a. good morning, everybody, and welcome to "squawk box" right here on cnbc. we're live from the nasdaq market site in times square. i'm beck request quick along with andrew ross sorkin. joe is off today. as an true mentioned yesterday, we did see the nasdaq setting a new high. it closed above 17,000 for the first time, but this morning you see a pullback across the board. the nasdaq with a triple-digit loss, about 105. the dow is off by almost 200 points, right now down at 190. s&p 500 down by 27. the treasury yields have been creeping higher. this morning you see them even higher. 10-year sitting at 457, the 2-year at 496. so, andrew, getting closer and

closer to 5%. here's what we're going to be hearing. abercrombie and dick's sporting good and chewy. later we'll hear from salesforce. as for weekly mortgage applications -- also jobless applications, separate issue -- and a report on the situation at 2:00 p.m. anglo american just rejected a request from bhp to extend talks as the deadline for discussions loom. the latest bid failed to address the board's concerns related to a disproportionate execution rink, they said, and there was no basis, they said, for further extension. now, the original deadline for talks was last week but had been extended to noon eastern time today. so a whole bunch of folks are looking at that. you're looking at anglo american down at 1% on news of that and

bhp down 2%. >> they raised their bid. it's the third bid they put in. >> they're getting heisman. meantime conocophillips in advance talks to buy marathon oil in an all-stock deal that could value marathon at over $15 billion according to a report in the "financial times." they say the deal appears imminent or the talks could still fall apart or another bidder could emerge. hess has approved an acquisition by chevron of $53 million, but that deal is still in discussion. they filed for arbitration. chevron and hess have told investors the pending deal would terminate if exxon prevails because that is the most valuable asset that hess holds. it's also exxon's most valuable asset. ex-son controls 25%.

hess is hoping to get its 30% stake in that. it says in the events of a challenge of ownership, this would mean essentially they would have the right of first refusal. there's a question. exxon is saying they think it's a change of ownership in the company. chevron and helsz with a change of ownership in the assets alone. this is what's playing out. it's expected to take some time to be looking at it. also you have regulators looking at this deal too. separately, exxon is holding its shareholder meeting today. the ceo marcie frost announced the fund would vote against the board of directors in opposition of the company's treatment of activist investors. marcie frost is going to be joining us ahead of that shareholder meeting coming up in the 8:00 hour. we'll hear from an executive of

the u.s. chamber of commerce who supported it. meantime american airlines shares are tumbling after it slashesed its sales outlook. i want to get more on that from phil lebeau. good morning, phil. >> it has analysts saying is this specific to the airline or a canary in the coal mine? >> we'll talk numbers and why it's specific to american airlines. previously they manned on earning between a buck 13 and a buck 45 in the second quarter. now it's between a buck and a buck 15 with revenue down as much as 6% compared to last year. previous guidance, it would be down 1.3%. what's happened? a few things here. as the company has been strug struggling domestically on a couple of things, one, they've oriented toward much more soft haul traffic.

but there's also been some issues when it comes to corporate traffic. they made a moving decision, to take away a lot of their corporate bookings interest third-party sites, agencies, and move them onto their own platforms. yesterday in addition to putting out this, robert isom was the architect, he's leaving the company. so roberts isome will be talking more about all of this in morning when he presents at bernstein's strategic initiatives conference in new york city. and you can bet most of the questions will be specific to what's been happening at american airlines. we mentioned that because we got an ak yesterday from united airlines which reaffirmed its guidance for the second quarter. we'll be hearing from scott

kirby as well as the bernstein conference. but, guys, there are a number of people who when this first came up with american airlines as far as changing its booking patterns and platforms and what it was planning to do as far as corporate travel, they admitted they had work to do. so you look at that, hook at a number of the other issues here. they need to do better with their co-branded corporate card, which is not performing to the level of united and delta. put that all together and you have a second quarter warning from american. >> phil, it's something to watch. we will be watching it. we'll be watching it with you and talking about it with you a lot more as well. thank you. >> you bet. we're also keeping an eye on shares of robinhood as the company plans to begin buybacks in the third quarter and conduct a program over a two- to three-year period. the stock up by 3 1/3 percent.

meanwhile tesla is offering shares who will vote on the $56 billion pay package. the company says it will select shareholders at random. his compensation plan was approved back in 2018, struck down by a judge earlier this year. the tours led by tesla and other executives will take place on june 12th when the results of the voting will be announced. when we come back, former fed vice chair richard clarion, what it would take to get one interest rate cut this year, sst one. thattory is next. "squawk box" will be right back. >> announcer: this cnbc program is sponsored by truist wealth, where meaningful relationships matter most.

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former fed vice chair richard clair it is speaking about interest rates. here's what he said on "closing bell." >> the rest of the year, inflation needs to come in at about 0.2 for the rest of the year. i think it's a close call, but i lean in the direction we probably do get one cut. clarida said it's a real case we night not get any cuts

this year. the markets are tuned in and watching for that. meantime check out the stock futures this morning. things are getting worse. naz dac off by 100 points, dow jones industrial average down at 200 and s&p 500 down by 27 points. joining us to talk about the markets is ross mayfield, investment strategy analyst at baird. ross, you are somebody who looks at this and thinks we're mid-cycle, that this is a bull market that's here to stay for quite a while. >> yeah, absolutely. all of the activity, momentive that we saw with the october lows, you know, it's bullish over the intermediate term here. you've got scyclical leadership and breadth. the stocks at the top of the market are working. earnings are inflicting higher. there's still to me a lot to like about the market even if, you know, a summer pause or a bit of chop is on the table here in the next couple of months.

>> the big concern people have been looking at is the health of the consumer. you're a little less worried about that. >> yeah. i think some of the weakness we're seeing is less weakness and more normalization. obviously 20222 a2 and 2023 wer boom time. we have a strock growth, labor market, which is the core of that. there are other signs that things are pretty good. one of the things we look at or have been looking at is the effect of the housing market. homequity is up big. it's a huge concern for inflation and affordability for first half time buyers, but for a majority of homeowners in the country, it's a big tailwind. >> so what does concern you? what are you kind of keeping an eye on? >> keeping an eye on credit. i think if anything, we'll start to see cracks there first. you know, higher for longer rates have obviously been digested pretty well by the

market, but we knowthat, you know, every week, you know, more and more papers are coming due and companies are issuing higher rates. that's the whole point of raising interest rates, whether it's office real estate or something else that's lurking out there. it's probably in that space, but we're watching credit closing. as of today, it's extremely tight. no concerns yet, but we're watching closely. >> bulls definitely have momentum in their favor. you've got everything that's happened with ai and the spending and technology associated with that, but it feels like the bar is getting higher and higher in terms of what the company has to do to impress or satiate what investors are looking for at this point. what do you do in terms of what you're looking for? which sectors? >> yeah, absolutely. well, one of the big themes for us or me over the course of the

cycle is going to be quality, right? higher interest rates makes it harder for companies. as you mentioned, especially what interest expenses are big e, a lot of companies never exist in an environment like this. high quality a cross-sector. as of right now, we're still seeing cyclical leadership. we don't want to get too far away from that. there's a higher bar to clear. we like global cyclicals, but with the quality tilt, even in a bull market, which is maybe a bit rare, we think it's going to be persistent this cycle. >> so with a all of those nice things you just said about the markets, you are thinking that this is a time to maybe look a little more internationally as well. why is that? >> well, i mean, broadly, you know, our wealth management clients like many are probably overindulged to their home country, right? you start from a base so you can have more international exposure, but europe and other develops economies right now are coming out of a bit of a weak

patch, so they have some catching up to do. they're probably going to get to cut interest rates before the spread and their activity is starting to percolate more out of this kind of manyny resection where the u.s. never got there in the first place. a bit of a catch-up trade. there is more cyclical abroad. i think you could expand globally and when you look abroad at both emerging and developing, you start to see leadership in countries at all-time highs. it's bullish, but you want to experience it in the u.s. and abroad. >> ross, thank you for your time today. coming up in just a moment, harvard looking to pull back on politics. we're going to tell you about the new policy the euniversity announced just yesterday. plus an albusoarm re only one copy exists. the museum is about to play it. we'll talk about it when we come back on "squawk box" in just a minute.

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the next level network. i sold a pillow! welcome back to "squawk box" this morning. harvard just announcing it's now going to avoid taking positions on matters that are not relevant to the core function of the university, it says, a change recommended by a faculty committee who urged the school to stop inning statements of empathy which it had done for ukraine and victims of the october 7th mosque attacks in israel. harvard says it runs the risk of appearing to care more for some

than others. harvard law professor nora felton says harvard isn't a government, shouldn't have a foreign policy or domestic policy, so they're taking a page out of the chicago business. it may extend itself to corporate america which is starting to take its position as well. >> i feel like corporate america got there first. i feel like corporate america spoke out in a big way in recent years and has been very quite this tomb around, and i think this is partly why, feeling like they got burned by it, feeling like they alienated part of their customers. i feel like this is harvard trying to do what corporate america is already trying to do. >> okay. a one of a kind-album is about to go on display in an australian museum. only a single cd copy exists.

over ten days in june a museum in tasmania will hoeftd small listening parties where the public can listen to a 30-minute sample. it includes the nine surviving members and features pop star cher. the cd comes in a nickel box and leather bound case. so why are we talking about this on a business network? it's because disgraced drug firm executive martin shkreli bought it but was later having to turn it over. it was sold to digital art collector pleaser which is loaning it to the australian museum for that exhibition. when we come back, the jury is set to begin deliberations today in former president trump's fraud trial. we'll hear how the potential outcomes could impact the

elections and pope ten chal markets thaflt's next. as we head to break, take a look at yesterday's s&p 500 winners and losers. >> announcer: winners and losers is sponsored by state street global advisers. ♪ ♪ the biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. it still does. what can you do with spy? ♪ ♪ [thunder rumbles] ♪ ♪

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seize the awkward. it's totally worth it. . good morning and welcome back to "squawk box." we're live from the nasdaq market site in times square. the futures this morning under some pressure. dow futures are down by almost 200 points. dow was down yesterday. s&p futures down by about 25, and the nasdaq is indicated off by almost 100 points. this comes as nasdaq set a new record yesterday, close at 17,000 for the first time. it's worth pointing out even though the dow has been down, it's only down 3% from ilts all-time highs. the jury in the trump fraud

trial will begin today. for how it can impact the elect and the markets, we'll turn to our next guest. what are you expecting? >> yeah, so, you know, the first question on the trial -- it's pending, of course -- how long the jury will deliberate. having been in that courthouse, it can take a while. we're not far off from a verdict one way or the other. i think there's a deep chance of a conviction, acquittal unlikely, but a hung jury a possibility. all the reports from inside the courtroom seems to reflect that the jury is sim pa think ittic with the prosecution's case. there are questions regarding michael cohen, a key prosecution witness. i do think the range of outcomes is very much the possibility. >> what's on the possibility? >> the entire range of outcomes.

