Treasury market, youll see the ten year right now is yielding all the way up at 1. 829 30year back at 2. 3 so some much higher levels of yields than weve been used to in recent month. Our top story, a series after attacks that took place over the Weekend Energy prices are soaring. Wti crude at 59. 55 brent at 65. 60 Big Questions for the future of the aramco ipo airline prices, all sorts of things Brian Sullivan is covering the huge moves in the oil prices in houston. But we want to start this morning with hadley gamble in riyadh, saudi arabia good morning, hadley. Good morning, guys. We are now over 48 hours from the largest ever terror attack on saudi arabias Oil Production facilities and still very muted response from not just the government itself but aramco were told in the next few hours we could see more information coming out of the company just about how this happened information about output, at the moments all we really got go on is the reemphasis time and time again on the statement that they released several hours ago and that was of course to say 5. 7 Million Barrels are lost the largest single outage in market history. That knocked out half of their Production Capacity and essentially that was 5 of Global Oil Supplies. Right now thats all we know from the government itself, but this has raised a host of international gio political questions as you know, lots of questions about whether or not plane bisHouthi Rebels that they were able to take on this attack with drones are actually accurate and a lot of that noise has been coming from the United StatesPresident Trump, mike pompeo essentially squarely putting the blame on iran over the last 24 hours. And calling on saudi arabia to make a statement and really to come out and decide how theyre going to move forward on this because this is a very, very hairy situation for the saudis remember, the last several months over the summer tanker attacks again and again in the persian gulf and really a failure on the part of the United States to take much action i think that that came as quite a surprise to a lot of gulf governments including saudi arabia and the uae they learned that the United States at least so far may have a lot of words but not too much action and certain tla is weighing on whatever decision they make in the coming hours as to how theyre going to respond to the possibility that this is an attack that came directly from iran and possibly be an iraq and also in the competing narrative if you look at the u. S. Satellite images of the attacks on these two facilities, 17 flash points, highly coordinate and one that required a great deal of input of the mechanics of getting done. A lots of questions whether this was missiles plus drones or missiles alone a lot of rumors and frankly not much news from the dpoft we are expected to hear more information about this initial investigation by aramco but also hoping to hear something from the Saudi Foreign ministry and the government itself and certainly that is something that the United States is looking for as well. Guys hadley a couple questions obviously theres the big geopolitical question which is what happens next in terms of what it means to be locked and loaded visavis what President Trump has said and what iran may or may not do, but the question i had just specifically related to oil right now s p has a report out this morning saying that saudi aramco has only 35 to 40 days worth of supply it sounds like aramco thought they could get a third of that back online as early as this week do you have any more details about how quickly any of this can really happen . And is that a good estimate or is that that 35 Wishful Thinking that 35 to 40 number is one we verified ourselves and i think that when we talk about whats going to happen next, ive had many conversations quietly with the aramco folks waiting to see what kind of information and how theyre going to roll out that information today whether it be a press conference or interviews hopefully or a situation where they would even just issue a statement as to whats been happening. There was also the prospect raised internally about potentially having a statement before the market opened around 2 00 a. M. Local time they decided to kick the can further down the road and decided not to go with that and telling me we want to be as accurate as possible and worried about putting out any misinformation that could hurt the narrative and that all has to do with the fact that this is coming against a backdrop of not just all the geopolitical unrest and uncertainty but also has to do with youll remember just a week ago the ousting of the longserving energy of saudi arabia, also leading opec and that opec plus agreement with russia so hes out the door and just a week later we have a new Energy Minister at the helm saudi aramco chaired by the head of the Public Investment fund all eyes focussed on really pushing forward with that ipo. This timing is quite interesting, isnt it . Also of course against the vee owe political backdrop of the u. N. General assembly and President Trump could decide to ease sanctions on teheran. Hadley, thank you for that report. We want to swing over to houston right now where brooiia sullivan is. Brian . Yeah, andrew. Listen, i think the key now is going to watch what happens to the equity market as well. Becky was talking that the dow futures are down 120 points but if you just plucked out exxon and chevron they look pretty good the one thing about this attack that stands out is that u. S. Oil looks pretty good right now. We talk about the vulnerability to Global Oil Supplies the one thing we dont have to worry about is the United States and so expect everybody expects a