Transcripts For CNBC Squawk Box 20170809

Measure. Overnight in asia, you saw similar concerns as markets in both japan and korea came under pressure the nikkei down by 1. 3 , that is a 2 1 2 month low. Hang seng off by a third in europe, you can see similar concerns playing out there the cac is the biggest loser in the major averages declines of over 1. 25 and for stocks in italy and in spain if you want to check out what has been happening with currencies, the yen has been picking up some ground this morning. It is considered a traditional safe haven right now it looks like the dollaryen is at 109. 77, dollar up against the euro. Also seeing a big move in the swiss franc, seen as asafe haven trade. You check that out this morning, but weve also seen gold a little stronger and u. S. Treasuries picking up a bit as well and big news, disney says that it will pull its movies from netflix and launch its own streaming service, it will take several years to complete. Disney making that announcement as it released Quarterly Results late yesterday well be hearing from bob iger and get wall streets reaction in just a few minutes. Mr. Wonderful may have his own reaction you would want disney to eventually sell to p apple im a disney shareholder. And this is between 95 and 110 every time we go through the espn cutting dispute which occurs every quarter and those concerns were brought up again 28 decline is probably one of the fiercest weve seen, but we know its coming. And here is the response okay, well just serve it up ourselves directly to you. That is an interesting outcompany, but its not just for disney for netflix, it means that netflix has to go this to the movie making business which is a crappy business. Since the beginning of time including all the hits and losses of color, sound movies, the average return is about 7 i was a little surprised that the street took this news so badly last night because you would think the idea of going over the top, maybe it shows process. I will use it probably as a buying opportunity when the stock breaks 100 im so used to this disney, you know, fib rue lags, but the can he has such assets and if they are going to serve it up, tell me if you have kids that you wont be buying that service. Of course youll buy if i could presubscribe, i would. Well talk more about this in a minute we should tell you shares of priceline tumbling in early trading on weaker than expected outlook. Top beiping estimates easily. Revenue of 3 billion also beating estimates. Third quarter guidance was lower that expected. Also a little bit of deal news for you this morning u. S. Credit card Processing Company vantiv is making a form allege offer to buy worldplay for 10 billion. The deal first noinsed announcey july. Lay for 10 billion. The deal announced in early July Jpmorgan was previously in the mix. And develop vernight, nort korea responding to a stern warning from President Donald Trump by threatening the u. S. Pacific territory of eamon jave more this is rhetoric that were not used to hearing. A new approach now from President Donald Trump toward north korea. He was responding to reports that north korea had successfully miniaturized a Nuclear Weapon that could fit on top of a missile heres what the president said yesterday. North korea best not make anymore threats to the United States they will be met with fire and fury like the world has never seen he has been very threatening beyond a normal statement. And as i said, they will be met with fire, fury and frankly power the likes of which this world has never seen before. He was responding to reports in the Washington Post and confirmed later by nbc news that the u. S. Intelligence community has assessed that north korea has successfully miniaturized a Nuclear Weapon that would be small enough to fit on a missile. Its a key milestone, but it didnt mean that the North Koreans have a Nuclear Capable icbm the reentry technology is a tricky piece its not clear that they have mastered that. But they did achieve miniaturization sooner than had been expected by analysts in response to the president s comments, the north korean issued a statement of their own in part threatening guam North Koreans saying that the Korean Peoples Army strategic foo forces xanling the operatiexami plans in the areas around guam with medium to long range problem kets in order to contain the Major Military bases including the Andersen Air Force base so that escalation of rhetoric there on the north korean side responding to the president s rhetoric, all of this as the United States has been trying to get china to interview with the North Koreans and we saw the United Nations imposing new sanctions as well within the past week. So a lot of moving pieces here well have to monitor it throughout the day and youre right in that were not used to the rhetoric coming from the United States. Were used to it from nooek. What changes is the time frame if they are further along than we had anticipated, that may make people wonder if we have time for the which i ceconomic substantials to take place thats right. And the question is the role of dhooi in all of that remember north korea and china sharing that border and question is will china enforce the sanctions and also will they police some of the black market activity going on that allows north korea to finance that nuclear program. This is a country that is pretty much isolated from the rest of the world, but still manages to get some revenue in from global trade. Will that be the way to solve if china can tighten the screws on that and then of course you talk about the president s rhetoric here, one of the questions will be was this a clib brdeliberate mirroring of the north korean rhetoric because thats how they speak, or was this donald trump sort of making this up as he went along or is this a deliberate strategy here very much sounded like some of the sort of baths of fire and the other pieces of rhetoric that weve heard from the for examplians in the past well hear more about all of these issues i know we heard from the russians saying that they would like too see a deescalation of the receiphetoric. But what about the chinese, japanese and South Koreans in the immediate arena . Yeah, and the japanese have issued their own intelligence assessment and concluding along the sale lines that the United States has that the North Koreans do now have this miniaturization capability but you talk about south korea and seoul, its so close to the dmz, so close to where any fighting would take place if there was a war touched off on the korean peninsula, its a little terrifying to think about the level of casualties that you could have in a very short amount of time if something were to break out on that peninsula and of course thousands and thousands of american troops on that dmz as well so a lot at stake here for all the players. Soul owing teoul the only pl even before the escalation the real estate protss closest to the river have lower Property Values because those would be the first places that would be overrun in case of some sort of a war breaking out and its horrific to think about what could happen here so the consequences are dire the president definitely escalating his receipts tore rick hes surrounded hes in bed minister, but hes surrounded by all of the apparatus of the u. S. Military. Bedminster, but hes sd by all of the apparatus of the u. S. Military. When you watch the comments being made, premeditated, planned, thought out in terms of what he wa terms of delivering a specific message that he think he talked about with his advisors in advance or something that he con koscocted the moment i dont have any reporting from inside the white house on this, but if you look at the timing of this and you look at the president s body language during that comment, this came during an opioid conference that the president had previously scheduled. But it was several hours after we saw the news break in the Washington Post that the North Koreans had achieved this Nuclear Capability so the president knew this question was coming from the reporters. He had time to prepare it. He was sitting back with his arms folded. He very much seemed like this was a prepared comment that the president made and he hit that fire and fury sound bite twice he wanted that piece of rhetoric to get out there into the conversation around the world. It felt to me just as an observer from the outside that this was a deliberate decision by the president id agree i thought the same thing watching it. Thank you very much. Well talk to you again soon in the meantime, Lockheed Martin says that it is seeing grows interest in its Missile Defense systems in light of the north korea threat the pentagons biggest weapons supplier saying its seen a recent uptick in his still defense questions coming from its clients. Shares of lockheed are up 20 year to date back to the top story of the morning, it is disney rolling out the Quarterly Results and announcing that major strategic shift. The company ending its deal with net fli netflix and in 2019 and launching its new streaming service and also launching an espn service we had a deal that gave us the option to move our films from the netflix platform to somewhere else starting with ka calendar year 2019, so thats what were doing were creating a disney Branded Service that will have those movies on it and if you look at the 2019 slate, it includes frozen 2, toy story 4 and a live action remake of lion king as a for instance so an incredible slate joining us now to break it down, Senior Analyst at fdr kacht capital. Mark, good morning were making a lot of this disney over the top service, but i wonder whether the bigger news is the espn over the top service. Actually, i dont think so. I think espn is a niche sports network. It wont be the flagship espn. It will be the stuff that cant make the cut on espn it will appeal to sports enthusiasts, there is probably a lot of those but that is something that is a complime complement, not a read placement. So meaningful, i think the disney brand itself is more important. So meaningful, i thine disney brand itself is more important. Why are investors not applauding this as much as bob iger wants i think the issue is that this accelerates the wave seen as threat to the traditional tv bundle as you get the disneys of the world giving you better and better quality online over the top subscription services, sports separated from the entertainment, others will respond. Fox isnt going to sit still they will respond to this. Discovery is responding. Cbs is responding. A consumer can get great entertainment, great sports without signing up for pay tv. Disney makes a lot of money for that, so i think the concern is cannibalism. Lets talk about espn again if you are interested in lacrosse and you played it at Boston College and you want to follow your team, you really dont get to do that easily on espn new but if iger will service it up and split it up into all these long and skinny tails, doesnt that service become far more interesting, knlts i mondcondit monetize small verticals in a way i never could before that has kept me in the stock. This is the way i can watch my own team and ill pay for it just for the game. Lacrosse is a niche sport compared to football so i think its unclear if there is a Critical Mass of niche sports subscribers that can move the needle for a something someg as disney. Im a little more sceptical than you are i think. How much programming does disney have, what does that look like relative to a net flex sflx service or hbo or Something Else do they need to buy additional content . When youre talking about the entertainment side, disney pixar, maybe star wars, maybe marvel, that is the best content collection, entertainment collection i think that you could point to anywhere. So you look at netflix as largely an entertainment service, not a sports service. This seems like a very strong alternative to netflix so i do think that the future for netflix is one of more competition, that is something that i think constrains their ability to raise rates long term might cap their Addressable Market opportunity because some people might want this Disney Service instead of netflix and if you are buying netflix new, youre making a long term bet 00 their ability to make a lot of money through pricing and growing subs disney might have just capped that opportunity did you cover netflix because that stock was only down about 1. 6 your point that its not just disney but others, down by almost 4 this morning in the premarket i do cover netflix. Valuation is my main concern and i think the competitive response from the dinosaurs of traditional tv has been very limited to date. But i think what were hearing with any disney doing this, the gloves will come off they wont be alone. Reports suggest that netflix users in the United States and canada, 30 prls of their usagn disney or pixar films on the service. A, do you believe that and b, how much does netflix pay to disney right now so we dont know precisely. Im skeptical of your 30 figure but i do think that netflix is paying something in the zip code of 200 million to 400 mmd i think its closer to 400 million per year to Disney Disney will lose that, so there will be eps pressure to build this up. But i think the bigger issue for netflix is that disney is now a rival as opposed to a source of something that is appealing on your service they will still have disney content, not the big movies. And i think that is the bigger issue for netflix. But there is this conversation that you could hold back some of the marvel stuff, you can that some of the disney stuff could stay on netflix or get sold to other places yeah. I think disney is thinking about what to do my bet is that they will decide that they need to go big or go home and they will take star wars and they will take marvel and put it on their owner ewner is advice is this the end of the secondary demarket . Service. Is this the end of the secondary demarket whether its hbo or whomever, creating consetent, putting it their own platform, letting it run and then they go off and sell to amazon or they sell to netflix or what have you is this a signal that that whole market will change i think in a whole market is definitely changing. There is pressure to put it on their own platform if im a producer, disney is now a new customer netflix is basically you get your price of production plus 40 , but they keep the content in perpetuity. With another contributor like disney, the deals could get more lucrative for contents makers, particularly family. Those old cartoons will be valuable in a big way. Park your kid in front of it for one monthly fee. Ill bullish on the stock. What are you saying for the call on disney itself as a result of what you know now . Up, down, sideways look, i think the stock is stuck in a range i think that earnings go down as they invest in this ramp i think that the concerns around the secular risks to their bread and butter go up and i think its not clear yet how affective competitively they will be with their service but our bias that particularly the pixar stuff is likely do well and ban tech the company that disney just acquired a big chunk of to power all of this, they not only will power this new disney channel, they do h bchlts o, mlb, a lot of others. Is hbo and other competitors going to have to find a new Technology Platform . Well, i think hbo is going to at t so that will be a new tech platform so i dont think that is a big issue. I think bam gets disney industrial Grade Technology at kind of the top level of skill in the market. Gets them big, gets them there quickly. Okay. Appreciate it. Thank you. When we come back, more saber rattling with north korea dwrifg the dow driving the dow to snap its ten day winning streak well ask if there is a bigger pullback ahead careful joe, theyve got you outnumbered. The dinosaurs extinction. Dont listen to them. Not appropriate. Now im mashing these potatoes with my stick of butter. Why dont you sit over here. Find your awesome with the Xfinity Stream app. Included with xfinity tv. More to stream to every screen. Lets get a check on the markets. Futures are under a little bit of pressure. Not by much. Dow futures only down by about 31, but this is striking when you look at the ten days in a row of gains that weve seen for the dow futures. Nine of them new record levels so lets continue to keep an eye on this. S p futures down by about 8 1 2, nasdaq do you know by wn by 38 treasury market, you will see that the ten year at least at this point isyielding 2. 