twoweek vacation. I dont know, thats two weeks . Two weeks . When youre on vacation thats nothing in the uk. He should be taking five. Yeah do you go let me guess, portugal . No, france. Oh, yeah, i got it. I nailed it. I got it. All right. So, i was right, huh . Yeah, good. Yeah. Awesome. How was it . It was good. Hes so busted. He looks like he wishes he were still there. Hes so busted, he doesnt know where to go with this. That would be my country of choice probably, too. We love you know, we dont care that they have no economy left because its so beautiful. And the food is so the rose and the food is very agreeable, ill tell you. So is the weather as well. Not quite as agreeable, joe, as i love the music not quite as agreeable as this wall behind me. Dow jones stoxx 600 only 101 sorry, 91 declines outpacing advancers at the moment. Risk aversion trade very squarely in. Not quite at the session low but near as far as can be concerned. The uk on a holiday yesterday, which is why i took the extra day as well. Why not . But it is down today. Ftse mibs up 1. 5 along with the xetra dax, ibex down 1. 33 and ftse mib down 1. 5 as well. Ill bring you antofagasta, the Mining Company down 2. 7 . More for the comments that the ceo gave us earlier today, saying were worried about an oversupply of copper because china demand is slowing, and that could weigh on prices until 2016. Take a look at copper prices. Gold is higher, as joe was talking about, around the 1,400 mark. And brent and nymex are higher as well, but copper was not there. But copper is firm. Spot silver at the moment, but ill tell you, copper is lower today. Sor sorry. On those comments as well from antofagasta. Lets show you bond yields. Weve had a couple pieces of news out today. The german business ifo index probably the most important Sentiment Survey out of europe, better than expected. Coming in highest since april of last year. That didnt help out the german market. Bond yields are low because of the riskoff trade. And auctions out of spain. The tbill auction went fairly well, they raised more than expected. Yields lower. Yields in spain as a result on the cash market are lower. At auction, costs at a twoyear debt sale, coupons rose a bit after berlusconis party, pdl, said that if they threaten to eject berlusconi from parliament because of his tax fraud conviction, they may try and break up the italian coalition. So, the cost of money at a twoyear Auction Going a little bit higher today as well. Thats where we stand. Back to you guys. Ross westgate, looking tan and rested. Very nice. Very nice. We have a little bit of other news for you this morning. Apple reportedly preparing its iphone tradein program. Joe, are you going to do this . You just got an iphone, so you might or would you trade in for the 5s . It was originally supposed to launch in june, now reporting that apples begun sharing details on the initiative. Apple customers will be allowed to trade in their used iphones for credit towards a new iphone. I think i maybe have the most imperfect iphone timing ever. It seems that i always choose to you just bought an iphone . Either my upgrade is illtimed or i choose to pounce on the upgrade a month before the new one. Why would this be better . Because you would take your phone why would the 5s be better . We havent seen it. Its coming out on the 10th of september. One thing id like them to fix the keyboard . Take that smartass siri and give her a little manners, and just, if she doesnt know for me, she always gives me some smart answer. I think siris been drinking on the job. She has. Shes been not so great for me. Hold on. Heres my phone. Stay where you are. Hold on. This is unprecedented. This has never been done before. This is, like, why, do you have going into the dark do you have Something Better come over. I just want to show you this. Im sorry. I saw this yesterday and it blew my mind. You know how on google, you know how google glass, you know how we always talk about google glass . Yeah. To get google glass to work, you have to say okay glass. Thats the phrase. Okay. Open sesame. If you say okay glass, watch this. Can you get this . Okay, glass. The glass is half empty. Enter. So, and thats what im saying. Its very smart, but it gets worse. Okay, glass. Stop trying to strap me to your 5 enter. It wont work. Am i right or am i right . She is a shes a smart ass. Can we say that . I want somebody to say yes, mr. Kernan, your hair looks great today, mr. Kernan, Something Like that. Although it would help if she did say that, probably. Yeah, i want her to. I do i want her to be nice shes not nice. I mean, if im going to talk to a machine it is going to get better apparently in the next better . The voice. Oh, it is . They say the voice will become less robotic, more natural. It will say joe like sean connery telling you how nice you look. So, joe, have you been working out . Things like that. Our newsmaker of the morning, he looks good, treasury secretary jack lew. Hell sit down with john harwood at 7 30 eastern. John will join us from washington with a oh hes right there. I want to talk about the other thing, Larry Summers. You are the man you are the man. Who was your source . Can you tell us that . Hey, joe . Yeah . Before we get there, can i just suggest to you, you might be able to get that app that trades siri for miley cyrus . Shell talk to you on your iphone that way. Yeah. Ow. Id like a twerking iphone. Will that man, that got a lot of play. Shes only 20 years old, come on. It works so well. Whoever her manager is, i want to hire him, but should i twerk . Do you think that would help . Maybe i could get on tv no, please, do not. I dont think this will work. Is there anywhere that i can do that now . John, someone inside ill tell you what, this im not under any false illusions that Larry Summers will be that much less keynesian than janet yellen or accommodative. I know hes a big stimulus guy. But just that obama, president obama decided not to do the politically expedient thing, im so if youre right, if your source is right, because the left really hates larry. And for the president to do that, its like im doing what i think is right and i dont care what you think, because the people that think that larry was the deregulatory guy, mr. Cdo and all that stuff. This is a bold move, and i like it. Well, let me just make clear, my source, and i talked to a couple yesterday who expect larry to be named by president obama, dont know that. Theyre reading the tea leaves. Oh. We talked about this before. Uhoh. They, the number of people who actually know what the president s going to do and when hes going to do it is pretty small, but theres a wider circle of people who are in touch with some of those people and who draw some conclusions. So, thats the basis for this. One source predicted that this would happen in october. The other said within a couple of weeks. This has gone on for a long time. Its been an unusually highprofile round of speculation. We havent really seen this to this volume in the past, but the indications are that the president is leaning toward larry. Good. And if he does make that choice, youre right, he will have picked someone with whom he went through the fire of the financial crisis, just after president bush went through it with hank paulsen, who andrews got a nice piece were going to talk about that. Interview today. But you know, there was a level of trust built in there. And remember, you know, Larry Summers had a lot of trust from bill clinton and bob rubin, people who had a lot of credibility during the 1990s, so this is a very capable person. Janet yellen also a capable person but doesnt have as close a connection to this president and this president s team as Larry Summers does. But john, you know, your report went so far as to say that summers is being vetted and that that vetting process is what could take the next few weeks. Is it possible that the administration could be vetting two people at once . How would that work and what are the Politics Around that . Yes, sure it is. Larry summers, because he left the administration, and weve seen some coverage of whos paying him since he has left and the Employment Situation hes gotten himself into, all of that has got to be vetted for conflicts and that sort of thing, but that doesnt mean that only one person is vetted. No, they could be vetting multiple people at the same time, just as a president vets multiple potential Vice President s during a campaign year. Well, you could sort of see it happening, john, and i am not surprised, because at first he was sort of floated, and then the left pulled out all the stops. There was a day, the Huffington Post had six straight articles that said Larry Summers is the devil. I mean, one after another came down. Then people say yellins better, the economist wants yellin, then you hear from the white house summers. Then someone else says yellin, yellin, yellin, then you hear from the white house summers. Kept hearing summers. Joe, honestly, im confused by the opposition of the left to summers. He has been a mainstay thats something for you to say, john. Simpatico. Hes been a mainstay of democratic governmental economics for a long time. I first met him in 1988 when he was michael dukakiss economic adviser. Ooh. Yeah. And hes been right there the entire time. And you know, there are people who go after the deregulation that he was part of during the clinton administration, same people who loved bill clintons speech at the Democratic Convention for president obama this year ralph nader called him a mega millionaire today. And how he lost his job at harvard, all that sort of stuff. Ralph nader called him a mega millionaire. Is there anything worse you can call somebody than wealthy, andrew . Not from a knowledge perspective yeah, theres one thing worse you can call someone. Whats that . You can call him a deadbeat and thats what jack lew will talk about in our interview this morning, the need for congress to raise the debt limit. They sent a letter yesterday to congress saying midoctober is when we hit that x date that well only have 50 billion in cash, and were getting ourselves ready for two simultaneous standoffs, one over government funding and the sequester and the other over the debt limit. And our interview with jack lew is going to be one of the beginning volleys in the really serious phase of that. Okay, john. Sounds terrific. Ask him obviously, ask him also while you have him, mr. Summers. I also want to know, if they take summers, does janet yellen leave . Whats the calculus there . But thats a separate issue. Anyway. You would think. That she would leave . Second banana for another term or two, i dont think, does she . All right, john harwood, thank you. Well see you. And that interview, of course, is at 7 30 eastern. Coming up, though, why facebook friends could impact credit ratings. Plus, if youve ever sent a text message in the middle of the night, youll want to hear the story up next. This is the craziest story, crazy. It is crazy, but it is it is a nice tease. Alex wallace joins us from the Weather Channel with a look at the national forecast. Alex, good morning. Good morning to you. Were tracking some storms this morning moving across the great lakes. You can see this activity really crossing wisconsin into lower michigan, Holding Together here for us, trying to make a run for detroit. So, maybe a little later this morning a few rumbles of thunder will be sneaking in there, and thats actually going to be the zone where we could be looking for some severe storms. Anywhere in the red, Central Wisconsin back down across into portions of the upper ohio valley. Well look for the main threats to be damaging winds and a bit of hail, but we cant completely rule out the isolated tornado either. South of all of that, its the heat. That continues out there for us. Weve got heat advisories, excessive heat warnings minneapolis down towards des moines. Des moiness going to be a spot that well be talking temperatures getting up into the 100s, all thanks to this big ridge of High Pressure thats in place. Temperatures 10 to 20 degrees above average. So, that puts us well up into the 90s in many of these areas, and look at omaha, 100 degrees expected for today. So, a take it easy day in midwest. Meanwhile, this big ridge is going to eventually slide into the south, so areas that have been on the cool side are going to start to heat up. More squawk box is coming up. Nascar is ab. Out excitement but tracking all the action and hearing everything from our marketing partners, the media and millions of fans on social media can be a challenge. Thats why we partnered with hp to build the new nascar fan and media engagement center. Hps Technology Helps us turn millions of tweets, posts and stories into realtime Business Insights that help nascar win with our fans. Welcome back. Its time now for the executive edge, our daily segment focused on giving Business Leaders a leg up. And you know, were approaching the fiveyear anniversary of the financial crisis and the government response coming up, about two weeks. If you think the collapse of lehman is that anniversary. In my the New York Times column this morning, we looked at t. A. R. P. And i talked to hank paulsen about his misgivings about bank bonuses. He rarely talked about this before, and speaking about the payouts, paulsen noted in part to say i was disappointed is an understatement. My view has nothing to do with legality and everything to do with what was right and everything to do with just a colossal lack of selfawareness to how they were viewed by the american public. And you know, guys, hank paulson has not come out and talked about the bonuses in a forceful way. Looking back five years, now he suggests that those bonuses are one of the reasons that the public hated the bailouts, which he, of course, worked so hard to support, and i think that he tried to keep it, you know, hold his tongue on all this for a very long time but decided now he might come out and explain what he was thinking about. You know, andrew, ill play devils advocate on this because you think about a lot of bankrupt Companies Like american airlines, for instance, got a lot of flack earlier this year for bonuses and big payouts that it paid