>> the stock market expected to open down this morning. we will see you all tomorrow morning. maybe we would do it from delaware. when you think? it's nice. i know some folks there. we have an invite? make sure you join us tomorrow. good monday morning, here it comes, q-2 earnings season. futures are week as china sets down and europe braces for a possible shutdown of russian gas. begin with elon musk billing on

twitter. the deal site expected to move from the boardroom to the courtroom. costco is expecting another month of strong sales. its ceo will join us exclusively. and are we talking ourselves into a recession? the biden aministration is saying yes. we are going to dig into the latest. let's start with elon musk, claiming the company has failed to provide complete information on spam accounts. in result the chairman did tweet the board is committed and plans to pursue legal actions. musk replying with meme's, laughing at the process. >> i think the delaware chancery , and david you can argue with this, but they have to protect

the notion of delaware as a place for corporations. as much as musk is poking fun, i do not think the chancery is going to be a role. >> there are so many different things to discuss here. this happened late on friday. there has been a lot of opportunity for people to write about it in the last couple of days. we are going to end up in the record, probably pretty soon. we have yet to see the complaint from twitter. they have yet to file, they will. will they get an expedited review? that seems likely. a lot of damage is being done by the fact that misty musk continues to essentially alleged fraud. one would imagine delaware would be anxious to see the parties in court as soon as possible. then of course you have an adjudication of the merits of

the claims that misty musk is bringing or is saying are the reasons for why twitter is in breach. at this point, as i have been saying for months, we are going to end up in court first of all. >> right. >> many people still believe ultimately this will end up with a price cut. this is simply a buyers remorse situation, and that we will end up with a price cut. this is back on may 16 when i was talking about this deal. this is what we were saying even back then. take a listen. >> they have a tight merger agreement. all of it is quite strong. it doesn't me because it is musk that he will not figure out a way to do something here. it is going to end up in court. >> well done. >> we are sitting here now and we are going to end up in court very soon. the claims that he is making it to have a lot more bots, but he has no evidence presented thus far in any way to enhance that.

by the way, in court it doesn't me those tweets that he has where we're going to find out now, they don't necessarily have to rebut him. he has to also bring evidence in court that says we believe and why we believe. then they can rebut that. >> the stakes are really high. >> the company is in a very difficult position with him attacking them constantly. now with their basic business model in question to a certain extent with him saying we think it is a far higher percentage of people paying in advertising that are nothing more than bots. he's also making a claim that they are not in compliance with the sec, given that perhaps this has been fraudulent. even if you were to prove that there were a higher number of bots, you still have to prove that it is a material adverse effect. >>'s team has spent a lot of time with management going over

very strong periods of open store, meaning that musk really felt that they had gotten a really good look at it. that is going to hold against them. i still think the likelihood that they get some sort of price cut is good. the board is in trouble if they just get that walk away. >> there is no way. they had specific performance in the contract. they are going to have a delaware judge enforce the contract and say these are the reasons why. most of the people that you speak with or that i have leave that will be the case. then the question is you are forcing him to buy the company, does he actually agree? there is an argument that maybe he will not comply. then we would have a situation where they could put him in jail. i know you laugh because it's funny. >> the idea of him going to jail? >> that is where we could end

up. this is a man who doesn't play by the rule. >> the take away is going to be musk is going to jail. you have about 10 seconds to repeal that. >> the other big out is financing. if the bank were to pull the financing that would allow him to pay the billion dollars and he will be done. when they find immediately they are going to be losing money, those banks. they had $33 billion in equity in front of them. that is where he signed the equity commitment. he is going to be forced by a court to make good on if they find that his claims are in fact no and void. >> it is interesting for people to understand. >> walk till israel.

>> they are all real and getting paid a lot of money. >> is like must has respites and -- representation that are not a bunch of stooges. >> i'm sure people pointed out over the weekend. >> i was hoping that we get leo on with us. i was hoping to email him this weekend to see if he could come on. we do want a voice of that type to give us a sense as to what the expectation should be. >> we are still waiting for the twitter law. >> musk comes an and he says you are in trouble, you have to pay. that is what his advice is going to be. >> mike ringlenghrough and trying to make a good case. >> mr. musk believes this is not verifiable. there is nothing that puts them on scat. i don't know if you noticed but

one of the cofounders replied saying a power still on the board i will be asking can we just let this whole ugly episode blow over? hopefully that is the plan and this is ceremony. >> what does that even mean? he has a contract to purchase the company. shareholders want the deal. the board signed off, he committed. he signed the equity commitment. he has to come up with $33 billion. let it blow over? i'm sorry, because he has higher s'mores? they should be thankful i'm not on the board. >> they cannot cave to musk. >> they are going to consider the merits of the case . >> the case is bad against musk. >> you don't think he can prove their 20% bots inside 5%? >> he stipulated after a deep dive that he was happy with it.

it was led by the cfo. it wasn't a joke deep dive. >> he didn't do business due diligence. he waved that. >> he's playing by their playbook. >> he's also saying they are not providing him enough information. >> that is nonsense. why when they show him? it makes no sense. i would show them what they eat in the lunchroom. >> i want the name and phone number of every single person. >> they want to be sold so badly. they would tell them the shoe size of everybody. >> certainly on the hunt for headlines regarding twitter's official response. >> we know the data set must -- musk is going to jail. >> no one said that. my point is there are some arguments being made that he will lose and they will say you have to buy the company and he

will say no. then what? do not pass go. maybe they put them in jail. when we come back a rarity, a rare interview with the chief of costco. we will gehita ot s ken inflation and the company's recent 20% sales job. so much to get to on this busy week of earnings. don't go away. i had no idea it was that easy to diversify my portfolio!