>> that's not helpful at all, tobin. handicap the situation for us. >> yeah, i think a conviction is possibly slight more possible than a hung jury. i don't think this is something where, you know, there's a really, really strong base case and anything else would be a big surprise. it seems like we're headed for a conviction. prosecutors tend to get convictions in most of these cases, the ones that they bring. this is not the strongest case ever. >> let's play that out. we can also play out the opposite outcome. for now let's play out the conv conviction outcome if that's what you think the expectation. what happens after that? >> it would be a huge problem for trump. that's n polling in february showing 70%. it showed an independent third of voters less likely to vote for him. the magnitude is slightly to be

less than that. voters are not great at telling you how they're going to feel in the event of a thing that happens in the future. this has been a quite steady race. it's been tightening over the course of the year, but within pretty narrow range. it's been moving pretty sideways. so, you know, if trump does get convicted, that's a problem at the margin for moderates in particular. there are going to be a lot of voters unfavorable to both candidates, but i think, looking at a convicted felon is one. the thing is to tip the scales to make the other guy the lesser evil. i don't think this is immediately shifting the race. >> okay. extrapolate -- let's extrapolate this out from jfor just a momen to the markets, which is to say if you think the markets are a forward-looking mechanism, call it 12 or 18 months out -- and by the way, the markets are doing well, as you've seen. we just snapped a winning

streak, but all in all, pretty good. you know, right now, i think the biden administration is taking some or would like to take some credit for where the markets sit. maybe there's an argument to be made if you think that the former president is the president in a few months. what do you think? >> there ooh is a lot of active scenarios going on. i think that's appropriate because i think the election looks very close. i don't think the odds are far off from 250s -- 50-50. you can look at it as a coin flip outlook. even if you favor trump, 55%, 60% is as high as you go. there are a lot of ideas on what to put on as far as the conviction/election outcome. our view is financials look

clear in the event of a trump victory. i don't think for the most part people are holding that all year in anticipation of that. >> what's the election trade? you said energy? >> yeah. i think -- i think traditional energy and -- >> you think that's a function of a return to president trump? >> yeah. i think that would both be in keeping with historical trends, which sectors tend to perform in election years when republican candidates ended up winning. and those are the sectors that have had some of the highest electoral disputes. there's power plant emissions, auto emissions, thing after thing after thing. many are going to end up in court and in many cases be struck down even if trump doesn't win. trump has been actively choreographing the energy index. i think that alone is sorts of

enough to -- >> what would be a loser in a trump presidency and what would be a winner or loser in a biden presidency? >> yeah, i think losers under trump, renewable energy is sort of the flip side, certainly there's been a lot of concern about partial repeal. most of the law will stay in place, but some evs are at significant risk. on the biden side, it's a very status quo outcome we'll be looking at. he'll be looking at a republican majority and house majority. but i think if he wins, regardless, that's one where you're not going to get big swings in policy one way or the other. those are more likely to get finalized and defended if biden wins. again worse for energy and financials is the flip side of the trump cenario. >> we're going to leave it

there. thank you, sir. appreciate it. still to come this morning, cathie wood, ark invest, taking a stake in elon musk's ai venture. we've got that story next. plus, we'll talk about investing in ai with investor mitchell green. a reminder you can get "squawk box" on your favorite podcast. follow us and you can listen any time. we'll be right back. when was the last time you checked in on your heart? with kardiamobile, the personal ekg device, you can check it from home using your smartphone. i use kardiamobile every day.

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box" on your favorite podcast. follow us and you can listen any cathie wood, ark investment management, has purchased a stake in elon musk's xai for its $60 million arc invention funds. in an email the ark revealed it represents about 2% of the fund's holdings. ark's chief futurist told bloomberg the ai foundation models are going to be worth trillions of dollars by the end

of this decade. those ai stocks do keep rising, but our next guest says he's waiting to get in on the hype. joining us now is mitchell green. he is founding partner at lead edge capital and alibaba and bytedance. thanks so much for coming in. >> thanks for having me. >> you think these valuations are far too high at this point. >> i think people are back to '20 and '21 crazy land and this might be a little '99 and 2000 world. a really famous early stage investor told me recently when i asked him about ai, what are your thoughts, he said 1997 or 1998, you could build a website, it would cost you $50 million and you would have to go to some micro system to buy chips. fast forward to today, you can take $40 and go with a credit card to go daddy. he believes ai is going to

happen the same way. it will create new industries, create new jobs, radically disrupt entry-level white collar jobs, however, it's going to take a lot longer than people think. >> let me push back on the comparison to 1999. i remember that too. the difference at that point was up in of those companies were making e profits. the revenue that was coming in, nobody had any profits. this time around, you can look at a lot of companies that are making some pretty huge profits that justify -- >> one, nvidia. >> okay. but what about what amazon's able to do with this and microsoft's able to do with this and what about the companies that i'm talking to when they automatic will i put ai in and they can cut their expenses drastically immediately. >> what's really interesting, i think, causing this weird dynamic in the markets is a huge amount of the value right now is flowing through nvidia and the giant data center guys. those guys are printing money

off of this, and all of these other companies, elon musk, raising $6 billion. anthropic. none of these companies are making money. everybody talks about how all these companies, smaller ai companies, a lot of vertical application operations. >> customer service. >> yes, or communications software. if you actually start to dig in and look at the gross retention data, it's like how many customers are coming back every day, you see a lot of revenue growth, but the growth retention is not very good. nothing like a snowflake or data dog or viva, which are world-class companies or microsoft data center businesses in which nobody ever leaves or amazon or ams, which implies lots of customers are trying this stuff, but a lot of this is

probably more hype than actual product right now. for instance, there are all of these companies in the investing world that you can -- we have the softway to help you analyze and make better decisions. at lead edge, we've probably made 100 investments over the last 15 years and probably looked at tens of thousands of companies, and we have them all direct to one folder in dropbox. i say to my team constantly, can you please give me software that i can ask questions of that, hey, we invested in this bizarre place in 2007. what is most like -- you know, what are the companies that are at a biggest risk? what will companies look like in the past. i was out last night for dinner with a large investor who buys stakes in other gps. i was asking him, do you use software to analyze one fund and look at the old history and compare it to other successes? he said, we've had companies

come in our office that have this big website all set up. we think a lot of this stuff does not exist yet. >> search stuff. it looks like a lot of bells and whistles can't be until you put a lot of money into it. >> correct. i think one area that's quite interesting is around tech-enabled services. think about the next generation deloitte or helping ian wise consulting or mckinsey and having -- using ai to make, you know, the associates much more efficient at their jobs. >> they'll be selling products to them, if not them, creating the products. >> it's a combination of both. we think -- we have seen some interesting companies around like iowai tech-related service.

they're really body shops but they're using ai for higher margins. >> you've heard from a lot of these companies, but every single time -- >> having met a bunch of them as potential vendors, we have been pretty underwhelmed with what we've seen so far could be another great example. our lp base is really unique. as you know, we have a lot of wealthy individuals that are investors with us. we host events. we have dinners. we'll have 200 people come to dinner in new york, 600 people come to dinner in austin, and we'll have seated dinners. we know how much these people have invested, what their hobbies are. we have 10 years of data for historical dinners. i say i to my team, why don't we build software and ai to have automatic seating charts. easy to do. do you think it exists? of course, not.

we see it in the retention data of these companies. if the software was as good as everybody said it was, the retention would be really, really high. >> last year, companies -- i'm talking public companies -- were applauded when talking about how much they were investing on ai. it feels like that's shifted a little bit and it feels like there's pushback from investors. it's like what we went through a few years ago when investors pushed back on meta and other companies that were investing tons and tons on metaverse. >> when you look at the capex numbers, the earnings calls in the last couple of quarters, the money that facebook and amazon and nvidia are spending, these numbers are gigantic. >> again, you can justify it if -- >> these companies are very real. the companies are printing money. they should be doing it. >> you think the software companies should be doing it or not doing it? the nvidia piece, e i'm more

concerned if meta should be spending the money or amazon or microsoft. >> i think the companies that are existing players and the companies in our portfolio that are not ai companies should be spending money to constantly think about how can we use ai or ai tools to improve -- >> you're going to look like a dinosaur. >> it just amazes me the amount of smaller companies we looked at that are solely focused on ai, and when we look at their retention metric, how bad they are. it implies people are trying things. we've got a company making patient communication software systems for hospitals. >> would you look at a microsoft and say co-pilot is a good product, a terrible product? do you think -- >> what do you think of it? >> i think it's a fine product. i don't think it's -- i don't think it's there yet. i don't think it's ready for prime time. >> i think you answered exactly

right. >> what about chatgpt. is there a way to make money off of consumers? >> i pay for it. >> it's going to be free soon. when you talk to a lot of really smart investors, there's a company that we backed that went to work for microsoft and is a the person responsible for developing get hub and co-pilot, which i think is massively helpful to software developers to improve basic tasks. this is going to take a long time and a lot of the infrastructure companies, which a lot of these ai companies are, prices are going to plummet. >> you see a washout. >> correct. >> that's what you're waiting for. >> correct. 100%. >> you have areas your targeting. how soon do you think a washout comes? two years? >> the problem is it costs so much money. $14 billion? anthropic.

in china, you've got moonshot. i think something that people are talking about, we obviously invests in some of the big internet companies in china. there is going to be a war, a turf war going on between china ai and u.s. ai. that's why you're seeing the c.h.i.p.s. act out of chinaand the new fund. they need to build these chips that nvidia has that they can't get access to. >> china has tried before, spending billions in the last decade. >> they have. and they'll spend hundreds of billions. we're not semiconductor experts. it's interesting how powerful nvidia appears to be. >> mitchell, i want to thank you for coming in. it's interesting. if you finding something, will you come in and tell us? >> sure. >> thanks a lot. coming up, a mediterranean chain cava betting big on grilled steak.