to all of its executives. And its defense was, listen, we wont ever be able to exit bankruptcy as a Viable Company if becant keep these employees on. And when youre in a corporation that has that bad of a reputation and is in those dire straits as it is, you could argue that to be able to thats what they argued back then. Keep the workforce, you have to. But these payouts were bigger than any other industry. Ill take a different take. Its all here in your article, andrew. Its what you decided to emphasize is what i have a problem with in terms of burying the lead. What hes basically saying is they wanted everyone to participate in the bailout, otherwise it wasnt going to work, there would be a stigma. That was the whole issue. To get it done, they couldnt have asked for restrictions. Right. So there was no chance they could have. Yep. But this is after the fact that the bonuses were paid. Yep. Why didnt you lead with, i believe that the root cause of every financial crisis is flawed Government Policies, and it was the case in that one as well. Why wasnt that the lead . Now theres no one in this country at this point that hasnt heard that it was all the banks fault and all the greedy executives fault. I would have led with that. In the New York Times, could you have put that . The root cause was flawed i know that flawed Government Policies is redundant, but if that was the headline, could that not have been the lead . It very well could have been. But it wasnt because its a rorschach. I see one thing from these comments and you see another. No, no, ill tell you why, just to give you the news judgment. People have been asking him questions about these bonuses for a very long time and he used to generally not say too much. Hes occasionally said that he thought bonuses were out of whack or this or that, but hes never really explained how bad he felt about what had happened afterwards. And i thought that was actually the valuable news but im back to your wellwritten article here. The reason he didnt pile on with the bonuses was because banking is not only a very honorable profession yes. He says, but a very necessary profession yes, i agree. That was not in the headlines either. So you know joe, also, when youve got to read andrews article. You know how they put the least important stuff, i guess, at the very bottom . Its a pyramid thing, right . Im just trying to explain but the first iteration of t. A. R. P. , subtract five years, that was 2008. This was under the bush administration, they wanted to get it done. Remember where the economy was there . I can understand why they didnt put anything in place, but you could always look back and say Going Forward as we add more payments on to this, we shouldnt have this policy. Andrew, i feel bad for hank. It takes two to it was probably after offhand comment. Little did he know im surprised your paper actually didnt put it on the front page. True. Has your column ever been on the front page . It has. This would have been the time to do it. Thank you, joe. Were moving on. Paulson hates bonuses. We have other stories to get to. Could facebook friends change a credit score . It is possible. This is a crazy story. A few Tech Startups are using social data to determine the risk of lending to people who have a difficult time assessing credit. For example, one company deems you, if you are friends with somebody on facebook who was late paying back a loan to that same company. So, guys, is the company you keep affecting your credit score . Im defriending bernie right now. I should have never i think if there was ever a reason to go on a big unfriending spree, this was probably, if there was one time when you could get a freiburger king whopper for unfriending people, i think this is only second to that to get more people to lose more friends. Yeah, they talked a lot about having additions to fico, about how renters should be able to be judged for how reliably they pay rent and cable bills and that sort of thing, car payments. Theres a lot of stuff that isnt actually included in your fico score, but thats not to say just because youre friends with someone on facebook that you should have joe, we talked about this article about six months ago. There was a piece, i dont remember where, that talked about who people were dating based on Credit Scores. Yeah, right. That was a determinant whether you would get the date. Did you see steve crosss piece sunday . I did not. It was on experian, transunion and whatever. It was unbelievable. It was unbelievable. There are people that had bad credit based on someone that wasnt even related to them, that didnt even have the last name. You cannot get that off your credit report. The people have no interest in getting it off your credit report. Youd have to go to the ceo of experian or transunion or a place to get it off and they wont talk to you. It never gets passed up the chain. I watched it in absolute flabbergasted watching the piece. There was one beginning part of that story that 60 minutes actually ran in october when the cfpv was first starting to evaluate Credit Scores and how much errant information was actually on your report. Never get it off. You can never get it off. Well, every seven years is rolls off, right . I dont know. I guess, maybe. But it was just unbelievable how they have no interest. They dont make any money by helping the actual people that could get the errant information off. Yeah, but thats youre not on facebook, right . Too many cronies. Facebook . You know, i dont know. I just cant do men really facebook, andrew . I mean, i dont whens the last time you did something on facebook, seriously . I go on probably every other day, but i dont actually post youre posting things and sharing your life with people . Not really. Hes just stalking. Just for you, joe. Just for you. We have a final story, and this is crazier than the last. Youve heard of sleepwalking, sleeptalking and sleepeating. Now theres sleeptexting, and its becoming apparently a nightmare for some cell phone addicts. Sleep disorder specialists report that theres an alarming trend going on, and you can obviously cause some embarrassing situations. In addition, sleeptexting may be causing health issues, because in many cases it happens about two hours after a person falls asleep. Thats when deep r. E. M. Sleep would normally begin. Youve heard of drunk dialing and booty calls at night. This is like you combine whats that powerful sleeping pill that causes people to do crazy stuff . Ambien . Ambien . You combine that with texting and youre, im thinking selfie wiener shot, that i could totally say i had no idea that i did that. But the fact that you could type while youre sleeping, thats pretty intense behavior there are some people who wake up in the middle of the night to write their dreams down. I dont do it, but there are people who do weird stuff like that. I dont know, they i find this hard to believe. I cant believe they said in this article, though, the people most susceptible to this are those who leave their cell phones on at night. I mean, who doesnt do this . Thats my alarm clock. If i do get an important email in the middle of the night, i want to be able to answer it. Not me. Ive done the opposite, where ive gotten a text in the middle of the night and looked at it and thought i responded to it, or an email, rather see, it could happen to you. My phones nowhere near me. Its for people texting a lot. I play a little brickbreaker in my sleep occasionally, but i dont text enough. Is that when your high score comes, middle of the night . Thats a long story. I got so good, i didnt even try for the high score. They dont have it for iphone, do they . Hes using the old they have it, but its no fun. I dont play it. Thats your executive edge. Coming up, more news, including bill ackman throwing in the towel on jcpenney. Well get the streets reaction. Then, next hour, treasury secretary jack lew in a cnbc exclusive with that handsome man, mr. Harwood, at 7 30 eastern time. Were back in a second. Ive got something for you too. announcer fancy feast delights with cheddar. A meal that is sure to delight your cheese lover. Now available in the classic form she loves. Fancy feast. The best ingredient is love. The beach on your tv is much closer than it appears. Dive into labor day with up to 50 off hotels at travelocity. Well, you know that its going to be all right i think its going to be all right everything will always be all right when we go shopping good morning. Welcome back to squawk box here on cnbc. Im joe kernen along with andrew ross sorkin. Kayla tausche is sitting in for the vacationing becky quick. Were going to talk about a lot this morning, including probably not going to talk about the twerking with we were not . Its over . You know how people who work on this show think theyre funny. The director has been, like, just going to twerk . Just quietly saying, you know, joe, if you did want to twerk, we do have some music ready, if you want to. Not that i hear it im not going to. Hes trying to induce me to twerk. Yeah, which would last forever. Did that music not get you going . Did you see, in and out, kevin kline . This is how i dance. Watch my fingers. In the club . This is how i dance. And thats all i will do. Can you dance while youre sleeping . Now, in the movie, it starts like that for kevin kline and he goes absolutely crazy, but im not doing anything more than this. Youre sticking with that . Will you twerk . I wont ask you, because i think that would be sexist if i ask you, but will you twerk for us . And because you know id be the best at it probably. Im not even, you know im going to get in a onepiece by the end of this thing. Im going to stick my tongue out and its going to be really would you put on the borat bathing suit and twerk . Thats pretty much what miley cyrus was two nights ago. I know. You know, here were still talking about it. Whats her agent . Whats her agent . It was the same agent as britney. I read something that if ten years after this have they done that this morning . Theyre probably on the west coast ten years after britney did some, kissed madonna, she was getting 15 million to be on, i dont know, one of the talent shows, 15 million a year to be on it. So, if miley can do that well ten years from now that the agent knows exactly what hes doing. Among the stories were talking about, im not so sure he always knows what hes doing. Bill ackman sold his entire stake in jcpenney after his campaign to overhaul the retailer failed. It was all was involved with putting in, hinging on this johnson guy, really, wasnt it . That he was a genius from apple and could repeat it there, and he didnt. Courtney reagan joins us from the nyse. Hey, courtney. Hi, good morning, joe. Thats right, 19 months ago Pershing Squares bill ackman came on squawk box calling them jcpenneys ceo ron johnson magical, and the day the retailers Transformation Plan was announced the most important day in retail in 25 years. Ackman bet big on the turn around, but now the bet is off. They are selling the stake in jcpenney to citigroup, the Bank Marketing the shares to Fund Managers for a reported 12. 50 to 12. 90 each, below mondays 13. 35 closing price. Ackman began to build that 39 million share stake in 2010 and 11, buying shares for an average price of 25, which means the fund stands to lose nearly 500 million or about half of that initial investment in jcpenney. Ackman resigned his seat on penneys board earlier this month after a very public disagreement over the companys leadership. Jcpenney had no official comment for cnbc about the sale, but the retailer couldnt have been surprised about the move. Shortly after ackmans resignation, an s. E. C. Filing explained that jcpenney would allow Pershing Square up to four stock sales per year as long as each was for 5 million shares, so you have to think this was anticipated at least in some way. The Big Questions now are whether the other large investors follow ackmans lead. Whether or not jcpenney will need to raise more question. Steven roth is a current board member and sold nearly half his stake already in march. Now Soros Fund Management is to become the largest investors with a 9. 1 stake followed by Perry Capital at 7. 