246 bids picking back up putting pressure on yields as that is seen as a safe haven trade two year 1. 339 . And if you take a look at gold which is also seen as a safe haven trade every time you get concerns, you to see a pick up here gold price up by about on 10 this morning to 172. 8 0. Joining us for more is chief investment strategist at jame j jannen and rich stein burpg from Steinberg Global Asset Management gentlemen, welcome to both of you. Mark, lets start out talking about the potential threat with north korea. We know that the rhetoric has been there for a Long Time Coming from north korea. Yesterday the United States stepped up that rhetoric through President Donald Trump what do you think, does that concern you . It does we raised it as a concern earlier by saying it moved from a red hairing to a black swan status we dont know what implications. Obviously the Immediate Impact is a military confrontation that is while perhaps somewhat expected, unknowable with regard to the Economic Impact and of course it involves some of our allies and some of our nonallies by way of china. So the recipe is something that aunt written down on paper and i think the markets reaction is one trepidation if not outright selling. Sell first, ask questions later. I understand what youre saying that makes sense but its not the reaction were seeing futures indicated down but only about 30 points. Why is there not more of a reaction i think largely we havent had an impulse yet a rocket hasnt landed in chicago at this juncture were still talking about an event for the most part the market is writing off. Sxwkted. Exactly and fundamentals have been supported. And rich, how do you try to figure this out, how to do anything with your port follow i cant, or is this an issue that we just think its a binary issue unless Something Big happen, we wont worry about it, and if Something Big happens, then your stock prices are the least thing that you will be worried about . This has kept us up at night, but its a teflon market these are not sticking to investors psyche. There has been a focus on Earnings Growth which this quarter came at a 10. 1 . If things get works it will take a while. So i think this is a continuation of rhetoric, its indicative of what the administration does, respond with words and then things get patched up i think investors have to get back to having that on their radar screen more, but until its a more imminent threat, it will be focusing on the cool kids everybody wants to play with the cool kids and the only way that the markets will have a pullback or be affected is if the momentum and pullback in indexes creates a pullback to allow people to deploy cash again. So mark, there is an article out on the street. Com today talking about how one market watcher, one market historian looks at what happened back in 1987 where we stepped higher and higher all the way up to the day the dow crashed and lost 22 this one day and says at this point valuations are higher than they were there. Is this snag omething we should concerned about . Well, you uttered a couple of the most famous words that are worrisome for any investors and that is that its different this time largely its now if you look at not just pe but the shiller, price to book ratio, youd have to look back to the period of 199 to 2000 9 o see similar levels and that said, you also see the fundamental underpinnings that are studenteupported so i dont think its purely a valuation issue that the market has to collapse from i think there would have to be some type of catalyst that would undermine the fundamentals that are supportive weve had double digit Earnings Growth, mid single Revenue Growth e. Growth we have an economic environment that is Pretty Healthy here in the u. S. And you combine that together and i think that makes for a pretty sanguine environment for equity prices to advance accounting for obviously things like north korea, perhaps some type of trade embargo or something otherwise a political gaffe that could again change the sentiment in the Market Participants which i think would lead to potentially a correction not necessarily a new bear market to derail the bull market kevin, do you get concerns about valuation when somebody points out that this is a higher valuation than in 1987 no, because i look at other Asset Classes against it i always ask this question every day. I have new money to put to work. Where do i put it. Show me an asset class that is better than equities right now and ill put my money there and i cant find one i cant buy credits. I cant buy bounds i dont like alternatives because they are not liquid enough i can get in and out of large cap stocks globally and relative to Everything Else, they are still the best game in town unless i want to be in cash and make nothing and that has been the case for several years. A long time all right, gentlemen, thank you very much to jofor joining s when we return, a battle against a devastating disease. The stoert of a venture investor who is fighting parkinsons has driven him to raise millions for the search for a cure. As we head to the break, take a look at the winners and losers u. S. Equity futures have been a little bit weaker again, this is the first time yesterday with the markets closing down the first time weve seen the dow down after ten sessions of gains before but you have to keep the declines in perspective. Futures in the red, dow down by about 34 points. S p futures indicated done by 9. Nasdaq down by 40. North korea says that it is carefully examining plans to strike the yooud teunited state territory guam this is just hours after this stern warning. North korea best not make anymore threads to the United States, they will be met with fire and fury like the world has never seen u. S. Officials said yesterday they now believe north korea has the capability to put a Nuclear Weapon on a missile. At the top of the hour, well be talking to general wesley clark, he is the former supreme allied commander of nato. Venture capitalist Jonathan Silverstein is no stranger to solving problems hes at the top of orbin med after a surprise diagnosis last year, hifs fundraising hit close to home. Meg tirrell reports on that. Reporter making smart bets on potential new medicines is how Jonathan Silverstein built a 20 year career mistakes just got a lot more personal it wasnt until i saw a Movement Specialist when i noticed i had a slight tremor it in my left leg that he was able to put it all together and say these are all symptoms of parkinsons. Reporter diagnosed at age 49, he discovered he has genetic form of the disease. Like other forms, there are no drugs approved to cure it or low its course so jonathan and his wife natalie decided to take action given the fact that jonathan works in this space, we are uniquely positioned to potentially make a difference. Reporter they founded the Silverstein Foundation with 10 million of their own money i sent out 1,000 letters to Venture Capitalists, ceos, to hospitals, Research Labs they came back with literally dozens of ideas. Reporter hes been traveling the world meeting with researchers, even donating blood, tissue and stem cells about. A guy from mike in ohio september me a check for 18 and he said ive got parkinsons, lets get it done and that is as good a motivation as anything. Reporter silverstein knows first hand how difficult Drug Development is, but hes also helped fuel advancement of successful medicines before. Ive seen miracles happen and now i have to create another miracle. Joining us now Jonathan Silverstein, orbimed and founder of the Silverstein Foundation. Thanks for being here. My pleasure in the last two days, youve been in two different states youre now in a third state. The amount of work youre doing and the pace youre working is just absolutely inspiring. And you already have some updates from even then youve founded a company, right . Thats right. Were launching today a Company Called prevailed therapeutics. And its in conjunction with reregenics bio were excited about the Management Team which is led by a researcher at colombia and the board will have some pretty big names on it founder of lexeon and as well as his cofounder and Peter Thompson is an entrepreneur so were excited about that company. It will be focused on bio logics and gene therapy approaches. Which is an area where we think there is a lot of promise. And not a lot of people have attempted to treat the disease in those areas and you know firsthand how difficult Drug Development is having worked in this space for two years. But one thing that you said resonated with you is being hopeful. What is it about the state of science and what you hope to do that makes you hopeful i think the pipeline for parkinsons drugs has never been better we have nucleus and antibodies, very have activators, reduction therapies on Clinical Trials these drugs all look really promising to me and i think that they will be a good bridge to the next set of drug which is will hopefully be cures. And youre thinking of even obviously taking these yourself. You also wrote an oped for us on cnbc. Com where he said being a patient has changed your approach to Venture Capital whereas before you may have looked for slightly less risk heavy projects now youre looking for cures i think as a Venture Capitalist your first opportunity to is make money for your investors. But as patient i have different needs. So easy to go for the low hanging fruit. Its hard to go for cures but its possible. I mean, i think henry ford said if you think you can do something or you dont think you can do something, youre right and i think we can do something. Jonathan, you bring up a great point though when youre a Venture Capitalist, your goal is to try to make money first. How do you convince people to put their money in what can sometimes be called cures for orphan drugs that places where youre not going to see a large market obviously youve already ponied up and put 10 million of your own money into this. How do you convince others to do that well, i think parkinsons is large market parkins parkinsons with dba is only about 50 patients in the United States but still a pretty large market. And many of the drugs that were trying would work in the large are parkinsons population so i think what we can see is getting a proved on an orphan drug and then using it as proof of concept to get to a larger market what is your definition of a cure is to delay the onslaught of the effects of the disease or to actually eradicate it . And im talking about you personally what do you hope to achieve . Because your enemy is time now yeah, my enemy is time. But im not nervous. Ive done this before. I think that i can do it again my definition here is, you know, feeling as good as i felt before i ever had any symptoms. And i think that is possible there is a lot of approaches which we havent taken yet because they are a little too risky and weve been fortunate to get some funding from the outside, most recently actually today we got a 5 million grant. And they are not even in parkinsons yet, but they have a great interest in the field. And i was just really touched by the fact that the Management Team said we want to advance the ecosystem in parkinsons and we believe in the way youre approaching it and they gave the money with no Strings Attached and im hoping other phrma Companies Follow suit can i ask a question about the economics. There has always been a question of how much r d money the big phrma companies should spend, whether the bit will come there occur backed companies, whether foundations ultimately fund all of this or the government. How do you think about that mix . I think it needs to be a little bit of everything there are big projects which are done by the niah or much bigger foundations like the michael j. Fox foundation where they are looking for bio americas that could bio markers that could be helpful for everybody. And phrma Companies Need to he focus on drugs that target knows bio markers or those specific animal models. And i think it will be a combination of everybody focusing together. And what weve fritried do is really get a group of people together that have diverse backgrounds, so people who have more chemists, discoverer, drug developers, people who have taken drugs from an idea all the way through to approved product. And in addition to people with obviously parkinsons, domain expertise. And when you put all those minds together with different approaches, special things can happen and thats what prevailed and we hope will be the first of Many Companies that will spin out of the incubator or the foundation, but a nonforprofit incubator in some sense. Thank you fascinating. Really appreciate your time today. Thank you. Thanks for having me. And meg, thank you for bringing him here this morning by the way, we had the web address for anybody who wants to donate, they can go to silversteinfoundation. Org. Very creative name. When we come back this morning, tensions rising between the United States and north korea. Well talk former general wesley clark. He served as the supreme allied commander of nato. And then barney frank will join us on the 10th anniversary of the financial crisischanged sin. And later this morning, William Cohen will weigh in on north Koreas Nuclear capabilities the governor has declared a Winter Weather emergency. Extreme risk of burst pipes and water damage. Soon, Insurance Companies wont pay for damages. At cognizant, were turning the industry known for processing claims into one focused on prevention with predictive analytics, helping them proactively protect the things that matter most. Get ready, because were helping leading companies see it and see it throughwith digital. You myour joints. Thing for your heart. Or your digestion. So why wouldnt you take something for the most important part of you. Your brain. With an ingredient originally found in jellyfish, prevagen is now the number one selling brain Health Supplement in drug stores nationwide. Prevagen. The name to remember. Welcome back youre watching squawk box, live from the Nasdaq Market site in times square. Welcome back to squawk box. Its time for the executive edge New Hampshire has sued purdue phrma maker of oxycontin, it is accusing of engaging in deceptive marketing practices that