Lowcost manufacturer. Heard it correctly. Well find out whether longer term thats good for our quality of life and our economy. All of that is ahead. Tyler is out this week. We start with syria and where we stand. A senior u. S. Official told cnbc, we are past the point of no return. An attack to begin within days. Four guide missile destroyers as well submarines are maneuvering in the Eastern Mediterranean and loaded with tomahawk videos like this one in the file video. British propose a resolution at u. N. Accusing syrian gov of carrying out chemical weapons attack. They complete their investigation this week in syria. U. N. Secretarygeneral ban kimoon said today u. N. Inspectors in syria need an extra four days to complete their work. While all of that is happening, its still very clear the war is still being fought very fiercely. This is video of Syrian Army Tanks being hit by some sort of explosives. We presume, although we do not know, they were fired by the rebels. Simon, down to you. It is our job to cover financial markets. Oil prices surging with brent up 4 since monday. Gold is pretty flat on the session overall. Both assets, importantly, have climbed to about 20 since their respective summer lows. Covering oil, alan joins us, Portfolio Manager of Spartan Commodity Fund and for gold, thomas, partner of orem option strategies. Welcome to the program. Alan, is oil in a oneway direction now . Well, sort of. I think well have a small retracement during the day and a rally back up by the end of the day. However, the problems over in the middle east are not going away any time soon. So, unfortunately well see higher levels in crude oil. I think well get to 114 in crude oil. You have to assume, dont you, there will be some contagion around the region to Big Oil Producers like iraq, or at least terrorism on a grander scale, before you Start Talking about supply interruptions. Real supply interruption i dont think well have. I think well have the fear of supply interruption which will get futures to rally. It might also prevent ships from being insured. Cant have ships insured, you cant have a ship across the suez canal. 25 of all oil comes through the straits of hormuz. Alan, i was looking for your confirmation. Yes, roughly 25 is going through that canal. Thomas, lets talk about gold. How constructive are you on gold . Glass half full because you rallied 20 or half empty because weve come down so far off the highs of last year . I think weve had a significant bounce here. A lot of it you know, were having some really thin markets here in august. And peoples tendency not to want to be sure during Something Like, this the syrian conflict, causes the market to rise. I think its maybe running out of steam here a little bit. As you get above 1400 the demand in china tends to wane and premiums between here and there has come in in the last few days. That could give you a signal if you were long to take some off the table here. I wouldnt be short here, obviously, because of whats going on. That tends to happen as its a newsdriven market. Guys, have a great afternoon. Thanks for joining us. Thomas on gold and alan harry on oil. Lets get to Rick Santelli. We have the results of a fiveyear auction. Thanks. Second leg of our supply, which is 98 billion, this portion 35 billion, and yes, it is five years. The yield at auction, 1. 624. 1. 621 tra is trading so it tailf a bit. Bid to cover came in at 3. 38. Chasing every dollar of securities available. The tenauction average for that is 2. 74. The indirects were close to average, 40. 3 versus 44 on tenauction average. The directs a little light, 12. 7 versus 16. And 46. 9 represents the share the primary dealers now have in their back pocket. So, c minus, back to you. Rick, it says something were having our best day on the equity markets now for four weeks. The dow up 83 points. So, cutting a lot of 170odd point loss we had yesterday despite the fact we appear to be advancing towards military action. It is the oils that are pushing the market higher. Some of those defensives like Procter Gamble looking a little heavy at this stage. Sue, back to you. Mortgage applications falling for the Third Straight week as rates hit their highest level this year. But thats not the only bearish news for the housing industry. Diana olick has it for us from washington. A little worse than expected but not by much. These contracts are indicators of closed sales in august and september. And theyre still up 6. 7 from a year ago. The realtors say the slip is, quote, not yet concerning. They blame rising Mortgage Rates and availability of credit. Now, speaking of credit, federal Bank Regulators today scrapped part of their proposal to make mortgage lending less risky. You remember those rules from dodd frank. They dropped the 20 down payment rule for a loan to, exempt from Risk Retention by the lender. Theyre now aligning their rules with the cfpbs rules which require no specific down payment but do require borrowers no more than 43 of income on debt, they document all debt and make periodic payments so no interestonly, negative amortization loans. This is still a work in progress. Were talking about late 2014 for any of it to be real. Thats whats going on today. Sue . Thanks for the update. We appreciate it. With syria, headline risk that goes along with that, the fed tapering, competing for the headlines every day, what should you do as we head into a volatile september and october. We welcome back richard mattigan, jpmorgan bank. Again to see you again. Lets start with the headline risk that syria presents for the