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welcome back to "squawk box." cava racing its guidance. they are planning to open more restaurants than initially planned. they're expecting customers to swap in the price. the traffic growth has not been factored in. they will raise prices by 3% since january. the stock has been on a tear up

more than 87%. schulman will be on "money movers." sweet green just passed -- added stake to the menu. coming up, we're going to talk about the decline in the birth rate in the united states and the potential impact on the economy and then calpers ceo is going to be here. she's going to talk to us about why she's voting against the exxon ceo and the entire board of directors. it's a big vote. "squawk box" returns after this.

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million babies were born. good morning to you. somehow every story relates back to elon musk one way or another and this is an issue he's been talking about for quite some time. how bad is it? and when do we have to really start worrying about it? >> first, thanks for having me on, andrew. it's actually quite likely in the not too distant future the global population is going to decline but in the u.s. we're facing a shrinking working age population pretty imminently. so i think that's something we need to be worried about. our working age population has been stagnant for a while. births in the u.s. have been

falling precipitously and persistently. >> if you were going to do something about that, what would it be? >> unfortunately, the lesson we can learn from other high income countries that have been expressly experimenting with pronate tallist policies reveals economic tinkering, tax credits, extended parental leave, that's not going to do it. i think what we want to do is hold steady birth rates even at the low level they are or turn them around to increase them, it's going to take a real big investment in families in this country. a lot more support, financial support, things that make it easier for parents to combine having kids and working. a dramatic reorientation of society towards a family friendly society. short of that we have to -- >> we've been going the last 100 years the other direction. is it a political -- it would have to be political will

almost. what would be a good country to look at as an example of a country that's turned this the right direction? >> yeah. so this is actually really interesting point. i think this is why this major challenge has snuck up on us because people have had in mind since the 1960s the misguided worry of over population. people have been celebrating declines in birth rates and we're starting to realize that's going to be really bad for our fiscal situation and economic dynamism. who has turned it around? japan has managed to stall it. birth rates in japan are still so low that they're far below replacement level. they haven't fallen out quite as low as south korea. they've spent four times as much on sharing their family. france has managed to throw a lot of support at this problem and stalled out their fertility decline but still far below replacement level. i can't really point to an

advanced economy that has turned around declining fertility rates. that's the issue here. i think what we have to think about is if we're facing an aging population, a shrinking age working population, how do we invest in a talent pipeline when there are simply fewer workers around. >> melissa, i wonder what those moves are that companies do -- that countries do that you think are successful. when you think of japan as the example to this, they're doing more and more to try to get women in the workforce. it's hard to boost your birth rate at the same time you're trying to get women to come to the work. what are countries doing to help? is it spending more on child care so women can work and have kids.

>> women there are still having below two kids on average. they're faced with below replacement level fertility. majority of women work across advanced economies of 80%. we shouldn't think of women either having and raising kids or working. the right way to think of any pro nate allist policy is parents combining work and having kids. it's had the trend line go in the wrong direction and has somehow done better on the other end of it?

meaning that the economy has succeeded despite the clear lesser number of people. >> i think the decline in population is really unprecedented in modern history so we're really in unchartered waters here facing a decline, imminent decline in our population. this is why it's a big challenge. people had this misguided idea we should be worried about overpopulation. we don't have any example of an advanced population. this is why i see this as a real major economic challenge that we need to pay attention to. we have to deal with this topic, i think rightly so. >> melissa, thank you for joining us this morning. it's fascinating.

i hope to talk to you about it again. hope to talk to you soon. >> we talk to you on "squawk box" i'm around drew ross sorkin. calpers making some big newsand the fun vote again. the board of directors in opposition of treatment. marcie is going to join us again at this table at 8 a.m. a judge has rejected amazon's request to dismiss a lawsuit filed by the ftc enrolling millions of consumers into amazon prime without their consent. it made it hard for customers to cancel and they knew customers had accidentally signed up for prime. cathy woods arc invest is one of the investors who scooped up a stake in elon musk's xai

securing a $24 billion value way according to bloomberg that stake representing 2% of ark's holdings. the futures, red arrows across the board. nasdaq off by over 100, s&p down by 28. let's get to dom chu. what's putting the pressure on the indexes? >> there's a lot of things moving on rates and everything else. some of the news items this morning for the morning movers are interesting as well. check out what's happening right now with shares of american airlines. that stock is down roughly 8% premarket. around 350,000 shares of volume. this is after america's fourth biggest airline operator lowered the current quarter guidance for profits and sales and announced the departure of the chief market officer. and they cut the target price to

12 bucks from 17 given that guidance cut. head over to cnbc.com/pro. subscribers there can get more details and analysis of that story. next up, a couple of merger transactions. the first in oil and gas. connick could he phillips is officially buying smaller rival marathon oil. it's buying at a little over the current $15 billion market value. up 5poun point 5%. we'll end with a deal that that is become official in the past 20 minutes ago. merck is buying eyebiotech. up to $1.7 billion in payments tied to developmental milestones. this deal will help merck purchase into the market of treating vision loss and boost the pipeline.

that deal was first reported by "the wall street journal" late yesterday which led to a little bit of headline movement in merck shares. merck just about flat on the session. i'll send it back to you. >> we'll see you soon. coming up, we'll bring you the latest on the israel-hamas war. later, jared bernstein is going to join us to talk about the state of the economy and so much more. "squawk box" returning after this. sure, i'm a paid actor, and this is not a real company, but there is no way to fake how upwork can help your business.

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results, 3.30 much better than the 2.95 than the street had been expecting. revenue up 3.02 billion. revenue sales jumping 5.3. they raised its guidance for earnings and comparable sales growth. we'll break down some of these results and get some reaction from an analyst in a bit. the stock up close to 6, 7, almost 8% right now. the deadly israeli strike on rafa continues to draw global condemnation putting president biden in a precarious position as he prepares for the presidential election in just a few months. joining us is michael froman. he is president of the council on foreign relations and former trade representative under president obama. thanks for being here today. >> thanks for having me. >> this is a very difficult situation. it's one where the biden administration had drawn a red line and now they're saying this doesn't violate the red line but it puts him in a tough spot.

what's going on? what's your read on this? >> it's a tragic situation. as this war goes on and on more and more civilians are going to be caught in the cross fire. israel has been heading into rafah not with the overwhelming force they expected but they're getting closer and closer to the center of rafah. prime minister netanyahu said this was a terrible mistake and israel is losing the public relations support and including in europe. they're recognizing the palestinian state and the longer this goes on, the more difficult it is going to be. it's why it's so important that the war come to an end, they get the hostages out, they deal with the hamas threat and they start talking about the day after issues around who's going to secure gaza, who's going to rule and hopefully make progress towards a more sustainable solution. >> it sounds like president biden and netanyahu aren't even

speaking at this point. >> well, there's more tension now, has been more tension in the relationship than in recent history. i think there's a lot of interaction going on behind the scenes. the war cabinet has come up with a proposal for a day after plan that does involve palestinian security forces and security forces from other arab states maintaining the security of gaza and protecting israel from potential hamas attack. there's a long way to go to get there. >> what are the sticking points? hostages are still being held there. >> hostages. the remaining divisions of brigades of hamas that continue to pose a threat to israel. being able to return to the north of israel from hezbollah attacks. rocket attacks from lebanon. those are all issues that need to get resolved. i think on the positive side there is a regional realignment going on where saudi arabia, united states and israel continue to be in discussions about a possible normalization of relations. there the sticking point is that

saudi is insisting on a pathway towards a palestinian state. right now while the war is going on, there's no support in israel, very little support in israel for that kind of effort. it puts a premium, again, on bringing an end to this conflict, securing israel and being able to deal with the longer term issues. >> let's turn to russia and ukraine. i think putin was expecting they need more support from chinese president xi when he visited recently. stronger show of support that they would back him. he didn't get that. does that change the situation or possibilities for what could happen there? >> well, i think china has decided to support russia to a great degree. they're not sending weapons per se but they're providing a lot of the underlying rocket fuel and microelectronics. they are developing a very different kind of relationship. >> the statement she put out did not give the support or the

ground cover i think that putin had been hoping for. >> what's going on there on the ground is on one hand congress has passed finally the supplemental bill that gives ukraine the weapons it needs to defend itself. there's a debate going on whether ukraine can use weapons to strike military targets inside russia. not have to wait for the russians to cross the border in order to defend itself. at the same time i don't think underlying support from china has diminished at all. it's really helping russia become a militarized economy posing a greater threat to europe as well. >> was this a complete nonstarter? when he said we can start having peace taublks? >> he said we're happy to sit down and talk provided we have to keep everything we have taken from ukraine. that's not a basis for conversation. at this point he probably is trying to wait out the united