helped fuel addiction the suit is marking the largest state or local government to actually make these types of accusations. The complaint claims that purdue significantly down played the risk of addiction posed by oxycont oxycontin. And fidelity is letting their clients use their website to view Bitcoin Holdings xt pe the experiment will help them learn how they interact with those currencies most have shied away so far because the sector remains largely unregulated. Bi bitcoin is trading at record highs. Coming up, well break down the quarter and tell us how consumer tastes are changing and we mean that literally and now a check on what is happening with european markets right now. When this bell rings. It starts a chain reaction. Thats heard throughout the connected business world. At t Network Security helps protect business, from the largest Financial Markets to the smallest transactions, by sensing cyberattacks in near real time and automatically deploying countermeasures. Keeping the world of business connected and protected. Thats the power of and. At where instead of payinging a befor middlemen,em. We work directly with family farms to deliver Higher Quality ingredients for less than you pay at the store. Get 30 off at blueapron. Com cook welcome back, everybody. International flavors and fragrances out with earnings they beat on the bottom line but revenue fell a little bit short of expectations. Sales increased in flavors and fragrance businesses, though joining us right now is Andreas Fibig the ceo of iff thank you for having me what are the driving forces i know that revenue was up in both of your major units but what are the things that are driving those sales at this point . What is really helping right now is that we have done over the course of the last two years five small exhibitions, and theyre all good drivers for the business one is the active cosmetic business where we do the active cosmetic ingredients the other one in the flavors space where we have created as you call taste point just for the middle market for smaller customers. Because we see, particularly in the u. S. , but also in europe, that some of our smaller customers have a much higher growth dynamic than the big ones and these elements are helping really driving the sales who are these types of customers . Theyre smaller customers when you go to a Whole Foods Market you see a lot of these new, innovative brands. Smaller companies. And we have tiered toward these customers. Are you talking about the flavors in particular . Yeah in the flavors business its 40 savory, 30 beverage, 20 sweet and 10 dairy. Yes youre making things for every single item . Absolutely. We make over 35,000 products and basically every product is tailor made for customer it could be a strawberry flavor. It it could be a sweeter formulation. Many of our customers are asking us how can they reduce sugar everybody wants to reduce it but wants to keep the taste profile. And were helping the customers to doing exactly that. Can i ask how do you do that without using either sugar, or something that is like a steve yeah kind of thing that other people are worried about on that side of things what we do is, and these could be synthetic or natural molecules, out of natural ingredients, where we basically boost the taste of sugar, reduce sugar lets say by 20 or 50 , boost the taste in your mouth, and keep the mouth feel, as well and thats something which is actually flying off the shelves right now, pretty significantly, because its a big issue what are you doing to do that to accomplish that we found molecules were bringing together with the sugar, which boost basically your the molecule on your tongue, and in your mouth, and thats it fools you to think that youre tasting something sweeter than actually the caloric count would say . Exactly i looked at a deal recently in retail, and i was looking at their books, private equity deal, and i saw a line item on the statement for fragrance. They were injecting smells into their stores all right . Are you in that business do you do we do this, as well we see it from retailers, but we see it in hotels, as well. The design fragrance for them, kind of a signature fragrance for the hotel or for the retail store. Is the scinnabon thing real people say they spray some sort of smell i dont believe it i think its just the cinnabons themselves which do it i cannot tell you we have something which can enhance the smell of coffee. Inside the coffee dont you get a lot of pushback from people saying why would i want to put a molecule that is not natural to the coffee inside of the coffee . What benefit could that possibly have for me nutritionly . And is there a risk inherent in doing this the topic, particularly in the flavor segment, probably more than 90 of our from our customers is from natural molecules. You take ingredients that are 100 natural andreas very quickly, 75 of your sales are outside the United States. How has the weaker dollar helped you . It certainly is helping you know, we have big businesses in europe. Exposure to the euro is important to us. Business is doing actually very well, and the dollar is helping right now. Thank you for your time we appreciate it thank you coming up when we return. A Strategy Change for disney taking a bigger piece of the streaming business comments from ceo bob iger were going to talk about it after the break. Plus President Trump sending a strong warning to north korea. Were going to talk to former nato extreme allied commander wesley clark and break down what it means for the markets whoooo. Looking for a hotel that fits. Your budget . Tripadvisor now searches over. 200 sites to find you the. Hotel you want at the lowest price. Grazi, gino find a price that fits. Tripadvisor. New deep hydrating eye gel with hyaluronic acid born to outperform the 1. Prestige eye cream for better hydration. And your best look yet. Olay eyes collection. Ageless. Good morning the futures pointing to a lower open as President Trump warns north korea threats will be met with fire and fury we are live in washington with the latest developments straight ahead. Disney cuts the cord on netflix and announces its own streaming service. Well take a look at the companys big plans and the latest Quarterly Results when we come up. Mr. Wonderful hitting the sweet spot with wicked good cupcakes whats driving sales and talk about the state of Small Business in america. The second hour of squawk box begins right now live from the beating heart of business, new york city, this is squawk box. Good morning, welcome back to squawk box right here on cnbc were live at the Nasdaq Marketsite in times square im Andrew Ross Sorkin along with becky quick, in for joe today kevin oleary, shark tapg investor, cnbc contributor, and mr. Wonderful. Which we discovered, by the way, youre not even sure where the name came from i dont know where it came from but it stuck i show up at the airport, and you know, the limos waiting it says mr. Wonderful i asked one of these guys, do you know my name he said youre mr. Wonderful i said no my real name he said youre mr. Wonderful thats pretty scary. Wonderful story quick check on the futures heres whats going on you do have some red arrows across the board were going to talk about the north korea threat in just a moment that weighing on stocks right now. Dow looks like it would open down about 27 points down. Nasdaq off about 37 points the s p 500 to open off about 7. 5 points oil right now if you want to buy wti crude by the barrel it will cost you 49. 47. And check out currencies, as well weve been watching the dollar throughout all of this, and right now, were at 1. 17 as andrew was just alluding to, that big developing story overnight. North korea says that it is reviewing plans to strike the United States territory of guam with missiles. That announcement comes just hours after President Trump made this stern warning north korea best not make any more threats to the United States they will be met with fire and fury like the world has never seen eamon javers is live in washington he has the latest on these developments eamon . Yeah, good morning, becky those comments that you just played from the president came a few hours after reporting from the Washington Post that was later confirmed by nbc news that north korea, according to u. S. Intelligence, has successfully built a miniature Nuclear Weapon that could fit on top of a missile. Why thats important is because its a key milestone of Nuclear Capability it doesnt mean that they have a Nuclear Capable icbm or Intercontinental Ballistic Missile but it does mean theyve achieved miniaturization sooner than expected. That means that they could put a bomb on top of a missile, launch that missile across the pacific ocean. The Key Technology there is building the reentry technology a missile that could survive the heat of reentry and then successfully impact on its target its not clear that theyre anywhere near that yet but its still a concerning development. Thats what led to this escalation of rhetoric by the president , and then also, by the North Koreans, who put out this statement in response to President Trump yesterday. North koreans saying the korean peoples arm Strategic Force is now carefully examining the Operational Plan for making an enveloping fire in the areas around guam with medium to long range strategic ballistic rocket in order to contain the u. S. Major military bases on guam, including the Anderson Air Force base so it was an escalation of rhetoric, becky, on both sides yesterday. Well see how things play out over the next hours and days here the president , of course, remains in bedminster, new jersey, which the white house skriebs as a working vacation. Eamon, thank you very much. Joining us is general wesley clark. He is refired tour Star Army General and the former nato commander and a senior fellow at the ucla center. Thank you for being here today thank you we are very used to ridiculous rhetoric coming from the North Koreans. We are not used to stepped up rhetoric coming from our president in terms of fire and fury, what does this mean to you . And do you think that this was very intentional message sent to the North Koreans . Well i think it was an intentional message. It probably was meant to reinforce the United States commitment to our south korean allies, and to make sure that North Koreans understand that the United States intends to stay in south korea, and our deterrent is strong, and were ready to take whatever action is required the way it came across was a little more bellicose than that, and we dont want to get in to a name calling contest with the North Koreans. This language, though, i mean, some people have pointed out that maybe this is speaking their language do you think this is the type of language that will come across how do you think the North Koreans will receive this . Well, you know, the North Koreans dont receive language the same way we do right the North Koreans, they know that we have a deterrent i think all the president really had to say is, that our deterrent is strong, and we stand with our south korean and japanese allies. But i think that when you carry language back to the North Koreans in that kind of challenging way, that it encourages them to then escalate the rhetoric and escalating the rhetoric reaches into a position where we dont want to be that is, weve always known that there was a risk of miscalculation on the part of the north. And as theyve made clear, they could attack if they thought we were going to attack lets stay away from the brinksmanship on this. This is a condition thats been a long time in developing. We understand the character of the north korean regime. Secretary of state tillerson said he wanted to open a dialogue i think thats the right way forward. Theres time to do this. China and russia working with us, keep the rhetoric down and work for a stable condition on the north korean side, and stability in northeast asia. Thats what were looking for. General clark, Homeland Security has a color coded advisory system in terms for terrorism here in the United States if you were to color code where we are relative to north korea right now, green being at the very low end and red being at the worst end, the most severe end. Where are we were in the yellow zone. Because the rhetoric is heating up the exercises by the north in firing the missiles has increased. This is part of the north korean strategy to intimidate the United States and intimidate the south. And it raises the risk of something accidentally happening or some miscalculation were not in as good a place as we should be but were not on the brink of conflict were we in the same place two days ago, though well, we were but we probably didnt know it general, i have a question for you. I want to take the other side of the coin and preface this question with please dont shoot the messenger. Part of your job as a general is to prepare for war and think about the outcome. Now, im in the Financial Services business. I create indexes for markets all around the world and yesterday when the news broke i called for the futures on all markets theyre not moving they dont care. Maybe people think its because there isnt going to be an engagement but maybe theres another side to this. What happens if we dance in other words, we go to war, this is horrible, i know peoples lives will be lost, but finally get this over with, and unify this country the outcome would be one of the most powerful economies in asia if we finally solve this problem. And maybe the market is actually thinking to itself, and im not saying this is the case, but im speculating it now, okay, theres a war. Ten years from now does it look like a unified germany is that why the markets dont care what is the probability of that happening . If you were in charge of actually doing it, how could you make it happen quickly and with at least the smallest loss of life to unify this country back together weve been listening to this stuff for 60 years i think its time to get rid of it is that one way the market looks at it . Well, i think the market right now in general, and im an investment banker also, im looking at it, i see the market generally underrecognizing geostrategic risk. Geostrategic risk in northeast asia is rising heres the truth, theres no easy military solution i heard the same kind of talk in 2002 about saddam hussein. Why dont we just go in there, you know, clean this up, and sure enough, we got the United States army in there and three weeks, baghdad was no problem, and do we like it now . Does it look like theres a stable democracy in the middle east and is everything fine so generally when you try to get a quick, easy military solution, you probably dont i think one of the reasons the market hasnt reacted more strongly is, they know that theres been tension for a long time in korea. They know the United States intends to fulfill its obligations to our allies in the region and they see the rhetoric as nothing but rhetoric at this point. It has danger inherent in it but they also understand, theres no easy military solution you dont go wheknow where all e weapons are. You cant spend special forces in to get them you dont want to use 70 Nuclear Weapons on north korea china has a stake in this. Japan has a stake. If you start war, there will be hundreds of thousands, maybe millions of casualties its nothing whatever like the unification of