3 , which recently sided with ackmans recommendations in that very public board battle over those letters. Andrew . Okay, courtney, stay with us. Dont go anywhere. Well bring in the ceo and chief Research Officer at the intelligentelci advisory group. Dana, where does the stock go from here . Overall it needs to have results. It needs to have samestore sales. Its getting closer to flat than the negative 12 and theyre going up against a negative 26 to negative 32 through the back half of the year. Is this a positive development . Is this a negative development . Do you say there was going to be an overhang on the stock and the good news is they just cleared that overhang out in one fell swoop . Or do you say to yourself, if hes willing to take a loss at this point, thats bad news for everybody . I think your first scenarios more likely. I think it was disruptive in terms of what was going on. You have to be able to get the company to some sort of level of stabilization. It was challenging to do that with the boardroom fights happening on main street. And now the Holiday Season is coming, the most important time of the year for the company. Theyre trying to get the Home Department fixed and focus and concentration is the key. Courtney, the view inside jcpenney, theyre happy to see mr. Ackman gone, not just as a board member, but also as a shareholder . You know theyre not going to say anything publicly in that vain, but you have to think they are at least a little happy that the distraction is gone. Even ackman himself called what he had been doing a distraction. He did believe in what he was saying, and those of us that believe in activism do think that it is a good thing to speak out when you truly believe in something. Clearly, he had money on the line. It just didnt work out. But like dana said, you have to assume they really need and want to get back down to business, make sure that those vendor relationships are very strong. Thats a key, key part of jcpenneys potential success Going Forward. You cannot have vendors pulling out, and that would create a very dangerous domino effect. As of right now, that has not happened. Jcpenney needs to make sure that is the status quo Going Forward. Dana, help me with this. The next time bill ackman announces that he is targeting a retailer, he comes on squawk, he sends out a press release, he does whatever he does, how does the market react . I think they think its very disruptive. He himself said that his poor Retail Investments have not gone as well, that its not been a sector that hes been enamored with, that hes had as much success at, so he should focus on other areas, given the fact that retail has been a challenge. Dana, when you think about jcpenney, though, is this the end of the beginning or the beginning of the end . Because it seems like you have a lot of selling pressure, you have a lot of pressure on samestore sales. How much time is the market willing to give jcpenney in this scenario with two big seasons coming up and then not a whole lot after that . I think what the market wants to see is just that the samestore sales and that theres positive momentum Going Forward, that its getting less worse and that lessworse scenario happened in the Second Quarter. You need it to happen in the third and Fourth Quarter. What you mentioned about the private brands is key. Arizona, st. Johns bay, names that the jcpenney customer was familiar with but they didnt have is now being brought back into the fold in a big way. Final question, dana. If you could buy any retail stock right now, which would it be . I think the one that has momentum, i think gap will continue working. I think theyve got their house in order. Wow. The product is better, the margins are better. Okay, well leave it there. Dana, thank you for that. Courtney, thank you for your report from the New York Stock Exchange. See you soon. Coming up, were going to talk about video games. Did you see the daily news . I did. Its early to be carrying hillarys water, is it not . I mean, look at this. This is a blatant example. Christie is by far one of the most popular politicians in the country right now. This is a major new york newspaper. Who you calling an idiot fatso . Even the New York Times, although theyd like to crush christie as well, but they would not do this, would they . This is pure hillary, because its probably going to be hillary could be you know who likes her. Mort. Thank you. What am i saying . Mort zuckerman who owns the newspaper. Ive never heard of this sports writer, never heard of him before, but he said something about rex ryan and sanchez getting, i think, i dont know, and the governor. And its new jersey, you know. Thats a new york newspaper. They hate us over here. You hate us over here. But you, you know, youre here a lot of the time. The future of video games where do you live . Oh, never mind. Youre young and single. The future of video games, maddens nfl 25 being released today. We have thoughts, we have voices, we have feelings. I know your thoughts very well. You make it known in the Mainstream Media your thoughts. Upper east or west . West village. Oh the outlook for the sector, next. Just by talking to a helmet. It grabbed the patients record before we even picked him up. It found out the doctor we needed was at st. Annes. Wiggle your toes. [ driver ] and it got his okay on treatment from miles away. It even pulled strings with the stoplights. My ambulance talks with smoke alarms and pilots and stadiums. But, of course, its a good listener too. [ female announcer ] today cisco is connecting the internet of everything. So everything works like never before. Welcome back to squawk box. Take a look at u. S. Futures, u. S. Equity futures at this hour. We do have some ugly red arrows there. The dow looks like it would open off 90 points. Shall i say that again . 90 points. And the s p 500 off by 12 points, the nasdaq off about 27 points. Not so nice. Making headlines this morning, a former exjpmorgan employee has been arrested in spain today over the london whale charges. Javier martin im going to mispronounce his name martinartano. Thank you. Is wanted by the u. S. On fraud and tax crime charges. U. S. Prosecutors brought criminal charges against the spaniard and his former colleague in connecticut. Im sorry, not in connecticut, in connection to the london whale trading scandal. Both worked for the banks chief Investment Office in london. Joe, want to talk video games . Yeah, i do. I was just checking out futures . Checking out the s p. Theyre ugly. I wonder whats the total amount of the correction here . Weve got to get below around 1,640 to get near nearterm lows. Its 1,644, testing those lows from the last mini correction we had. Video game season kicking off with madden 25 today. Joneth geller, i saw for madden he will be remembered for video games and not for football coaching, but my interest is more in the new consoles because ive been hearing about them from someone near and dear. Xbox 1 is the next generation . Is that what its called . Yes, xbox 1, a new playstation 4. They do different things, right . At the end of the day, theyre gaming consoles, but everyones been pushing to own the living room, so these boxes are not just Gaming Machines anymore. Microsoft and sony are really trying to own the entire living room experience. You have netflix on it. Right. You can get your tv on it in some cases. So, this isnt just a gaming machine. Its bigger than that. Why do you make the point that this could be the last generation . Because somehow, ipads and phones are going to somehow replace these consoles . How would that happen . If you look at the Computing Power and the Processing Power of your ipad, your android tablet, it is very, very high. And i think the day in age of us needing a dedicated gaming console is going away, and thats why you see this push from microsoft and sony to integrate videowatching, movies, music, social experiences. So, youd still get the console because you wouldnt get a gaming console anymore . Well, you get the console because now you have something in your living room that connects everything youre watching. I think thats why its very important to watch the space closely, why apple is rumored to enter, intel, a lot of Companies Really trying to get in there because at this point, its unchartered territory. How would you use your iphone to play on a bigscreen tv on a ps so, apple has airplay, which is really cool. It uses wifi. And anything youre doing on your phone or your tablet will show on your bigscreen tv. Thats awesome. You knew this. You literally just need a control andrews nodding. From your iphone or ipad. So its a brilliant way to do it. Thats why theyre letting you lead this interview because i, like the viewer, am finding this stuff out. And youre trying to build a case to not get these products for your son. No, i actually, i dont know i think im probably going to, right . But you could wait and use your phone to i mean, look, youre not going to have the same experience in terms of gaming for a hardcore gamer, but i think as weve seen over the past couple of years, casual gaming is a really, really big category. You know, you have two minutes to kill, you pick up your phone, you look at it, you play a game, you go to your meeting or go do whatever youre doing. So, i think the hardcore gaming is kind of slowly going away. And i think this is going to be the last time that general Consumers Want to go buy these types of boxes. For xbox, it seems like a precarious time, too, because for recent years it was always synonymous with don matrick, the former ceo ofmaddrick is now the ceo of zinga. Is that problematic for that unit or do you think they have stuff coming out in the next few quarters to make it worth their while . Xbox1. I think the games will be cool. I dont know if that head change makes a difference at this point. I think everything is kind of baked into the plans. Id be more concerned after the xbox one comes out into the next console. I think its a tricky area. If you lock at nintendo, the wi u, an absolute no its a nightmare. Microsoft might have a new ceo. There is also talk could the company get broken up. A lot of things may happen in the next 12 months, would microsoft, would it be a good thing for microsoft to spin off the xbox as a gaming business, a completely separate business . I think thats microsofts problem, the Windows Division are doing fine. They make revenue, profit. Xbox breaks even or a slight profit. I dont know if you separate microsoft out, you still have phones, tablets, cs. Im not sure how much that make sense. But they obviously havent been doing too great with all those things. Are you up to speed on the game . A little bit. Have you heard of what is beyond two souls out yet . Do you know what im talking about . I have no idea. My son, beyonce knowles, how about the last of us . Have you heard of that . No, i havent. Beyond two souls big. I think the fifth, hes never had a grand theft auto, but the fifth is coming out. I am hearing rumblings. He should not play that, should he, at 11 . I would probably play at 11. Beyonce knowles may contain graphics. This is like milely cyrus. Its a joke. It may contain content inappropriate. For me. They need to supervisors. You cannot do enough supervision. Beyonce knowles. Okay. Thank you. Coming up, a cnbc exclusive, treasury second jack lew citizen i sits down with our john harwood. Thats at 7 00 eastern. Stay tuned. You wont want to miss it. [ male announcer ] its time. Time to have new experiences with a familiar keyboard. To update our status without opening an app. To have all our messages in one place. To browse. And share. Faster than ever. Its time to do everything better than before. The new blackberry q10. Its time. The new blackberry q10. Nascar is ab. Out excitement but tracking all the action and hearing everything from our marketing partners, the media and millions of fans on social media is is. The worst year in baseball is said to be the most profitable. The Houston Astros are set to pull in an estimated 99 million operating a season, thats nearly as much as the operating income of the last six world series championships teams combined. They began the season with a league low 26 million active payroll. They got that down to under 13 million. Which those people are close to it. Anyway, individuals, coming up, Quarterly Results from luxury retailer tiffany. Plus a cnbc exclusive, with secretary treasury jack lew. Skip to my lew at 7 30 eastern. Ive got something for you too. announcer fancy feast delights with cheddar. A meal that is sure to delight your cheese lover. Now available in the classic form she loves. Fancy feast. The best ingredient is love. The beach on your tv is much closer than it appears. Dive into labor day with up to 50 off hotels at travelocity. Good morning, welcome to squawk box here on cnbcment im andrew ross sorkin. Take a look at the futures. I have to say, its a bit of an ugly morning t. Weather outside not so great t. Dow jones off 86 points. The nasdaq opposite 28 points off. The s p 500 looks like it opposite 12 points. If we get it about right now. We have a big morning on squawk box. We are now 30 minutes away from John Harwoods exclusive interview with treasury secretary jack lew. Lew is urging congress to raise the debt limit as soon as possible and save the 16. 7 trillion ceiling will be hit by midokay. Thats the date and we dont have much time. So we will see where that goes. Also, we got your Morning Headlines this morning, john harwood reporting this morning that larry summeomers. He is still being vetted for the job according to a source. Also, former journalism p. Morgan chase employee Xavier Martine artaggio has been arrested in spain this morning. He is wanted on charges in the u. S. Connected to the london whale case. He turned himself into police after he was located and contacted authorities. We are watching shares of j. C. Penney, bill ackman sold his entire 18 stake in the retailer of resigning from the board two weeks ago. Ableman first bought those shares at just over 20, well above where they are now. We have more on that story in just a few minutes. Joe. The dow jones, our guest host, mark zandys moodys economist. Mark le monis is star of the cnbc series the profit john mortimer, Wealth Management and director of strategies. Do you want me to come right to you, mark . What is moving the stockmarket . What is moving the stockmarket . Thats a good one. Yesterday, jeff, one of the things that i thought was interesting as bad as that durable goods number was, it almost looked if it lessened the september taper, the market wanted to trade up until secretary of state kerry started talking about some type of maybe strike in syria. It almost looked like bad news was back to being good news, it would keep the spigot opened. Did you view it that way . I think you are on to something there, joe. I think the market is trying to discount the amount of the fed tapering and when it will happen. Its sort of a perverted way, like markets have to do a lot of the time, they can rise on bad news given that the leg widity would continue to stay in the system. So well have to see again how the fed tapered the meetings in midseptember. Kind of what those releases are and see how markets react. I agree with you. I think until kerry got up and spoke, markets were actually doing quite well up until the 2 00, 2 30 hour on the east coast time. Jeff, we are all waiting for the day when the fed can hand off the baton to the underlying economy. If rates are going up for the right reason, thats an improvele economy, improving profits, then we will be able to handle the tapering. The minute they see 280, 290, 3 on the 10 year, its almost as if they discount what that means for the economy and immediately look at their own pocketbook and say, oh my good, it wont be 85 billion any more. Thats what makes me think we will have to get through this tapering. Once you get the shot, its over, its this looming thing in front of us. We cant get 18 traction it seems like. The take away, we must always remember that markets are discounting mechanisms and they are frying to figure out, especially shortterm traders are trying to figure out what they all means for them. The 3 , i agree, it might be more psych Electoral College cal. We believe tear rates have begun their upward trend, rough numbers are 50 basis points the next few years. Rates have to normalize, hopefully, they are doing so, because of the strength. We already got a couple years worth. You may have said, again, 166 on the ten year, it was probably much too low, given the backdrop going on in the Global Economy at that point. So you have to discount, maybe it was 50 basis points too low. So i might take some, you know, i might disagree with you a little bit there. It may have been a false bottom. But i get your point we think again we are on that progression. We think we will have a stronger second half from a gdp standpoint as well. Sorry. Its up . This is the kind of stuff, this kills andrew, you know what it means. Income disparity, widening. People buying rings, getting married. No, no, rich people. The high end, income disparity, American Dreams dead. I have a statistic for you. Well, ill ask you. Take the top 5 of the income distribution. What share of Consumer Spending do they account for . What do you think . Not as much as people would think. Really . Give me a number. I dont know. 20 . No higher . Id go 35 . Exactly. 