How Will Markets Respond to North Korea Talks?

NEIL CAVUTO, HOST: All right, only five away. Five hours from now, the president of the United States sits down with the leader of North Korea, Kim Jong-un, the first U.S. president to do so with a North Korean leader. And the stakes obviously couldn't be higher. Welcome, everybody. I'm Neil Cavuto. Well, leading up to those talks, Kim Jong-un out and about visiting a Sands casino resort in Singapore. The guy, remember, doesn't get out that much. The North Korean also stopping to pose for a selfie. Former basketball star Dennis Rodman arriving on the scene, saying that he wants to cheer on both sides. And stocks, which were all over the map, ended up nominally to the upside today. But what is remarkable is, through trade wars and tiffs and alienating comments back and forth between ourselves and the Canadians, they have been up and continue to go up. So what do they see that maybe some worried pundits do not? Let's get the read from John Roberts in Singapore, at least for this summit. What happens next? Hey, John.

JOHN ROBERTS, FOX NEWS CHIEF WHITE HOUSE CORRESPONDENT: Neil, good job morning to you from Singapore.And the latest that we're learning is, the reason why President Trump has moved up his departure to 7:00 p.m. tonight from tomorrow morning here in Singapore is that Kim Jong-un's people told the United States' delegation that said he was going to be leaving this afternoon.The president had reserved Wednesday morning for additional talks, if it was necessary. So, the president decided, well, if Kim's leaving, there is no reason for me to hang around. So he's scheduled to go out at 7:00 tonight, after a 4:00 p.m. press conference, which will be 4:00 in the morning, 12 hours from now New York time. So if you want to hear what the president has to say, set your alarm clocks, because that's when he will be speaking.

The president with a lot to offer Kim Jong-un in their very first historic bilateral meeting today between the United States president and a North Korean leader. He's got to economic guarantees for Kim on the table. He's got security guarantees, a potential end to the Korean War, after it's just been under an armistice for all of these decades, and the potential for the normalization of relations between the United States and North Korea, if -- and this is a big if -- North Korea and Kim Jong-un are willing to give up their nuclear program.The president also changing up the paradigm here. This is not going to be incrementalism, as we have seen in the past, where the United States trades some economic benefits for something to curb North Korea's nuclear program. The president wants complete and irreversible and verifiable denuclearization of the Korean Peninsula.

What's really interesting is that the first meeting today is going to be simply between President Trump and Kim Jong-un one on one with only their translators present, unlike this big luncheon, bilateral meeting that you see here with Singapore's prime minister, Lee Hsien Loong. And there's the president together with Prime Minister Lee. Kellyanne Conway telling us this morning that that's the way the president likes to do things, mano a mano.


KELLYANNE CONWAY, TRUMP SENIOR ADVISER: President Trump made very clear he would like to meet one on one with just the translators with the other principal here. And that's very much the way this president has been doing business successfully throughout his career. And it is anything -- it may see -- it may strike many people who have been involved in the past as an unusual request. But, remember, we're looking at an entirely different framing.


ROBERTS: And Kim Jong-un taking in the sights of Singapore last night. One of the places he visited, as you mentioned at the very top of this, Neil, was the Marina Bay Sands Hotel and Casino. There you see Kim walking around. Really is extraordinary. This is the farthest that he's ever been outside of Pyongyang as the leader of North Korea. That Marina Bay Sands, the iconic structure now on the Singapore skyline, that there's three high-rise towers of hotel rooms, and then something spread across the top of it that looks like a cargo ship that somehow landed up there, it's owned, by the way, by Sheldon Adelson, the Las Vegas casino magnate and a big supporter of President Trump. So, Neil, perhaps Kim Jong-un getting a look there at what might be possible to get some new economic incentives from the United States in exchange for denuclearization. I should say one thing about the departure, though, Neil. While the president is set to go tonight at 7:00, we're told that the departure is still fluid. Probably no reason to delay it, but you never know. They're
holding open just in case -- Neil.

CAVUTO: Very interesting. John Roberts, thank you very much. I know you have a long day ahead of you, night, whatever. Claudia Rosett, a foreign policy fellow at the Independent Women's Forum, has long warned, don't get too excited here, not that she's trying to be a wet blanket.


CAVUTO: But she knows the North Korea leader well, knows his father and grandfather well, and some past history on North Korea very, very well. So, you say we should go into this with eyes wide open. What do you mean?

CLAUDIA ROSETT, FOREIGN POLICY FELLOW, INDEPENDENT WOMEN'S FORUM: Oh, yes. I mean, be incredibly wary. The fact that Kim enjoys strolling around Singapore at night doesn't mean that he's about to give up his nuclear program. And it does not change the character of the most brutally, bloody-minded, repressive, totalitarian state on the planet, which is what he runs.