violent snapback in u. S. Stocks. Not just the big caps. I think exxon is up 3 of the premarket, chevron about the same, but if you look at some of these high indebted, heavily shorted oil stocks, stocks that have been down andrew 50, 60 in 12 months, theyre going to violently snap back, but everybody i talked to sauz dont buy into that longterm. This is likely a one, two, threeday phenomena because everybody who is short has got it covered there are also Second Derivative play we talk about the Defense Industry a loft questions this morning as well hadley talked about it where were the defenses . Why didnt the iron dome, the missiles work to down either whatever it was drones or cruise missiles watch the airline and travel industry as well egasoline and jet fuel prices are going to spike airlines they tend to go down cruise lines go down when oil prices go up watch the vix from a market perspective volatility, what this does is expose the vulnerability of one of the crucial supply lines in the world. Dont just watch the Energy Stocks watch oil. Watch travel watch cruise lines and also watch volatility the vicks guys perhaps could also spike as well whatever ends up occurring here, whatever we end up finding out, one thing we do know this is the single biggest daily disruption, in Oil Production ever in the history of modern humanity, 5. 7 Million Barrels and it shows that whatever the attack wherever it came from the world saudi arabia is vulnerable okay. Brian, thank you for that report well check in with you in the next hour. For more on the escalating conflict, lets bring in retired army cornell jacobs. Good morning. You see the president tweeting we are locked and loaded, what does that mean . Do you think were headed to war . No, it doesnt mean anything. We are always locked and loaded. We have an entire fleet in the mediterranean. We have a fleet just off the gulf we have satellite imagery. We have a great deal of capability in the region and can launch an attack on anybody from there at any time, but were not doing it and this administration has been reluctant to counter any moves by adversaries and one of the reasons that you dont see john bolton in the white house anymore is because he advocated a strenuous response against iran and the white house is not very much interested in doing it. We just heard from hadley gamble, reporting the saudi perspective that the u. S. Is all talk and no action do you think thats the case or does this push us yeah. No, no we like to talk a lot but were not acting, certainly not in a military way i think the administration would like to resolve things because wooe moving into an Election Year going to war is disadvantageous to both of those ojtd ibjective. We have been trying to use economic means and still havent used the entire pan plea of methods we can use economically. We havent squeezed iran to the extent economically. Although economically iran is suffering, which is probably why you see them acting out in more ways. Theres no doubt about it because if we really wanted to push them into a corner we could. We havent squeezed any of the nation states including our allies who go around the restrictions on iran and deal with them in any case. Theres lots more that can be done, but i dont think the administration wants to do any of that. I think the administration does not want to get involved in a shooting war by the way, i think there are going to be some incidents in the gulf to be sure, but i dont think the administration wants to use the military instrument of power. Jack, just speaking about the drones, you think of drones and think of those little tiny things you can swat away were talking about a very different scenario here. Yeah. Drones come in all different shapes and sizes and capabilities and dont just include the hobby drones not necessarily the reaper size drones, there are lots of them they can be acquired just about anywhere indeed, the houthis already demonstrated the capability of putting their own together this is not really complicated technology what is interesting here is the coordinated nature of the attack and launches from a wide variety of places, not all of them none of them in yemen, some of them undoubtedly from syria and possibly iran. So, the technology itself is not very sophisticated but the coordination of the attack is very much sophisticated. Do you agree with mike pompeos assessment that iran is behind this . Theres very little doubt about it the houthis dont do anything but by themselves and on their own. They are a proxy for iran in the continuing proxy war in the middle east between iran and saudi arabia for control of hearts and minds and economies no, no iran is almost undoubtedly behind it all. Thank you for your time. Youre very welcome coming up, two other big stories breaking over night, Purdue Pharma filed for bankruptcy and the United Auto Workers are on strike against General Motors look at the biggest premarket winners and losers in the dow as we head to break oh, wow. You two are going to have such a great trip. Yeah, have fun thanks to you, we will. Aw, stop. This is why voya helps reach todays rement. Um, you guys are just going for a week, right . Yeah thats right. Can you help with these . Oh. Um, were more of the plan, invest and protect kind of help. Sorry, little paws, so. But have fun send a postcard voya. Helping you to and through retirement. When didwhen i needed ton . Jumpstart sales. Build attendance for an event. Help people find their way. Fastsigns designed new directional signage. And got them back on track. Get started at fastsigns. Com. Breaking overnight, the uaw on strike at General Motors with about 48,000 hourly workers heading to the picket