35 . What was it in 1990 . 35 . No, 20 . Okay. So it matters. It matters. And its happening. Its happening. Thats consumption, so you know the income, wealth, what really matters is spending. We hear this a little on the durable goods numbers. I want to hear. The capex at a lot of Companies Got soft. A lot of people saw earnings slowdown. They were worried how much money they were going to spend. I think a lot of companies are pulling back the durable gods. Capex companies are not expanding, boying the same amountf equipment. There is a lot of lead times, people waiting to see, what is my Fourth Quarter going to look like . Is it time for me to refinance my debt . Do i need cash on the side . I think that is keeping the durable goods numbers. You hang your hat on the 175. You think everything will always be okay because of the 175 . You still think were on track . I think were on track. 175. 200 k. Your recovery is on track. The fed will be able to taper. Everything is going along as planned . Everything is going to script. Pretty much. Im a little nervous about this rise in longterm Interest Rates. Its a little ahead of what i expected it to be. Only a little bit. Would you be with all your companies, would you be planning for the same economy . Im nervous. Im starting to think, do i make an acquisition . Is it time to refinance . Do i need to open this many for Interest Rates or the economy is recovering . For both. Im not sure theyre recovering as much as people think it is. I have seen the slowdown in my businesses. It seems to be Small Business versus big business. 25 of the rv market, i look at the foot traffic that comes through my stores. The ability to get credit for consumers. The rv. To me its rv, house, a car, whatever you want it to be. Its very sensitive, i would suspect. People spending dischretienary dollars on things they dont have to have. Its a shocker for me to see that this early. You know what the flipside of what you said is, you know, i know you are fawn partisan, sort of. But what you just said was. I am nonpartisan. Exactly. What you basically said was we hear the tax cuts dont help for the wealthy. They dont spend their money. They bank their money. You said how important the high end is to the consumer economy, we are told they dont care about payroll taxes. They dont care about tax increases, because it just gets banked anyway, the money they have. You made the case a high end tax cut would hurt the economy. It would. Although it did. Although, a tax increase on lower and middle house holds would be more damaging. Even though you made the case it went from 30 to 25. Say you raise taxes on upper income households, it will do damage, no doubt. Because it is such a large share. It looks like it will do damage at 35 of spending. They will continue to spend. Because they have savings, resources. You dont get tiffany buyers. Is it a high end person . The high end. Is that what you are sell something. That is something new to the market. Are you selling the breaking bad rvs . Not the breaking bad rvs. Last week you said you werent. They got up a u all uppy cooking meth. It was a reference i cant have their near my business. I cant have it. It was another network i was mentioning. You are a member of the team. I am already a member of the team. You said the last 30 days, a noticeable weakenning . Yes. So its the traffic pattern that concerns me. Its the what leads me. I watch my phones the foot traffic. Whether its walmart looking at their volume or j. C. Penney, we realize our business, its about the foot traffic and the registers. We look at what is the average ticket. If it drops 4 or 5, it tells us something. I dont hear from the auto makers. The auto makers or retailers . You make a difference. You no ewho we have today, richard engel, one of the best in the business. We were watching him last night. He got into syria and got out. Oh, thanks to, jeff mortimer, my man, im sorry. I started with you, though, right . Yes. You got to talk . Yes, i did. Youll be back, please. You are one of our favorites, right, andrew, isnt that what you say . Yeah. Okay. Well have more from or guest hosts. Thanks. Up next, if profits take on j. C. Penney, bill ackman selling his 18 stake in the company. Leadership forcing his hand. Find out if the profit would take a stake in the retailer next. We have been talking about it all morning, treasury secretary jack lew on the debt ceiling. Why he is urging congress to raise the limit now. Welcome back to squawk box. Lets look at the equity futures right now. Shares of tiffanys we are watching. The luxury retailer earned 83 cents. We have been staying about 90 points into the red for the dow if it were to open right now. The s p and nasdaq in the red. Tiffany, the market is up 3. 5 . It Beat Estimates by 9 cents. It increased its fouryear forecast to 3. 60 per share. That was compared to estimates. Revenues for the Second Quarter were short of street consense it. Currency adjusted of 5 . It was a something the market was fairly pleased with, andrew. Lets talk about bill ackman, hedge funds manager bill ackman selling his stake to jc penney. As for the companys filing. As j. C. Penney reached the point of consolidate or die . Our next host has thoughts on this marcus is here from the profit. What time is the profit on . 10 00 eastern. I want to be clear, its my money. Its my money. Its not cnbc money. Its not your money, its not the networks money. It will be joes money next season. I thought those court shows like divorce court, i thought the behind the scenes, each side got paid by the producer. I dont get paid. If you can help me renegotiate my deal. You are now a reality tv star. What are you doing . I do it for free. Over time as the deals get bigger, i may, at this point. How is your wallet looking after this . A little thinner, car cash, which will be a great one, ill make good money on t. Last episode of the season, my favorite, i plan on making some real money. What a tease. Im not going to tell you what it is there the first one. Car cash. You were going to make enough on that to cover the others . I will make close to 10 million. Its car cash, an auto buyingch onehalf, a mock of carmax. There is no inventory. I dont have to worry about capital. Facilities are very small. Its a very quick inventory turn model. Back to j. C. Penney, so im a boyar if i own sears. You are a boyar . So i dont really are you recommending eddie lam pert. I dont want to make recommendations to eddie loom better. He understands the consolidation play. For me, when i look at the space, macys has come in, walmart has come in, target has come in. Theyve taken the soft good spread of the 19 to 20 clothing stuff. What i worry about in the sears, j. C. Penney model, every mall has a sears and or j. C. Penney. Can they make it in the same mall . Is this a ploy to renegotiate leases . Im not sure what Sears Holdings play is. For me, the model looks the same the demographic of the boyar at sears and j. C. Penney looks awfully similar. Im not sure the market can handle both of them. Beth are severely distressed companies. Isnt it trial they get it right . Two wrongs dont make a right. Is there a way to consolidate those businesses, stream line the revenue, get rid of the sg and a, the fixed costs born in the leases. Can i ask you a different question. Yes. You are an entrepreneur, an operator. You look at bill ackman, an investor. He thinks hes an operator. Eddie lem better lambert thinks hes an operator. A smarter guy, though. He understands merchandising and inventory. Thats his difference. How should we think about the distinction between investors who think they know what should be happening at these companies and the operating guy . What i always like to see is an investor who recognizes his or her role in the place, role in the business and for a guy like bill ackman, its surrounding himself with good leadership at the operations level who can lead his business and understand hes the money guy the capital guy, hes not the guy that will go into the stores and tell them, your merchandising is not right, your marketing is not right. Bill has done wit his wallet to say im totally out of j. C. Penney. In an age of activism, do you look at investors and say, these are fast money guys . You should listen to them . Or do you say they are bright and better, in fact, than some of the boards do. Lets look at berkshire, they make great investments. They surround themself, they boy Great Companies because of the management team. Never any problems there. A big difference, bicker checks, too. You see like a nelson peltz, where would you put him in this . Somewhere in the middle. So you rolled up camping stuff . I rolled up the mom and pop dealership. You saw how wayne did it in certain ways with Waste Management and autonation. And you know wings on swisher now to some extent. Which is if you want to have your bathroom cleaned, there are a bunch of mom and pop operation. You can consolidate the whole thing. Is there anything left fragmented . The funeral home was for a while . Anything left that you would do . Im not sure it matters what the business is, it allows what the execution s. A lot o are consolidation failures. We will save money by putting our toilet paim, the key to consolidation is buying good businesses that have best practices and leaving them alone, maybe finding some branding synergyment if i lock across my hundred Companies Across the country. They may be in the same industry, they operate differently. Its management. It all comes down to management. Of course, the profit 10 00 p. M. Eastern time and pacific time. He has plenty of money. You could lose everything here. It would hurt. Absolutely. It wouldnt hurt your life style. I wouldnt go to tiffanys. We are minutes away from an exclusive interview with treasure secretary john liu. Up next the drum boats are getting louder for a response to chemical weapons in syria. We will speak to nbcs richard engel. Stay tuned. Ive got something for you too. announcer fancy feast delights with cheddar. A meal that is sure to delight your cheese lover. Now available in the classic form she loves. Fancy feast. The best ingredient is love. 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Because now more than ever, the future belongs to those who challenge the present. Secretary of state john kerry says the attacks are undeniable and the government should be held accountable. Richard engel is just outside syria. I watched you last night, richard, and reference the last time you were on when i asked you whether you were going to head to syria. I was looking at a map. You were in egypt. Somehow you got in on the more than border of syria. Did you get anywhere near the, where any of this maybe you dont want to answer this, did you get anywhere near where any of this happened . No is the short answer. The, yes, we move around a lot in this business. We were in egypt for all of the incidents there. Then we came to istanbul, headed down here to the border region between turkey and syria and then went into syria, but just mostly stayed in the northern parts of the country, meeting with rebels, moteing with refugees. They also believe that there have been Chemical Attacks in that area. In fact, if you speak to the rebels, they talk about 30 different times where chemical we upons have been used by the regem. We didnt get to those areas. In damascus the latest atrocities lapped, the u. S. Believe clearly was the work of the syrian regime, those areas are completely cut off. It is even difficult for syrians to get in there and today the u. N. Inspectors were supposed to go into those areas. It was announced a short while ago, even they wont be going there to continue their work because of a disagreement over security. We didnt know, richard, i think, pretty well, secretary of state kerry basically said it yesterday, that we know. But is that enough given that there is the slightest, you know, plausible deniably russia has, discuss it matter to the International Community whether we dont foe we have documented proof . Its still not enough for us to convince everyone. Will it be enough for the president to make a move, do you thin think . I think that is exactly the white house intem jens right now. They have been briefed. They are completely convinced that this was a chemical attack on a mass scale carried out by the syrian regime. This was a missile attack, groundtoground missile. We have been told there were at lowest four different locations, all under groft control that launched these missiles into town. The muenks has incredible Satellite Technology. They have Good Technology to pick up conversations, radio chatter, private emails as well. So this wouldnt be the kind of thing that would be difficult to hide. You could see where missiles were launched, where they landed and what kind of effects they produced. So i think if the u. S. Says they have a good intelligence case, this is not like in iraq we are talking about maybe they were developing weapons in secret and we dont know about it. We could see