CAVUTO: Claudia, the argument has always been, we don't pick and choose the leaders of other countries with whom we negotiate. If that were the case, FDR certainly would have found an alternative to Joseph Stalin. But Stalin was the only guy we had representing the then Soviet Union. And this is the only guy we have representing North Korea. What do you make of that?

ROSETT: Yes. Well, the problem with the analogy there is that Stalin was also fighting the Nazis.

CAVUTO: Very good point.

ROSETT: And Kim Jong-un isn't actually fighting anybody. And, of course, once Stalin got done fighting the Nazis, he installed Kim Jong-un's grandfather in North Korea. So, out of that came the Cold War and our current problem. So it's true. You don't know -- you can't always -- you can't pick who you negotiate with or who you confront. But you can be keenly aware that everything points to Kim will want any benefits, but he's probably going to look for any way he can find to not deliver this denuclearization, whatever that actually means, basically to not give up his nuclear program. And, remember, he also has biological, chemical weapons, and the conventional weapons that have held Seoul hostage since the Korean War. So, that's the real scene.


CAVUTO: I'm sorry, Claudia.

But we must know the history on this, right?

ROSETT: Right.

CAVUTO: That other administrations...


CAVUTO: ... also entering talks with the best of intentions and the highest of hopes, were hoodwinked. So this is a little different here, that the actual leaders of the country are meeting.


CAVUTO: So that changes the complexion a bit. But how do you avoid the North Korean history of just lying? I mean, how do you verify what they are doing, when in fact, in some cases, they can drag it out for years looking like they're following an agreement, as they did during the Clinton administration, and yet rip it up as soon as that administration goes?

ROSETT: Neil, we have to offer a seriously credible threat. That's why I am encouraged actually that President Trump wants this one-on- one meeting, where if I were North Korea's translator, I would be worried that I was going to be killed on the way out of Singapore, because these will be the witnesses. But that's a chance for President Trump to say to Kim Jong-un, here are -- just in case Kim Jong-un has been misinformed by the lackeys and acolytes who surround him about the real nature of American military might, capability, and so on, look, we do have the ability to obliterate you. And Trump needs some credible way to really make that threat. Now, I don't know if he will. But that's what might persuade Kim to do something. And the problem is, what needs to happen for anything to be credible, for any complete, verifiable, irreversible, in the phrase of the day, right, is the end of that regime, a change in character so profound that it's effectively gone, that Kim presides as some titular head of a very different regime, which I think would bring his downfall, or that we simply get rid of them.

It's -- unfortunately, Neil, that's where all my calculations end up, is, this regime has to go. And when that happens, we can talk about seriously decreasing the danger that is North Korea. But as long as Kim Jong-un has this power that he inherited and has greatly amplified by such things as assassinating his brother -- half-brother with V.X. nerve agent, executing his uncle, people who had ideas about liberalizing North Korea, by the way, he has had murdered, it really isn't going to change. We are likely to see more tinsel and promises and kicking the can down the road. So that that's the bottom line, Neil. The regime, one way or another, has to go.

What I would -- in my dreams, President Trump would say to Kim in this private session, there's one security guarantee we can offer you, and that is the Marcos residence on Hawaii, where he lived out his life in exile after he left the Philippines, because if -- I don't think, while the regime remains in place, we can pry away its nuclear program.


ROSETT: I think, in the end, the regime has to go first.


ROSETT: And then you get rid of it.

CAVUTO: Don't hold your breath on that.

We shall see what happens.

ROSETT: No. But -- yes.

CAVUTO: Claudia, thank you very, very much.

ROSETT: You're welcome.

CAVUTO: I think.


CAVUTO: Let's get the read on just that from Oklahoma Republican Senator James Lankford. He is a member of the Intel Committee, among others. Senator, what do you think of that, that, in the end, this really comes down to recognizing we can't trust this -- this guy and the people around him, and that, ultimately, the only way to assure cooperation down the road is that he not be there?

SEN. JAMES LANKFORD, R—OKLAHOMA: He has been the brutal dictator. And the people around him have answered yes to every single statement that he has made, because, if they don't, he has been executed publicly. And he is not afraid to be able to take military leaders, put them on a post, and kill them with an anti-aircraft gun for a public execution. So, he has been a ruthless dictator, despite all the pictures of him smiling and walking through the streets in Singapore. And we should be keenly aware of that as we're negotiating with him. Now, if he wants his people, and he has any compassion for the people and the millions of folks that live in squalor and poverty in North Korea, he will set aside his nuclear weapons, and so they have the opportunity to be able to have electricity and food and the opportunities that the rest of the world around them has.

CAVUTO: Do you really think he cares, though?

LANKFORD: Well, we're about to find out.

CAVUTO: Yes, I guess you're right.