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>> what an honor, costco sells jumping 20% in june. talking to is now exclusively

as the costco ceo, craig jelinek. honored to have you on the show. thank you so much. let's cut right to it. you have a different model from the other retailers. i think a lot of people just say listen, they have the same thing. can you explain to people membership model and you worked very hard with your suppliers to have better prices. it's not the same business as target and walmart. >> we are a membership model. we have limited skus. we continue to drive volume on fewer items and try to allow the supplier to leverage and share in terms of the cost of goods. we are a volume business. we are not a margin business. we drive a lot of sales. that is all we know.

that is what we do. >> with that said on the prerecorded conference call that you just had there was a mention that hard good sales have slowed down from low double digits to high single digits. is that because of maybe the consumer getting a little more cautious? >> there are a couple of reasons. the consumer could be getting cautious. one of the other areas i look at his jewelry. icy jewelry started to slow down. you can read a couple of things, television sets, computers have slowed down, but keep in mind a year ago, a year and a half ago during covid when everything was stay-at-home the computer business and the tv business was off the charts. it could be a combination of a. people have done a lot of purchasing of those products. also, they may not need them at the moment. that is part of the transition

also. one of the things we are seeing is our patio furniture business is very strong in spite of the increased in cost based on freight issues. overall, i think the consumer is not doing bad. as you can see unemployment is down significantly. if people want to work they can work. my view at the moment is things are not so bad. >> we should add the average price of gasoline in this country down 25 days. that is the longest stretch. is that going to bring meaningful relief to the lower court? >> i think that it should. the question is that it is down. i am not sure if there is a reason at the moment, other than there is less gallons being purchased at the moment. oil still fluctuates every time we turn around. it's down one day, it could be back the next day and up a percent and a half. i see this morning it is down. honestly we hope it continues to go down.

>> craig, it is david. you just said we are not doing bad, yet we continue to hear everyday people talking about a recession coming. give me your thoughts in terms of the expectations and how you prepare the company for that possibility or rather you dismiss it to some extent. >> you never want to dismiss it. if you start dismissing during a possible recession you're going to end up with a lot of inventory. in my opinion it is relative. i can say for a lot of people when oil was at its peak, everybody has a different way of explaining recession. in my view it's about what you are able to buy. for a lot of people right now they are in a recession because they are trying to survive with buying gas and making their house or rental payment. for people with higher income levels, they still have discretionary income to purchase goods. we have a tendency to probably

have members in terms of our customers. you don't know what is going to happen three months from now. interest rates have gone down. we have our own costco credit card that we have with citi. it continues to grow every period. the write-offs have not seen any significant difference. we think things are not so bad. keep the mind for the last two years i picked some right, and i haven't been right. >> some of your competitors have and write other hints large inventory builds. you mentioned outdoor furniture. that seems to be on sale at a lot of places. you are not finding that as well. you did not have an inventory issue there. >> not at the moment, no. you're right in the middle of

the holiday season with the fourth of july. we will see what happens over the next 60 days in terms of patio furniture. right now we feel pretty good in terms of inventory. >> as you know we always won a rise in membership fees. maybe it's not the right time to do that. yes, we want a special dividend. i know that these are asked about repeatedly. i do not mean to go on about it. any thoughts on either one? >> i can tell you we think about it every year. right now in terms of the membership fee it is not on the table at the moment. i agree, i made it very clear, i don't think it is the right time. we will let it go at that for the moment. the special dividend we've done i think three over the last six or seven years.

i'm not going to commit one way or the other other than stay tuned. >> very good. shanghai, i know you lost about 35 million and have to close for 6 weeks. you still plan more question one this fiscal year and then three more. can you give us what it's like to work over there in this market? >> obviously i have not been to shanghai myself. you have people wear especially during the lockdown it was very complicated for people getting to work and people were getting a little on edge because they couldn't leave their home. right now things seem to be business as normal in shanghai. our construction on new facilities are back up and running in china. the new ones that we plan to open over the next 2-3 years, right now things are pretty well leveled out.

you just never know what is going to happen if you get another issue over there with covid and things start to shut down again. right now it is business as usual. >> renewal rates, all-time high. does incredible high gasoline prices help renewal rates? >> i don't think so. let me put it this way, it doesn't hurt at all. i think overall our value proposition on everything that we sell continues to help our renewal rates. >> you must be tired at this point of answering questions about food court, but you did tweak prices on some items on the menu. inevitably it leads to speculation about the hot dog combo. is there any inflationary environment where you would raise that price? >> no.[ laughter ]'s

>> how about free samples in the era of covid. >> we are still out there with free samples. it is business as usual. unless you have a jurisdiction that allows you not to have one it is business as usual. >> i keep telling david the free samples are fantastic. when i listen i always think of the $100,000 diamond ring and how that's doing. one of those are the most extensive things selling right now? >> i was say it is hit or miss. we will still occasionally sell a big diamond, but in terms of the diamond business, it has softened up at the moment. >> costco famously paid its

workers above pier level. i am wondering if in this whole wage environment others manage to catch up or are costco worker still earning a premium and are you want to try to keep pace with that? >> we are going to keep the pace with that. particularly when i say our senior employees and our tenure employees, everybody has had to move upon entry-level wages and that has narrowed between us and our other competitors. we will continue to be the best in the market in terms of wages. >> that has been costco's history. same people there for when my store open, the way that i love it. thank you so much for coming on. good to see. >> gentlemen, thank you for having me. >> when we come back we will >> when we come back we will get the mat dashed and -- dash

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>> welcome back. let's do a mad dash and then we will get an opening bell a few minutes from now. upstart has not been going up. what is important is that you need to know i had these peopl , the ceo on that money.

there was a bit of a dispute. we were a little heated. that was because i did not know they had a lot of loans on the books. now it turns out goldman is downloading the sale of slower growth. the ai that they used to price loans may not be as good as fico. the idea was everyone can get along with upstart. well, we have ai. david, the buyers of the loans are not happy. apparently there are some businesses that are not doing that well. everything about this says the price target of 14 by goldman may be right. >> i thought that it was pretty interesting. >> you bring up an important point. they say they make oans for underserviced areas where basically the credit was not being properly understood.

they package it up and they sell the loan. but when the business starts to go bad that is a problem. >> it reminds me very much of 2008. it turns out they are not as good. and then what do you do? i want to call this downgrade realistic. that is a great point to bring up. >> let's get the opening bell. and the nasdaq the pediatric research foundation marking his 40th anniversary. while we are on financials, jim, what is the playbook on banks this week? >> i think they are cheap in a sense that if you don't believe there's going to be great losses. if you don't believe is going to be like upstart, i'm not even sure they have bad loans.