where rockets were launched. We could see the results that happened in those areas and those results have been pretty clear. Reason says there are doubts. Many countries, the u. K. , britain, france, israel, turkey, several arab states are completely convinced and support a punitive strike. Not a longterm campaign, but a oneday campaign, a twoday campaign, thats unclear at this stage, something to show there has to be consequences for using weapons of mass destruction against civilians and doing it in a way where everybody can see it and causing hundreds, maybe even more than a thousand casualties. Yeah. I, and i am told that you couldnt necessarily knock out any of the facilities involved in the production of any of these wmds, but it would done just to hurt the regime to some extent. Im wondering whether that, would that change their future actions if you did a twoday strike and bombed some facilities, richard . It really depends on how far you go. If its a symbolic strike, you bomb a few air fields, ammunitions factory. Are you right, they are not talking about hitting the actual chemical weapons, they can relows them into the atmosphere and kill more people. If you do a symbolic strike, it wont change the calculus in the war. I can hear the Syrian Rebels saying, the open six and to cross the region that this wasnt enough. It was just a fig leaf that we know what the United States can do when it wants to strike and u. S. Credibility, the u. S. Ability to deliver deterrents would be weakened. If the u. S. Goes further than that. We are talking a severalday complain, zoisive campaign against the infrastructure of the regime, command and control, communication, weapons, delivery systems. Then we could start to see major defections because the rebels will simultaneously launch an offensive. He promised. That he said as soon as these airstrikes begin, we are going to go on the offensive, hoping that the regime will start to show cracks. There will be major defections and the rebels are optimistic, it could be a turning point and with their help it could be the kind of action taco lapses the regime, going back to the first scenario, they think if its a week symbolic strike or no strike at all, then it will be sending the message that assad he got away with it and it might tempt him to do more chemical weapons attack t. Scale and the degree of u. S. Response will be very important here. Richard engel, thank you, once again for your time this morning. We always say, just watch your back, be safe. Its a Business Network but we cant tie it to what happened in the market at this point, but its just on its own, we would i think cover it. Egypt suddenly is not quite as much on the front burner every minute. On the go at all times. We thank him for being with us. Coming up next the interview of the morning, jack lew still in a meeting. We are ready to go. We will bring you that interview when treasury secretary is there. The economy the debt ceiling. Why he is urging congress to raise the limit before it is reached in midoctober. Squawk box is coming back after a quick break. Welcome back to squawk box. In the headlines this morning, well be getting fresh data on home prices later this morning t. Home price index out at 9 00 eastern. Its expected to show a 12 year over year increase for june in the biggest markets. British Prime MinisterDavid Camm Ron the latest toast weigh in on the u. S. Assertion the Syrian Government used chemical weapons against civilians. Its an absolutely important situation to quote cameron and the International Community must respond, they are weighing on investor sentiment, leading to a selloff laid in trading yesterday. Mcdonalds is adding chicken wings september 9th and at all locations by september 24th. However, its a limited Time Offering like most mcdonalds offerings. It will take flight and be gone by the end of november. I leak. Is there bleu cheese with the wings . You need a little celery. Thats saturday night. If i knew, i probably wouldnt have. Oh. You would have had to have come to jersey. Next time we have wings at our house. Would wings be enough to make a trip into the city . No. What would have to be there . Business. There has to be a good reason to go in there. Zafdy. This is a convoluted way im going to ask this question. Now im nervous. You know that lew when he was not in this position, secretary lou had at least. You know the administration well, he sort of had the reputation that maybe he would be less conciliatory with republicans in the house. He was fairly try de ly striden. The president says he wont negotiate. Do you think secretary lou will be more willing to try to patch things together or is it going to be a my way or the highway deal again . Well, it cant be my way or the highway. Theyve got to come to an agreement. The president says he will not negotiate on the debt ceiling. Not on the debt ceiling. There is also the budget. They run out of funding the end of september. Theyre going to probably combine the two. The decision will be around the funding at the same time. What do you think he will say to horowitz today . I think his point to go on tv is to say, we got a big problem with the debt ceiling. We got to raise this. You can never really separate the posturing from the actual negotiating thats done with trial balloons whachl do you think this will be today . Mostly . I think hes laying it out there. This will be a big problem. Do you raise it . Give or take, late or early november. It depends on revenues, frady di, fannie. In the grand negotiation, do you try to leave yourself little wiggle room . Dont you say its early october or middle of october knowing i think he came out saying late october, early november. Is it then december . I dont think so. Its possible. Splitting hair irs. About a month ago, treasury said it was going to start borrowing less and less. Do you think it has no more accounting options left . I think theyre running out of them. What itself the difference if its november 4th or 15th . They got to sign on the dotted line. Its going to be combined with the funding for the government. They will negotiate around it. They have to come up with something, right . They cant sign a piece of legislation without something around it, with the word entitlements, tax reform. I dont think they come up with some big thing. This is the kind of uncertainty that even the left acknowledges can hurt the economy. Like for a long time, regulatory tax. Affordable care act. No. No. The minute the republicans were at caught fault for threatening to shut down the government. That uncertainty, you were right there with. Everybody expects. Is this the uncertainty that could derail . Only if they dont sign a piece of legislation. Is that possible . Its possible. You dont think so at this time . No, politics are changed. Whoever is down that path will lose. We got to go. We bought the secretary ready as we speak. We will have treasury secretary of the u. S. , jack lews name, a preview of tonights episode of the profit. Our guest host has been here the last hour. We will get some final thoughts from him in just a bit. Here at optionsxpress, our clients really seem to appreciate our powerful, easytouse platform. Lets get to washington and the treasury department. Thats where we find chief washington correspondent john harwood and treasury secretary jack lew. Thanks, joe, thanks, secretary for joining us. Its good to be here with you. Since you sent your letter to congress, have you spoken to Speaker Boehner and, if so, how was the conversation . I have exchanged calls. I did speak with other leaders. I think in general the news was taken as it was intended, which was sharing the information that we have. It means that congress doesnt need to act. I think its helped framed how they are thinking of coming back in the fall. The speaker said his staff reiterated yesterday we need dollar for dollar spending cuts if return tore raising the debt limit. So some conservatives talked about linking the defunding of the aca the Health Care Law to a riset this debt limit. What will happen to those ideas . John, the president has been very clearment we are not going to be negotiating over the debt limit. Both of those are total nonstarters . Congress has already authorized funding, committed us to make expenditures. We are now in the place where the only question is, will we pay the bills the United States has incurred . It is just the only way to do that is for congress to act. For it to act quickly. What we need in our economy is certainty. We dont need another self inflicted wound. We dont need another crisis at the last minute. Congress should come book and act. Is a clean debt limit with nothing attached to it the only kind the president will accept . I will reiterate. The president made clear he is not negotiating. Since 70 to 89, every congress has acted to pay the bills of the United States. This Congress Needs to do the same. But you will negotiate over the budget which government funding runs out at the end of the month. Yeah. We have been very clear for quite some time on fiscal policy, the president thinks the right answer is a balanced approach. We have pressed very hard for the kind of agreements that would do both, spending reform, entitlement reform and tax reform. We hit a bit of an obstacle with congress, there hasnt been an openness to do the balance with the tax reform. The president has tried to reach out in every way that is possible to make it clear, hes looking for the sensible common middle ground. Thats very different from do we take something as muhammadal as the credit of the United States and put it in jaep order or raise a question. I think if you look back at 2011, we see what the problem is when you can confuse the two. 2011 was the very first time in certainly my years in washington, three decades, where there was debate about whether or not to the default. It used to be the debt limit was treated as a deadline to force action to come together. In 2011, we actually saw the specter of default raised to something that was an affirmative position some were saying was better than the alternative. That was dang ruchlts we cant go back will. Given the stance the republican has taken, are you 100 confident this, in fact, will get worked out without any of the negative repercussions we saw two years ago . Well, look, i think as i talked to leaders on both sides, there is an understanding of the seriousness of this issue. I dont think that the leaders are in a place where anyone wants a repeat of 2011. I dont yet see that they have a plan to avoid it, with i is one of the reasons its so important for this emto come back in just a couple of weeks and get to work getting this done and trying to make the debt issue different from other debates that we have. What if the speaker calls you and se, jack, i want to help you, i know we have to raise the debt limit. I got to give something to my members or i cant get the votes. What do you say . Look, i think we saw in 2011 the dangers, going down the path of having the kind of gloegs e negotiation over the debt limit have over other issues. The debt limit is just different. Its just different. There cannot be any question, but we are a country that pays our bills. Its not as if we get to go back and undo the dmimts that we made. These are old bills that have to be paid. It is part of the rock solid stability of the United Nations u United States that we always pay our bills and congress has the job to raise if Borrowing Authority to make that possible just as congress has the authority to authorize the expenditures in the first place. After september, is there any circumstance under which the administration would accept either a delay in parts of obamacare or a defunding of parts of obamacare . No. And what about, could the administration accept a continuation of the sequester as is with no changes . We made it clear on sequestration, we think the right thing for the country is to replace senseless across the board cuts which i should remind you are designed tob so objectionable to spur congress to come up with a more sensible plan. Its important to the replace them with balanced policies that take medium an longterm action to put more sensible deficit reduction in place of across the board cuts that hurt us economically and over terms of national security. Our goal going into this debate is quite simple what do we have to do to keep the American Economy growing . We know there are things we need to do. We need to continue to invest in infrastructure and technology. We know there are things we ned to the for national security. Across the board cuts are not the way to get will. Is the only way sequester is replaced in whole or in part is if republicans agree to additional tax increases or could you see a trade of entitlement cuts, some of which your administration have said are necessary for the discretionary cuts we have seen now . John, i think there should be sensible blends approachs to medium and longterm deficit reduction. I dont want to get into the details of what package would be, because a small or large package might have different characteristics. You know, i think that the president made clear he was going to make tough entitles actions, those require balance in terms of ref few for fairness and for economic results. Thats what we need. So if you touch entitlements, there must be taxes with that . As i say, i try id to say, the big deal that people talk about requires a balanced approach with revenues and. A smaller deal might be different. I dont want to speak to a smaller deal. We have seen over the years, lots of different ways of approaching things that are smaller, but the key is balance. There has to be balance. Chairman camp and baucus are pursuing a tax reform process, both, theyre exploring Corporate Tax reform as well as individual reform. There is no bill yet. Will is no action yet. You have watched congress for a long time. Is this still possible to do in both realms individual and corporate in this congress . I think that the president tried very hard just a couple weeks ago to make clear there is a path to do business tax reform. There was a way to do it so we could simultaneously do some other important things for the economy. Invst