states, wait out the election and see if things change here. there's certain -- greater certainty now that ukraine has support from the u.s. and europe. that militarized board is being delivered on the ground. hopefully ukraine will defend itself, push russia back, change facts on the ground so when it is the right time to negotiate they're doing so from a position of strength. >> you don't see europe weakening its resolve on this. it's in the backyard. >> as long as the u.s. is at the table and continues to do its part, europe will be there. there's been a lot of discussion between president macron and chancellor schultz about europe coming together, standing up its own strategic economy, defensive capability. it would be a good thing, put more money towards defense including nato, rationalize some of their defense industry which is subscale. too many systems, too many national champions. there's a long way to go for that. europe feels very much this is

at their doorstep, is committed to supporting. has done a lot, will continue to do a lot. the question is, if the u.s. is not there, will they do it on their own. there are some serious doubts about that. >> there was a story in the wall street journal about how black listed chinese companies are rebranding themselves as american. the company behind american light arm which is a new home by the big three. this is a company that had been banned from doing business here. it doesn't seem illegal what they're doing though, finding a new head quart terts and new name for the company. it is driving regulators crazy. what's your take on this? >> we have to get our arms around what is it we are trying to achieve? are we trying to reduce our ties with companies in china or chinese companies in the united states? on the one hand we're trying to encourage investment. if you go back to the late '80s,

late '90s, the japanese and korean companies invested in the united states and changed the dynamic. this is one issue of trying to circumvent the black list. i think the other issue is as chinese companies go to other markets like mexico and export to the u.s. what they could not export from china, does our policy focus on the country of origin or the companies involved? >> does that call for a reassessment of nafta or the new nafta? >> that's coming up in 2026 anyway. there's a five-year reassessment of nafta. whoever is president at the time will undergo that effort. i think it's more of a question of generally in trade policy do we focus on countries or companies? at what point is a company in mexico mexican or chinese? >> what's the answer to your

question? >> if we are concerned about chinese companies undermining america. >> from an economic perspective? >> from an be economic perspective. if we are concerned about an over supply issue, that's another issue. we shouldn't be concerned if it's coming from mexico. i think the reality is we're concerned about both and we haven't sorted out what the purpose of our policy is. >> you didn't mention concerns about the feds. if you have cars that are built in america and they decide at some point they want the cars to shut down because we're in war with them, is that a realistic or worthy -- >> i've not seen any intelligence about that issue per se. i've heard the administration talk about it. do we want a robust electric vehicle industry in the united states? if we're going to do that, then

there is a logic to that argument that then you keep out the dumping of other products that might undermine the ability of our industry. we'll be left with more expensive and not as competitive products but that's a tradeoff we need to talk about. >> thanks for being here. >> thanks for having me. a lot more on "squawk box." the show down between tesla and the shareholders. they say they should reject it. musk is trying to woo investor directly. the futures right now. take a look, dow off 214 points. nasdaq off 113 points. s&p 500 looking to open down 30 points. we are coming right back in just a moment. time now for today's aflac trivia question. william g. morgan developed which sport in 1895? the answer when "squawk bo rern tus.x" in my health insurance. gap in your health insurance? yeah, it didn't cover everything when i got hurt.

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tesla shareholders beginning to vote on the approval of elon musk's pay package. elon musk is offering tours of tesla's giga factory to 15 shareholders to rally support for his pay. joining us is eric tally, columbia school's professor. if you were voting, which way do you vote? >> it turns out i have a position in tesla, a very small one, and i'm inclined to vote against. the rationale for moving to te texas is a difficult one in my view since there's not much developed law. this is an expensive experiment. on the standpoint of voting for the ratification of the pay package is a complicated issue. one of the big issues that tesla's now confronting, like much of the ev sector, it's sort of a melting ice cube currently with margins thinning, competition from china heating

up, major political candidate saying that evs are not in the future of u.s. policy and so that would make me a little bit queasy as well. that clearly had an influence on glass lewis. >> what do you think the risk is, i assume you must think it's not very high, that elon musk says, you know what, thank you so much for playing and good luck to you, i know i've got money in this, meaning elon musk has money in tesla, but i'm going to start focusing on some other things. i'm not so thrilled to work with a group of people who doesn't want to honor the contract? >> he's been -- he's been unapologetic about placing himself in that position and there is a plausible claim that other shareholders are mulling over right now to say, look, you know, the one thing that's been kind of the secret weapon of tesla is elon musk. keeping him happy is of

paramount importance. to the extent he can continue the winning streak going forward, we want to keep him around. we want to keep him happy. the hanging of the threat to take his ball and go home is complicating in a bunch of ways. even if this vote that is being put before shareholders is to have legal effect, one of the big requirements behind it is that it has to be uncoerced, that the shareholders don't have to team like they have something hanging over their head in order to approve or ratify the compensation. >> even if there was an approval of the vote that it would be overturned by this judge? >> i'm just saying that mr. musk should tread carefully here if in fact what the move here is is to try to get a share holder vote coming forward is essential to essentially patch up some of the flaws that gave rise to the opinion earlier this year.

shareholder votes can carry a lot of sway in delaware. they have to be fully informed and can't be the byproduct of coercion. >> i don't understand two pieces of what you just said. don't make any sense to me. >> all right. >> one is the idea that there's fraud. do you not feel fully informed at this point about this agreement? >> i feel completely informed. >> okay. >> so let's take that off the table. everybody's fully informed. this idea of coercion. the idea that employee might not stay you think is a form of coe coercion? >> not entirely in that direction. one of the other issues mr. musk has raised is the fact that he might take a projs ekt that was i side tesla, the initiative of ai and take it elsewhere? does that make my hand feel a little bit forced in voting?

yeah, it might. >> xai just raised $6 billion. you're also fully informed, eric. >> i am. he certainly made that position clear though we're still in a state of flux -- >> let's say you vote against him. then what do you think happens? >> well, it's unclear exactly which way things are going to go. if the vote against against mr. musk there is a -- >> you want to vote against him. you are doing this as a political stance? you want him to lose. if you want him to lose, what do you think happens if he loses? >> it may well be the case that mr. musk decides that he's going to move on to other pastures and there is an argument in -- among tesla stockholders that that would be a bad thing. there's an argument that it might be an okay or acceptable thing for the future of the company. that's exactly the inflection

point i think yewe're finding ourselves in. >> you think there's more value to be created with the value he's not there? >> it is a super close call in my view, andrew, that, you know, this is not 2018. this is 2024. in fact, that's one of the big problems here is that i think getting a stockholder vote to approve and ratify this pay package would have been much easier even a year ago than it is right now. >> do you feel it's fair, i know the word fair is sort of -- thrown around as a word -- do you think it's fair that this individual, you know, signed a deal that appeared to be voted for, hit all the numbers and is now in a situation where not only the judge is saying that she's overturning the contract but that the shareholders are

saying, actually, now that we know everything, we know you did everything, we know you did everything you said you were going to do, we don't really want to give you the money? >> yeah, i think quite frankly delaware tries to empower shareholders to make exactly that type of decision. from the standpoint of a shareholder -- >> lets people renege on their deals? >> i'm agreeing with you, andrew. let me get it out here. in fact, i think delaware basically is, if anything, it is about trying to empower shareholders to say, look, we knew what we were doing and we're going to do it again and we would like to give mr. musk some compensation for services rendered. to the extent that stockholders of tesla, you know, want to do that right now and they do so on a fully informed and uncoerced basis, it's hard to justify, you know, tying their hands and saying, you're not allowed to do that. there's a genuine debate as to whether that's a good idea or

not. if the balance of stockholders of tesla decide, yeah, we want to make sure mr. musk is fairly compensated for services previously rendered and we want to be able to do so by expressing our opinion through our vote, it's going to be hard in my view for delaware courts to say we're just going to disregard that expression of intent by stockholders. >> all right. what do you think you'd ultimately have to pay him if you didn't pay him this amount of money? >> that's an interesting question because one of the issues in the background of this case, andrew, is this idea of, look, the contract has been voided. is there some sort of a resti restitutionary amount or fair compensation to be put in the case? chancellor mccormick didn't engrain that because that argument didn't get put before her. the comps are difficult in this situation because of the fact that this is such a unique compensation package, but one possibility that still might be in the offing is for tesla to

come forward and mr. musk to come forward and say if you nullify that opinion, let us make an argument about what the fair value of- >> let's say he said we'll negotiate. instead of paying me $46 billion pay me 30. sounds to me like you would actually reject that, too. >>ing that may be -- if this route is something that gets pursued, that may be where we end up going. to the extent that that is correct, that would be in part a legal argument about what that fair value -- >> the thing that doesn't make any sense to me about your position, i'll be very honest about it, is this is going to go on in court for years if this isn't paid and even if elon musk were to say i'm going to focus on tesla. the amount of distraction that this is going to be. he has to get compensated somehow i would think, right? and he's going to be suing. there's going to be appeals going on. i mean, it's -- it's a

fascinating issue. the company's worth $550 billion now, 45 billion is a lot of money. this is a stock that in very unusual ways has swung in some cases by 15, $25 billion ina week or two. >> stakes are definitely high here, andrew. one of the things a lot of people when they think of protracted legal disputes that they don't sort of factor in is the possibility of a settlement of those sorts of disputes. that would be a type of a situation where you could imagine, you know, at least if appropriately positioned in front of the court a settlement coming forward that does in fact have, you know, better deliberation, at least in the eyes of the judge by the board of directors. >> how could there be a settlement? how could there be any type of settlement? in court? >> it easily could happen. if mr. musk were to file his own

lawsuit for restitution for benefits conferred, that is a separate cause of action that as far as i can see is something that would be available to him and is still available to him. that is a lawsuit that itself could be settled by tesla. >> so he has to sue the company? this is very complicated, eric. thank you very, very much. >> thanks a lot, andrew. >> appreciate it. >> becky. >> cheers. when we come back, the latest read on housing plus former fed governor dan tarullo. he led the bank's financial federal regulatory reforms. then jared bernstein on the president's economic plan as we head into the election. "squawk box" will be right back.