if anyone can make the case that bad loans are ticking up it will nullify how much money they are making on the fed funds right being up. i think they're going to say you know what, that interest margin is incredible, it is going higher. i do think that people will have a positive you on what goldman sachs. but bank of america may be the best. >> you don't think reserves be an issue? >> i just don't think so. they are like us. david, they could be talked into thinking they were going to have a big spike and have to do something else. jamie diamond will probably be saying if a hurricane is coming and going to bed down the hatches, which means to me don't make as many loans. >> by the way, something else we should talk about is the

high-yield market, obviously an important area of funding for so many potential deals. it has essentially shut down right now. i don't want to make too much of that. where secondary prices are trading it makes a very difficult to do new ones. what i've heard from any number of participants, other than a few deals already in process, you are not going to see new, high-yield deals probably between now and the beginning or after labor day. part of that is seasonal. part of it is effectively what you are talking about. you had a backup in race significantly in terms of high yield where things are trading on the secondary market. even if you go back to twitter, when and if morgan stanley has to fund that deal, they were looking at some serious -- you know, i have it here somewhere.

six and have billion dollars term loan +475 with a 3 billion secured bridge, +675. and the 3 billion secured bridge plus +1000. the minute you find those you are underwater. that is where you find yourself. it's something to keep an eye on. >> david, this is to some degree impossible. if the employment numbers were so strong on friday how can a market be shut down with a country that is doing so well? >> i don't know. goldman has the household survey. it is noisier, but it does show rotter weakness. >> i was surprised. >> there were a number of areas i didn't want to hear slow down. they can get the tvs. everybody doubled ordered. there was a belief that all the consumers wanted everything i

you had this backlog, and all these companies double ordered. now they have too many tvs. >> speaking of electronics, they have price trims today. >> they keep picking on pat. what is that about? they won't stop. >> do you really want me to answer? what you think about that? let me tell you what i think. >> my wife always says would you, please, ask this question rather than give the rhetorical. >> let me tell you, that intel stock has been going down. >> ibm is the best down stock this morning. >> ibm stock is at 6% the sheer. >> it wasn't expensive. >> there is a piece today on

meta. it basically just says that mark zuckerberg up session with the meta-verse is going to cost us. that no one is going to the meta-verse. they are happy to be in this verse. he is white willing it, david. >> he's making a awfully big bed if it goes wrong. >> i have used it. i do think that if you want to get a touch with people and do things it is a great way to get in touch with people, and have a four way something. not like that. >> that sounds like error after midnight. >> afternoon delight? >> you are probably right, that is what the meta-verse one and are being used for. let's be honest, foreign always leads. by the way, speaking of

which you do look like a strip club bouncer. >> in the avatar that mark zuckerberg made for me i am jack like you wouldn't believe. >> you look amazing. you don't want to mess with that guy. >> this is laura martin who had a great call on netflix. >> we had her on oftentimes. i'm sure she'll talk about this. >> i am going to make a point here. i think that reel is doing better than tik-tok. i think betting against mark zuckerberg has been a sucker bet and will remain a sucker bet. >> okay. it's a fair point. you may very well end up being correct. we know that you will be following it closely.

>> how much is that stock? >> would you like me to tell you? 59.1% of the year. >> what a great early pool. >> her response will be cost growth will exceed revenue growth for the next two years. >> i told you that. >> nobody thought that reels would take over tik-tok. mark zuckerberg is letting people go. i didn't see district 13 last time. >> that is a new one. guys, i wanted to go to broad calm. this morning or actually on july 6, but we've heard about the news this morning, tom krause who was effectively the number two there president of broad calm software group, one of the key architects of the most recent deal is leaving.

he is out of there. he is going to be resigning effective july 15. he will be accepting what they are saying is another role of a privately held software company. my understanding is we may get more details later today that this company may be involved in rolling up other companies as well, it may become public at some point. the way that it has been framed to me is a real opportunity for him and one that he could not pass up. in the filing that they share with us this morning they make it clear that this has nothing to do with any disagreement with the company or management on any matter related to performance operations, policy, practices, or financial statements. it is a loss for them. as i said previously, our friend is not going anywhere. >> i think it says he's 70 years old in the proxy.

>> he's not going anywhere from my perspective. >> that may figure into your decision-making. >> a lot of people at home may not understand. this is not just anybody. this is a very smart man who had many roles. he was considered to be a successor. >> if there ever was going to be one. i do not know what the company yes. i'm told that we will most likely find out later today. >> all of the end markets are worried about. people are starting to worry about high-performance computing, the data center in china. there isn't an area of technology that is an under assault right now. that is a bad chart, but they have good dividends. i say you have to recognize it.

as much as i like laura, and she just nailed meta-verse, i think what they are saying is mark zuckerberg is failing. i'm not going to buy into his failure yet. >> jim, a lot of handwringing in europe about the possibility of the russians using this maintenance on north stream tw . saying we have to start preparing a cabin in the next few weeks. >> look, i think it's like putin wants to get it to the winter and see if the allies cave and see if they become more willing to sacrifice volodymyr zelenskyy, which would really be incredible. that is what i think he's betting on. >> twitter shares down about 7%. we spent a lot of time at the top of the show talking about it. i talked to a couple of people

who have been buying the stock in part because they feel as though twitter's case, when they make it, and we haven't seen the filing yet or i should say the complaint is going to be quite strong. they very well might end up if they were to go the distance with a claim of specific performance that elon musk would be forced to uphold. meaning he would purchase 54-20. with that said there is also a belief, jim, that you are just, given time, given everything else, given the damage been done, if you are the board you certainly are open to the idea of him paying less. how much less is the question? then you put on the other side of impact he were to prevail, what is the bottom on the stock price? given what is going on in digital as what happened with snap? certainly is a lot down from here.

that is the construct right now. most people leave that the case is weak. we'll have to see. >> i think the analog is pinterest. i think pinterest is a very good company. it collapsed in a way that was shocking. this was a company with a 56 member group talking about being purchased by microsoft. it has been a fiasco. i think it is possible that twitter is worth 25 or maybe 23, but is not going to happen. they are not going to let him walk away. >> you are already passing judges that the delaware court is going to say you've got to do this? >> i think the delaware court doesn't want to be a kangaroo court. there are 49 other states. >> i get that. he's going to have to present

evidence to say your da user well lower than what you say and there are a lot more bots. if you can do that that could change things for twitter in some way to rebut. >> what happens if they go and the people from twitter who helped to review it with musk say that at the end musk told them i feel much better and i think it's fine. does that matter? >> when did he do that ? when are you told that he did that? >> at the end of that weekend when he looked at the data. >> really? it does appear to be a case of buyers remorse. probably a few days later. >> 73 million shares, i think we are little south of that. >> that is he original 9% almost 10%. then there is a lot more behind that that he has to purchase at a far higher price.