in infrastructure, Manufacturing Centers for job training. I think there has been a convergence of views on the business tax reform. Whereas i talk to democrats and republicans, there are a lot of ideas where i think progress can be made. On the individual side, it is a bit more complicated. It is intrinsically checked to the larger fiscal policy conversation, without additional revenues, i dont see a path towards comprehensive tax reform. One can see a path towards business tax reform, we use the onetime savings to do a few of these important things. Congress, obviously, has been gone, so there hasnt been much of a chance to see if that idea has the ability to make progress, but you know i think that for people in the Business Community who have talked to me about the need for immediate action to remove the uncertainty about Corporate Tax reform, business tax reform. There is an opportunity now. Thats what the president was speaking to a couple weeks ago. Our time is short. A couple things before i led you go. How concerned are you about the reaction of Financial Markets to two different events . One, the possibility of military action in syria and, secondly, the tapering of bond buying that the fed has signaled is likely to happen this fall . You know, i focus on the core economy here. I think we have to take every step we can as we make policy to try and keep our eye on the baum of what does the economy need to keep growing in the future. We have Foreign Policy decisions that are going to need to be made for reasons other than core economics and obviously well have to manage accordingly. In terms of fed tapering, you know, as treasury secretary, i will focus on core economics. Weve seen how strong is the core economy . I think our core economy has been growing in the 2 range and i think its important to note that thats with substantial head winds from federal policy. Some on purpose, some not on purpose. We withdrew the payroll tax cut because there was a shortterm policy that had to be withdrawn as we started to see economic growth. The across the board cuts of sequest trapgs are an unintended self inflicted wound in the short termment they were manet to be replaced by medium and longterm savings that would be a better path to the future. In spite of those drags on the economy, 23 are seeing 2 growth. As we get to the end of the 84, we think without the head winds of additional federal cuts, the economy should pick up a notch again. You know, i think that one of the really important things about the debt limit debate, all these debates is we in washington have to be careful to be a part of the solution, not a part of the problem. These kind of manufactured crises, last minute decisions put the country on pins and needments and people make economic decisions in a state of uncertainty. We have some control over that. I Hope Congress will act quickly to settle markets down so they dont get worried about these positions. Could larry somers be an effective fed chair if he is the president s choice . John, i will leave my comments on fed transition where they belong, in the oval office. How soon will we know the president s choice . As soon as he makes an announcement, he will make an announcement. A pleasure to have you with us. Thank you. Up next, final thoughts with one more guest host, the profit marcus lemonis. What will happen to the economic recovery, if rates push higher. We will discuss that ahead of the home price index. Well be right back. You think about risk. I dont like the ups and downs of the market, but i cant just sit on my cash. I want to be prepared for the long haul. Ishares minimum volatility etfs. Investments designed for a smoother ride. Find out why 9 out of 10 large professional investors choose ishares for their etfs. Ishares by blackrock. Call 1800ishares for a prospectus, which includes investment objectives, risks, charges and expenses. Read and consider it carefully before investing. Risk includes possible loss of principal. Nascar is ab. Out excitement but tracking all the action and hearing everything from our marketing partners, the media and millions of fans on social media can be a challenge. Thats why we partnered with hp to build the new nascar fan and media engagement center. Hps Technology Helps us turn millions of tweets, posts and stories into realtime Business Insights that help nascar win with our fans. Its time for final thoughts of marcus lemonis, hes the host of cnbcs the profit it airs at 10 00 p. M. Eastern time. Tonight is not about as much as the businesses have been. This is about bullying in the work force. When we were kids, we saw bullying in the school yard. We are now seeing it in business. One of the messages i want to make clear today and Going Forward, this kind of behavior, no matter who you are, no matter what kind of company you own, what your role is unacceptable. I tell people, if you are bullying, i will come find you. You have any bullies that work for you . No, i dont. No matter how well people produce, if they are a bully, they got to go. Bass you smile you because you smile, are you not a bully. I am slapping the guy around that bullies. I do take some pride in that. Its a little of a wood chip. You have to be tough with this to turn these companies around, too. There is a lot of ingrained behavioer that will not cut it. With this particular guy tonight. I hope people watch it for that purpose alone. This is one of thegies you want to take out to the being of the wood shed. Is he that bad . Hes that bad. He does own the place. I dont know how his business will do. I couldnt imagine people would want to take their dog there. Its bad. Its bad. You should go to washington. Theres lots of bullies there. You did buy the company . I did not. I did not. Watch the profit tonight. In the next block, we will talk housing, economy and much more, our exclusive interview with jack lew. We want to thank marcus lemonis, the profit for being with us. Futures right now are still in the red. Squawk box will be right back. [ male announcer ] its time. Time to have new experiences with a familiar keyboard. To update our status without opening an app. To have all our messages in one place. To browse. And share. Faster than ever. Its time to do everything better than before. The new blackberry q10. Its time. The new blackberry q10. Ive got something for you too. announcer fancy feast delights with cheddar. A meal that is sure to delight your cheese lover. Now available in the classic form she loves. Fancy feast. The best ingredient is love. Treasury secretary jack lew in a cnbc exklausive. John harwood joins us to be right back down the interview. We will talk to two strategists about the looming debt battle and the next fed they were. Jane wells joins us from the largest farm show in the country. She said there is some story she hasnt told me about. Back it up, beep, beep. Shell bring us the forecast for crop prices and the outlook for Farm Equipment makers. The third hour of squawk box begins right now. She thinks my tractors sexy it really turns her on shes always staring at me while im chugging along i brig big green tractor, jason aldean. Welcome back to squawk box. First on business worldwide, im joe kernen, along with andrew ross sorkin. Our chief economist modys analytics. We will talk a lot more about the exclusive interview that you just saw, john harwood and treasury secretary jack lew, first, though, andrew has a recap of your Morning Headlines. We are watching shares at tiffanys after mixed results. Tiffanys earned 83 cents per share, they also increased its fullyear forecast to 350 to 3. 60 per share versus estimates of 3. 53. However, revenue for the Second Quarter was short of the street consensus. Take a look. Thank you, andrew. Former j. P. Morgan chase employee xavier artaggio is wanted in connection to the london whale case. He, himself, turned himself into the police after he was located and contacted by authorities. Meanwhile, we are also watching shares of j. C. Penney this morning. Perching bill ackman is selling his stake. You can see shares down 2. 3 in the premarket. Ackman resigned two weeks ago. He first bought the shares at just over 20 per share, well above where they are at barely 13. Andrew. A check on the markets. We have red arrows. Dow jones looks leak it opened off 80 points, s p 500 off 11 points. The nasdaq offant 25 points. If you flip that board off over to europe the dak is off about 1. 6 . The kak is off 5. 6 . Maybe jack lews comments will turn things around. Are you joking . I was trying to be somewhat sarcastic. You need to sounds more sarcastic. You are very ernest. Almost all the time. The interest did get slightly worse, before the interview they were down 64 points. Down 80 points. Anyway. Hopefully you saw secretary jack lew telling the cnbc the president wont negotiate. John harwood joins us now with more. Most of the stuff, john, some of the stuff is to be expected. We heard it the last time the debt ceiling was an issue. And that is, you know the stuff we hear over and over again. We already spent the money. This is about spending the bills. Was there anything out of the ordinary or that we hadnt heard before that struck you, john . Well, i thought it was clear, joe that, the administration is opened to negotiateing on extending cost funding and the nature of continuing resolution, a temporary extension, whether it includes tax increases or not may depend on the size of the deal, whether it includes entitlement reforms are an important element in that. Jack lew said the administration under no circumstances would accept a delay or pashl defunding of obamacare, which many conservatives talked about. What he did make clear as the president has in the past, inlight of what happened, we had the downgrade and the White Knuckle moments in 2011 is they simply will not negotiate on the debt limit. Heres why jack lou said thats the case. I dont think that leaders are in a place where anyone wants a repeat of 2011. I dont yet sigh they have a plan to avoid it. Which is one of the reasons its so important to the come back in a couple of weeks and get to work on getting this done and trying to make the debt issue different from other depayments that we have. Now, this, of course, has been the situation that the leaders have faced over the summer, yet, that i are committed, Republican Leaders and Democratic Leaders to not shutting down the government and not having the debt crisis t. Challenge is, where do you get 218 votes in the house and 60 votes in the senate to get that done. Thats the challenge that awaits us over the next couple weeks. Do you think its significant that you would run a head loin when Administration Says its possible we might open just a crack to negotiating with the other side. When that becomes something so different in the past and an actual head loin, you know, we might actually troy to negotiate something instead of standing mixed on all the demands to me, thats a sad state of affairs. Are you talking about negotiating on the government funding or the debt limit . With republicans on any context. They will definitely negotiate on government spending. You know, one way, one reason that this, the line is not as firm as it may appear is that weve got multiple things going on at the same time, extending funding for the government t. Fate of the budget sequester and the debt limit. When you roll all those together, significantly, jack lew said in his letter to congress the moment when it needs to go up, midoctober, that is closer to when government funding ends out the end of september. Most poem thought it was likely to happen in september. Means it will get jumbled up. Not negotiating on one doesnt 3re cloud guesses on others. In the loins of congress, these things get stick with us, john, lets get some more reaction. Secretary lews comments, joining us now is joe watkins, a former white house official, jimmy williams, msnbc, a contributor and former Senior Adviser to senator dick dur bishop. You probably confused john a little bit, joe. Havent president s in the past sort of, i dont know, maybe tried to do a little bit more, not a lot of speeches and campaigning, but maybe actually work behind closed doors with the other side to see what can get done . You are hitting the nail right on the head. What has happened traditionally in this white house unlike other white house, the president when he wants to get a message out, rather than talk to members of congress and work out a dole. What he does, he guess on the road and makes speeches. Speccing to the choir having them applaud you for why congress isnt moving the way you want to move is analogous to taking the knee at the 5 yard line. The president needs to be talking to congress. Nodes to engage members of the house and not. He should have spend time playing golf to talk about what we do and how we fix obamacare. What can we do to make it viable as opposed to where it is now, that it will cause disaster for our economy. He should have been talking to republicans all summer. Jimmy, whatever has caused it, are there so many sobs on the other side that the president shouldnt even be expected to at this point . Is that what you would say ojoe, that hes tried, there is no point to it . A lot of people in his party stel tell him, dont go talk for the these guys . There would be no point to it . Is that yourancer . When a child touches a burrow, a stone stove and bunks his finger and touches it again, at some point, you will run out of fingers to burn. I suppose. Come on, jimmy, the republicans were after bill clinton nonstop, yet, bill t passed relevant fair reform, as a matter of fact, he gave us a budget surplus. You are right. Joe makes a very god point. Which is the Republican House and senate, impeached bill clinton. Hes still worked with him. Im not sure why he did. That at separate issue. Okay. Shouldnt stop you. Go ahead. I want to make one point the most important negotiation and could have going on this summer is within the republican party. Correct. You remember. They passed the ryan budget earlier this 84ment then they go through the process of trying to pass the appropriations bill matching that ryan budget. Just before we went on recess, the Republican House would not pass the bill the