market. I was actually surprised that we didnt see more of a flight to safety into the bond market. And the stock market is having a pretty decent day despite that. Whats funny. A lot of this is august. Weve got light volume. Weve seen outflows from core bond funds, pressure on treasuries. I think a lot of this, to play the counterintuitive trade, is to figure out what the real knockon effect for syria is. Were caution but not alarmists. Does it depend on whether it stays in conflict between syria and the u. S. Versus a regional conflict yeah. That would involve russia and possibly china . The u. N. Rate to the chase is usual. How do you get from syria, lebanon, jerusalem, iran, iraq, and russia. Were not viewing this as contagion, per se, but the fact its taken us this long to get here has people paused and worried about how far it goes. Right. Lets move to the fed, then. The fed obviously watchess the headline risk but they tend to be more focused on the economic b backdrop jobs. Yes, basically jobs is the key there. Do you expect a taper in the september october time period . And do you think the market is viewing any tapering as a def defacto . At this point the fed has to taper. They teed up the fact that even though the data doesnt deserve a tightening and were not going to see that, tapering seems to be the thing they want to start as bernanke exists. We dont have press conferences in october. You dont taper in september. If youre doing, it youre doing it now. We hope its taperlight because they dont need to do something significant. Then they can step back and be more datadependent. Simon . Richard, dont we have to take a bit of a reality check here . We were in a position before syria blew up where we decided it had blown up in which all the major Central Banks had their slap on the accelerator to try to get the economies moving. They were kind of teetering, you could discuss whether the United States is still on the scale of velocity but what it needed was one big external shot and we may have that with syria now. Isnt that a gamechanger if youre teetering between growth and not growth in so many areas . Im going to disappoint you on the answer, simon. I dont believe that. I think the markets are trying to be a little more alarmist, not knowing what the extreme is here in syria. Im more concerned about oil, if it sustains where it is now and keeps rising to what it does to global growth. In particular to places like europe and japan were starting to see recovery in, but we dont know. Were close to stall speed but we think we get closer to the 2 1 2 range on u. S. Growth on the way to 3 next year. Well talk to you a little bit about emerging markets but talk to me about the u. S. Market. Given everything weve laid out, do you like domestic equities . Yes, is the short answer. I sound boring on that because i think weve said this for the last year and a half. We had an Investment Team meeting with my senior strategists last week and again this morning. I keep telling them, can we start looking at International Markets more aggressively . Ill tease on the emerging market come opponent. There are pockets of emerging markets that have have the most compelling fundamental value weve seen in the last five years. Markets arent going to care for another three to six months. That is a tease. Richard, thank you. Well see you again ifn a few moments to talk about emerging markets. Meanwhile back to the situation in syria. The arab league said today it doesnt really want the u. S. To attack. Frank gaffney, former secretary of defense, served in the reagan administration. Welcome back. Its nice to have you. Lets start with the arab league. They did condemn syrias that basically the d engel is u. N. Inspectors in syria have preliminary findings of those chemical weapons that were used but the arab league is not giving the president the cover he would apparently like to get for broad support for an attack in the region. Yeah, hes not getting cover from the arab league. Hes not getting cover from United NationsSecurity Council because russians and chinese arent on board. He may or may not get much help from others. The brits seem quite ready to go at it, maybe the french. But a lot of others, i think, are hanging back. In part, lets face it, thats because what the president is trying to come up with is kind of a well, i think of it as a go goldielocks strategy. Not too much, not too little, just right. Its unlikely hell be able to use just the right amount of force to punish Bashar Al Assad and not precipitate any repercussions that are a distinct possibility here. Perhaps regionally and perhaps beyond. Are you referring to irans threats to attack israel . Well, those. Russians have said that, you know, they expect there will be very profound repercussions more broadly in the region. And who knows. I mean, youve got hamas and hezbollah units that have been supported by the iranians over the years. Hamas is a little bit on the outs at the moment as a result of the sunni shiite split. But they are present in the United States as well as latin america and elsewhere. These represent dangerous elements. Im afraid they may just get the pretext their looking for if we trigger Something Like this in syria. Before i bring simon into the conversation, if indeed you dont think the president can strike the goldielocks solution, what should the president do at this point . What should the u. S. Do . I would like to see him adopt something akin to what jimmy carter did when at a similar moment back in the late 1970s he realized that he had made a terrible