LANKFORD: That's the big issue is, if he comes to agreement and comes to and says, I will set aside all these nuclear weapons, the United States is very willing to be able to lean in to provide economic engagement. We're not going to just pour millions of dollars on them. But if they open up their economy and they are able to set aside nuclear weapons, they could be as prosperous as South Korea is. It was a great example of what communism and free markets look like when you look at North Korea and South Korea, a very, very prosperous South Korea, and the North Koreans that live in squalor and poverty.

CAVUTO: It is kind of weird, for whatever reasons, though, Senator, that we have a situation where we're alienating or talking nasty about our friends, like the Canadians and the Germans and then all those in the G7, maybe for perfectly valid reasons -- they would argue otherwise -- and we're cozying up to this guy.

LANKFORD: Well, I would hope the presence not cozying up to this guy. We have very strong sanctions on him. We're watching out for their illegal transportation of any kind of goods leaving out still. We're still working diplomatically around the world to be able to isolate North Korea. So, our sanctions in place. We're continuing to apply pressure. But it's entirely reasonable to say, we're not applying pressure so we never talk. We're applying pressure to force us all to the table, so we actually talk and get to an agreement. So, if you're going to apply strict sanctions, the reason for those sanctions is to get to the table that they're headed to in about 12 hours from now, and so they can get to that table, get a resolution, come out of it out with a first step. And I have no optimism that everything gets resolved today. But I do have some optimism that they can at least lay the groundwork for the next meeting. And, usually, the next meeting is when you start getting some things actually resolved.

CAVUTO: The fact that they're talking, to your point, is something in and of itself. And, as I was raising with the prior guest, we can't pick and choose the leaders of the country with whom we meet. And the hope is, at least from this administration talking to the other administration, North Korea, is that they will change their ways. Their history is that they don't, that they lie and they cheat and they find ways around things, sometimes waiting years to not live up to those accords.You talk about the Ronald Reagan approach, trust but verify, but even when we were trying to verify, they were changing the rules midstream. So how do we avoid that this go-around?

LANKFORD: Well, you keep strict sanctions on. You do what the Trump administration is doing wisely in that. And that is, keep the sanctions going, keep the pressure on them. And when things change, not with words, but with behavior, then we begin to back off and to begin to loosen that up. But you have got to have a clear set of guidelines of what we're looking for.

CAVUTO: But in the past, they did change with behavior, Senator. You know what I mean?


CAVUTO: So, you could be hoodwinked into thinking, oh, well, they are doing what we said.

LANKFORD: Typically, in the past, the North Koreans would say, we will test a nuclear weapon -- weapon, we will test a missile if the rest of the world doesn't give us food, aid and money. And so we would give them money. They would not do a nuclear test. They would not test a missile for four, five, six seven years.

CAVUTO: Right.

LANKFORD: And then they would do it again, and we would go through cycle after cycle. If this -- if this challenge is, no, we're going to talk about actually dismantling your facilities, burying other things, setting aside the potential to have that, having clear inspections, then you let off sanctions, that is very different.

CAVUTO: All right, sir, thank you very, very much. Very good seeing you.

LANKFORD: You bet. Good to see you as well.

CAVUTO: All right. This a big deal, as you might imagine here, and one that the global markets are pretty fixated on themselves. We're going to have live, complete coverage of this all night long, beginning at 7:00 prime minister with my colleague Lou Dobbs. At 9:00 p.m., when the talks formally begin, we will continue on FOX Business. And will be on all night, because this matters. This is something the global markets, as I say, will be watching closely. So we will get the real-time read from them, particularly the Asian markets, as this is going on, and then later on trading in futures. We will get a view of the oil markets. We will get a view of people who are putting money on this, what they make of this. You can catch one or the other. Rarely, in a format like this, can you catch them both. We will provide you both on FOX Business, and only FOX Business. We will have more to this.


CAVUTO: All right, what to make a trade tiff now that has escalated with our friends, particularly Canada? Because the markets aren't worried. And the fact that we are now at the lowest point we have ever been all with those friends, including Canada, including European Union, including the Germans, who are worried, even the Italians, who are concerned, where is all of this going? Market watcher Gary Kaltbaum. Gary, you would think, looking at the markets, even with a nominal uptick today, but it had been a lot stronger earlier today, but the markets have appreciated through all of this angst and hand-wringing here, even with this blow-up at the Canadians? What do you make of that?

GARY KALTBAUM, FOX NEWS CONTRIBUTOR: I think we're just in a war words right now. And I don't think a war of words is really going to kill a market at this point in time. And the market does have a lot going for it. We have talked about it, earnings, a tone a buy-backs. And we still have the ridiculously low interest rates. And the best way to explain that, Neil, is, we're at 3.8 percent unemployment. The last time we were there, we had 6 percent Fed funds rate. We're now at one 1.7 percent. So the easy money definitely helps the market also. So I think markets in good stead, and right now fortunately ignoring all this.