east germany, and west germany in the 1990s. And china doesnt want the unification to happen. The last thing china wants is a unified korea as an american ally on its border in northeast china. So theres a lot of differences. And i think what we have to do with this is, weve got to strengthen the deterrent in the south. Weve got to have dialogue, supported by north koreas neighbors in the north weve got to keep the pressure on and weve got to look for ways to cool the rhetoric and see stability. Theres no easy solution to this general clark, the rhetoric is one thing but the real issue that changed at least from our knowledge of this, in the last 24 hours, is the idea that there is military intelligence that suggests they can miniaturize the nuclear bomb meaning they could arm a missile. That changes the scenario drastically. Where does that leave us what does that mean . And how do we get the time line wrong for so long . Well, it means that first we need to strengthen our strategic Missile Defense. That is in place it could be stronger theres legislation in congress to do that we should move on with that right away but, when russia developed Nuclear Weapons, when china developed Nuclear Weapons, we were faced with the same dilemma. Suddenly the equation had changed. Here what we have is a strong u. S. Deterrent against north korea. North korea certainly knows that if it crosses that Demilitarized Zone and initiates conflict it will be totally, utterly destroyed. The question is, can it inflict any damage whatsoever on the United States or on our allies the only thing thats changed is, yes, theres a possibility that a Nuclear Warhead could reach the United States. Thats certainly frightening we live with that for 40 years during the cold war with our commitment to our european allies weve lived with it with our commitment to our japanese allies now, with the case of china. So, yes, we dont like the fact that north korea has a Nuclear Weapon but its not a situation that is impossible to see our way through. This is why the United States has to think very carefully about what our objectives are. It may be all right for President Trump to say its intolerable. But if you say that, you have to see forward to how it is youre going to convince them to get rid of that Nuclear Capability you know, the only person weve convinced to get rid of the Nuclear Capability was moammar gadhafi. Prime minister tony blair and look what happened. As soon as he got rid of it, two years later we said you know we dont like that guy much anyway thats a real lesson to kim jongun. He could look at that and see, even if he was generous, whats the odds that two years, three years now, someone wouldnt say, now that they dont have Nuclear Weapons, we didnt like him anyway so, we have to see it from his side, and we have to think what our objectives are our objectives are to stabilize the situation in northeast asia. General clark thank you for your time today. We appreciate it, sir. Thank you okay we have some corporate stories to share this morning. A 10 billion controls border takeover deal is done. A month after it was first announced credit card Processing Company vantiv is buying brians wordplay the two companies have been talking since july 5th to work out the details. The new company will keep the wordplay name and be headquartered in cincinnati. Also Fidelity Investments has jumped aboard the bitcoin band wagon to a small extent. Its going to allow customers to hold bitcoin to view the value of their investments on its website. That will be done through a digital wallet provider. In this case it will be coin base which will provide the value of Bitcoin Holdings to fidelity and valueact has sold 7 million microsoft shares it sold a similar amount in may but still holds about 9 million shares valueact had bought microsoft below 30 in 2013 and pushed for changes. Microsoft stock is now, of course, well over 70, and i do believe that one of valueacts executives is still on the board of microsoft hmm so people should watch that were also keeping tabs on disney this morning. The company saying that it will pull its movies from netflix and launch its own streaming service. This is a process thats not going to happen overnight. It will take several years to complete disney making that announcement as it released Quarterly Results late yesterday you can see disney shares down by 3. 7 . Netflix shares also down by 4 netflix also declining to talk about this news on the news disney that will be pulling its films to include in them a new disney Branded Streaming Service starting in 2019 heres what disneys ceo bob iger had to say. We had a deal that gave us the option to move our films from the netflix platform to somewhere else, starting with calendar year 2019 slate and thats what were doing. So were creating a disney Branded Service that will have those movies on it and if you look at the 2019 slate it includes frozen ii, toy story 4 and a live action remake of lion king as a for instance so its an incredible slate. Well get the streets reaction to the numbers and the announcement in just a bit when woo he come back well be talking Market Reaction to the news about north korea were watching curvesies this morning as the yen hits an eightweek high on some of these latest concerns about tensions there. The futures, though, theyre down but not by much well have a much broader conversation about the markets when we come back. Stay tuned you are watching squawk box on cnbc these days families want to be connected 24 7. Thats why at comcast, were always working to make our services more reliable. With technology that can update itself. And advanced Fiber Network infrastructure. New, more Reliable Equipment for your home. And a new culture built around customer service. It all adds up to our most Reliable Network ever. One that keeps you connected to what matters most. Welcome back to squawk box this morning take a quick look at futures right now we are in the red, or at least it looks like were going to open up that way. The dow looks like it would open off about 44 points. The nasdaq would open off about 40 points down and the s p 500 would open down a little over 9 points we want to talk markets, in particular i want to talk about how you guys are even thinking about north korea this morning joining us is anastasia am rosa, Global Investment strategist at Jpmorgan Private Bank which has assets of more than 1 trillion. Also andre every time its tough. Its tough founder and ceo of zoe financial. When you guys woke up this morning, or even yesterday when the Washington Post first broke the story in terms of what was possible with a Nuclear Warhead, did you think to yourself, that theres a not a trade here, but i need to think about this in terms of where the markets are going to go i think it depends on your time horizon so if youre very tactical, which anastasia will talk about, then of course, this is going to generate volatility. Its going to generate opportunity. For our clients that are trying to invest to retire one day, i think its very dangerous to make Investment Decisions on some emotional reaction to something that could happen, and has very little probability of occurring. Are you in the same place so we did look a little bit closer at the volatility thats coming out this morning. I do think the markets are reacting as one might predict. Youve got gold that is up, and deals for clients who are looking to hedge some of these geopolitical risks which we cant predict which way its going turn out i think theres a few opportunities that stand out one thing weve been looking particularly is gold and even though its up on the year, if you look at gold volatility, its actually the lowest level that its been in ten years. So, for more tax for some of our clients who are more tactical looking to position there. The big theme that weve been talking about within parts of our private bank is the dispensing thats an ongoing theme for us for several years now, because we do look at risks not going away whether its, terrorism threats, whether its rogue states, just not going away so because of that we are looking to i dont know if you heard, kevin had a very provocative, should we call it a thought experiment for now just testing the general. Testing the general but ill test you, do you think that investors could potentially even see past something terrible happening in north korea, meaning or something terrible with us in relation, and try and see past that and say, maybe ten years from now, actually the worlds going to be a much better place and therefore we shouldnt worry about any of this stuff youre more daytoday i think yes, investors can see that but its really difficult to predict the outcome. One thing that i would say, we all know which way the geopolitics of it are going to go the way theyre going right now, china is looking to export less, or actually no coal at all from north korea, so somebody might have to fill the void in coal imports in china whether its domestic production, or whether its imports. Most of the Hedge Fund Managers look at this and still look at it completely in a binary way and say i cant even trade this i cant think about it im not going to think about it. Its either going to happen and it will either be terrible or not but i cant enter my true investment picture thats the way that i look at it like what is my edge on this and the answer honestly is zero. Therefore, why am i going to make any kind of bet on it if there is really no edge on it. Anastasia, i have a question for you regarding your clients, and maybe this is whats going on out there in the market, why its so resilient. Ubs put out some data about their High Net Worth clients theyre servicing. Theyre holding 38 cash, and they have for the last four years. Has the risk been built in where people just say, look, im willing to put money in the market but im going to hold back so much that i dont really care if theres war in north korea. Is that where were at i think thats right, kevin i think investors have been very cautious ever since the financial crisis and i think investors have been continuing to deploy that capital very cautiously. I think in the same ubs report that you saw yesterday, clients continue to be concerned about politics, they continue to be concerned about geopolitics, national issues, international issues, so i think thats whats driving some of those cash balances but, you know, in a market like weve had so far this year, everybodys looking for an opportunity to deploy cash at better levels. And we might be getting it you think this is a pullback . Well, this is a start of a very small pullback. Its very tiny but thats what weve had so far this year. And thats what you might expect when the economy is on solid footing. If you think about it, were in a perfect sweet spot in the markets right now. Because the Global Economy is fine the u. S. Earnings are fine and at the same time, the fed is fine the fed is not looking to choke off thisexpansion just yet so for that reason, thats why we havent had a pullback. I think everyone has a plan until you get punched in the face, right . I think from our perspective, we are actually putting north korea aside, starting to dial down risk, and the way that i would describe it is everything looks great from an economic standpoint but valuations continue to get more and more expensive, and at some point you have to have a plan, even though you might get punched in the face, right, of what does that mean . What if the market is going to have 15 dialback . How is that going to look like and for a lot of our clients they used to have an 80 20 equity bond. And now its 92 , 93 equity in bonds. Its time to get it back through what they thought their plan was originally okay. Thank you. Appreciate it. When we come back, disneys major shift in streaming plans up next, though, the arrest of tiger woods on may 29th comes to a head today when he is arraigned. We have the tas ghdeilrit after this break squawk box will be right back. You always pay your insurance on time. Tap one little bumper, and up go your rates. What good is having insurance if you get punished for using it . News flash nobodys perfect. For drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. Switch and you could save 782 on home and auto insurance. Call for a free quote today. Liberty stands with you™ Liberty Mutual insurance. Going somewhere . Whoooo. Heres some advice. Tripadvisor now searches more. 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Good morning welcome back to squawk box right here on cnbc were live at the Nasdaq Marketsite in times square among the stories front and center at this hour, Mortgage Applications rose 3 last week, according to some new figures from the Mortgage Bankers association. Both new purchase and refinancing activity increased as the average 30year Mortgage Rates dropped three basis points to 4. 14 also the state of wisconsin wont break even on proposed foxconn plan for at least 25 years. This is what i was trying to talk about earlier this week thats according to some new statistics the states legislative Fiscal Bureau and nonpartisan entity foxconn hoping to open the lcd screen making plant in 2020. Which raises the question whether its worth the 25 years. I saw the headlines on this report and my question was, does that include the number of jobs that are created and the the taxes the employees would be paying in im not sure i dont know the answer. My understanding is it is somewhat dynamic not fully. These plants are the size of seven, eight football fields so the amount of jobs they create just building them is fantastic. I mean, a facility like that, if it actually happens, is a good thing no matter how you cut it no matter what the subsidies were because youre just basically subsidizing productivity in my view youre building a plant thats going to employ thousands. Youre getting stateoftheart technology and robotics in there and youre keeping the supply chain domestic i dont see any bad news here. I do think its a little different when a city pace to fund a stadium thats being built for the nfl or something along those lines, because the taxpayers end up on the hook they end up paying the bill for that this is a different situation. Taxpayers arent paying for anything you just are granting some but you have to look at the whole supply china basically if the manufacturing facility stays domestic right the dry cleaners i dont know how dynamic, back to andrews point, i dont know how much of that they have captured if any of it. Well, i think its the point is, give me the negative case to it why wouldnt you want to do this is a better question, because i cant find one reason this is a bad thing. And what would it be what would be negative well, i think the only question is, if it takes 25 years, could you use that money more productively . I disagree, i think moneys fundable i disagree it costs something to build the stadium, it doesnt cost anything to do this money is money no but its tax receipts youre going without but its tax receipts youre going without if they dont build the plant there, too but the question is could you find somebody else who could come in who would do it for a marginally better pricing. I dont know but there isnt anybody thats done it bigger than they have they have done this in other jurisdictions, obviously, in asia so successfully, that 2 million jobs left this country to go work there thats the way you should look at it. Theres 2 Million People associated with supply chain making just the apple phone. Theyre not here well heres how you get them back and i think theres a very strong argument for why, you know, i dont care how many years it takes, what does a phone look like in 25 years . Maybe its plugged into your head who knows. You still have to manufacture something to make it might as well be domestic. By the way, it does assume that theyre still going to be building all of the stuff 25 years at this plant. Which actually goes to theres two issues that are up for grabs. One is whether all of these jobs actually turn into robotic jobs, which they very well may i think we should all assume that maybe disagree with that yeah. In which case the numbers actually look worse. I just think its complicated. 