>> he's a little less say not conforming. is there any chance he's buying stock? >> no, he can't. >> what do the rules mean to him? >> he is conceivably in receipt of material information. it would be good. they would absolutely say don't do that. i think he's capable of doing a lot of things that we don't think. >> which is why you will hear this refrain that even if he loses and they say you have to purchase it and he says no, i won't. >> after the bell friday test was up. more time for musk to focus on that. >> every move he makes is watched. >> we needed to get more information on where they send you if you are in contempt of court. >> do they have a white-collar

state court? >> that is going to be quite a day if we ever get to it. would it be the same laws that we are? is he different? >> kind of. he's kind of a suit >> in a what? >> superman? you don't get that? >> he is quite something. guys, i didn't want to point out alibaba is down. carl talked earlier about macau. we've seen the impact on many of the gaming companies. china regulators finding them for what they call disclosure violations. that is having quite an effect. >> everybody keeps rushing back to the socks. as soon as they rush the chinese government makes up something. this was a very small fine. it was emblematic of okay, guys, here we go. you stupid americans.

they are giving their people covid to hurt our supply chain, i disagree with that thesis. that is a thesis mentioned in my mention column a lot. people want to sue my zucchinis and they hate my tomatoes. >> you tweeted out a picture of your garden with the word lunacy. >> i have these things that are going. i don't even know what to do with them. they are starting to bring in poison ivy. >> it is staples a utilities leading. let's get the ball. >> just back from a week in the caribbean. normally that is low season, full. everywhere i went it looked like europe in the middle of july. revenge travel alive and well.

take a look at the sectors. as mentioned, you have consumer staples doing well. campbell's, kelloggs up there. tech is either side of positive or negative. some of the semiconductor names on the weaker side. still can't get anything going. a lot of people are very happy about this. if you look at some of the bigger commodity names you see companies still near a 52-week low. some of the big energy names are also lower. a lot of people happy about that because they are inflation proxies. lockdowns causing a lot of concerns with some of the big casino names. earnings season will start this thursday with j.p. morgan. if you want a taste of some of the concerns, look at wd-40. they reported this morning they had disappointing numbers and

commentary as well. here is the ceo. we are operating at a challenging environment that has continued to deteriorate gross margins due to inflation. that is a big issue. it's going to be lower. remember wd-40 was one of the great darlings of the covid era hitting 340 or so. twice as much is what they are now at the end of 2020 early 2021. near 52 week low. as far as the earnings situation goes we're modestly positive for the quarter. 5.7%. it was a little over 6% three months ago. here is the key story, the energy profits are so enormous they are distorting the picture for the s&p 500. i have removed energy from the earnings estimate. if you take out energy it will be down 3%. that is an enormous difference

and indicates how much profit and revenue these energy companies are making. even before the season starts there's been a very high number of companies that have been commenting and giving some kind of guidance. 71 companies that issue negative guidance for the second quarter. that is the highest is the fourth 1:45 thousand 19. we've been talking about it for a couple of months. a lot of people are waiting for analyst to start downgrading second half estimates. look at some of these downgrades. we had some other ones. we are finally starting to see some of these downgrades for the second half of the year. i think we'll see a few more in the next couple of weeks. >> all right, thanks.

coming up later this morning jim and the cnbc and vesting club will hold their monthly meeting. any hints? >> i'm not as negative as all the research that i hear. i can't be. >> you can find out a lot more by using the code on your screen. by the way take a look at the report three or four as we have 2% climb on the nasdaq. once again, led by weakness in europe. we are back in a moment.

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we are not talking enough about housing prices. some are taken down kb home. they actually like morris, much bigger. says to me, okay, guys, even

though these are down, hoosier mound. the analysts still have to downgrade them. >> home sales getting canceled at a high streak since the beginning. >> it really is. it is the beginning. inventory is building so just be careful in stocks. >> we will see you, tonight. a long weekend, ahead. when we come back, their reaction from elon musk terminating that deal with twitter. don't go away.

good monday morning! welcome to another hour of "squawk on the street. those quote morgan brandon is on maternity leave. a very busy week. the dow jones is down 127. some worries about energy security in europe and what q2 earnings may bring us, starting tomorrow. >> we are only 30 minutes into the trading session. we will get to twitter. here are some of the other big movers. txdot under pressure after

companies failing to comply with anti-monopoly rules and not disclosing transactions. you can see each of the names on the screen. down at least 5 1/2%, right now. stocks are getting crushed as beginning a one-week shutdown. trying to contain the spread of covid. las vegas down 9%. a pair of retailers getting downgraded at jeffries. the firm changing its call from underperformed to hold. those stocks in the red, down four and half %. turning to the broader markets, s&p has gained about 7%. the eighth notable rebound but while others faded, are there reasons to think this one may be more long-lasting? let's bring in mike. >> the short answer, is not

enough yet. there are a few things that distinguish the current bounce back. that's 7% gain, this morning. one of them is the starting point which was at the lowest valuation level and with the most depressed readings we have seen in any of these bounces when they started. whether that matters or not, that gives a little bit more cushion. you see the large funds tracked by cnbc. obviously, the inflation peak is kind of well into the market. the perceived inflation peak and the bigger question when we talk about the lowest evaluation, it is based on public earnings forecast. that is a hurdle to present those earnings are not too high, at this point. some impressionistic things in there. every day, the last five sessions, it seems like we get a bit. and i don't find a lot of people saying that the june low was the bottom.