CAVUTO: What I found remarkable. It's one thing when the president tweets-- and they were getting escalated back and forth with the Canadian prime minister -- but it's when Peter Navarro started talking and framed it in a totally different way.I want you to react to this, Peter Navarro, the president's trade spokesman, talking, more to the point, about the leader of Canada.


PETER NAVARRO, DIRECTOR, WHITE HOUSE OFFICE OF TRADE AND MANUFACTURING POLICY: There's a special place in hell for any foreign leader that engages in bad-faith diplomacy with President Donald J. Trump, and then tries to stab him in the back on the way out the door. And that's what bad-faith Justin Trudeau did with that stunt press conference.


CAVUTO: Gary, I'm not -- you know, I don't know what it was that ticked the president offer or what got Peter Navarro's attention here. But as far as I -- and as long as I have covered the Canadian prime minister, he was fairly consistent in his anger over the tariffs. He expressed it a little bit differently, but he has pretty much consistently said he was concerned before the summit, during the summit, after the summit. So what's going on here?

KALTBAUM: Neil, I think he may have had some bad coffee. I'm just a logical guy. And I don't understand. Rhetoric like that is reserved for Saddam Hussein and Al Qaeda. I don't know why they would do that. And if you're trying to move the needle in negotiations, that the last thing I want to do, because that's all that's being talked about right now. Let's hope cooler heads prevail once North Korea is done, and we get back to doing all the -- all the trade talk, and we get in a better place. And I got to tell you, Canada, we have a trade surplus with, including services. So I don't know why they would attack Canada. We have it much worse with other countries. And, again, I was in the car when I heard this, and I just could not believe my ears.

CAVUTO: So, it had to be for another reason. I'm trying to give the benefit of the doubt here, because, obviously...


CAVUTO: ... the president and the prime minister are not of the same political persuasion or parties or thought. But it's not as if any of this was new or a FOX alert, where the prime minister was coming from and how annoyed and concerned he was about these tariffs coming his way and the surplus that we enjoy with his country when it comes to goods and services. So I'm missing something. I just don't know what it could be or whether it sets the table to talk tough to the North Koreans and/or the Chinese, to let them know we could do this even with our friends.

KALTBAUM: Well, I'm a big believer that most things are not said by accident, so I'm pretty sure they're trying to set the table for, you better listen to what we have to tell you. You have been doing to us for years. We have been giving you $100 and only get getting back $50 for decades. And we are the new kids in town. And we're not going to be like the past. And either you listen to us or trouble lies ahead. And that is where I think this rhetoric comes from. Again, if it was me -- I always try to put myself in the position -- I'm not talking that way, but, as they have been saying, we have a different type of administration right now.

CAVUTO: All right.

KALTBAUM: And they're acting like the big dogs.

CAVUTO: All right. We will see what happens.

Thank you, my friend, Gary Kaltbaum.

KALTBAUM: You got it.

CAVUTO: A very, very good read of the markets. This will be quick, right? We're told just a few hours and then done. How does that stack up against other big historic summits? Let's just say much, much shorter.


CAVUTO: I love having historian Burt Folsom, because he can always put the rush and rat-a-tat of today in great perspective. Burt, thank you for taking the time. I was thinking of you when I was looking at the nature of this meeting, that it's really going to be hours' long. I guess they could extend it. I don't know how it will go. But hours ain't exactly days, ain't exactly Camp David couple of weeks.


CAVUTO: It isn't all -- the nearly week that John F. Kennedy and Nikita Khrushchev had back in 1961. So, what can they do?

FOLSOM: Right. I'm not sure how much they can accomplish, but, in some ways, summits are better when the goals are narrow. And they are. Just between the United States in working with North Korea, we have a denuclearization goal. And then North Korea wants to get trade reestablished and the sanctions removed. So the goals are clear. Sometimes, summits have gone poorly, even though they had more time, because the goals were too complicated and the said -- the countries were at odds with each other.

CAVUTO: Yes. And then they can drag on and on. I'm thinking -- I'm ping-ponging around here, so if my crew can indulge me. The Camp David accords Jimmy Carter had with the leaders of Israel and Egypt, they went on for two weeks. They were dicey throughout. They were done sort of clandestinely, because we didn't know what was happening there, just that they were always still meeting.

FOLSOM: Right.

CAVUTO: But they ultimately got an accord going after two weeks. But what do you make of that? And I like what -- how you framed it, that sometimes the rush war or the limited timetable might work to that advantage. Explain.

FOLSOM: I think that the comparison with Trump's potential summit here is-- with the Carter and the Camp David accords in 1978 is -- 40 years ago -- is a good comparison. The goals were narrow. In other words, words Egypt and Israel, we want them to be at peace. You had Sadat and Begin there with Carter. And that was indeed accomplished. A narrow goal. They didn't -- they had a couple weeks, and they accomplished that.