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the latest read on mortgages and rates out just a short time ago. it's a 30 year fixed for

conforming loans with 20% down. total mortgage volume application fell to the lowest part since march. applications for a mortgage fell and home buyer demand for loans hasn't dropped that much. that's because affordability is so bad.

this followed comments on the direction of interest rates from minneapolis fed reserve. investors buying up a lot of individual homes playing into this as well. >> we talk a lot about big institutional investors who own a lot of properties. they own very few when you compare it to the rental landscapes. >> it's still less than 5% -- >> i'm sorry --

>> less than 5% are the big institutional investors. you had a lot of smaller investors buying into the market but it's concentrated into certain cities like atlanta, north carolina, cities like charlotte, raleigh durham. you see a lot of investors there but it's no so widespread that it's cutting into that supply as much as some people think. >> i was thinking of airbnb and vrbo. >> that's a different story, airbnb. >> diana, thanks a lot. still to come this morning, street reaction to dick's sporting goods. results and the state of the consumer. later, exxon mobil ceo darren woods accusing calpers, the largest public pension fund of neglecting its members to urge a shareholder revolt. calpers ceomarcie frost will join us to discuss. "squawk box" will be right back. one of the most important

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shares of chewy are higher after reporting quarterly results. earnings came in at 15 cents a share. that was 9 cents better than the street was expecting. revenue of 2.88 billion. that was also a beat. the company is authorized to share repurchase program of up to $5 million. those shares up by 5.8%. meantime neel kashkari

saying he wants to see many more months of positive data before they cut rates. i want to bring in a former fed governor. led the reforms in the wake of the financial crisis. now harvard law school professor. good morning to you. a new piece out for brookings hutchins center saying reconsidering the regulatory uses of stress testing should be something to be considered. dan, it's nice to see you. what do you think the chances for a rate hike, now that that seems to be on at least mr. kashkari's table? >> well, andrew, i actually looked a little bit more closely at governor waller's speech last week. i thought what he did in that speech, very good speech, was two things. one, i think he pushed back some on the idea there's a significant chance of a rate increase and the second thing he did was to i think reflect the sort of the broad view within the fed that they are going to

need to see some more progress on inflation absent something pretty bad happening in the labor market and i would draw your attention to that second part of it. governor waller said, yes, i want to see several more months of good inflation data, but he said in the absence of negative developments in the labor market. so he still is keeping both sides of the dual mandate in mind. i do think he was pretty forthright in pushing back at the idea that a rate increase might be looming there. the. >> so when you think though about -- as we get into the fall and we keep saying the election is coming and everything else, even if you think that, for example, say powell may be predisposed to wanting to lower rates, what are the chances he wants to touch rates before the election? >> i think to a considerable extent, andrew, i think there's more sensitivity to this issue

outside the fomc than there is within the fomc. i think from the fomc's point of view they've been talking for some time now about the conditions under which they may lower rates and if those conditions are met, if, for example, governor waller's pre-conditions of several more months of good inflation data showing that inflation is moving back to target on a sustainable basis, if those are met, then i think the fomc would be inclined to go ahead with what it otherwise normally would do. secondly, if there were to be some sort of at this point unanticipated shock to the economy or unanticipated significant developments in the labor market i don't think the fomc would hesitate to lower rates. >> you think -- we had a debate about this the other day. do you think the transparency

the fed has created has now created its own problem? do you think this is a good strategy, bad strategy to tell us what they're about to do? >> well, there's no question that transparency can be an important tool of monetary policy. i don't think anybody wants to go back to the days where people had to sort of look at tea leaves to even figure out what the fed had done, much less why it had done it, but i do join others in wondering whether there's kind of an overload of information right now, number one. and number two, and i think you're referring to sort of that forward guidance in non-crisis periods. as retiring fed president mester said, during crisis periods forward guidance can actually be quite useful when rates are towards the zero lower bound but i wonder whether in normal times

the inclination to say, you know, here's when we're going to change be, here's when we're going to move at the same time saying you're data dependent is a little bit at odds with each other. so it might be that the fed would be better advised to talk about its general expectations, talk about the conditions under which it will be comfortable lowering or feel the need to raise rates and then let the market draw some more inferences because i do think at this point the market's kind of overreacting every time some member of the fomc gives a calendar period during which he or she expects there could be a rate change. >> dan, thank you. nice to see you. >> andrew, nice to see you. >> appreciate it. thank you again. when we come back, dick's sporting goods reporting a short time ago. we'll take a look at the numbers and the market reaction. that stock is up by more than 5%

this morning. as we head to a break, check out the shares of abercrombie & fitch. they reported quarterly results. they are surging past expectations. they're raising the sales growth forecast for the full year and that stock up by 2%. "squawk box" will be right back. (grandma) and a million stories to share. (vo) the key to being rich is knowing what counts.

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welcome back to "squawk box" pap economic on a deal announced earlier. conocophillips buying rival marathon oil. a $17.1 billion deal. a look at stocks right now. right now looking at conoco down 3% on the deal. marathon up close to 8%. and dick's sporting goods out with quarterly results. talk about the quarter and consumer with michael lasser, ubs equity research analyst. a lot to like. they beat expectations and

raised earnings guidance for the full year along with revenue guidance and comps, too. what did you think? that stock up by 7.3% actually. >> you nailed it, becky. few retailers this reporting season who have a combination of reporting mid-gel digit comp growth along with raising the guidance for the year. what i think is that dick's is in a good spot to capitalize. increased competition, within the athletic footwear and apparel space, it's doing a great job of executing. now, the stock had a really nice run over the last year or so. it does trade at a premium to where it has historically. it's going to have a good response today, which is warranted. i think from there probably consolidate and wait to see how trends shape up for the consumer and for this space in the second half of the year. >> you had said ahead of this report yesterday you thought they should maintain their guidance, just as a way of being

cautious? what do you think they're willing to throw caution to the wind? >> a couple things. one, they did exceed consensus by 30 cents and raised forecast and exhibiting optimism. what it suggests, number two, trends even into this, the early part of this current quarter are quite good. now, becky, i would remain somewhat cautious into the back half of the year. we are going to have what is a very distractsing election. there is a shorter holiday shopping pert this year. six fewer shopping days between thanksgiving and christmas. that will be a challenging season for retailers. so despite increased confidence that dick's is exhibiting to this morning with its raised guidance, we would offer some cautious view for the second half of the year across the retail sector.

>> michael, i was going to ask if you could read more into the consumer about this. sounds like despite what dick's is seeing you're not buying it anyway? >> we have a neutral rating on the stock. our view while dick's is doing a good job, the stock hag reflected that and in its increased multiple over the last year. what does this read into the consumer? says a couple things. one, the fact that dick's is benefiting from a really good backdrop for certain athletic footwear and apparel from vendors like hahn and hoka, few trends happening in the retail space right now. number two, while it says low-income demographic is pressured others are feeling pretty good. they have jobs. they're willing to spend on the right products at the right time. but that is an isolated occurrence right now in the

retail sector. by and large, trends are pretty rough out there. >> so sorry, though. what? consumer? >> more affluent consumer. the lower-income consumer is under some pressure. >> got it. michael, thanks a lot for joining us this morning. >> thanks, becky. when we come back, a lot more on "squawk box." jared bernstein joining us when we come right back on "squawk" in just a moment. gonna clean the fence. daughter: it's a lot of fence. dad: you wanna help me? dad: aim at the wall, but get closer. daughter: (gasps) what the?! daughter: alright. dad: side to side. when you work with someone who knows a lot and cares even more... you can do this. ...you're unstoppable. (♪♪) wow... are you kidding me? you can do this. at truist, we believe the same is true for banking. ♪ i wanna hold you forever ♪ hey little bear bear.

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joining us right now to talk about the economy and inflationary pressures jared bernstein chair of council of economic advisers. jared, good morning to you. >> great to be with you. >> you know, i want to start this conversation talking about the price of gasoline. and what's happening there. what the white house is doing, because there is a big, big fight about it. you want to access or plan to access some of the reserves to try to lower the price, and you're seeing folks like mike johnson say it's disgraceful and former president trump saying it's disgusting's what do you say about that? >> start out with a relevant number. that number is $3.58 a>>ed.

a> gallon. exactly the same gas price as a year ago. now, look. we know that families are still struggling, but it's also important to recognize who we're fighting for. which relates to some of what you're talking about now, and the progress that we've made. gas and food prices, while still too high. stipulate that from the outset. flat in terms of gas. same price as a year ago and down slightly for groceries, which are down in the last month by .2%. that's while real wages and incomes are up. definitely not there yet, but this is movement in the right direction. >> but this is a temporary movement in the right direction, because of the -- there are the underlying issues in the energy complex as such that a lot of folks, the oil patch, would say this administration has not been good to them. >> well, a lot of folks in the

oil patch have been doing well in terms of production and profitability. that's good. we have record production of crude oil. we also have record production of renewables. so we look at the outlook there and it looks like we're hitting hard on both cylinders. it's also important to recognize starting with the memorial day weekend and the start of the summer driving season, you saw president biden take action to help lower prices at the pump with release of 1 million barrels of gasoline from the northeast gasoline supply reserve. not to the conflated with the 180 million barrels of the strategic petroleum reserve released back in february of '22 after the ukraine conflict got under way. >> how can that reserve be used? a real question mark about that. >> should be used in periods where there is some level of emergency out there to help make

sure consumers can get through a period of a disruption or a shock. surely the invasion of ukraine, when the president not only released 180 million barrels, but coordinated with other countries to release their own barrels from their own -- >> appreciate when it was used then. i'm saying now. >> well, the release of the gasoline barrels from the northeast gasoline supply reserve was something that had to occur. that's just some of the natural ebb and flow. that was the legislated release. the timing was the choice of the president to make sure that between memorial and independence day we could put a little downward pressure on the price to help drivers at the pump. nothing exciting to see. the natural management of these reserves. >> ask you a broader question about inflation. talking about a story that i think went viral over the weekend. polls suggesting that majority of americans think we are in a

recession today. what do you make of that? >> it's a little hard to know what to make of that. it's factually not the case, but i think people are always the best arbiters of their own economic conditions. look, recession means different things to different people. you and the "squawkers" know what it means in terms of the economic definition and that's kind of dynamics and growth and unemployment and jobs that are really quite the polar opposite what wior looking at. unemployment below 27% 11 months in a row, not recessionary. no argument there. i think what people are saying is that they're still struggling with prices that are too high and the president leans into that point every time he talks about that. the important question then becomes, are we moving in the right direction? we talked a little earlier, in this very discussion, about how the gas prices exactly the same

today as it was a year ig. that's remarkable when you consider the geopolitics of the region. when you talk about grocery prices, you go back to when they peaked. rising in double-digit, it was double-digit. now 1% over the past year and negative 1% the past three months. meanwhile, in comes wages and real terms are up. i did a calculation this morning. ream disposable income per capita up $500 over the past year. none means we're out of the woods. people are still struggling. we are moving in the right direction, andrew. >> jared what do you make -- so a lot of times people talk about the cumulative impact of inflation during a presidency, and they say, look. if you start the clock at the beginning of the presidency, and you go to now and you look at the inflation and you look at wages, there are many americans that will say they are genuinely behind. even if you believe the trend line. today is in the right direction, what do you say to that?