Republican Appropriations Committee prepared based on the ryan budget. They have to physical out their own stance, people like john mccain and Lindsey Graham say, get rid of it, we dont like the defense cuts. Haed this meltdown on within the house on the transportations bill. Theyve got to get their own stance together and its clear that the Republican Leadership does not share the desire of some of the could have been servetives, rand paul, others who say, well fund the government if they defund obama care, Republican Leaders say we cant get the votes, they say, okay, well attach that to the debt limit. Its hard for the president to go esht in that circumstance. Can i make a point . The debt limit has never been a matter of goes, historically, or should it be . We shouldnt be debating the debt limit. That is something whe have to do. Its reasonable to debate everything else. We should be debateing the budget and future tax spending and policy t. Dent limit that has not. John, are you in the camp that the president has been left with very little else to do than go speak to a different university. He will have applause and stay if campaign mode. Has been his only option, the other side is in disarray, so there is no negotiating that could have been done, that what you are Say Something harwood . Well the other side has to get their strategy before they can make real paroling. When the other side is at least a significant minority within the other side is incysting on a stance, which is so far away from what the president could accept, like say, well get rid of your signature achievement in order to keep the government funding, the president said, hey, that itself not reasonable. I have heard the word balance in every proposal for the last two or three years. Balance, i know what it means, it moans revenue increases and taxes. Every single thing he has put forth, the word balance has been there. We all know what it money, every time. This hasnt been a whole lot of room for movement there. Has there, joe . I dont know, is it just me . I think, joe, what i think is the fact that jan harwood has spoken clearly and truthfully about some of the disagreements, even within the republican ranks. All that means if are you the president of the United States, if you see that disagreement among republicans, there is rom to negotiate, then you can Start Talking to folks. To not talk to anybody i think puts us in a terrible position. The position we are in right now. It doesnt have to be. The president can lock back. Well the white house has talked to a group of Senate Republicans in exactly the kind of strategy that joe has mentioned. Dennis mcdonagh the white house chief of staff, republicans like bob corker and others have been saying he has been very solicitous of them and open a conversation. There havent been a lot of specs or they havent made a lot of headway. They are reaching itr out so some of those people they can i they can work with. Champ rodgers, as john just mentioned, this is a very important point, which goes to the internal struggles in the house gop caution. He put up a bill in the committee on the thud bill, the trpts bill. They couldnt get it out. Those numbers are determined by the budget. Paul ryans bungt. Of which every single mebl of the House Republican caution voted for that budget. So they voted for the budget. Then when the numbers come down to the Appropriations Committee that, number says its this. He cant get that out of the committee. There is not enough spinning for them. The second point is, they asked for sequester. Queer sitting in sequester. Next 84, it will be 110 billion bucks. We know that is the law. You will get 1 trillion debt reduction. They asked for it t. President signed into law, which i felt was foolish. Now they have this. If you want spending cuts, theyre there already. They are sitting under your photo. Let mem them go. You hate those. 1. 4 trillion to 643 billion. Thats since obama came in. I know you hate it, you will take credit for it. Man, oh, man. I love you, joe. I love all you guys. This is a conversation. . Is whats happening. Right . Its happening in america. A sad commentary. You know what, i saw it on andrews face. Depressing. Why . We have al accomplished so much. Depressing. Look at the deficit reduction ha has occurred over the last three years. Take it forward. Its 4 trillion over ten years. 4 trillion over ten years. You like it. Jimmy likes it. Yoep i dont understand it. The process is ugly. At the end of the day, we actually accomplished something. Its good, jimmy . 1. 4 trillion when bush left office . Today 643 billion. Thats the number. Is that good . I think its fantastic. We should get below 500 billion. Should put us where we were before the bush joe. I dont think the white house nodes to unsettle markets any more than they are unsettled. Lock at the economy,ist very weak. A lot of underlying weak inside in the economy. Why do we need this . There ought to be a negotiation, a discussion. We ought to have a chance to avoid the disaster lets go back to two years ago, i was luxuriously sitting on nan tuvenlth i had to leave to fly back to new york about how the republicans were taking us to the brink. I dont think they want to go there again on this one on the debt ceiling. I dont. Your vacation was disturbed . I was furious about it. It made me hate the republicans even more. When will you hearn the chops to go to Marthas Vineyard . Im a moderate democrat. I can attest to that. All right. John, good, thanks. Its like having the treasury secretary on squawk box as well as joe and jimmy. We will sy see you later. You like having the treasury secretary on. Still positive . Yes. Well seal be talking about that in the next hour. I think i said that off camera. He didnt say. I think you opened up the discussion. I think you are right. Do you think he said anything . I think the market will be relieved. I didnt 93 he was going to say na. Wow. Ill let you go off cam and collect your thoughts. Meanwhile, coming up, corn prices in focus at the Farm Progress show in decay tur, illinois . I forget which is which. But thats decay tur. Lie ma, ohio. Its for sale. Whole get jane to pronounce that for us. Hey, jane. Hey, kayla. Lima, ohio. This is the real american people. 125,000 farmers and others will be out here kicking things like the statement of the art tractor. We will plow one into the outlook right after the break. Welcome back. The price of corn falk nearly 30 so far this year. A lot of our reporters when they get like really important and seniority and everything like that. I dont mean age. They get that, shes constantly on a farm or in front of a big pig at a country fair or something, jane wells joins us now with more from the countrys biggest farm show. These are your ideas,ant they, jane . Whats the story . These are my ideas. These are my people. This is america. This is where it puts theed if on the table. Right. Gets people off to work. I love it. But were going to have to see what happens in the future here. Because corn prices are actually heading being up to close to 5 again. We will have a hot spell in the corn belt this woke. Still its unlikely we will see 8 corner any time soon. That can make it a challenge to sell these state of the art tractors. Its their brandnew series up to 590 horse power. It is a monster. Heres a deal. If you look at the stock chart rpths it has been a god run for a lot of these equipment manufacturers. Theyve had record revenues, strong orders. Most analysts think the buying cycle is peaking. We could see a dip in 2014ment they are down, ubs predicting a sales drop. As farmers anticipate lower cash receipts and farm income. You dont want to spend as much. You dont need to deduct as much against your taxes. One thing they are selling now is the next evolution, which is more efficiency for precision farming. Tractors which drive themselves through satellites or technologies that measures the best yields on your farm. We have an old faxed windows bootle. They have an open platform that works across many different pieces of equipment. They are working with apple to develop it. But deer is going the more Traditional Apple route, developing its own proprietary closed system, allowing others to provide apps. Think itunes, wireless Data Transfer is the big new dole, many farmers thumb drive a tractor and dont do anything with it. Listen there well, now, we will be able to wirelessly transfer that to a website. We call it my john deer. Com. Then the farmer can access it on his hand held device, ipad or his home computer and we really are i would say the support ore of mixed fleet on the farm, we are collaborateing with other types of equipment manufacturer. The foreman benefits versus lock them no one core eom. Okay. But farmers need to be convinced their data will be secure. Is a challenge. Dave stewart finally pulled the trigger on a 15,000 system, which led to monitor yields across his acres of corn and soy beans. It is mostly telling him what he already knows. I can show that to my landlords. They will say, i want that 200 bush el corn on all of it. This area here needs attention. And we will. Theyre all very understanding. Look, here the computer says. I dont have. I have been telling you this for 40 years. This is real now. S so. All right. Later on squawkon the street, if we had put our 401q in illinois farmland five years ago, we wouldnt have to get up early anymore and come to work. I say its great. When you think about the malthusan predictions. You watch the way these guys maximized deals, it gets more will you, more and more efficient. It is amazing. Through the Satellite Technology they can move them to within an inch, its better on fuel and efirntcy. When you talk about efficiency, this is the one place where you have nobody flain complaining about gomcs. Jane, this is all satellitebased. It isnt your verizon letting you steer it in the middle of the field . The satellite is directing it where to go. You have things measuring terrestrial or satellite. The key is to combine this information and share it among pieces of equipment even with your dealer. They dont want to share information. They have to be confident the data can be kept private if they wish it to be so. Yep, its amazing. You kids, it macs me proud, doesnt it . Have you ever been probab probably have you ever seen an animal . I used to milk cows in the summer. You used to milk cows in the summer. Vermont. Picture it didnt hap. Heres my big fear, my big fear is later within i ask for video of corn and soy bean the editor wont know the difference. I apologize in advance if i talk about kompb and you see soy bean. All right. Thanks so much for that, jane. We lock forward to your reporting throughout the day. Coming up, we will talk about apple, which is sparring with the government over changes the company will have to make after being found guilty of price fixing in the ebook market. We will talk with analysts, how it is protecting the tech giants bottom line when we get back. Ion tomorrow requires challenging your Business Inside and out today. Welcome back to squawk box. Apples program was supposed to begin if june. They have shown initiatives with employees. Apple customers will be able trade in used iphones for credit zbordz a new one. The opening rounds of the u. S. Open featuredage i tannial italian francesca. There trksz back to the ballboy for an hug. Williams cruised to victory in the match. Lets get, yeah, u. S. Open time. You willb there. Right . I have to find a way, yeah. That is i like the cnbc, man, and those lights. This and wimbledon, its a great thing. Oh, because i do it with a t . I pronounce my ds with a t and my ts with a d. My mother said it doesnt matter. Lets get a check on the markets. Rick santelli joins us from the cme in chicago. We had secretary treasurer jack lew on, rick. Did you get to watch that at all in. No, no, i didnt get to watch it. Tell me what he said. I know he usually pours out lots of information. I dont think, that was sar castic . Yes. A little smirk on his face. He said in the United States we pay our bills, i always love that, is that congress spent all this money, all were trying to do is make sure we pay our bills. You always hear that, dont you . Yeah, you know, its one of those real three card monty deals with the show. You cant stop the spending and mr. Lew would understand this dynamic. I think i believe bob woodward, he was the scientist behind the sequester. But you cant stop him from spending and once they make the commitments, then, of course, they, they, meaning anybody involved in the buckary process say you cant stop the government. You have to raise the debt ceiling. We all know that its not publicly or a media standpoint a winning standpoint. At some point it needs addressed. The topic is japan reaching their debt, reaching big levels of debt. I think its a bit had. I think we node eed to deal wit this in an honest way, the notion, after some of the ideas about how debt slows growth. Everybody wants to change and change the face of us a territory. But i think, you know, lets take a back seat and be an observer to what is going on in japan. They had a slight bit of december of what they are trying to do with stimulus and following our feds directives. But it doesnt seem to have worked exactly the way anybody would have designed it. Here they now sit, exploding the deficit, raidsing taxes is the next thing to do. Obviously, theyre much more on the Governor Brown model than they are on the taxes of texas or balance, balance. Faveness, balance. Ba are you arguing for . Its going to be balanced and sensible. Are you arguing for unbalanced and unsensible . Are you stupid . Hey, joe, you ever meet people, you will be in a conversation, they go, listen, trust me on this when somebody comes out with anything too quick in a conversation or a relationship or a friendship or in a political relationship, thats when i kind of pull back. I would assume that people are going to be fair in government that are trying to serve the people and the more they remind me, the more i know its disingenuous. All right. Thank you. One more thing, joe. Go ahead. You see the yield . Look at your screen. 2. 77 earlier. Where is it now . It touched 2. 