CAVUTO: What about the one with Richard Nixon, of course, and the king, now, of course, Beijing, the great outreach to Mao Tse-Tung. That wasn't about signing some sort of an arms deal. It was just a way, I guess, at the time to triangulate for Richard Nixon the old Soviet Union and China.


CAVUTO: But explain how that went.

FOLSOM: Right, because Nixon wanted to at least establish an increased trade agenda with Mao. And the Soviets and the Chinese were jealous of one another. And for Nixon to reach out to China like that was to in a way embarrass the Soviet Union, make them a little bit defensive. And, of course, once Reagan began negotiating with Gorbachev some 15 years later, then the Soviet Union was really put in a hole, because Reagan was able to push against that high Soviet military budget. And the Soviets simply couldn't afford to go on with their massive weapons program.

CAVUTO: In the Reykjavik situation, Burt -- maybe refresh my mind -- that that was all going nicely, until really near the final day, where Ronald Reagan discovered that the Russians had snuck in that line about the space initiative that was near and dear to him, and that the U.S. would abandon it.


CAVUTO: And that was like a little line on a closing statement when you try to settle on housing purchases.

He upped and walked away.

FOLSOM: You're right.

CAVUTO: Now, how did that go after that?

FOLSOM: Well, that was at Reykjavik in 1986.

And Gorbachev wanted to undermine the SDI, the Strategic Defense Initiative, that Reagan was proposing...

CAVUTO: Right.

FOLSOM: ... because he knew it might be successful, and that would, in effect, outmode his whole weapons arsenal that they had invested so heavily. So, the Soviets were anxious to avoid that. And Gorbachev made that clear. Now, Reagan, in turn, was trying to push human rights violations by the Russians, to sort of put Gorbachev a little bit ill at ease. And so they went back and forth. And, ultimately, Reagan was not going to concede and eliminate the SDI initiative and therefore did not want to go forward. But they did meet again next year in Washington, the next year.

CAVUTO: Right.

FOLSOM: See, it was a postponement. They respected Reagan. And, therefore, Reagan was ultimately able to be very successful. They did eliminate some weapons systems. But, ultimately, it bankrupted the Soviet Union. They were not able to go forward. And Reagan was an excellent negotiator.

CAVUTO: He was, and a wily figure at that. In the end, Donald Trump was saying this past weekend, Burt, that I can size up how things look within the first minute. I'm paraphrasing here.

What did you make of that comment?

FOLSOM: I was startled at that, because I can -- when I heard that, I thought, I can imagine Reagan thinking that about Gorbachev. And, remember, he was able to isolate Gorbachev at the first conference, the Geneva conference in 1985.

CAVUTO: Right.

FOLSOM: They did have some time together. And I can imagine Reagan thinking. What I can't imagine is Reagan saying that. Trump may be right. It's odd that he would say that. But, in a way, I think he's maybe trying to project to Kim that he's strong and that Kim is not going to be able to get away with any maneuvers against Donald Trump.

CAVUTO: Yes. Keep them guessing, as you say, right? Keep them guessing.

FOLSOM: Exactly.

CAVUTO: Burt, thank you very much, my friend, for your perspective. And that find brain of yours always comes in handy as we step way, way back from this. What is the benefit of trying to make sure it's short and sweet? It would still be short, but will the results still be sweet? The read from a guy who served our country, not only on the battlefield, but in the United States Congress, after this.


CAVUTO: It's all in how they look, all in how they president themselves. The president says he can tell within the first minute how things are going to go. So does that mean he smiles, the North Korean leader smiles? Why these things matter more you know -- after this.


CAVUTO: All right, so what to expect when they first sit down. Donald Trump made some news over the weekend when he said, within the first minute or so, I have a pretty good idea how things could go. Don't laugh about it. A lot of people say, in business, as in just general life, we can size up someone almost that quickly. Retired us U.S. Army Lieutenant Colonel, former Republican Congressman Allen West, he served in Korea, by the way. And it's very good to have you. Thank you for taking the time, sir.


CAVUTO: What do you make of that? You're a pretty good read of folks. That you can size them up that quickly?

WEST: Well, I can tell you, when I was a commanding officer, one of the things we would tell young lieutenants that were reporting in for the first time, that most of the good commanders can size you up and make an assessment of who you are by looking at you, your comportment, how your uniform looks, your haircut. And then, when you open your mouth, you either confirm or deny our initial assertions. So I think it is very important that President Trump does that. I think that he maintains the high ground and maintains a position of -- I want to say dominance, really, when you think about it. And I listened to your previous guest. I think it's important that we keep this meeting short, because the longer it goes on, it makes it seem like Kim Jong-un has a moral victory, has a propaganda victory. It's very simple. We lay down the markers. This is what has to happen. And then you allow the respective staffs from North Korea and the United States to continue on with this process.