>> i start by saying once again i know i said it before, i'll say it again and repeat it, because it's so important. people are the best arbiter how they're doing. they tell us they're struggling we're listening to them, but we don't stop there. we take action to help lower costs, and in precisely the areas people tell us they're having difficulty with. whether it's childcare, housing, whether it's energy. whether it's junk fees. doing all we can to lower costing, and, look. especially this year and this time of the year it's important to contrast that with who's fighting for whom? we're trying to lower health care costs. the other trying to repeal precisely the mosier that lower those costs. there's a real contrast to be made and really important underscoring of who's fighting for whom in this period. >> okay. jared, thank you. always good to see you. appreciate it. >> thank you. it is just after 8:00 east coast and you are watching

"squawk box" right here on cnbc. i'm becky quick along with andrew ross sorkin. joe is off today. among our top stories this morning -- conocophillips is -- is buying smaller rival marathon oil. it's an all-stock deal valued at $17 billion. we will have more on that deal at 8:30 a.m. eastern time. exxon is holding its annual shareholder meeting today. public pension fund calpers made news last week when the ceo marcie frost announced the fund would vote against exxon's board of directors in opposition of the company's treatmentof activist investors. marcie frost joins us in a few minutes. and elon musk is offering tours of tesla's giga factory in texas to 15 shareholders who will vote on his pay package. the latest effort to rally support for the compensate plan originally approved in 2018 and struck down by a judge earlier this year. more more on the markets,

paulison perspectives and former strategist for wells capital management among others. we are watch aring markets. sitting at our near new highs depending which of the major averages you're watching and seen a lot of momentum to this point. how are you feeling about things? >> i think, i feel pretty good, becky. thanks for having me this morning. you know, i think there's a lot of things that are going right here. we got an economy supposed to be dead 18 months ago into recession from a reversed, averted yield curveamong other things but it just keeps going and looks pretty healthy to me. balance sheets healthy. liquidity is healthy. overall. i think earnings, you know, another good earnings quarter. so i feel pretty good. i think that the market is, or the economy's going to slow down, becky. i think that the policies have

been tightening, whether you look at higher yields in the last year, the stronger dollar, or lower fiscal deficit to gdp ratio. kind of modest monetary growth, traction at the balance sheet is going to come loam to roost to slow the economy and slow inflation. so i think we're finally going to embrace the idea of the soft landing, and we're going to take inflation and cpi terms below 3% and that could set off a lot of positive forces for the markets. i think there's still more upside room here. >> yeah. sounds like you think we are far more mid-cycle and late-cycle like some of the guests we talk to? >> i do, becky. i think that it's been difficult to just how old this cycle is because unemployment below 4% two years. typically you get unemployment rate that low, you're close to the end of the cycle. just run out of labor. reality what's going on, in the last two years, the unemployment

rate understated because every month it's growing. new interests come in and keeping the job creation going with fresh new entrants weren't even considered the labor force. i think unemployment is highter than reported. labor force 2% higher than the previous recovery peak level and generally gone up 5% or more in almost all post-war recoveries. i think there's still -- the laker force, if that happens i think we've got a ways to go before we run out of resources and the recovery is over. i think it's relatively middle aged. not old aged. >> you're not worried about inflation, think it's going to come back down. a lot of things are pushing and maintaining that steady, keeping it higher? you're describing sounds like the perfect scenario. trying to think of things that would throw off that scenario or that might be more a reason to give a little pause? >> well, you know, i think that

the problem -- inflation has come down a lot. 9% wage inflation 6 to under 4. the problem hasn't been inflation come downing. it's been coming down. the problem has been it hasn't come down to the 2% fed target. i'm fought sure-- not sure wher that came from. we don't have to get to 2% to have things be good, i don't think. and i think tightening policies we've had in place the last year including mortgage rates and the ten-year yield, 3.5 to 4.5 will slow us down. i think we're already seeing evidence of that. i don't see how inflation from here is going to go a lot higher. i mean, could it persist, a month bad report here or there? yes. i don't think we're at a great, a risk of that. seems like we've created a narrative risk of inflation. i think the risk was gone a long

while ago and if anything things turning out much weaker over the next year and that probably the other way around. i think a recession -- >> pardon me. >> worries about inflation. >> you think rates peaked here because of that? >> i do. i look at rates, i think that if you look at the ten-year yield, it went up with inflation, when inflationary went 0 to 9%. not come back down as inflation's come from 9 to 3. went up with commodity prices, when they went up but not down until commodity prices came back down. it's now 2% above the dividend yield on the competitive alternative of high, s&p high dividend yields index in the s&p. used to trade at a discount over much of the last ten years. i just think in many ways the ten-year yield for me is looking very hot. i think we're going to have a pretty good rally in the ten year and wouldn't be surprised

if we see much closer to a 3% yield than 4.5. maybe sometime before the year's out or early next year. >> always a calming voice. appreciate your time this morning. >> thanks for having me very much. i appreciate it. coming up, the nation's largest pension fund versus calpers. marcie frost, ceo of calpers taking a stand against the energy giant what she calmed screwyard bullying dealing with activist groups. she's going to join us right after the break. and former majority leader eric cantor on the race for the white house and potential impact on the markets. "squawk box" is coming right back. wall street forecasts over $100 billion in sales for weight loss drugs known as glp-1. even with unliked and inconvenient injections,

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welcome back to "squawk box." calpers, the largest pension fund in the united states planning to vote against exxon mobil's board of directors ceo woods at the annual shareholders meeting. two activists group led to do withdraw proposals for the oil-gas giant to reduce

emissions but exxon still suing them anyway. that's what this is all about. joining us, calpers ceo marcie frost. >> good morning. >> a decent explanation? >> a great explanation. >> explain your position as relates to these activists, which did withdraw their position. >> they d. but exxon, read the statement in a little bit, but part of their perspective is shareholders is basically -- gone wild. there is almost too much democracy, too many activists proposing too many different planses, some of which she have a well stake in and some believe they are political? >> yeah. let me start with saying that we have engaged with exxon. had a number of discussions with exxon on this topic. my investors relations team talking to their relation sheep. multiple requests to drop the lawsuit. i'm not certain the problem we're trying to solve or exxon

is trying to solve didn't use the system in place through the s.e.c. if they want add no-action advisory could have gone that route through the s.e.c. and decided to take it directly could to court. even after this proposal was taken bay-of-back by the two activists partially trying to create case law for the future? >> i believe it's about redefining ordinary business limiting the number of proposals and limiting the topics that an owner like at calpers. they're not an activist. they're an active owner. limited rights and topics with the company we see that as a if a douche "risk. >> take it back just one step. this is happening because the s.e.c. changed the rules for what can be brought for a proxy. and there were a lot of ceos at the time who said this was going to be a massive headache. it would take a ton of management's time to try and deal with it. there aren't very high bars for this, and in the case of these activists with exxon, they

brought the proposals multiple times and lost all the votes brought to share hold erz. exxon frustration, same vote, same response and yet have to deal and spend so much time with it which is why i think they want to have the court's rule on it. as about d as andrew suggested. >> the case law could expanden into diminishing rights owners have to have discussion conversations with companies like exxon. happens to be an oil as gas company. another company we'd take the same action. s.e.c. expanded a bit topics that can be brought forward for a proxy solicitation. those are issues i think are material items to a portfolio like calpers. not short-term risks. calpers has long dated liabilities. topic wes talk about with a company more those long dated but not expanded to the point

exxon will be crippled -- >> what do you think about the balance some companies would say sort of nuisance proxy contests. >> uh-huh. >> the balance trying to manage the business and providing some form of shareholder democracy? >> uh-huh. well, i think having the definition of a nuisance proposal, if you think about exxon. i believe there are 12 proposals on this year's annual meeting. 12 proposals on a company that made $36 billion in profits does not seem problematic to me. >> let me read you what exxon says, in fairness for everybody here, what exxon says is a statement to cnbc about this whole issue. we've engaged with calpers. you said you've engaged with them. on this matter. do not understand how they can make such a poor fiduciary position to vote against a board overseeing creation industry-leading shareholder value. far from having a chilling

effect on shareholder proposals our efforts are intended to get clarity on rules to foster an environment for open and meaningful shareholder dialogue. if anything calpers vote against our entire board appears to be an attempt to chill shareholder voices. >> uh-huh. so the boards of these companies have a responsibility to represent the shareholders and we believe they've failed in this case allowing this litigation to move forward. i think that exxon is entitled to their opinion and mr. woods and i had a lengthy conversation he heard me out, i heard him out, we didn't reach agreement after that call. he's proceeding with the litigation and we're proceeding how problematic this can be. >> have you talked to other shareholders that will vote with you? >> we issued the s.e.c. limit-of-following a process put before us. i think new york, les lewis not a fund manager but but a proxy