175 years ago 40 of the jobs in america were all around farming. Now theres 2 we didnt know it was going to be search optimization, and i mean look i want everyone to get i think its great for wisconsin. For the people it seems like its great for wisconsin however, i think there is theres a true cost and i just dont think people necessarily appreciate what it costs if you put it up for another state someone will take it i guarantee. I think this longterm has a lot of positive ramifications. And you know should you give trump credit for this . Did he not go to that state and say i will bring you jobs . Yep did he not deliver . Doesnt matter where you stand on loving him or hating him. He said that in the campaign and look what weve got here but hes buying the jobs. Just just for 100 clear whats going on here would you rather he buy them yes im with you i agree. Im just saying there is a cost. And i would imagine that in the same conversation weve had about whether i should be the redistribution of wealth in america, this is part of that. And so anybody who doesnt think that its part as long as we all agree on what it is, then its fine. Look at the subsidies that go into every countrys support of the Aerospace Industry whats the difference . There isnt any here you want it to be technology you want it to be cutting edge all im saying is in the same conversation we had yesterday or two days ago about who should pay for the subways im absolutely right on that one. You said it should be based on usage absolutely. Who is driving. Who is all of that absolutely. And that hasnt changed in two days because im still right and all im saying is here we are providing effectively a corporate subsidy. Look at elon musk and the jobs hes created, with the battery with solar i agree except for the fact were having a whole conversation on tax reform where were all talking about tax reform in this country and getting rid of loopholes and giving benefits to Certain Companies over others on a state deciding what to do correct youre not talking about giving federalized each state should compete we had a company that moved from california to florida, why because of taxes let the states compete let it be an open market its a wonderful thing where do you want to start a business now texas and florida. Those are the best places. And thats where the businesses are being started. Now wisconsin wants to get in the game good for them. Let them compete i love it. Okay. Well take that to the bank. In the meantime, one more story for you. A lottery milestone has been reached. The jackpots for powerball and Mega Millions have topped 300 million. The first time both have been over that mark at the same time. No one won last nights Mega Millions drawing meaning that the next jackpot estimated at 382 million. Tonights Powerball Jackpot is at 307 million. And becky and i are going to be running out, the closest bodega. Thats why we have. We put in five bucks each. And no one mentioned it to me send in the email. Five bucks both of you never made. You will never, ever win this thing. Its entertainment. I will be laughing if i win ill be laughing all the way to the bank. Right . Ill be laughing. Because it will never happen thats the way i look at it. I know. My dad has the same opinion, he says taxes its stupid. If youre not in it you cant win it im glad i didnt say it. But its five bucs for entertainment. By the way, if were not here tomorrow you know why. Tiger woods is going to be arraigned today but he will not be attending court its related to his may arrest for driving under the influence. Woods could avoid Community Service or jail time because he meets the qualifications for palm beach countys first time dui Offender Program where a 12month Monitoring Program is mandated he was arrested on may 29th after police found him sleeping in his running car with the blinker on disney surprising investments with a rollout of a new espn streaming strategy. Lets turn to greg portal. Greg, what do you think of this decision and what do you think of the stock selloff as a result well, the stock selloff is particularly tough, because its investors really voicing their opinion on how disneys going about doing this but if you look at the pure Strategic Value of disney, a consumer company, building direct relationships with consumers, its a very smart thing for them to be doing okay, let me ask you a question about the drawdown on the stock. Every time we talk about espn, and you know, cord cutting, and reductions in subs, which is basically 28 in this quarter the stock gets slaughtered same things happening here again today. At what point does espn, and this new optimism of selling it over the top, as iger was talking about, come out of the equation when do we finally say i dont care about espn anymore because disney has so many other assets and so much other content, and theres so many problems, i dont care about espn . Its not now obviously because this was a tough quarter they missed by two cents by the way, right, on the actual earnings what is the real drawdown on this its espn between, is it not espn is clearly the drag. Whats really surprising is that investors continue to be surprised about the trends in espn so the fact that espns under pressure, and that the earnings are down, in that particular unit, really shouldnt be a price for investors now or a quarter from now or a year from now. The better news, and the more positive news that this is the first time disney has had a real Clear Strategy to execute to try to prevent some of those future losses you like this plan to go ahead and pull the content back, create their own portal and sell it themselves . Absolutely. The idea of feeding someone elses platform, which is what theyve been doing with netflix, really is problematic for Consumer Companies going forward. Because you really dont want to give consumers a platform other than yours to access your content. Because you want to own that consumer and you want to control them, and not be helping somebody elses brand along the way . Right and disney is one of those Rare Properties thats able to actually be a creative to the platforms its part of greg, whats the chance that there is some cannibalization . We were talking earlier and i was saying i think the sorkin family, even though we are not subscribers, it would look like were paying Something Like 20, 30 a month to disney just in terms of movies and tv shows that are bought, frankly, through itunes and other oneoffs like that once a service like this were to come out, if it was 14. 95, the sorkin family would get on that, wed stop spending 30 a month how does that work into the numbers . Theres so many different dimensions to the pricing element of this. That its going to take awhile before disney can really dial that in. Absolutely, theres going to be cannibalization. The questions going to be whether the direct relationship as a consumer, and all of that data and usage information theyre getting will put them in a position to offset those losses i think we can put to rest that disneys going to buy netflix as a rumor that one is dead i think that one died lets get the speculation going on apple buying disney what do you put that up . And just give me odds. Do you think thats even realist ick . Its a tough one to see happening just because of the enormous commitment to content you would see happening there and the strategy of why that would make sense for either company is still not clear in my mind thank you very much thank you when we come back, wicked good cup cakes hitting the sweet spot with shark tank investor kevin oleary. The companys cofounders will join us after the break. Stick around, squawk box will be right back. Time now for todays aflac trivia question are you ok . What happened . Dad kinda walked into my swing. Huh . Dont you mean dad kind of ruined our hawaii fund . I thud go to the thothpital. There goes the airfair. I dont think Health Insurance will cover all. Of that. Buth my fathe without that cash from aflac we might have to choose between hawaii or your face. Hawaii what . Haha. Hawaii you might have less coverage than you think. Visit aflac. Com and keep your lifestyle healthy. Aflac now the answer to todays aflac trivia question in 2013 a motherdaughter duo hit a sweet spot on shark tank. Joining us now dani cofounder of wicked good cupcakes and her mother and Business Partner tracey noonan. Cofounder and ceo of wicked new cupcakes and in full disclosure im an investor in this company. This is shark tanks first royalty deal and a monster success. Dani, traci, welcome to shark tank. And thank you for having me i see you brought the product, too of course lets talk about the business right out of the gate. Theres a huge speculation and started about two years ago that cupcakes were going out of fashion. You should be basically bankrupt now. Right are you in the cupcake business or are you doing Something Else . Were totally a gifting company and thats the thing that has kept our momentum we now focus on the Customer Experience by providing our delicious cupcake jars in boxes like a birthday box. Or a thinking of you box a baby box we are were a gift if you think about, lets say valentines day and women are sent flowers what do you send a guy so our product is unisex, its an everyday product. There are birthdays every single day. We are a gifting company how is it like to work with your mother, dani . I really love working with my mom. I feel like i lucked out meaning, i have a good family behind it to work with for example, mom, she does a lot of promotion of new products i handle all the daily operations, and i handle the location, and scott is our i. T. Guy, and hes great with handling all of our finances, and all of our technical support. You guys are expanding into different product lines though, too . On the point that youre a gift, youre not just a cupcake company. What are the new lines that youre looking at . Exactly so, we have these right here our alcohol infused cakes. Im going to pass one down this one is absolutely delicious. Its my favorite, am rhetto hazel nut. We also have are we eating oh, absolutely. One bite. You have to try this. I was going to be good. You know me with carbs and baked goods. The second it starts it doesnt end. Andrew stop your whining and chow it down this is a maple bacon and whiskey. Maple bacon and whiskey it is yeah, im going here. Here, you want this . You go here. Gluten free cupcake, which are delicious. We have flourless chocolate Peanut Butter thats to die for. Flourless, do we have that over there yes, we do. Pass that one over. Here we go. Oh, wow its good thank you and we also have a new line of pies that are coming out. I cant really talk about them right now. But well have a celebrity who will be featured in the line isnt that who buys these things who is your customer whats the demographic and what area of the country. Hold on ive got some questions. This is heaven right here. Demographics are mostly women between the ages of 25 and 60. Mmhmm. Perfect gift giving range and, like i said, there are birthdays every single day birthday box is the perfect way to say happy birthday. It comes with hats, candles, and you can pick whether you want to put pie, cake or cupcake jars in the box. One of the most successful deals in shark tank history. The Company Keeps growing and they used the platform to get their Company Acquisition costs down to almost zero. Talk about infusing. They were thinking about infusing marijuana into these at one time we had to say no we had to say no heaven in a jar thank you thank you. Thanks for coming in. There was a lot of talking going on when youre eating but what do you have with your picture on it . Thats the mr. Wonderful. And it is the best flavor. Whats in there i think its got a bit of a Peanut Butter buzz to it, ily ts cookie butter. Folks well be back with more news right after a quick break we check our phones 85 times a day. So it only made sense to create a network that keeps up. Introducing xfinity mobile. It combines americas largest, most reliable 4g lte with the most wifi hotspots nationwide. Saving you money wherever you check your phone. Yeah, even there. See how much you can save when you choose by the gig or unlimited. Call, or go to xfinitymobile. Com. Xfinity mobile. Its a new kind of network designed to save you money. Welcome back, everyone we are watching a developing story on the geopolitical fron this morning north korea says that it is carefully examining plans to strike the United States territory of guam with missiles. North korea state media reports the strike plan could be put into place at any moment that announcement comes just hours after President Trump made this stern warning north korea best not make any more threats to the United States they will be met with fire and fury, like the world has never seen all this news hitting the futures markets this morning but really lets put this in perspective. We talk about fire and fury and the dow futures still down by only 51 points s p down by 10 the nasdaq by almost 44. And the spartan world championship, the super bowl of the popular and gruelling Obstacle Course races will be held september 30th to october 1st in lake tahoe, california. Its going to air on nbc and for those at home whod like to train at your local gym before the big race youre in luck spartan race ceo and founder good morning to you. Thanks for having me. So, are you you dont run it anymore yourself, do you . I do. You still do . Not competitively im not going to beat the men and women out there now. They are the most elite athletes in the world so, what are the new obstacles for this year . So weve got we really wanted to standardize our obstacles, just the same way any other sport does you dont see anything change in football or hockey or baseball so we built obstacles seven years ago, and theyve pretty much remained the same rope climbing, barbed wire crawl, walls that youre climbing over. All the standard stuff you probably have at home. Your biggest competitor right now, tough mudder . They were they were. Weve eclipsed the field so youre doing about 60 Million Dollars a year in getting people to buy these tickets, and then run to exhaustion yeah. And youve done some three marathons in a week . Can i lets be pragmatic here how many people on the planet can actually do something that crazy . Well there are 7 billion people on the planet, right . And were getting more unhealthy. And so theres a bunch of people, hundreds of millions, our goal is to get 100 Million People healthy that will get out there but this is beyond