CAVUTO: You talk about a victory for the other side, I guess, for the North Korea leader here.

But I understand like keep it to time. But a few hours is really tight, unless, as to your point -- I know we chatted before about this -- they have done a lot of legwork and sort of the groundwork for this in advance.

WEST: Well, if anyone thinks that we're going to solve what has been going on since 1953 in this meeting over Singapore, I mean, you're delusional. But I think the most important thing is that President Trump looks eyeball to eyeball with Kim Jong-un, who is a person that is economically destitute in his country, quite isolated internationally, and let him know that you have a chance. You have a chance to bring a brighter future to the people of North Korea, or you can continue down this path, and you will find yourself being the member of the Kim family that saw your family's rule come to an end.

CAVUTO: Why do you think, Allen, that the North Koreans are doing this, that this -- this leader is doing this now?

WEST: It's very simple, Neil. The game of international extortion has come to an end. When I was stationed over in Korea in 1995, that was during the Bill Clinton administration. That was when Kim's father was in charge there. And what they would, they would rattle their sabers. They would make their threats. And we would give them the financial aid and the food aid that would keep them sustained. That has ended. When you look at these sanctions, they are the toughest that we have ever had. We have a mini-naval blockade, pretty much so, that is out there intercepting any ships that are coming and going from North Korea. And that has put a stranglehold on him. And, furthermore, we're putting a lot of pressure on China as well.

CAVUTO: Do you feel -- when you are watching this summit -- I'm thinking of having people like you monitoring these developments as they're coming. And since I will be covering it live tonight on FOX Business, which, if you don't get, Congressman, you should demand, but what are you...

WEST: I do get it.

CAVUTO: Very good. Do watch it.


CAVUTO: But, in all seriousness, what -- help me do this. What are you going to be sort of waiting for, wanting to see?

WEST: The main thing I want to know is whether this process continue on. Where does it go from here? I didn't expect this to be the great end-all meeting, like your previous guest talked about. It is not going to be two weeks at Camp David or what have you. But what are going to be the initial markers that were laid down? And where do we continue on in this process? I would like to see what Secretary of State Mike Pompeo comes out and says. I would like to see what the national security adviser, John Bolton, comes out and says. I want to hear that the sanctions remain in place. I want to hear that we are giving them an opportunity over the next six months to a year to start the dismantling of their nuclear weapons and ballistic missile program. I also think that Japan wants to hear that they're going to have their hostages released as well.

CAVUTO: All right, sir, always good seeing you. Thank you very much, Allen West...

WEST: My pleasure.

CAVUTO: ... for joining us, and your service to this country, incredible service, at that.

WEST: Thanks, Neil.

CAVUTO: All right. We were up about 5.25 points today. In fact, the markets have been doing just fine, as I said, throughout all of this. The read on what's more of a worry, what's going to be going on in Singapore tonight or what just transpired in Canada over the weekend, after this.


CAVUTO: All right, two of the best from FOX Business joined me now. We have got Susan Li and Charlie Gasparino. And I am so glad you guys join me, because I need to make sense of how the markets are handling this whole Korea thing, the post-trade thing.


CAVUTO: They are -- we're about up about five, seven points. But what is going on?

SUSAN LI, FOX NEWS CORRESPONDENT: Yes. We came off of session highs, though.



LI: But we are pushing closer to 2800 for S&P. That is the high that we haven't seen since March. And traders that I talk to say, you know, we could see a positive surprise from North Korea later on tonight, because it's not just a two-way summit. It's not just North Korea and the U.S. China is involved as well. We know Kim Jong-un flew to Singapore on an Air China jet.

CAVUTO: Right.

LI: If all of that goes well, and there's a positive surprise, there could be possibly some positive surprise in good rhetoric for the China-U.S. trade relationship as well.

CAVUTO: As you have been reminding me, the underlying fundamentals are what markets respond to. And the earnings have been great. The balance sheets are good.

GASPARINO: Right. Economy is getting better.

CAVUTO: And even if things are going kablooey with our trading partners, it's OK?

GASPARINO: Well, listen, everything looked hunky-dory in late 2007 to early 2008. And I remember when it -- when the switch went on, and it wasn't. And I would just say this. If Donald Trump gets peace in our time with this, the markets will go up, OK? Got you. If he gets nothing, and he just doesn't do anything bad, markets will trade off other issues. But this trade stuff that he's worked -- that he's doing, the role of the dice, I think the market isn't -- right now, the markets are just saying...

CAVUTO: Because it doesn't think anything is going to happen.

GASPARINO: We don't think it's going to happen.

CAVUTO: Right.