service will advising to vote against at least the independent director perhaps the ceo. new york come out said they're voting against a portion of the board. again, it's not around, this isn't an oil and gas company this is about -- >> symbolic. what happens you know, when something like this happens the inherent human reaction for a board like this is to be defensive. they say, aww, these people, trying to screw us. we're -- they don't say, okay. let me think about whether i'm right or wrong here and maybe really introspective whether i -- right? you go -- especially public like this. the question is, when you pursue something like this, what are you hoping to get in the end? >> yeah. i hope they listen. if they see this as a governance issue. they're proposals are non bindi binding. they don't have the to implement them coming from shareholders. another slate running against the current board but understanding the owners of the

company feelabout this litigation. i think that's been understood. >> just to take a step back. you're in a similar situation where you are representing the pensioners in california. do you guys regularly take votes to see what they would like to see done with their money? to extend the democracy? >> we have very open meetings at calpers, a number of stakeholders coming foreexpressing viewpoints on a number of topics including how we should vote on companies and their annual meetings. so, yes. >> i said about exxon. what they want -- >> i would say mixed but a lot of confusion about our vote. a lot of our members thought we were divesting from exxon. that is not the case. we are fulling invested in exxon to a tune of about $1 billion. it is ifaif a fiduciary issue. >> i want to swish a couple

gee gears. i don't know if you can comment on it yet. the next big controversial vote, elon musk pay package. you have a stake in tesla. what do you think? >> one of the proxy proposals we'll take a serious look at. the team is eyouvaluating it, n voting in favor's that proposal as of today. >> did you vote for it in 2018? >> i believe we did vote for it in 2018. this is about long-term -- >> hold on. you believe you were duped in 2018? >> no. i believe we used the information available made the best choice. >> what i find interesting about this particular choice. 73% i believe of shareholders voted in favor 2018. a judge has said shareholders were not informed properly. talk to most shareholders, most big shareholder.

not duped, completely onboard with this. now this almost opportunity arrived on your doorstep to say, actually rethink this, if you will. there's a view that, oh, maybe we're not getting the value we thought we should. you thought you should get it, but he's worked, by the way, under the assumption he was -- given the numbers dealing with the contract. >> uh-huh. right. >> if i told you that you were being paid a certain amount of money in 2018 and then called you and said actually know what? we're not giving you that money anymore, what would you do? >> great question. i would go to my board. i would talk with my board if it was truly a commitment made to mr. musk by his board they should follow through on that commitment. for us -- >> how can they follow through if -- >> non-binding proposals. they could follow through. he have a choice to follow through on this proposal. >> you believe that the board could still pay elon musk? >> i believe the board minus the

court issue. i'm not factoring in the court issue on this. but for us the reason we do this is the company long-term value creation of that company cannot be a spike in performance because we've seen spikes in performance at tesla. this is about long-term value creation. if the board is supportive and again not factoring in the supportive u, most proposals are non-binding and the board could make a decision to go ahead and pay. >> all right. fascinating. got to run. last, real quick, where do you think we are in this sort of cycle right now and where are you moving your money? >> we have a strategic asset allocation. not day traders or market timers. a diversified portfolio and see the markets do incredible welsh watching through summer and fall. credit an issue we're paying close attention to. consumer credit is getting a little tight. >> and a lot of money has yet to be returned.

a lot of marks in private equity, real estate and others, you know, you have a higher valuation in some cases, but haven't got the cash back. >> uh-huh. >> how concerned are you about that? and how concerned should the rest of the financial world be about the issue of exits? >> yeah. i think, you know, for asset managers and owners who don't have sufficient liquidity to ha handle lie acts could be a trucking time to mace pacing commitments. we're notin that situation. we can continue to make pacing commitments at the returns -- not returns. return of capital slowed. >> yeah. >> but we are reinvesting more into private equity and private debt. >> thrilled to you have at the table. hope you come on back. >> yeah. >> last time we said it, five years ago. do it more frequently than that. >> thank you. >> nice to see you. coming up, we are going to

hear from executive in the u.s. chamber of commerce supporting exxon's legal strategy against the activist challenge. when we come back -- former house majority leader now vice chairman at moulous and company eric cantor our special guest as the nation and markets get ready for the race tthe o white house. "squawk box" returns in just moment.

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right now for the latest on the 2024 presidential race and the impact on investors in the markets. for that we bring in former house majority leader eric cantor, managing director at moelis and company, and eric, no shortage of things to talk about here this morning. lawyers delivering closing appeals to the jurors in former president trump's case here in manhattan. and he is leading in polls. where do you think we stand

right now? just an article from politico yesterday that said that basically democratic insiders are running around in a complete panic? >> you know, listen. there's so much baked into the discussion and even the amount of investors in the markets at this point about the election. so i don't see anything really changing where we are. you know, whether or not trump is indicted, i don't think it makes much of a difference for the electorate, because those who are committed to him will be even more committed to him. either way those who de pies him will continue on that. i think what it really comes down to as we've heard in some discussion this morning, it's about the cost of living in this election. about people's perception of how they're going to sort of manage through the high cost they've been xperiencing. it's not the fact that, i mean, jared bernstein on talking about inflation coming down. the fact is, absolute numbers are still, it's 19% increase in

prices since president biden took office. it's too recent. it's too soon for people to think, oh, things are great now. >> all that may be true. what do you think it is former president trump is going to somehow magically do and wave a magical wand that is going to change this outcome? >> listen, i'm not saying there's in magic wand. >> that's crazy. that's the point. the point. >> we all know how politics works. big issues to confront as a country after the election is the fisk's, calling it the fiscal super bowl. i mean, it's about the numbers. it's about tax reform, because most of the trump tax cuts expire end of '25 creating net $4 trillion hole. net. so -- over a ten-year period. that's on top of the added costs of the interest bill we're experiencing. >> so what will americans -- listening to a strategist this

morning. greg vallier on another network talking about how he sees it. comes down to a pretty close run, except you do have a moment of building for trump in the swing states. >> i do think we are so polarized and divided at this point most states are red and blue. we know where people live. we know how they vote. it will come down to four, five states and in my opinion, it also will come down to just a few localities or counties in those states given the fact republicans typically do well in rural x urban areas democrats in cities. professionals in arizona, georgia, wisconsin that will decide the vote. >> and rfk jr., how does he play into that? who does he steal more votes from? >> jury's still out. both camps very worried. it's going to be like this. you know, i think my gut is, ultimately anybody with a name

like kennedy for voters who aren't paying a lot of attention are naturally going to be more democratic, and i think probably hurts biden more. that's my sense. >> talk about what you're saying to business leaders at this point, if -- we don't know what's going to happen with the election, but how are you telling them to prepare? what should they be doing? >> i think one of the things we're seeing at moelis is it's just taking longer to execute on deals. that has a lot to do with regulatory and what's going on in washington. has a lot to do with lena khan and the ftc, the doj. and i think that in any way, shape or form, if there's a change in the administration, we're going to have a better and more clear regulatory construct when it comes to m & a. that's without a doubt. so now we just have to, you know, folks who are having to spend more time, more money preparing for any kind of transaction because of the, you

know, the unpredictable nature of the regulatory regime in washington. i do think that people are looking forward to maybe some relief there, if the administration changes. and we just talk about tax reform. that's a big ne. people will begin to sort of bake into their thought process after the election. >> how do you -- game out the tax system when so much of what's said in an election year, nobody really believes? >> i think this is the cynicism that surrounds the politics. >> for good reason. >> right. i think it's completely warranted, but you -- listen, we have a corporate tax rate right now that is, puts us in the middle of the rankings basically in the industrialized world. if you recall, prior, even when i was there president obama admitted that a 35% corporate tax rate was very non-competitive and we were seeing all inversions occur. >> also worth noting that when

the trump tax cut was, took place, the business community was prepared to very much accept a 25% corporate tax rate and it was actually trump that brought down the rate to a level that everybody said, goodness. can't even believe it's this low. >> before we -- >> before we say middle of the pack, let's say what's actually happening here. >> talk about the "thought" and theory behind corporate taxes and what it means. first of all, the bargain was, if you will, if you lower taxes, like on corporations you're going to broaden the base. that was the supposed paid for. s.a.l.t. taxand others things. ful you're going to lower taxes you should have more money to pay wages. you should have more money to return money to shareholders and you should have more money to properly price your product or service. right? i mean, all of these trade-offs. >> goes back to the payforward.

how are we filling the $4 billion hole? >> it doesn't matter. look at deficits. >> no question. given the fact nearing $1 trillion in a couple years. in a time interest rates -- percentage of gdp tax revenue represents we are above the norm. about 18%. the problem is spending is that much more disconnected to the norm as a percentage of gdp. neither party wants to have a real discussion about spending. that's the disappointment. if we really would go and confront the real problem -- >> do you believe -- you're going to vote for former president trump? >> i'm a republican and i will be there voting for him, yes. >> and do you believe that he's going to deal with entitlements or costs? >> no. i don't. >> you don't? >> i don't believe he nor biden will deal with it. both said they're not going to

deal with t. eventually markets have to buck up and say -- >> look what happened in the '90s with bill clinton. a forced mechanism to have the parties sit down and figure out what they're going to do about entitlements. remember? welfare reform provided -- actually much better policy results, and it added to the fink's health. i think at some point when these trustees of these entitlement programs get, say, okay. you're going to run out of money. congress will have to act. washington will have to act. >> eric, thank you very much. eric cantor. always good to see you. >> a pleasure. coming up, will the race for the white house impact fed policy? as fed chairman jay powell wrestles with inflation. a look at the fed's action during psintredeial election cycles. an important piece of history. "squawk box" returns after this.