maybe that is a small comfort to say people are not too optimistic, right now. >> i was just looking at goldman sachs where they were showing how the pace of shortselling slowed notably over the past three weeks suggesting short-sellers must be mindful of the countertrend rally into july. does that signal to you capitulation in any form? >> not in itself. it does say that traders are wary of the likelihood that you could get a little bit of a first higher. you have also seen some stocks show light. the tech basket has performed better. the flagship fund is having another double-digit rally. this one has come from a slightly higher low. maybe some people are going to grasp onto that. there is still plenty of crude starting with another 3% upside in the s&p minimum. >> there is a lot heading over

way. we will see. twitter, shares are sliding after elon musk announced he is abandoning that deal. mark crockett and justin patterson. guys, it is good to see you. mark, a lot was written over the weekend, according to some, what a week weak case elon musk has going into this. >> i think that one of the he has is the discovery process in court. i think that there is reason to be cautious and concerned about what could come out. twitter has a history of restating dow. it has not told much precisely on how it calculates the standby and that would be easy for them to do. they haven't done it so that suggests that maybe they don't want that out there. and so i think that the risk is that there is some doubt on the

numbers that makes it difficult to complete the financing combined with the recession, combined with the damage of all of this uncertainty is doing to the company. and if you don't get this deal done, i think the stocks will be much, much lower than what we have seen, today. it is to the board to make a meaningful compromise. >> i don't expect you to be an expert in all things related but you did make a reference to what the stock would be worth were there not to be a deal. so give me the number. if he goes away, he gets off with $1 billion or whatever it is, what is the twitter stock worth in this current environment? >> we are arguing that it would be suffering at the low end. it could be $11 stock. that would be based on 80%, 90

. and also reflecting the fact that the business has been meaningfully disrupted. >> $11 says barton. the same question to you. what is twitter worth? there are a lot of investors right now weighing the strength of his case versus the possibility that he actually were to prevail, somehow. and, therefore, twitter would be an independent company, again. where'd you come to in terms of evaluation? >> with the economic cycle being incrementally worse and twitter having seen 5% disruption, the longer this persists, the worse the fundamentals get. i look at tears, right now. trading around 10 times. twitter still having a high teens multiple. to eject you could be looking at something that could be 40%

to 50% lower if something doesn't occur. a unique scenario where twitter absolutely wants to close things and you have to wonder if elon musk is in a negotiating tactic or if he has actually changed his opinion. >> and that explains why, initially, twitter wasn't keen on selling the company. now, they are going to delaware in order to try to ensure that this deal closes. but another option is that of a settlement. i am curious. you have given us a downside scenario if they don't come to a deal at all but what if they come back to the bargaining table? what kind of a price do you think we should be looking at for a potential deal? >> twitter should be a $33 stock which puts the difference between embarks and 54.20. and it would be meaningful and one that i think would come after

disclosure that the deal falls through. and elon musk, ultimately saying , okay, it is now cheap enough that i can move ahead. >> yeah, that is hard to imagine. and as you point out, not just that he would need to prove that there is a far higher number of body counts or fake accounts but that it has a materialistic effect, as well, under the merger contract. many believe that they are will be and into it but we will wait and see. but i am curious as to whether you think there is damage being done to twitter's business as a result of these question marks and whether that is going to resonate at all with the advertisers? >> that is a great question. bosque, themselves, are not really generating revenue, today. to claim that there is a bot problem creating results for advertisers is a little bit spurious within.

that said, if twitter slows down on innovation because we are a lame-duck scenario, here. employees are wondering what the current state of the business is and that weighs on innovation, it does wait on the future as is, to market and makes it that much more difficult to get incremental budget share against tiktok, snapchat's of the world. >> some are trying to read a lot into the letter arguing that if you had more in the way of some of these violations in the process and not disclosing data that they would've said so. or they certainly would not have framed it as something that elon musk believes. i wonder, would you expect this soon or is that process that comes in the course of a trial? >> i think a lot of it comes in the course of a trial when you say discovery. i think that he raises

questions that i think the car would like to answer and i think answering those questions but the risk is not just material but the impact on financing. if that late makes lenders more skittish than they already would be, if what elon musk is doing is damaging the business, that we may be in a recession. >> you have a street low of 33 as you move your price target. we will see what the coming months and weeks bring us. take a look at our roadmap for the rest of the hour. including the call for oil saying it could fall to 65 during the recession. we have a lot more on those gaming closures sending the shares of companies that operate are lower. we will get a live report from china. every single hedge fund strategy has outperformed the s& p 500 this year but there has been a huge disparity between larger and smaller funds and

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president biden is heading to saudi arabia to reset relations with oil producers as the administration seeks to supply. it could collapse to $65 a barrel by the end of the year if a recession hits. the commodities are research. i want to get to the study in a

moment but first i want to ask you about this idea of $65 a barrel and the potential recession. do the jobs numbers change your perspective that we get to a recession to get to that $65 a barrel price pan out? >> not exactly. we have increased the likelihood of the recession. without that it was important to bear in mind commodity prices if there were to be a recession. typically, commodity prices go down and we think that would happen again. obviously, there are a number of wildcards playing but it was an exercise based on the judgment that we are moving to a 50-50 probability that we are we have a significant slowdown in the economy would enter a recession for a couple of quarters starting in q1, q2, we don't know when that might be. >> what does the equation look like? obviously, there is a big

political component out there. on squawk box this morning talking about the potential for russia to get more aggressive on commodities to the end of the year. how does that play out if you have a recession on one hand but you have this massive supplier on the other hand restricting supplies as the geopolitical strike continues in europe? >> it depends on which commodity you are looking at. when you are looking at western politics, we don't think that the russians have been playing with oil and foreign policy. they have been when it comes to natural gas, when it comes to fertilizer and some other commodities that might end up that way with nickel, with the world's largest supplier of palladium where they are the world's largest supplier by far. their main revenue source is oil. it is not the other commodities and it is exceedingly unlikely in our judgment that they are going to do anything other than the what they have been doing

overtime, supplying volumes that they can sell. so russia has a history of selling oil at whatever the price would be until very recently when it joined discussions. it is a highly profitable part of their commodity space. and what they have done to date is to absolutely grab that marketshare and discounting points where there is volume in the market and their volumes are up since the beginning of the year. so it is a judgment call to be sure but oil is the one least likely of all commodities where they likely try. >> a lot of discussion about the president's trip to saudi arabia. does he meet with nbs? do they resume sales of weapons? but mostly, can they get a firm commitment on supply from here on out? is that something material to the price? >> it might be material to the price.