mistake by hollowing out the United States military. Now, this isnt going to be an immediate corrective, but a course correction is in order in terms of signaling to our adversaries that the United States is not weak and resolute as they think. Signaling to our friends were reliable, which theyve come not to believe. And signaling this deliberate diminishing of our country, which weve engaged in for the past five years, would be at an end. Thats important apart from syria to keep the message of keeping this a much more dangerous problem and a much more dangerous world. Simon . I think were out of time, sue. Thats where we have to leave it. Let me ask you, frank. Apparently we have a little more time. We can be clear here that the idea of this clean surgical strike, it simply does not exist. Kosovo has taught us that. Afghanistan has taught us that. When thats laid out as a poobl strategy, we should call out and say, youve got be completely in it or out of it . I think thats certainly true. Whats worse, there are no good guys in syria to speak of. The Muslim Brotherhood at best will prevail if we are successful and regime change, which lets face it, is our policy. Whatever we do with these strikes. But worse yet, its quite possible that it will be al qaeda. We should not be engaged in a civil war in syria that might have either that outcome or iranianbacked so, why not do nothing . Why not just come back into that classic isolationist stance and let them fight it out, as many in this country would like the president to do . I wouldnt recommend isolationism but i wouldnt embroil us in this particular war. We have a much bigger problem, a strategic problem with iran. I think if we do what we need to do there, regime change, syria and a lot of other things will take place will take their due course. Theyll be fixed in due course, is what im trying to say. Mr. Gaffney, goo d of you to spare your time. Ahead on the program, where did this countrys bailout money go . Part of it went into one mans condo in florida. Thats coming up on power lunch. Made in the usa is about to surpass a global milestone. Vote in the finance. Yahoo. Com poll. 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They found a slide in quarterly orders. This is coal producers cut back on their spending. Stocks down about 23 so far this year. A bunch of retailers out with earnings today. We begin with chicos, apparel retailer, posting weaker than Second Quarter earnings. In its Conference Call it said sales were up 5 in the current quarter. That improvement was across all its brands. Specialty apparel retailer express matching street forecast as sales rose 6 and raised fullyear guidance. Jewelry retailer Zale Corporation reporting first profitable fiscal year since the financial crisis of 2008. Sales rising 8 , sue, at its flagship store. Everybodys buying diamonds. Hard assets, i guess. Thats a 20 gain in that stock. America as the bastion of cheap labor . The u. S. Is fast becoming one of the lowest cost countries for manufacturing in the developed world. But longer term is that good or bad for our economy . Senior economics reporter Steve Liesman is here with me in the studio. Phil lebeau covers the auto and airline industry. Hes in chicago. Steve, im going to start with you. For a long time we lost a lot of cheap manufacturing overseas. A lot of time comes cheap manufacturing, cheap wages. Longer term, is this good or bad . A couple of things are happening that i know about. First, the huge u. S. Energy story. Thats creating possibilities for manufacturing in the United States. Could make u. S. A lowcost producer. We have a highly educated workforce. Executives woke up one morning and realized they hadnt slept because handling factories in china and overseas is a much bigger time consumer than they thought originally. For certain products it may not make a whole lot of sense to make them over there because of all the allin costs of doing it. One thing where i disagree with Boston Consulting Group is we may get manufacturing back but we may not get manufacturing jobs back. A lot of the new manufacturing in the u. S. Will be automated. I want to share this quote with you from Management Consultant warren benis. The factory of the future, it begins, will have only two employees. A man and a dog. The man will be there to feed the dog. The dog will be there to keep the man from touching the equipment. Whats happening in robotics. Theres going to be jobs here. Theres going to be manufacturing jobs, but maybe a lot of them are going to be handled by robots and not by people. Weve seen some of that already in the auto industry, certainly, phil. Not just the auto industry. Its happening in every industry, sue. Thats the thing thats interesting about this report. Steves right. A lot of jobs people think will come back to certain industries, its not coming back. Its the efficiencies of the plants in the United States, thats at the heart of what the Boston Consulting Group is highlighting here. What theyre saying here is that there will be additional jobs added by the end of the decade. Theyre saying between 2. 5 and 5 million, not just in manufacturing but related industries as well. Service industries as well. Steve, one area we disagree, ive been in a number of plants in the last year that are much more highly automated, adding robotics, and theyre finding they also need jobs. Sure. The robots cant do anything. I just saw a great report from Andrew Mcafee from m. I. T. That talks about the new robotics that are you can train quickly. There are choices we can make as a co