healthy. I mean being able to run 26 miles three times in a week, thats spartan that was back in i ran 300 miles okay, but are you built in a unique way do you have absolutely not. You and i in 30 days could go out and do any of this stuff no chance in hell thats happening. Anybody on this set we can go out and do it. We are built as human beings were animals. We forgot were animals. Were not supposed to be sitting here typing and doing anything were supposed to be out sweating, breathing heavy, running. This is exactly what were supposed to be doing theres two versions of this. This is now almost like pro people, professionals. These are elites. And then theres the rest of us right . I would argue youre very fit how long would it take if i paid for it how long would it take to get andrew to be an elite . If you paid for it . I mean would you pay maximum package i can afford the maximum package. Id like you to take the challenge. What would it be from now, six months. Six months . Six months, easily. And how much a day would he have to do he would train minimum 2 1 2 hours a day. Why cant he do more . We could train more but at some point youre getting diminishing returns. So 2 1 2 hours a day. Thats a lot. And that means sleep a lot, too . We get some sleep i cant eat these things get rid of the cupcakes talk about diet that must be very important. Were very focused on plant based diet less is more contrary to everything we learn out there. And so, we would get him on a plant based diet hed be training 2 1 2 hours a day. No meat very little fish . Very little very little. What about protein . Everyone says protein, protein, protein. Listen, largest animals in the world, they eat plants interesting they dont mix whai proteins. Id like to be in the gym beside andrew with a big steak watching him as he eats the plans and runs around for 2 1 2 hours. Lets do it what about becky . She could becky could definitely do this mr. Wonderful could do this. Yeah, that sounds interesting. Okay, can we make a pact here yeah, im not doing it. For next year im amazed. By the way, airs on nbc so its all in the family. We could race together, bring our cameras. Come on i think we have to say one thing, though, you built a heck of a business. Yep what youve done here is remarkable thank you we have a race in december in iceland. And so i dont know if you know the producers of this show have you all coming out to iceland. Its a 24 hour event whats the date december 14th im putting it on the calendar thank you so much for coming in when we come back its been ten years since the global fanalinci meltdown barney frank will join us on whats happened since that time. No, please, please, oh shrieks in terror heavy breathing and snorting no, no. The running of the bulldogs . Surprising. Whats not surprising . How much money aleia saved by switching to geico. Fifteen minutes could save you fifteen percent or more. Thank you so much. Thank you so were a go . Yes we got a yes what does that mean for purchasing . Purchase. Lets do this. Got it. Book the flights hai si si ya ya ya what does that mean for us . We can get stuff. Whats it mean for shipping . Ship the goods. Youre a go you got the green light. That means go oh, yeah. Start saying yes to your companys best ideas. Were gonna hit our launch date scream thank you goodbye let us help with money and knowhow, so you can get business done. American express open. Tensions rising. They will be met with fire and fury like the world has never seen. Global stocks slide as threats between north korea and the United States escalate ten years since the first tremor of the financial crisis were going to talk to former congressman barney frank about whats ahead for Bank Regulation a decade after the meltdown. Plus disney lets nix go let it go announcing it will launch its own streaming service. Well tell you what ceo bob iger said as the final hour of squawk box begins right now. Live from the most powerful city in the world, new york, this is squawk box. Good morning, everybody. Welcome back to squawk box here on cnbc we are live from the Nasdaq Marketsite in times square im becky quick along with Andrew Ross Sorkin and our special cotest this morning is kevin oleary. Shark right here on squawk box. Lets get a check on the Global Markets this morning stocks in the red amid some rising tensions between the United States and north korea. The futures are indicated lower. You do has closed up ten sessions in a row this morning the dow futures indicated down about 51 points. S p futures down by 10. 5 and the nasdaq indicated off by 44 in europe this morning, some bigger decreases the cac right now is off by 1. 75 . The dax in germany off by 1. 5 stocks are down in london, in italy, and in spain. And well have more coming up in just a moment. Okay well have much more on north korea, but first todays top corporate story of the morning, disney going allin on streaming. The house of the mouse offered a new direct espn service. Disney will also end its Distribution Deal with netflix and pull its content from that platform by 2019 and then launch its own streaming movie online service. Heres what ceo bob iger told investors yesterday. We have tv Library Product but well be making a significant investment in original content both movies and Television Series for this platform exclusively if youre a family, or youre interested in the disney brand, you want to subscribe to extremely rich, robust, disney brand of service youll be able to do it and well use the bamtech platform to basically drive or power the product take a look at shares of disney right now also netflix shares both down walt disney off about 4 in the premarket and netflix down as well, about 3. 5 back to that developing story. North korea says that it is carefully examining plans to strike the United States territory of guam with missiles. North korea state media reports that a strike plan could be put into place, what they are saying, any moment secretary of state Rex Tillerson is weighing in on that threat. And President Trump just tweeting moments ago, writing my first order as president was to renovate and modernize our nuclear arsenal. It is now far stronger and more powerful than ever before. Eamon javers joins us with what this all means eamon, good morning again. Good morning, becky that tweet from the president coming just within the past few moments. Its more provocative language now today regarding Americas Nuclear arsenal. We also saw the secretary of state as you mentioned touch down in guam this morning on a Flight Refuelling stop for his flight this was previously scheduled not necessarily a response directly to north koreas threat to attack guam, but in remarks in guam, the secretary of state very much describing the president s comments about north korea as a deliberate escalation of the rhetoric. Heres what the secretary of state had to say this morning. I think the president , what the president s doing is sending a strong message to north korea, in language that kim jongun would understand because he doesnt seem to understand diplomatic language i think the president just wanted to be clear to the north korean regime that the u. S. , you know, unquestionable ability to defend itself, will defend itself, and its allies, and i think it is important that he deliver that message to avoid any miscalculation on their part the secretary of state there simply saying the president is speaking north koreas language in his remarks yesterday heres the comment that the secretary of state was talking about yesterday. The president was asked about north korea developing miniaturized Nuclear Warheads that could fit on top of a missile. Heres what the president said north korea, best not make any more threats to the United States they will be met with fire and fury, like the world has never seen becky, despite this rhetoric, Rex Tillerson saying this morning that americans can sleep well tonight, saying that theres no significant change in the military situation over the past 24 hours. So some reassuring language there from the secretary of state in guam. Eamon, thank you very much. Folks we are just getting the second part of the president s sweets this morning. We showed you the first part just a few moments ago now hes tweeting, hopefully we will never have to use this power but there will never be a time that we are not the most powerful nation in the world we will be speaking to former defense secretary William Cohen at 8 30 a. M. It has now been about ten years since the first tremor of the financial crisis but what if you jumped into the stock market at that point mike santoli joins us. Hes got that story. Yeah, andrew. Stupendously bad timing or bad luck if you did get in ten years ago today ahead of the greatest wealth destruction event in history. I decided to look back and say what if you had entered the stock market or bought a mix of stocks and bonds right at that moment whats your 10year experience been to me the surprising result is theyre not that bad our annual return for the s p 500 is about 7. 8 , you know, per year thats not that much lower thats your total return including dividends. Thats not that much lower than the roughly 10 that the s p delivered over the very longterm. What did it take to get that decent return . Well, what it took is first of all you had to wait out a 47 decline that took place in a year and a halfs time once you were already into a bear market before lehman failed you went down another 40 if you bought at that moment. So it was awful and it tested everybodys patience along the way but it also took trillions of dollars in Central Bank Intervention one of the great long and strong bull markets of all times to this date that stretched stocks into the upper end of its historical valuation so basically the idea is, yes, this is the old buy and hold as i said that makes buy and hold sound like such a good deal exactly time is your friend. The markets ultimately will bail you out. I also think its important to recognize in the moment youre going to doubt that wisdom its going to hurt if you pay any attention at all youre probably not going to follow that advice if you really do kind of wed yourself to the daytoday or if you also remember bill gross saying dow 5,000 makes some sense when dow was at 7,000 or 8,000. This is actually good news. For those out there watching thinking to themselves that they think were on the precipice of something terrible, and im not suggesting something terrible is coming, thats actually does this speak to why you wouldnt want to pay somebody to market time for you. So much of what we do at Financial Services is tell people, pay me and ill know when to go to cash pay me 2 or 20 of your profits and ill know when to go to cash thats what the Hedge Fund Guys say. This data youve just shown us says forget all that buy an index by an etf and sit there. It always feels that way when youre deep into a bull market in general its very hard to pay somebody to dance around the moves in the markets but there were many stretches, during this period, when the 10year return of stocks was negatively right . So if youre looking at the same 10year return in 2010, you say, wow, i wish somebody could have gotten me out of this, out of the way of this bear market. I do think youre still going to have that argument in the market even though the evidence suggests that that patience ultimately will get paid for mike santoli appreciate that. Stick around, former democratic congressman barney frank is with us the coauthor of the doddfrank financial reform act hes also the cnbc contributor and the author of frank a life in politics and we welcome him to the program ten years later, where do you think we are are we back on the precipice or in a much better place well, were in a much better place on two counts. First of all, the economies adone very well. The argument that the legislature that we enacted in 2010 was going to be a job killer, or particularly destructive to the financial industry has clearly been repudiated by the facts. It has done very well. I was interested to see President Trump announce that the economy was doing so wonderfully, in his first six months, and i did want to note, thats despite the fact that two supposed job killers are still fully in effect, the financial reform bill and the health bill. I know he thinks he could make it even better seems to me hard for someone to argue that those two programs which have been in full effect during his entire presidency to date are totally destructive of the economy, and then brag about how well the economy is doing. The fact i think what we have done is substantially diminished the chances of there being a crash course by irresponsibility of the Financial Community while in no way diminishing Economic Activity congressman frank i have to ask you a question as an investor in the Financial Sector not Everybody Loves you. And i want to tell you theres one group, and im just asking you to explain, because youve recently been on the press with this, Regional Banks feel youve done them wrong. You constricted their Balance Sheets in a way that they cant compete with the big guys first of all any Regional Bank, frankly, ive heard you say yes if i could do it again i would have given them some more relief. They got the same onerous terms that a mega bank had and they dont have the same revenue streams. Is it fair what youve done to them would you change it . Well, first of all, im sorry, i am staggering under your revelation that not Everybody Loves me and i will try to regain my composure and deal with that crushing i have to deal in reality i love you well, i kind of regard that at the same category the point is this, we did, in fact, impose on the biggest banks more restrictions. Its not the case that they all got to see secondly, if you look at, for example, the way that the stocks work with the stress tests the biggest banks have been told that they couldnt pay dividends, as you know Jpmorgan Chase and bank of america, no Regional Bank has been told that, in that same way secondly, i do acknowledge that the 50 billion limit, at which point you should be subject to special increased supervision is too low and i felt that way and i agreed with dna in 2013. But the point i would make is this, exactly one bank in the entire country has moved from below 50 to over 50. In other words, no Regional Bank has had its status changed because of that. And i, having said that yes, i do agree we should raise the 50 to 100 or 125, but beyond that, no, it is not the case that Regional Banks are subject to the exact same rules that Jpmorgan Chase are so, yes, we can the Regional Banks provided all the loans to Small Business. And when they got much more onerous in terms of Capital Requirements on their Balance Sheet they stopped lending statistically excuse me, thats not statistically true. It was not a sign let me finish the question. Why did you even have to care about them, because the too big to fail doesnt apply to a Regional Bank. Who cares if a Regional Bank with 10 billion goes bankrupt that doesnt change anything let them i dont know let the market decide first of all we had just asking just asking. Well, if you keep saying just asking, i dont get to answer. Okay, please answer the fact is, the fact is that i have to challenge your premise. There has not been any statistically clear sign of any failure of loans to smaller business i also misunderstood