in the summer season, you have to remember that our hurricane season is set to be extremely impactful when it comes to the market to the fact that 2020, the year of the pandemic, we had a series of hurricanes that resulted in u.s. production dropping from 13 million barrels a day to two million barrels. most of that drop was due to the hurricane season. the 2020 and 2021 hurricane seasons, we will see an interruption of a couple of million barrels a day of u.s. supply and nothing that can really be done with the saudis or the u.s. or anyone else can bridge that gap so that is one thing to bear in mind. the other thing to bear in mind is that there is a long way to go and the saudi's or the eu think there is an ex-essential problem or annex essential crisis within the region. they would not like to see the jc pla being reborn again and i

think anything they might do on the oil side is going to be highly conditioned on what happens in terms of energy security, military security and other things. and i would also like to point out that the saudi's have done absolutely nothing to prepare for an increase in production. we happen to believe that if they get to as they plan to buy september that they have enough to add up to 1 billion barrels a day but they cannot do it overnight. it takes time. and it takes about three months of planning. we are in july and you had three months to that, they won't be prepared until october 15th, a couple of weeks before the u.s. election. i say that there is not much that could be happening here practically speaking that is going to have an impact on oil prices. >> talking about the potential supply and thank you very much for joining us, today.

still to come, it is the largest market player you have never heard of. robert planck will join us for that story. first, check out some of the biggest laggers. you'll always remember buying your first car. and buying your starter home. or whatever this is. but the things that last a lifetime like happiness, love and confidence... you can't buy those.

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- hell no. - no. let's take a look at shares. rgh down almost 20%, this year, alone. costco on friday had that more than 20% increase in june sales showing signs of strength in the retail market and the co joined us to talk about the company's quarter and how some consumers are tracking their spending. >> everybody has a different way of explaining recession. in my view, it is about what you end up with on income and what you are able to buy. and a lot of people are in a recession because they are just trying to survive with just

buying gas and making their house and rent payments. people with higher income levels, they still have discretionary income to buy goods. >> would try to get him to talk about the decline in gas prices and he said it was to volatile to tell. >> i was a positive but with some caveats. i am not going to raise the price of that hot dog combo, though. >> ever! indefinitely! no matter how high inflation goes! family offices now manage an estimated $6 trillion globally. they are unregulated and so their investment strategies and positions, many of them can remain history. robert frank is live at post nine. so great to see you in person to unravel some of that mystery for us.

ledger focusing on this in part because it is also a reflection as well as the enormous wealth that is created over the last 15 to 20 years. >> 100% because all of that wealth on the top needs somewhere to go and if you look at the company as a whole, they are large with hedge funds. analysts estimate family offices now estimate $6 trillion in assets and before, $4 trillion in hedge funds. growth is being driven by more wealth at the top. increased concentration and it is shipped away from managers for families with at least $100 million or more in total assets. the big shift is away from public stocks or bonds with direct deals and more towards buying companies directly or taking steak. family offices have about one third of their assets, right

now. about 20% in private equity and that is by far the fastest growing sector right now. growth also leading for calls for regulation, not surprisingly. after that rko blowup last year, democratic leaders of congress calling for bills to maybe disclose their size, disclose their investment and at least their executive office industry fighting back saying they only serve a single family. they don't pose systemic risks and they pose no threat to individual investors. you can watch the first of our family office investor interview where we talk to the top ceos and ceos of the top family offices today. >> again, you point out far larger than hedge fund accounts and have not grown for quite some period of time. but i wonder, is it all about not being fees, as well? direct investing in private equity, is it avoiding some

fees or is it a combo that they are willing to go into some funds, as well? >> these are guys and women that started companies and sold them and missed running a company or co-running a company and missed the return of running a private company which are often better than you get in the public market. so it is that ability to participate and have an impact on the operating business as a co-owner or stakeholder as well as higher returns that you get in the private market and getting that payback or premium for patient capital. they don't need that exit in 8 to 10 years like private equity needs. >> you bring up the rko situation and that has gotten a lot of attention. there are lawsuits flying around and it manages money for a single person or a single- family there are also employees involved. they clearly can have a pretty dramatic move on the broader

market, as well. is there actually an appetite to get these things regulated? >> there is. people say individual investors are not harm but those who got in on the top of the rko got hurt and in addition to that, these are offices that are getting so large that they can have unlimited leverage and they can do whatever they want without disclosure. so there is an argument to say, look, this is a quiet industry that has had much impact for years but now needs to catch u . >> we generally know the names of those who create family offices but is there a generational shift going on where they are passing the baton to a newer generation and names that we will have to get to know? >> and that is why a lot of these offices are impacted. the reason a lot of them are going into crypto is because that younger generation that is inheriting that wealth is deep

into those two sectors so that will cause a shift into where this money goes versus the previous generation. >> interesting! that is a great point and it makes it more risky if you are investing in some of these newer age type of investments. after the break, we will turn back to twitter with early facebook and google investor. twitter, one of the biggest laggers on the s&p, today. ♪ ♪ wow, we're crunching tons of polygons here! what's going on? where's regina? hi, i'm ladonna. i invest in invesco qqq, a fund that gives me access to the nasdaq-100 innovations, like real time cgi. okay... yeah... oh. don't worry i got it! become an agent of innovation with invesco qqq

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good morning! i am here with your cnbc news update at this hour. president biden will host survivors and family members.