74 and three quarters, hovering at 275. This is a hugely significant area. If we start to slip below this, look for done sol days ago, when i say slip below it, closing basis mostly. I like it. Well be watching it. It feels like the fever is breaking. Breaking for all the wrong reason, hey, they wont do it in september. Whohoo it seems like we are getting involved in a war trade, too. I won have guessed we would be anest sized to homogenous sizes. Political forces changed. I would say right about that, rick. Will they or wont they taper, debate continues. Yes. For all the wrong reasons. Meanwhile, coming up, the department of justice outline, changes it wants apple to make in the ereader market, saying they colluded to drive up the profits of ebooks. Story and a whole lot more coming up next. Ive got something for you too. announcer fancy feast delights with cheddar. A meal that is sure to delight your cheese lover. Now available in the classic form she loves. Fancy feast. The best ingredient is love. Welcome back to squawk box. Lets get to the broader implications of this and more from our next guest joining us from stanford is daniel ernst. Help us make sense of this. This decision, they lost this case on the ebooks means what to them, ultimately . Well, actually, ultimately, i dont think it matters at all. Particularly with the stocks at 12 earnings, the run from 400 to here, there is a plethora of potential product catalyst sitting in front of us, a watch, tv, mental improvements, which i think people misforecast the potential for those things, china mobile, japans, there are so many things in front of apple, earnings, 2. 5 dividend yield t. Fact that government wants to get involved in how content pricing for books. Ultimately, lets just talk about the implications. This is the issue. We talk about ebooks. People, you can write off the book market and say its a tiny piece of their business. Ultimately, if they get into the tv business, the they partner with others on content, you are now having the fwft have minders literally sitting in cooperty no watching over there coopertino watching over them. How does that make their ability to purview some of these options . I think that would be a lot more troublesome to the parents of cnbc at comcast if the government has to come in there and say, you have to carry it at this channel and this price. You cant be a part of that process. The consumer cant decide. If the consumer doesnt like the pricing on ebooks, two to the library, amazon. I dont get it at all. Of course, the government said it was illegal, having said that, to then try to go into the tv business, for example, up in that business, you imagine they will have to make deals with different providers. Will be made more difficult by the fact the government will be sitting there looking over their shoulder in a much more aggressive way than clearly they were before. Well, i think its especially the content holders that is a much more tough nut to crack for apple in going to the tv market than it is worrying about what the government Metro Detroit do. So i like to believe that eventually rationality, i know when it comes to government, thats not always the case. But we dont have at love examples of government being involved in content pricing. So i reasonably expect we will not see that again. I really dont think it matters for apple here, sitting in front of a whole bunch of products coming out. Real quick, on content, Walter Isaacson our friend that wrote the book on steve jobs. He talked about how hed cracked the code. Every analyst says the apple tv is coming. Yet, here we are. What itself the problem . Well, i think the reason why it hasnt come is the point that you made about theyre having to negotiate the contract. The tv is easy, right, look at the iphone, the ipad. They have the best interface. My 5yearold boy came here and said why do you weed netflix from the ipad . He said its too hard to use the tv. Its so funny, apple hasnt fixed out how intuitive, the mac operating system, they made it easier to interact with technology. Thats the easy part. Apple has clearly done that. Im sure its in the labs. The real issue, the only way thats an interesting product for them is if there is a full suite of content on that. Its a tough nut to crack. It will take a force of personality. Thank you for joining us. We appreciate it. Coming up, the home price numbers set the tape at 9 00 a. M. Eastern. Back to squawk box. The futures are hitting session lows, right now down 1. 17 on the dow on worries of a possible strike, which could be forthcoming in syria. In fact, the Wire Services currently western power has told the Syrian Opposition to expect a strike within days. According to sources that attended a meeting between enjoys and rebels. The opposition was told that actions to deter chemical weapons could come as early as the next few days. They should prepare for peace talks in geneva, which might get messed up if the russians and chinese follow through on you angry they would supposedly be. Are we supposed to be doing something . Dont look at me. No press, please. Dont look at me. From blue velvet. We are watching the housing numbers. They are due out in 15 minutes. Joining us to talk housing is david bernsen, senior Vice President of nationwide insurance and former economist of fannie mae. Thanks for being with us this morning. I know there is an expected increase in the houses for june, case schiller, what are you looking for in that . Kayla, i think that will be exactly right. This is june so home sales were pretty strong in june. Will is a lot of momentum, positive momentum with home prices. So from a year ago, a 12 gain is very reasonable. To what extent is a lagging indicator. Home sales were positive in june. In july, existing home sales were still good. But how should we be interpreting this number in terms of where we are right now in the housing recovery . It is an indicator thats a couple months old. We are almost in september. This is a june home prices. If you see them today, it probably wouldnt be as strong. Even if Housing Demand is starting to fall a little bit because of the rise in Mortgage Rates, we probably wont see it in prices for a number of months. So when do you expect the rise in Mortgage Rates would trickle through to prices . In the last three months, we seen the rate rise by 100 basis point, that has to hit the home buyer at some point, david. Well, it has to hit the home buyer if there are other things that dont offset that. Historically, we had a stronger economy to go with that. If we get a pickup in job growth, that can offset the Mortgage Rates. The problem is, we have not yet seen the pick up say in Payroll Employment and so the rise in motherinlaw rates you see it prex with the nba Mortgage Applications is tarting to hit housing. I think where we see the fall numbers for prices, if Housing Demand has not picked up, we may see home price gain slow. We will certainly not be looking at home price decline, perhaps gains of 5 or 6 . David, what Mortgage Rate would do real damage to Housing Demand at this point . Given what you know about the job market and credibility and the factors that matter . Well, mark, i think we are close right now. With Mortgage Rates between 4. 5 and 7 . If rates went up another 100 basis points and payroll gains stayed where they are now, i think we could see Housing Demand slip a fair amount. On the other hand, we seen the unemployment claims trick him down. Theyre the lowest they have been since before the session began. If that discuss translate, it would pick up this fall in Payroll Employment, we may not see any decline at all. Over with the rye in Mortgage Rate, we may see housing deman pick up. There is a lot of concern about mortgage availability, particularly for first time home buyers. Is that something you think is of concern and whats going on there . You know, i have been very concerned about that. My biggest ken about the housing market. There were some indications that Credit Availability is starting to ease a little bit. You can certain lip see that in the federal loan officer survey, where we are seeing banks offering easier term for emergency, so i think that its probably a little easier to get motherinlaws now than it was. You think about the housing boom, we had the mirror test. If you were alive you could get the mortgage. It was that far in the other direction. We didnt move somewhere in the middle. Its still very tight to get a mortgage. Were getting closer. David, we are five years from that mortgage bust. You were the chief economist at fannie mae. Next week is the fiveyear anniversary from when they took fannie and freddie into conservatorship. In one word, how kould would you describe that . In one word . Im not sure you can do one word. Slow healing. David bernsen from nationwide, thank you so much for being with us, david. Getting ready for the trading day ahead and we will check in with him at the New York Stock Exchange as we hit new lows right now. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Ive been doing a few things for playing this and trading. Ove tdd 18003452550 and the better i am at them, the more i enjoy them. Tdd 18003452550 so im always looking to take them up a notch or two. 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Weve been up a lot and the market has been soggy in the last three weeks, but it does not need that news and the jack lew interview was not reassuring to me, because it was business as usual and come back september and september is awful because of what we do, and of course, he did not say that, but syria and the government coming back and it is a kind of a time of thin market where you can expect some pressure. Yeah. Did the durable goods number is always volatile, and zandi is here, and says we should watch 175 and as long as we are at 175 things are on track, and he says that everything is on track. What you think . Well, look, i dont think that things are good or things are bad. Yesterday, you talked, joe, cogently about how the bad news is good news and get 275 on the 10year, and maybe down to 260 and oil under 110 and we do what we do in syria, and maybe anew. But i dont like it when washington comes back, because it is very obvious from the e e beginning that these guys are at war again and you know, joe, come in and a bad statement and syria on the agenda for a long time and iran, and we will be fight it with a couple of good turns in china, and europe, and a tiffany here or a tjxx there and not enough. Things are on track meaning that we wont go down 5. 7, but not up here. Jim, the battle in washington, and that is kind of consensus, isnt it . It is baked into the market. Does anybody expect anything different from ta . Well, no, the confidence when i look at the retail in the last couple of months, they have the confidence to buy the hard goods, but i dont get the sense that people are feeling that good. Look, if we have a good employment number next week, and we hear any movement at all out of washington, then that would be upside, but still, mark, when we have washington at war, and we have had big declines because of washington and few advances because of washington, and so business as usual is not inspiring to people, when we are trying to get to 2 gdp to 2. 5, you will be back at 2 , and im concerned. Im concerned about housing, because the Home Builders say it is ter rifx and the guys who bought them and rent them are terrific, and things are not terrific. They are not as good as they were. And jim, the best over the next three years is to raise the debt ceiling when we needed to, and no grand bargain and none of that happen, but then im thinking that the Discretionary Spending is shrinking and the sequester is going to cut the debt and maybe we would do okay if we didnt do anything else. Well, i dont know. Im with you, but i want washington off i hate it when washington is on the business section, because the name calling is horrible and i think that your analysis, joe, is rig right, it is not that bad, but when you get the partisan conflict and something in syria and funky earnings, it is difficult to mount a big adva e advance. Yeah. I think that we are not that good of friends with russia and china anymore, so im wondering about that . No, no. Feels like 1977. Thanks, jim. Youre welcome. And our guest has been mark zandi from Moody Analytics who started his own business and then sold it to moody with 120 employees. Good the know that. He is shocked. Im not going to and especially that he has a lot more than i counted on. Last word when we return. When we made our commitment to the gulf, bp had two big goals help the gulf recover and learn from what happened so we could be a better, safer energy company. I can tell you safety is at the heart of everything we do. Weve added cuttingedge technology, like a new deepwater well cap and a stateoftheart monitoring center, where experts watch over all drilling activity twentyfourseven. And were sharing what weve learned, so we can all produce energy more safely. Our commitment has never been stronger. A talking car. But ill tell you what impresses me. A talking train. This ge locomotive can tell you exactly where it is, what its carrying, while using less fuel. Delivering whatever the world needs, when it needs it. After all, whats the point of talking if you dont have something important to say . Thanks to our guest host mark zandi of moodys analytics, and it wont be a long goodbye, because you will be here a week from thursday, right . Next week. Yes, the gdp and the jobs report. You were awesome. Thank you. You have always been a friend of austan goolsbee. Join us tomorrow, and squawk on the street begins right now. Good morning a few weeks become tu boys are back together and what a morning for it. Welcome to squawk on the street, im Carl Quintanilla with jim cramer and david faber at the New York Stock Exchange. We are looking at a selling as the market prepares for a potential u. S. Strike in syria, and the return of debt ceiling draw marks and we have caseshiller home prices hitting the wires and Robert Shiller is coming up in a moment. 10year yield down to 2. 76 and europe in the red as well despite a strong german Business Confidence survey. And the road map is