your question when you talked Regional Banks i thought you were talking about the banks in the 60, 70, 150 range. We generally talk about the banks under 10 as community banks. I do degree that they have had some problems, and i am for giving them some relief. I also would acknowledge that there has been a case where they are making in many cases fewer loans. But those loans havent disappeared from the system. Its damaging to them and i want to give them some relief there is no sign that smaller businesses are having overall trouble getting the loans. Theres one other factor i want to mention, much of the problem that these Smaller Banks in particular are complaining about have nothing to do with the bill that i cosponsored with senator dodd much of it has to do with Money Laundering the drug and terrorism stuff, there is for example some people, know your customer people complain about the know your customer requirement, thats not in our bill in fact, if you look at it, as i said, much of the problems come from the whole set of bills, the Money Laundering, bank secrecy act, the notion that the law that tripped up Dennis Hastert and wound up going to prison, not in our legislation having said that i do think the banks under 10 billion have been spending more money than they should have to to try to comply with things that nobody ever thought they would have to deal with. So i do think they should be exempted to the volcker rule once again i ask you, wheres the evidence that in the economy as a whole theres been any constriction of lending, where its needed . Congressman, while we have up here i wanted to get your reaction to the litany of various scandals we continue to hear about at wells fargo, and why you think that those occurred, and were allowed to occur given some of the rules and regulations that you put into place oh. Many of them began before our rules started. But i take some pride in the fact that they are now being uncovered. Theres no reason to think that wells fargo suddenly in the last couple years started doing things when they were pristine before and i think its a good thing that we have, for example, the consumer groups, which republicans in the house voted essentially to abolish, you know, can i just note for people who are concerned, that republican vote in the house to essentially undo almost everything we did, has the same validity as those repeated republican votes to repeal the Health Care Bill when they knew they were going to be beaten all the republicans voted for that i would just know that the l. A. Times discovered the problems at wells fargo long before the Consumer Protection bureau did right but the Consumer Protection bureau was the one that cracked down on them for having done it. That is true but the fact is that before you let a Consumer Bureau, you did not have a Credible Agency Whose Mission it was to deal with those kinds of things. And it was the Consumer Bureau that took tough action about it. So, you ask me why it happened it happened because theres been a culture in the bank over the years, particularly worse in some than in others, that you only worried about making money, and in particular, this is a big part of the problem, comes up with the whole arbitration versus lawsuit thing the problem has been that these small abysses, the smaller one individual, not enough for the individual to sue. And thats why i do regret this eclipsing of the possibility of lawsuits, when a whole lot of people are being cheated out of small amounts. Congressman, were going to leave it there always great to talk to you and we look forward to talking to you again. Hopefully we wont be talking about a crisis thanks when we come back, just six months until athletes from around the world arrive in south korea for the olympic games. Were going to check in on the preparations, amid rising tensions with the countrys neighbor to the north. Plus we will talk about the north korea threat with former defense secretary William Cohen. Thats coming up at 8 30 a. M. Eastern time you are watching squawk box. C toothbrush really cleans. Better than a manual, and my hygienist says it does. But. Theyre not all the same. Turns out, theyre really. Different. Who knew . I had no idea. So, she said look for. One thats shaped like a dental tool with a round. Brush head. Go pro with oralb. Oralbs rounded brush head surrounds each tooth to. Gently remove more plaque and. Oralb crossaction is clinically proven to. Remove more plaque than sonicare diamondclean. My mouth feels so clean. Ill only use an oralb the 1 brand used by dentists worldwide. Oralb. Brush like a pro. Welcome back to squawk box this morning shares of generic Drugmaker Mylan taking a hit mylan reported quarterly profit of 1. 10 per share that missed estimates by six cents. Revenue also missed forecasts. Also taking an expected revenue from new u. S. Launches out of this years guidance moving it to 2018. Cited challenges in the north American Market including uncertainty in the u. S. Regulatory environment we are just six months away from the start of the Winter Olympics in south korea. But what are the security concerns as Tensions Mount with north korea . Contessa brewer has more on that right now. Good morning good morning to you, becky. The state Department Says it is working closely on security with south korea to protect next years games there are no travel warnings for south korea. And, in fact, more than 150 staffers and athletes from the u. S. Olympics committee have traveled there in the past year. But a travel ban to north korea goes into effect september 1st and pyeongchang where the olympics will take place, preparations are on schedule more than 50,000 hotel rooms in surrounding areas secured. Theyre just moving forward. Organizers expect some spectators will stay in seoul and commute to daily events on this new high speed train to pyeongchang. Service cuts travel time from four hours to one hour thats significant we need that here half of the 12 olympic venues here were built before pyeongchang even won the olympics bid so theyre well on their way. Ski jumps already hosted the International Competitions there. The organizing committee tells us of the six new facilities, theyre 97 completed. Were seeing Real Progress if it seems like a well oiled machine, dont forget south korea hosted the olympics in seoul in 1988. Hey, theyve been to the big circus before. And many of those venues are still in use today the country just doesnt want to get stuck with the gargantuan White Elephants that we saw in rio. Already nine of its venues have owners in place for after the games. Ticket sales, though, theyre lagging. In south korea less than a quarter of the target goals, selling mainly for the opening and closing ceremonies, figure skating and short track speed skating. Of course those are sports in which the countries excels organizers say koreans are notorious lastminute buyers so they think the ticket sales will light up once the Olympic Torch Relay kicks off in november. Six months seems like not too far away but i can see that being, you know, people havent really been its not in the media its not everywhere. So lets see what happens now with six months out. What about the impact in terms of United States travel to south korea as weve been hearing all of this rhetoric theyve actually seen it increase they say it was up significantly this year versus last year although there was a softening in may and june. Whether that was because of the threat of north korea, or because of summer destinations being somewhere else but significantly, theyre seeing tourism drop off dramatically from china. Which is their biggest source of visitors makes up 50 of south korean visitors, and china has put in a travel ban because of repercussions over the defense system, south korea is working on with the United States. Wow they banned travel companies from organizing tourists to south korea, so theyve seen a real as punishment marketing here in the United States to try and pull some people out of here into that market to the actual events . Because i havent seen anything online for tickets well, theyre not for sale yet for outside of south korea so thats one reason why were just focusing on what ticket sales are doing in south korea and what the culture of last minute buying means. They havent gone on sale here yet. So we may see that now that were six months out, and when ticket sales start opening to the Worldwide Market contessa, thanks very much. Sure. Coming up when we return, President Trump gives a strong warning to north korea former defense secretary William Cohen is going to join us at 8 30 eastern time toalk l tal about it squawk box returns in just a moment that is legendary musician Glen Campbell. He died after a public battle with alzheimers he was the first artist to win grammys in both pop and Country Music categories with his breakout hits, gentle on my mind, and by the time i get to fee next he costarred with john wayne in true grit. He hosted a Television Variety Show and played guitarist for some of the best artists in history. Kevin oleary has been talking about this big fan of the wrecking crew. He was a member. He actually was on some of the beach boys albums. Elvis, the beach boys, frank sinatra, the mommas and the poppas all of these acts that you were listening to even when you didnt realize a session guy that broke out and had an amazing voice Glen Campbell was 81 years old. When we come back we have some breaking Economic News Second Quarter productivity and labor costs about to hit the tapes. Plus, the former defense secretary William Cohen on the rising tensions between the United States and north korea. What it all means. Stay tuned squawk box will be right back. From Second Quarter productivity and labor costs. Lets get to Rick Santelli at the cme. Take it away all right were looking at Second Quarter. These are preliminary. Theyre going to change a bit. On nonfarm productivity expecting a number around 7 cents. We ended up with more, up 0. 9. Just shy of 1 and last months, q1 First Quarter moved from zero, unchanged, to up 0. 1 now lets look at the associated labor costs on the other side of the ledger up 0. 6, just about half of the 1. 1 we expected. And last look, well, moved in the opposite direction, from 2. 2 to 5. 4 so, big move on last look with regard to final First Quarter on unit labor costs that productivity number up 0. 9. How does that measure up it measures up that its better than last month which rise up 0. 1. But prior Fourth Quarter 1. 8 Third Quarter the High Water Mark recently up 3. 3 we really need to get these productivity numbers higher. But at least this one is a bit better still whole sale trade at inventories. Yields move back down. We always debate as to whether theres still flight to safety issues in a market with low volatility that seems to be able to assimilate and accommodate everything i do think that we actually had a response in treasuries to some of the news regarding north korea and those issues keep a close eye on the dollar index and cross currents with the dollar yen becky, back to you rick, we have a response but maybe not one that would seem to rise to the level of the rhetoric, and the new developments that weve heard on this front why do you think that is because i think we now live in markets where people on key boards are masters of the training universe. And to try to do things that may or may not occur in the mediumterm just is too long of a time line. I think traders believe they can deal with these things in a more proactive way, and lets face it, theres a lot of issues, whether its the middle east, north korea, that have gone on literally for decades, and with respect to how you trade these issues, you could be concerned but it seems as though that concern is shortlived in the market you think thats complacency . Or you think thats just reality . I think thats reality. And actually, if you go back in time, markets been hard to handicap during geopolitical i remember in the first gulf war very clearly how everybody thought that once the green screens went, and things started to happen, that oil would go crazy. It did go crazy. Before it all happened, it went down that wednesday. I remember rick thank you very much. Its great to see you. In the meantime, secretary of state Rex Tillerson responding to President Trumps warning to north korea saying that the president sent a strong message and language that the north Korean Leader would understand joining us right now is William Cohen, former u. S. Defense secretary during the Clinton Administration hes also the former u. S. Senator from maine and hes currently the chairman and ceo of the cohen group and mr. Secretary, thank you for being here today good to be with you how do you read all the developments over the last 24 hours when it comes to north korea . Well i think the president has engaged in what i call bombastic language and i dont believe the North Koreans are going to take that as a serious threat if he says if you threaten us one more time we are going to unleash fury the likes of which youve never seen. So the first thing they do is make another threat. I think that they are convinced that the United States is not going to launch a preemptive attack based upon one of their rhetorical threats and therefore theyre going to keep challenging the president i think the best thing to do is what secretary tillerson is doing. Everybody calm down. Lower the rhetoric last week the president said in the wake of a missile test by the North Koreans, grave consequences were going to follow secretary mattis went out very soon thereafter and said, wait, the president s not suggesting military action, but rather stronger diplomatic and economic sanctions. Which is exactly what happened we were very successful in getting those sanctions. So i think the people surrounding the president are tamping down the rhetoric and i think thats the right course to take rather than accelerating or increasing the level of the rhetoric itself. How effective do you think these economic sanctions will be first of all, will they be fleeced properly by the chinese . And second of all, do you think it will have an impact on how the North Koreans react . I think there are two things that have to take place. You have to beef up the defensive capabilities of south korea. President moon has put the thaad Missile System on hold i met with him when he was in washington recently and he has concerns about why this was done and how it was done. But he has to put that back on the table and make it active right away i would suggest in addition to that the japanese consider having a similar system. Thats is going to get the attention of the north korean and the chinese and others then you crank down on the ability of the North Koreans to do business. And then target our allies who are doing business with north korea saying if you continue doing business with them youre not going to be doing business with us. I think the combination of having a much greater defensive capability, much tougher sanctions, and then go to the North Koreans saying life could be better for you, but not the way youre pursuing. And finally i would institute a propaganda campaign. I would try and drop Free Phone Service to all the North Koreans so they can see see what is happening in the south and compare that to their lives. Propaganda suggests its not true youre suggesting we open up the