titling a bipartisan safer communities at, reducing gun violence. survivors and and family members of those at columbine, sandy hook and elsewhere are expected to attend. a wildfire threatening the largest grove of giant sequoia's has more than doubled in size in just a day. residents were evacuated but the rest of the park remained open. the washburn fire has grown nearly 2.5 square miles. the cause of the fire is under investigation at the moment. production of the abbott nutrition factory. the plant shutdown over contamination contributing to a national shortage. the plant reopened in mid june and damage from severe thunderstorms plans to halt operations, yet again. well, it has been nothing short of quite a saga set elon

musk first announced that deal to acquire twitter. that was a little less than three months ago and now it has ended with one of the world's richest men saying, no, i don't want to do it and i don't want to do it for a lot of reasons. this sets up a high-stakes battle that is coming soon. our next guest saying that it set the company up for a lawsuit that is not in anyone's best interest. >> i just think that i twitter, there is something really wrong in management for a long time and there is no reason to believe that this transaction is actually in their best interest. >> the google investor and cofounder joins us now to discuss. roger, they got a 54/20 deal. they got specific performance and they are going to end up in delaware court. we don't know what is going to

happen, here. what is your best guess? >> the market quite obviously thinks we are done, right? stock is down a ton, $20 below the offer price. quite clearly, investors are in. there is a binding contract and it does not have a lot of wiggle room for elon musk. and it is probably important for investors that twitter and its shareholders defend themselves here because if people can end binding contracts and walk away without any consequences, that is not going to be good for investors in any context, long-term. and my ense is that this goes to court and there will be shareholder lawsuits as well as a twitter lawsuit. i think evan williams comment to just walk away and be friends, i think that, if that option is one that turns out badly for everybody. >> it turns out badly because

there may be even more downside from here. $34.19 from those who believe you still might get 54/20 or at the very least, a renegotiated deal at the current stock price, 11 bucks if that thing truly falls apart. do you think there is being damaged onto twitter's business overall regardless of where this ends up? >> i don't really think so. i think the issue has been there for a long time. in my view, it is one of the most brilliantly designed products and yet the management team and board of directors have never been able to build a business model on top of it. that was equivalent to the quality of the product, itself. and i think they have done a lot of really dumb things over the years to lessen the value. i have been a big believer in scott galloway's principal that twitter is still important to the news media, politicians nd celebrities that they should have a business model that

looks like bloomberg, that the people who depend on it should get a lot more and everyone else should get a view only mode at zero price. and i think twitter could be a real business that way. the way it is right now, i think it is always going to be at this point. >> that was one reason elon musk actually came through and said he was buying the company. there is a lot that he could do, there. i am curious, he is the most unique man we have in terms of business, the most consequential on the planet, right now. what do you make of elon musk and what he is doing here and even beyond that, sort of how we should be him? >> i quite honestly view elon musk has being a masked head, a figurehead for a business culture that has just gone completely off the rails. we have gotten into the mode in silicon valley that will use technology to exploit human weakness rather than to empower

people that we have supported a management culture that, frankly, is so self-centered, it just has no regard for people touched by the product, has no regard for rules. in the long run, that is just bad for investors and bad for the economy and bad for the country. i am just hopeful that one of these days, we will have the courage to say, enough of this and do something smart. >> roger, where do you think jack dorsey is in the equation? at one point calling it on the singular solution to twitter that he trusts. the two are friends. jack was involved according to the merger document in the negotiations in terms of getting elon musk to kind of think about taking up the scene and obviously looking to divide the company. you met, obviously, tons of entrepreneurs in silicon valley. >> i don't honestly know and i think part of the problem here is that twitter has been a company so insular that really

good ideas exist out of the marketplace like scott galloway's, and never penetrate the board and really get serious discussion and the result is that you get a lot of people that are friends with each other that are more or less playing at the executives. jack dorsey had a full-time job at another company, at another public company while he was ceo of twitter and elon musk has god knows how many companies. and to my mind, a company like twitter deserves the full attention that people engaged on it and the company hasn't had that for many years. i think that is part and parcel of what is wrong, here. and what jack dorsey thinks i am sure is very important to a bunch of people. i think his investors wish you would sit there and what we need right now is somebody willing to devote their entire

professional existence to twitter. and we haven't had anybody doing that for a long time. >> that is true, roger. your point about masked as a visionary is true but i wonder in the valley right now given the turmoil he is is brought at least to this deal not to mention prior companies that he said he might want to buy and didn't, what is his standing, right now? what is the appetite to do business with him in the future? >> i think money talks in silicon valley. i think everyone will be delighted with elon musk. i saw bankers going, you know, this whole experience doesn't change their viewpoint at all and i can understand why. he is the richest man in the world. and those looking to get rich are going to want to hang around with him. i don't see any change in that until his network comes down and other brighter starts come along. >> you work pretty critical a

few months ago. this is the guy who has given us tesla, spacex, rockets to mars. i cannot remember any businessman who has been as consequential, certainly, not in my lifetime. >> what we are seeing, these things are not inconsistent. henry ford created something incredible at the ford motor company but there were a lot of things that henry ford did that were just awful so the notion of business people being complicated and having bad sides and good sides, that is not new at all and i think elon musk is in some ways cartoonish in the way he does things. right now, the market is letting him get away with it so he has no incentive to behave in a different manner. the issue now is that he signed a binding contract of 4/20 and the question is, is he going to uphold it? i don't know but it is very consequential. >> we are talking about it earlier. i will ask you the question.

it is certainly possible that this delaware court says you have to buy twitter at 54/20 and if he says no, i won't, what do you think happens? >> i haven't the faintest idea. what we have right now is that we have a lot of loss in the books that we do not enforce and mostly to people that we don't enforce look like elon musk, people that are incredibly rich. and delaware has a history of being coin-operated so how the court comes down is anybody's guess. >> we always appreciate your insights on these matters. thank you. >> see you soon. still to come, we are going to talk gaming stocks. macau stops gaming operations for a week. some of the biggest losers on the s&p, this e doing. thw jones is down 125. oil continues to get suppressed.