GASPARINO: But there has been sort of unexpected stuff that comes -- that came in the past. It always does. And let me tell you something. You're going to have -- you have tax cuts, which are going to increase the size of the deficit, meaning we're going to get marginally higher interest rates anyway, because we have to sell more debt.

If you got that...

CAVUTO: Not if the growth goes at the rate it's going.

GASPARINO: But if it doesn't initially -- and, usually, it takes a little while -- if it doesn't, if it doesn't pay for itself, you are going to have a trade war on top of much higher interest rates. Not good.

CAVUTO: So, there are a lot of worries about that.

LI: Right.

CAVUTO: When you talk to people, Susan -- and, of course, you sat down with the Canadian prime minister before everything hit the proverbial fan. There's a lot of ill will out there now.

LI: Oh, yes.

CAVUTO: And I'm wondering how that's reverberating.

LI: Well, Neil, as I mentioned, it's actually making Justin Trudeau look pretty good in Canada, because, yesterday, if you went and watched any of the Canadian airwaves, read any Canadian newspaper...

CAVUTO: Sort of rallying around the leader, right?

LI: It's the big, bad U.S. bully coming in to tell us what to do. And if Justin Trudeau is standing up to him, well, hey, maybe he might not be a bad strong leader for Canada in the next elections, which he's behind in the polls in some...

CAVUTO: But isn't that the expected response? I found it unfathomable, the comments that were made about Justin Trudeau, whatever you think of this trade deal. But you're going to rally around the leader, conservatives, liberals alike, right?

LI: Correct. And that's what happened both sides of the aisle.

So, in some ways, I guess there's been a bipartisan effect in Canada thanks to Donald Trump.

CAVUTO: Right. Why do you think he did this, the president did this? Or Peter Navarro said there's a special place in hell for...


GASPARINO: I think that was all...

CAVUTO: All drama?

GASPARINO: Yes, gamesmanship for the Korean thing

CAVUTO: In what way?

GASPARINO: Well, to show that we're not going to take anybody's garbage, and we're going to fight you. And -- but -- but, that said, words do matter. And if you spit in the eye of the G7, which -- who are nominally -- at least -- at least in name -- people we can use to blunt the growth of China as an economic superpower looking to take over the world -- that's a real problem. Like I said, right now, the markets aren't recognizing that trade is an issue. They have grown comfortable with Trump. They like his -- most of his fiscal policies. They like his deregulatory agenda. They don't think he's going to press the button on trade. However, markets are often wrong. And if he does press the button, if there is a wide-ranging trade war, if China doesn't kick in what they're supposed to kick in after we let ZTE survive, if there's a problem with trade, and we got a trade problem, when we have higher interest rates, that could be a problem for these markets.

LI: You just said markets are usually wrong. Is that what you said?

GASPARINO: They're often wrong.

LI: They're often wrong?

Well, I'm looking at the Russell 2000, the small caps index, right?

CAVUTO: That's right.

LI: If there's rotation to small caps, what does that say about political risk? It says that people don't know -- they're going to smaller companies, not large ones, that might be more impacted by trade regulations.

GASPARINO: They're also looking for yield and for growth, right?


LI: And yields below 3 percent still on a week...


CAVUTO: But, so far, they're looking the other way, right?

GASPARINO: I'm saying, you increase your risk profiles right before the markets usually blow up. Just -- that always -- that always happens.

CAVUTO: That doesn't mean they will blow up.

GASPARINO: But it often happens.

CAVUTO: Always a half-empty -- someone is a Debbie Downer here.


LI: Yes.

CAVUTO: All right, we will see what happens here. All right, in the meantime here, obviously, the summit, and that's getting a lot of attention here, but the other issue has to be whether this has gotten a little ahead of itself, and that some sort of a correction, some sort of a pullback is in order. I'm not talking about the markets. I'm talking about the expectations -- after this.



FORMER GOVERNOR BILL RICHARDSON, D—NEW MEXICO: The North Koreans will use that picture of the spy chief smiling, the jocular nature of that meeting, for their domestic political propaganda, because they -- the number one thing the North Koreans want, Neil, is to show that they're on the par. Two leaders, their leader and the president of United States, are in the same par.


CAVUTO: All right, so, does that mean that no one can smile? I don't know. Tara Maller is with us now, former CIA analyst, Counter terrorism -- Extremism Project senior policy adviser. Tara, what do you think, that you got to be very careful how much emotion you show one way or the other?

TARA MALLER, SPOKESPERSON, COUNTER EXTREMISM PROJECT: You do have to be careful. But, at the end of the day, the North Koreans are going to use this for propaganda no matter what happens. They're going to use the photo-op, the symbolic nature of this. And you know what? That's fine. I'm sort of less concerned about some of these softer variables. They're all important, the body language, the photo-op. But what's really going to be important here at the end of the day, are there zones of agreement that President Trump and the North Koreans -- the U.S. and the North Koreans can reach through these, I think it's three meetings, really? It's a one-on-one with President Trump. And there's a more expanded bilateral, which I think Secretary Pompeo will sit in on, as well as General Kelly and perhaps a few others. And then I think there is perhaps a lunch following. At least, that's what been reported. So there's been a few opportunities here, but I don't think we want to set expectations too high. It's a good first step. There's going to need to be a long road map ahead to reach any sort of real outcome.