lines. This is the First National strike at General Motors since 2007 that strike was estimated to have cost the auto maker more than 300 million a day. Contract talks are set to resume at 10 00 a. M. Eastern. On twitter, President Trump urging the two sides to get together and make a deal well talk more about the cost of the strike and the sticking points in negotiations, phil lebeau will join us at 6 30. Also new this morning, Purdue Pharma filed for chapter 11 bankruptcy protection, collapses under the pressure of thousands of lawsuits. They reached a tentative deal to settle 2,000 cases that were set to go to trial next month. Although, some states rejected that deal, and now pursue pharmas chairman steve miller will join squawk on the street. Busy week for the markets. Fed kicks off a two day policy meeting tomorrow with stocks near new highs david, well start with you. You have counted how many cycles of tariffs, easing of tariffs, market goes down on the tariffs, slowly rebound actually it doesnt rebound immediately, sort of stabilizes then rebounds after we think some positive things are happening were vulnerable to it. This one does sort of feel like its possible that we might actually get some kind of more lasting temporary resolution in that paradox is on purpose this time the political implications are much more severe go back to the first couple times this happened, the president still had a lot of time to work through it and so forth, but i think this time maintaining the Strong Economy narrative into an election is very vulnerable. Hes seems determined to get it done the difference is china. China seems less concerned about their vulnerability, but their vulnerability is not in doubt. James, on the fixed income side, youre still not sure what goes on in terms of fed and Everything Else, but just take a step back and just go into the twoyear and just wait at this point, is that the best move yeah, i think one of the things you look at in the Capital Market space is sort of been a year where everything worked the income side from the Equity Income side has worked the bond market has worked and so when those corallations move sort of positively together, we like to take a little risk off the table. The two highest yielding assets on planet earth are 30 year italian debt so parking money in the short end of the Treasury Curve and let this play out a little bit makes a lot of sense right now. Quite a backup in rates after the events of the weekend, too it had already bottomed and the ten year started moving. Where do you think the next resistance level is . Do you think we get back above 2 near term joe, i think this is a complete redo of the two other periods we have seen 150 on 10s. Weve had these sort of call the mini pauses, mini recessions in this expansion the 150 was the level for us it held. You can see a 2 level i think thats exactly where the fed is going to go theyre going to ease tomorrow or on wednesday. Maybe one more in october and then you see positive slope to the yield curve and a lot of those sort of technical things that concern people about economic slow downs go away. So i would expect a twoyear, tenyear and 175 funds rate. That matter to you, david oh, it does in terms of the liquidity they were taking out of the market in Fourth Quarter last year, that doesnt seem to be a play right now. Plenty liquidity in the market that is there for risk assets, but as far as the shape of the yield curve, the thing im not sure i agree it can hold when the fed brings it down. Thats what i was going its not just the fed. The bank of japan, bank of england everybody is moving this week youll hear more from them soon. Thats right. I think those amount of assets pouring into the long end of our curve is going to continue to hold that yield down i dont see that changing any time soon. So your strategy at this point is do you care about growth do you care about value . Do you buy the dips, go for yield stocks yeah. Were not yield stock people were growth of yield stock people we want Dividend Companies raising the dividend over time you look at the events of this morning, chevron and exxon, we would never buy something because we think it would be a shock to oil supply. Chevron and exxon, 5 , 4 yields these companies have grown the dividend through far worse economic periods than were going through right now. I think its sustainable Dividend Growth from two really Good Companies you get an added benefit that they seem to be defensive. You would have bought them before this snechb. We had been buying heavily throughout august, absolutely. James, if you had to park money in fixed income, when do you think the next buying opportunity would be for Something Like a ten year or even longer than that . Where do you think were headed . Are we permanently at these low levels well, were going to move is global gdp moves my only shortterm trade where i think rates could back up a bit is inflation has come off the mat domestically i think we were overbaug at the 150. I think the fed gives us a pause. Global economy sort of stabilize and we get some sort of fiscal activity out of germany which i think we will, and you start to see these Inflation Numbers certainly not problematic, but with the oil events over the weekend, youre going to see pressure on those numbers. So i think the dramatically overbought levels are behind us. And i wouldnt be surprised if you had a 2 but being agnostic, i completely agree with david you want to have a balanced portfolio of growing dividend stocks, noncorrelated bonds. If yo do that in this environment, youll have a competitive and growing income stream sort of regardless of where absolute yields move you have to be flexible