truth . Im suggesting we drop the truth on them. And yes, an Information Campaign as opposed to a misleading or false fake news. Information campaign, this is what your brethren are doing down south, how would you like to live like that . And i would continue to proliferate that message in addition to Everything Else taking place and then perhaps the North Koreans will come to the table after having their eight or ten or 20 missiles they have and say okay weve achieved our goal here, were ready to sit down and talk to the United States with our compatriots, the chinese, and the russians, and the japanese and others. I think thats the way you bring about a deal not by threatening to unleash mr. Secretary, what about the goal of unifying this country . In the same way germany was unified and became an economic success. What about the possibility im not a war mongerer here. Im asking, at what point does this country be better off together and would the chinese ever let that happen . Where do you stand on that actually, i have made that argument to the chinese. And have encouraged them saying, look, south koreas one of your best trading partners. North korea is a liability youre worried about a unified korea, with a military presence on your border that doesnt have to be the outcome. You could have a unified korea, in which case part of that agreement, the United States would substantially reduce its presence, and you would have a korea that would be productive, efficient, and one of your trading partners without a substantial military presence by the United States. That so ive argued to the chinese youre playing checkers, when you have a reputation as playing chess. Look at this chess board and see how you could bring about something thats in your interest your economic interest and your strategic interest so i think your suggestion is one that ive tried, and i would hope they would consider at some point in the future. You could have a unified korea it would be peaceful, rather than have this constant friction and potential for going to war, which would, in fact, disrupt the markets if youre talking about a nuclear war being carried on in the korean peninsula. That would affect the chinese. It would affect the entire Asia Pacific Region the markets would respond then, for sure secretary cohen, thank you, sir. Pleasure. The white house wants to simplify the tax code by eliminating deductions, but closing loopholes may not be so easy ylan mui joins us from washington to tell us why this morning. Andrew, there are nearly 200 loopholes in the tax code. And getting rid of all of them will be worth an estimated 18 trillion over the next decade. The Tax Foundation ranked the biggest ones, and it found that most of the benefits by far goes to households, not corporations. 15. 6 trillion, versus just 2. 7 trillion over the decade now the largest individual loophole is the ability to exclude employer contributions to your Health Care Premiums from your income in other words, youre not taxed on the money that they pay towards your medical benefits. Thats worth an estimated 2. 9 trillion now the mortgage interest deduction, which always gets a lot of attention, is actually number five on their list at 895 billion on the corporate side, the giant loophole is multinationals deferring taxes on foreign income the Tax Foundation estimates that costs 1. 3 trillion in federal revenue. Accelerated appreciation is worth 154 billion and theres also an incentive for companies to manufacture in the United States, thats about 152 billion now when you look at the other laundry list of loopholes that could be considered as well they include railroad retirees, carve out for student loans, carve out for foster care. Republicans say that wiping out almost all of these loopholes will help pay for an acrosstheboard tax cut but closing any one of these is going to be hard because theres a vocal and often very valid constituency thats going to fight for each one thats why they exist in the first place. Okay, thank you for that. Coming up when we return, casual dining restaurant p. F. Chang is ditching up a ding South Central strategy well talk to the ceo right after the break. First a quick check on futures we are in the red. Dow looks like it would open off about 37ois. Youre watching squawk box on cnbc welcome back to squawk box this morning check out shares of wendys. The restaurant chain beat on the top and bottom line. Wendys said onethird of its Global Stores have been reimagined, as it continues a planned revamping. Were going to continue the conversation about food. The battle for the stomach is intensifying p. F. Changs is one company confident it can reset its brand. Joining us right now is Michael Osanloo the ceo of p. F. Changs did i get that right, sir . You did, andrew shaw very much you brought us food well eat that in just a second. Weve been eating thisother stuff you want to have your meal before dessert my mouth is watering. Why do we have to kuwait you want to go for it im here and its there go in, dig in thank you very much that looks okay so while hes eating, lets talk about whats going on it feels like it has been a challenging environment right about now. Yeah. I think thats a fair characterization you know what it is . I think theres a bifurcation happening in casual dining people who cook real food with integrity are going to do well you actually see that if you look across casual dining. I dont know if everyone knows this but everything that you eat at our restaurants is made from scratch. And i feel confident that the direction america is headed, that from scratch cooking, made to order, is going to do well. If you dont do that, i think you are struggling weve seen a lot of go privates yes in your spice whats going on with that . I think youre in a cyclical phase where Public Markets are more and more nervous. Right and i think private markets see the longterm potential in casual dining. So i think theres an expectation that private money, if youre willing to invest for three to five years youre going to do very, very well in casual dining you and others in some cases are attached to malls, shopping malls. Yes we are you know, if you read the headlines you think that were in the retail apocalypse yeah. How is that impacting your business, and how do you see this in the future well, heres what i aid i think there are malls and then there are malls. And the malls that are winning actually have some form of Retail Entertainment happening so whether its restaurants, its other entertainment, anybody who can draw people to a mall are going to do well. And thats what we do. If you look at our performance, and you know, we have a little less than 40 of our restaurants associated with malls, theyre actually doing just as well as the restaurants that are in freestanding centers or lifestyle centers. Which tells me that our guests are willing to travel to malls, and its actually putting us in a relatively good position give me the downlow on your typical guest . Our typical guest is evolving theyre typically around 45 years old, college educated, and theyre people who frankly care about what they eat. That also applies to a younger demographic. I just tried it. Its delicious thank you now, i probably got 20 people in my office who are between the ages of 25 and 35 years old. Yeah. Every lunch, a big debate rages about where were going to go get takeout or whatever on two metrics. Yeah. Salt and sugar. Right is that something you now have to deal with. When people say how much salt does it have how much sugar how many calories is in it this is delicious but it must have salt. It tastes great. Yeah. I think youre raising really good points. Which is that, more and more, people care about what they put in their bodies. And this is not a millennial phenomena or a boomer phenomenon everybody wants to feel good, eat well, and really, honestly, live a little bit longer and so as a restaurant company, its incumbent on us to work hard to think about that and so, we paid painstaking attention to everything that we do youve got some green onions in there, right we believe in our farmtowok platform our green onions are sourced from a Third Generation japanese family farm in Southern California you ask them, the farm, they will tell you that we are incredible exacting customer that we want perfect 18 inch bluegreen stalks, its got to taste great. I have another question, chipotle, the disaster of the imagery there. They went direct to farm, they had quality issues, they sickened people and then you had animals falling from the ceiling. That must be the nightmare for you as an operator how do you make sure that doesnt happen to you . Its always a balancing act we source 25 of our produce is sourced locally. Because we have very strict controls in our supply chain weve got to feel 100 that were buying things that have a clean history. That we know that we can put in front of our guests. And you just cant get people sick in this industry. We have to go but one thing, technology. Yeah. In particular i know what youre doing on the supply chain. I dont know if its a Delivery Business we had the cho of grubhub on recently big question of whether you think amazon is eventually going to get into the space, not just through whole foods but whether theyre going to try to partner with restaurants and do delivery themselves ill tell you a little secret, theyre a very good partner of ours already. Amazon is theyve been a very good partner to us. We have great partners in grubhub and amazon eats and i think thats an exciting place for casual dining. How big a business is that for you . Right now its small but growing at an astronomical clip and i suspect its going to be a very material business in the not too distance future. Michael, thank you for coming in our pleasure. Thank you. When we come back, jim kraker will join us live from the new york stock exchange. Well get his change on todays top stories. Check out the futures under just a little bit of pressure this morning. Looks like the dow is oh, theres a starbucks chart. But it does look like the nasdaq is down by about 25 points below fair value well be right back. What do you think about disney what they came out with on the announcement with the shortterms for the earnings and longterm for over the top. He had to do it hes trying to show how much that bundle is worth that its worth more than the 70 that approximate public pays but the problem is the investment its going to be huge. If you add up all the things he has to do theres a huge amount of investment. What is he going to do every single quarter a down number who would own that stock he has to do it. Theres no choice. And stuff thats probably not going to pay off until after he is gone but he is setting the company up i would say for years down the road. Apparently theres no search firm i think hes going to stay to see this through and he has to this is a very difficult thing to navigate. We understand how robust it s. I know that they pay for a lot for programming but at the same time have to tell you, this is a moan youme monumental shift. What do you think about netflix pulling the disney content . Does that change the metric for them no. Theyre spending so much money develop og their own programming. Its vital the marvel programming for netflix is fabulous and that could become in play its not yet but those are some of the series that people love. We had a couple of analyst that suggests that other content producers are going to have to follow suit and i wonder what the landscape looks like with everybody with their own over the top services i dont know what that means for shareholders. Yeah but i think that its coming more than anybody who is now taking aim, reid saw it coming because if you look at the things that drive subscriber growth international, you think think its disney but its not thats not in keeping with the Conference Call. Netflix is make everything up on the Conference Call and i dont think they are. Well see you in a couple of minutes. Right now a quick programming note, tomorrow on squawk box david runsinbete will be our guest host well be right back. Your brain is an amazing thing. But as you get older, it naturally begins to change, causing a lack of sharpness, or even trouble with recall. Thankfully, the breakthrough in prevagen helps your brain and actually improves memory. The secret is an ingredient originally discovered. In jellyfish. In Clinical Trials, prevagen has been shown to improve shortterm memory. Prevagen. The name to remember. He told heine could suffer politically for his support of donald trump during the 2016 campaign in the emails from last summer the netflix chief writes im so mi mystified that it moves me from different judgment to bad judgment and not what anyone wants in a fellow board member now peter thiel spoke on his behalf at the Rnc Convention weeks before hastings sent the email but if you think things are getting politically correct one way or another this is an example of how complicated its getting. In the last six months since i travelled the country, particularly places like texas, fargo, tiny towns, i learned that the politicians on both sides is very high and when you talk about mccain, that speech get nothing done and then votes down the change and he got nothing done too, most young entrepreneurs today in my staple have a very very low regard for politicians period so what i have learned is that when we make assumptions sitting here in new york and boston and talking about what is going on in washington more than half of america couldnt care. Thats what i think. What do you think about getting involved in politics or even speak publicly about their own politics or giving money and i say this because jami jamie dimon was just on our air. He tried to stay out of politics but gets pulled into the political situation. This is an example. Its a great question if you asked me six months ago i would have said freedom of speech should rule always. Now i tell them stay out of politics 50 of your customers will be unhappy with whatever you do. Its gotten uglier. Its gotten uglier. Particularly on how fast social media hits my companies theyre using it to acquire customers. If theres partisanship you lose customers so now, we debate this all day long because were on probably different spectrums, i dont know where he is but, you know, its a very interesting its on the day. The point is i think you dont want to hurt your business and politics is now hurting business. Do the managers respond in kind to that do they see your point of view i look at their sales quarterly and i point to specific cases where they have gone into their, their city and done something for one side or the other and then my own team that shows them the social media, the blistering social media, you have no idea how you can read it. You do, youre obviously signature here its brutal. Thank you for being with us. Its been so much fun. The diversity of conversation here makes this show amazing think about all the guests we had probably 30 or 40 since have been here its been wonderful. Its been a pleasure. You made it wonderful, mr. Wonderful. Now i have you wearing a jacket andrew. Its a big mistake. That does it for us today make sure that you join us tomorrow right now its time for squawk on the street. Good wednesday morning and welcome to squawk on the street. Some flights to safety this morning as we watch developments