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macau shutting down all of his casinos, this week, in an attempt to slow down the spread of covid. we are live from beijing with more. we have likely seen this movie before? just maybe the sequel to it? >> reporter: that is right. as of today, the chinese gambling capital is in lockdown for the next seven days, all nonessential businesses including casinos will be closed. residents have been ordered to stay at home and to undergo four rounds of mass testing just this week. about 1400 cases since mid june. that is tiny by u.s. standards but it has not stopped the authorities from putting 19,000 people in quarantine, more than 3% of the city's population.

macau is being replicated all over the country. just this weekend, multiple more cities shut down altogether. one city triggered by 10 cases and another by four. another, just one case. what has officials extra nervous is the arrival of the highly contagious omicron variant, ba 5. those cases have been linked, for the most part, to oversee travelers routing through the financial hub. shanghai has announced it will have two fresh rounds of mass testing this week. those multiple shutdowns have been highlighting one of the major complaints of the business community and that is the perpetual uncertainty. and that is something that the casino operators in macau are going to have to face.

>> eunice, has there been any commentary from chinese officials about the continued desire to do the shutdowns? what the threshold for the shutdowns will be? will there be any changes? you mentioned there is the highly contagious omicron variant in china. i am just wondering if there is any clarity on the future policy, here. >> no. in terms of the individual regulations, there isn't a whole lot of clarity. and that is really the problem. that is one of the reasons why some of the companies have had such difficulties. chinese companies as well as foreign companies that they cannot really make head or tails of the regulations. for example, here in beijing, a vaccine mandate was announced and a couple of days later, another part of the governor government seemed to reverse it but we still have no clarity.

that was supposed to go into effect, today. that is one of the reasons the businesses are having a hard time. from a national perspective, it is quite clear that zero covid is the policy that takes ultimate priority despite the fact that the economy is slowing down. >> still the policy and speaking of regulations coming from china but slightly in a different way, you have a lot of chinese internet companies down today over concerns of antitrust and regulation. for investors, it has been quite volatile based on the potential for additional regulation. anything you are hearing on the ground? >> absolutely. we saw stock tumbled quite a bit. a lot of that is because of the tendency that they face from anton monopolist behavior. these are actually kind of

small fines, about $75,000 each. from alibaba, that is really chump change even though both of them have seen five or 12 different deals that they were having trouble with. in the eyes of the market regulator but still, the signal that is being sent to a lot of these companies is that despite the fact that it looks as though the worst of the regulation and pressure from the authorities is over, that it is still there and it is not necessarily going away anytime soon. leslie? >> eunice, thank you. eunice in beijing, for us. let's stay on this story of gaming casinos. we caught up with the casinos ceos. >> all three took -- mccalla

used to make up the majority of the revenue and profits, roughly 1/4 of the byline for mgm. that is why you are seeing a decline in the stock price but severe covid restrictions [ technical difficulties ] with me to talk about what is at stake. >> it is a tough time. you have to basically hunker down and wait for the term but the idea is hardly imagined. it will turn this year or next but when it does, macau will go back to making $3 billion and a lot more than that in the future. it is just like a lot of things, you have to -- churchill said, when you're going through , keep walking. this is. >> they have been essentially trapped there for years and it

is very, very difficult. i appreciate everything they do for us. >> it comes back and then some. it is the largest gaming market in the world bar none. miss th. bernstein's gaming analysts say the gaming closures in macao may last more than this week and july gaming revenues are expected to be, listen to this, 97% lower than 2019's numbers. really remarkable. carl >> they are still committed to this market though completely and totally, right >> every single one of them. they said that this is the place where the money gets made, that when the restrictions end, not if, but when they end, they expect a kind of pent-up demand, a coined of rebound that is unprecedented, and given what we've seen in las vegas, given

the inflationary pressures at stake and the packed crowds that are still making their treks to las vegas, they say macao has got its best days coming >> that's a bet in and of itself right there. fascinating, contessa. contessa brower looking at the action, especially today in casinos in macao we'll check the meta and there's thoughts costs will outrun revenue. cramer disagreed earlier we'll talk about that. the dow is down 24 we'll be back in a bit your projects done right

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yesterday "squawk on the street." i'm dominic chu. all the minimum wage or indices are lower so far every sector on the s&p as you can see behind me is down on the day. calm services, energy, consumer discretionary technology are the biggest laggards meanwhile, you do see materials as one of the big outperformers today. still down normally it's a more economically sensitive sector, cyclical sector, if you will, but that materials outperformance is due to companies like these,

paint-makers, sherwin williams, bubble wrap, steelmaker newcorp, packaging products my aycor. materials, by the way, the smallest sector in the s&p with a 2.5% weighting keep it right here more "squawk on the street" coming up right after this don't go anywhere.

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welcome back when it comes to hedge funds returns in 2022, the bigger firms are doing far better on a weighted basis henly funds lost 1.5% during the first six months and on an acid weighted basis they had an average gain of 1.46% outmeasuring the s&p by 14 percentage points according to recent figures which rates hedge fund performers. bridgewater and citadel have soon a boon from trading and diversified basis assets with outside volatility especially on an intraday basis. these characteristics have served them well in the current

environment but contrast that with firm more heavily exposed to equities, fundamental equities, those that have seen outsized gains in recent years like tiger global and pershing square are falling back down to earth, and at least in those two cases underperforming the s&p 500. that said, despite the wide disparity in returns this year, the average hedge fund across all 28 strategies that hfr tracks is beating the s&p 500, including dividends, so, you know, protecting the downside even if they are in the red this year on average. >> right i mean, we talk about the big blowups, but i'm glad you put a spotlight on it, particularly the quantitatively driven strategy add de shaw and 2 sigma, both of which are having strong years, both very large asset bases, a lot of quantitatively driven. >> assets classes should not be too heavily exposed to equity. types of things the investors look for in the current environment, and it seems leak it's paying off for now. again, we're seeing like in the

broader markets, we're seeing a lot of reversion to the mean here because bridgewater has underperformed pretty dramatically in recent years and finally having a good year where you've got the tigers of the world seeing the opposite effect where they are performing quite well and now coming down to earth. >> yeah, tiger as we said, having a very difficult year keeping an eye >> leslie, thank you. >> thank you >> that will do it for us here on "squawk on the street." "tech check" starts right now. >> good monday morning welcome to "tech check." i'm carl quintanilla backing out of the twitter deal? more on the entire social media landscape. as valuations plummet, companies are skapg up beaten down tech stocks and why crypto will rise again. that's the title of one guest's op-ed. we'll discuss why the bus tells us nothing about cryptoo's future, jon. >> we'll srt