CAVUTO: Yes. And, to your point, Tara -- and we have discussed this before -- the fact that they're meeting, we can get in the weeds and say, oh, what do they to have agree to or not. This is unprecedented. This is historic. Whether you're a Trump lover or hater, calm down. It is historic, in and of itself.


CAVUTO: Having said all of that, though, some are wondering, given the president's language and harsh response to G7 leaders, and particularly the leader of Canada, I'm wondering what that was about and what it might portend for this meeting.

MALLER: Well, look, I did hear remarks coming out of the administration that that was sort of to lay the lead-up to North Korea, to show that Trump is strong and he's not going to back down by criticizing Trudeau. I think that was sort of fixing it after the fact. Really, what we need to see here going into this meeting in a well-prepared, clearly articulated strategy. I agree with you. This is a historical summit. Praise where praise is due to the administration for lining it up and getting it have to happen rather quickly. I am a little bit concerned about this first portion of the meeting, this one-on-one, where there's nobody else in the room but translators. I just think that leaves open a lot of room for potential volatility. And what I mean by that is, after that happens, you're just going to have both individuals' declarations of what actually transpired. And you could see some disputes after the meeting about what actually was said. I mean, we have seen that before with the Trump administration, and not in a situation that is this high-caliber, this high-pressure.

CAVUTO: But they will have other meetings. They're starting out mano a mano with their translators, right? I mean, it's not as if they're going to -- the whole thing is that way. Right?

MALLER: Agree. It's not as if the whole thing is that way, but that is supposedly the first meeting that is going to set the tone. We have heard President Trump himself say that, if he doesn't think things are going welcome, he might not even go forth with the meeting.


MALLER: That is -- those are his words, not mine. I'm not saying that is going to happen.

CAVUTO: I hear you.

MALLER: It could go quite well and set a very positive tone for the rest of this day. So, as President Trump likes to say, we will see what happens. But I do think that that one-on-one, I'm sort of surprised that Secretary Pompeo or somebody else didn't push to have perhaps one other person, to protect the president as well, right? The North Koreans can come out of that claiming that President Trump said things that he didn't say.

CAVUTO: There might be a reason for all of this. But, Tara, we shall see. Tara Maller, thank you very, very much.

MALLER: Thank you.

CAVUTO: Again, we're just about four hours away from the historic sit-down here. There are a couple things you're going to want to watch, we can tell you right now -- right after this.


CAVUTO: Closer and closer we be, four hours away now from the big sit- down.

Talk Media News chief foreign correspondent Luke Vargas with the latest from the Singapore -- Luke.

LUKE VARGAS, TALK MEDIA NEWS: Thanks for having me.


CAVUTO: What is it like there? How are things going there?

VARGAS: Well, I mean, we're just hours away, the city here starting to wake up to probably one of the most historic days in diplomacy, for a city that has hosted a lot of big meetings in the past. I have to say, myself and a lot of other journalists were in that press briefing yesterday with the secretary of state, Mike Pompeo. And I think we're starting to be pretty confident. This man, Mike Pompeo, is going to pick up the pieces. Whatever comes out of the meeting today, he's a full-time secretary of state. Everyone believes that he speaks for Trump. And his schedule reflects this confidence, that there's going to be at least thread that can be found after today's meeting that the U.S. can take to our allies, South Korea and Japan. Pompeo is departing for Seoul, South Korea, tomorrow. And he heads to Beijing on Friday, again, just sort of cementing this notion that this U.S.-North Korean diplomacy isn't operating in isolation. It's part of a bigger diplomatic process that involves our allies. And, again, unlike Rex Tillerson before him, I think everyone believes here Mike Pompeo is willing to dedicate all of his energy to continuing whatever comes out of the Singapore process. Once again, you want to leave these talks in trusted hands. And I think Pompeo is giving off all the right signals.

CAVUTO: Luke Vargas, thank you very, very much, the latest from Singapore there. And Luke is right. Others are confirming as well that they expect something to come of these talks, brief though they might be. We're going to be monitoring, of course, on FOX Business 9:00 p.m. When the talks begin, we will begin. And we will be on throughout the night, as long as it takes, to get you the latest, with concurrent foreign market reaction, particularly Chinese market reaction, Asian community market reaction, as that will extend overnight to futures trading and rest. Altogether, to put this in perspective, people will be betting money. We will be on it throughout the night.


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