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the presidential election and between now and then, plenty of data for the fed to absorb and consider for its path. how active is the central bank during an election cycle? a question we ask almost every kay of almost every guest. steve liesman has take an look at it. steve? >> yeah. crunched data, andrew, and we

found, analysis found the fed is plenty active during presidential election seasons of heights and cuts but shows discernible bias for one party over the other. 34 years of data shows fed moves 23% of the month during presidential election season, january through october of a presidential year moved 30% outside the election. two-thirds of its actions cuts during election season. relating back to moatly the pandemic and great financial crisis. compares to 50% of the time outside of cuts, outside of election seasons. many things happen during election seasons. part of something the fed was already doing. like the 100 basis points of cuts when george bush sr. ran against bill clinton. hiking under president clinton when al gore ran against g.w. bush and incomant bush ran against kerry. big moves in 2008.

more than 500 basis points of overallcuts. 300 took place during election seasons and fed of course cut by 150 basis points down to 0 in march 2020. when then president trump ran against president biden. 's in response, of course, to the pandemic. none of this says the fed hasn't been or won't be political. fed share arthur burk with president nixon 1970s. president trump's tweet had impact on lowering rates in 2018. nom reluctance on part of the fed to move during president's election seasons and no particular party bias over time. what can't be known, sorry to say after crunking the data, if it's a close call, where it latter? fed steer clear to avoid perception of bias if the case for moving is marginal? andrew. >> what do you think about that question you just posed yourself?

t. i mean, i think -- i think that the fed, if it's a close call, would steer away from potential bias, but remember what fed officials are saying. quoted kashkari early this morning. waller on. they want clear and convincing evidence. why? because they don't want to tweak opinion they don't want to do a cut and hang out for a while. both waller told me and powell said publicly cutting is a process and why they want clear and convincing evidence. i'm sure, i think they're going to take flak if they cut from republican side but would like the case to be obvious both with the markets and to the broader public if indeed they're going to do o. >> smart stuff. thank you for helping us this morning. >> sure. when we come back, pension fund jind calpers plans vote against exxon mobil's board against treatment of activist

investors. supporting the strategy against the activist challenge. reaction from chamber executive quaadman. that's next. "squawk box" will be right back. w with a speaker in it! that's right craig. a team that's highly competent. i'm just here for the internets. at&t it's super-fast. reliable. you locked us out?! arrggghh! ahhhh! solution-oriented. [jenna screams] and most importantly... is the internet out? don't worry, we have at&t internet back-up. the next level network. i sold a pillow!

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about redefining ordinary business, and limiting the number of proposals and limiting the topics that an owner like a calpers. calpers is not an activist. they're an active owner. if you limit the ownership rights and discussion topics with a company we see that as a ifiduciary risk. >> calpers ceo marcie frost with us earlier this hour. the nation's largest pension fund planning to vote against exxon mobil at the company's annual meeting today. join ug, tom quaadman.

in february u.s. chamber joined that lawsuit on exxon mobil's behalf against two activist groups and, tom, thank you for being here. let's dig through this a little deeper. for any viewers who weren't with us a half hour ago maybe we need to back up and explain what this battle is over. exxon mobil is suing two activist shareholders i believe third year in a row brought proxy requests they wanted to put to shareholders that exxon thinks are ouch line with what it should be considering and counter to the company's best interests. why don't you talk a little why the you chamber of commerce decided to get involved in this? >> sure, becky. good morning, and thank you for setting that up. let me make two points at the very outset. number one, you know, with calpers, remember, calpers more often than not famed to meet its discounted rate, created unfunded liabilities totaling tens of billions of dollars of taxpayers have to make up and

led to have been a factor in municipal bankruptcy in california. so taxpayers and pensioners in california should be questioning calpers as to why they're attacking a high-performing very profitable company. number two, the reason why we're in this mess today is because the s.e.c. abdicated its responsibilities. the proposal process at best an "alice in wonderful" maze of activists. at worst, it's broken. s.e.c. neutered resubmission thresholds repealed proxy advisory reforms, they havejust opened the door to any, you know, proposals that have broad societal impact. so while we have 90% of shareholders repeatedly rejecting this proposal, yet it is here again. so, you know, unfortunately, exxon had no alternative but to

go to court since the s.e.c. no longer want to be a rational arbiter here. >> and this is the, the changes that the s.e.c. made, what? a year and a half ago when they will made? >> a couple years of staff where they said broad societal impact are aloud regardless what's going on in a company. people fail to remember what is a broad societal impact in a democratic administration is one thing in a republican administration another. shareholders are caught in the middle of a pendulum swing. >> you want businesses taken out of politics entirely? you don't want to deal with this? what we heard from harvard university. they don't want anybody there making official statements on things not relevant to the absolute mission of the college or university at this point? >> so what we're talking about, apples and oranges, but when talking about a public company. right? the shareholder proposal process

and director of elections are geared towards stewardship, long-term growth return, et cetera. issues like that and strategies. instead we've seen over the years that you know, the shareholder proposal process is now dominated by political and social issues that we know politically, right, are know politically are very divisive in our election season, but we're throwing them into the boardroom and shareholder meetings where they don't belong. it takes the eye off the ball of what investors in both management and directors are working towards. so the system itself is broken, and that's why exxon had no alternative but to go into court. it's not about limiting shareholder rights at all. it's to ensure that those processes work in the manner they're intended for, and not to make the boardroom a political debating society. >> where do things stand with that lawsuit at this point, and what do you hope to take away

from it? >> well, look, i think, one, we've seen judge pitman has ruled that this is not moot. two, i believe one of the activist investors has gone back to exxon in the last day or so saying that they won't move forward with this again. look, there are two things that i think we have to really put in context here. one is the proposals were rejected by 90% of shareholders, there comes a certain point in time where that should not come back. number two, that proposal is actually designed to put exxon out of business. so, again, we've seen where companies are deciding they no longer want to go public because they don't want to deal with these issues, or we have to change these processes to make sure that they're working as intended. >> what does the proposal say, exactly, the one that the activists withdrew after exxon decided to sue them? >> it was about scope three

disclosures. they wanted exxon to make scope three disclosures, which even the s.e.c. in its climate disclosure that was finalized a few months ago, was restricted or taken out altogether. part of it is because farmers in states that have senate democrats in them petitioned the s.e.c. to do away with that. scope three is not a measure of what actual emissions are, and it was just designed to put a company out of business, which actually raise as fiduciary duty, which we've raised earlier this morning. can an investor just purchase $2,000 worth of shares and try and hoist a strategy to put a business out of business? it doesn't make logical sense, particularly for the 90% of investors who have rejected that. >> i can agree with the process expect that you shouldn't be able to buy a few shares and then risk control of the agenda and require management to come

up with a large portion of their time they're dealing with it. what is the threshold? calpers said they have a billion dollars, that's less than two-tenths of a percent because exxon has a market cap of $515 billion. what is the threshold? >> we submitted a rule making petition on this years ago, and in doing that we want to make sure that individuals did have an ability to do that. we see six individuals who file majority of shareholder proposals. jay clayton, when he was s.e.c. chair actually put in place some very thoughtful proposals regarding thresholds for when sh stockholders can issue a proposal, when something that has been rejected repeatedly gets a time-out. unfortunately, gensler is just new to that. so they've let them place those thresholds that go back to 1955.

so that's somethingi think we need to come back to. additionally, the reforms under jay clayton were designed to ensure the recommendations were done in an open process, not a black box that activist investors could steer the advisory firms, but also base it on economics and return. and unfortunately, that has been done away with and we're in court with the s.e.c. on that issue now. >> i can remember when evelyn davis was the director's biggest issue and concern. >> famous newsletter. >> exactly. tom, thank you forouti yr me today. >> thank you very much. "squawk box" will be right back. chain, easy-to-use tools and paper trading to help sharpen your skills, you can stay on top of the market from wherever you are. e*trade from morgan stanley power e*trade's easy to-use tools make complex trading less complicated. custom scans can help you find new trading opportunities,

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as of today, minus the conversation that is yet to happen with tesla, they would not be voting in favor of that proposal. we do not believe that the compensation is commensurate with the performance of the company. >> that was calpers ceo marcie frost earlier this hour, making some news from the public pension fund would not be supportive of musk's pay package at this point, perhaps a meeting with tesla would change that, but it doesn't seem likely. tesla and other tech stocks.

deepwater asset managing partner is here. how much do you think this issue about the pay package for tesla is weighing on the stock right now, and what would you do? >> i think it is an overhang and i respectfully disagree with the idea that the performance hasn't been equal to the pay package. the reality is tesla stock is up more than 14x over the last five years. units sold, volumes of cars sold is up more than 5x and i think the performance of the company from a fundamental standpoint and the stock have been tremendous and probably beyond most long-term investors' expectations if you were holding the stock in 2019. >> what is the risk to the stock at this point? >> i think the risk is that if the shareholders vote down this proposal, elon does not get his pay package, there's also been

some tension around control as it relates to ai, exposure with tesla and elon's desire to have more say on that. i think you risk elon saying, hey, maybe i'll go do something else. i have a lot of other companies i run and he may choose to spend more time at those versus tesla. >> how do you think about him going off and doing x-ai already? some shareholders are frustrated by that move. >> i think it's a separate business, creating potentially one of the leading foundation models in the world is a little different than trying to solve self-driving. and full disclosure, deepwater participated in the financing they raised. so we're very excited about xai as potentially one of four leading foundation ai models in the world, the other being that from openai, meta and google. so i think they have something that's potentially

groundbreaking where they include this data from twitter, real-time social data, potentially some of the other data from elon's other companies about the real world. it could be a very competitive model versus the other players. >> i want to thank you for joining us. it's a fascinating topic. i'm sure we'll talk more about it and you're clearly in the middle of it all. that does it for us. make sure you join us tomorrow. "squawk on the street" begins right now. good wednesday morning. i'm carl quintanilla with jim cramer and we've got some risk off today, yields are higher around the world, germany, japan, u.s. ten-year. we've got some decent guides higher in specialty retail. the roadmap begins with nvidia, apple. the chipmaker looking to rally, closing the market cap wit