we only have ten seconds >> consumer discretionary and health care, and i liked the financial stuff that happened last week and the beginning of this week. >> very good liz young, thank you is that new? is that a special? >> it is not new but it is a mary duffy special >> with the hair, all the color, it's nice. excellent. thought i old say that compliment join us tomorrow "squawk on the street" is next good wednesday morning welcome. to tr"squawk on the street. i'm carl quintanilla with jim cramer and david faber coming up, all three indices near highs the eu proposes gas rationing for its members. we get tesla tonight our roadmap begins with, quote,

less bad results we'll take a look at what the street's focusing on and it's a small victory in its battle against elon musk as delaware orders the trial for october. and cathie wood. >> netflix here is reed hastings offering his assessment on last night's earnings call. >> we're talking about losing 1 million instead of 2 million our excitement is tempered by, you know, the less bad result. you know, looking forward, streaming is working everywhere. you know, everyone is pouring in it's definitely the end of linear tv over the next five, ten years, so very bullish on streaming. >> he did say losing a million, jim, it's hard to call that a

success but well set up for '23. >> i watched this stock in the morning where everyone said relief rally this was simply not only not a great quarter, but i think it was a recognition that they're talking about a lot of mixed messages we're going to use microsoft why? because we're going the use microsoft. we did "stranger things 4," and now you're kwgoing to watch something else it wasn't a reaffirmation of growth those looking for it were disappointed >> that's a great way to put it, jim. the couple calls i had this morning with people who don't want to own the stock, and i will point that out, not owners of the stock, less bad isn't good subgrowth, big question mark then the bigger question, which is, you know what, if you're going to slow spending and

you've been consuming so much money all these years because you're been catapulting your growth, when that growth slows, shouldn't free cash flow explode? while it's growing, it's not exploding. >> a good analysis you have this situation, right, finish the call, and go back over the call again and i say, all right, this thing is a very interesting -- like david said, potential cash flow generator. when it comes to growth, i've got so many other growth stocks, i found myself thinking -- you did a piece last night for apple -- you know, olesz bad is not good enough if it's a high multiit will >> it's a 16 1/2 forward multiple >> right >> or more high teens multiple. >> right so that's not cheap. >> right less bad is good if we're talking about dow chemical less bad is fine if we're talking about ibm, although i

was surprised it was hit so hard but 14 times earnings. less bad from a stock that wasn't a growth stock, if i want that, i want a lot of other stocks that i like a lot more. so this is one of those perfect examples of this moment where i'd much rather buy a growth retailer that has slowed down to some degree that has the same multiple than a company that is still slowing. >> yeah. >> some of the bulls today would point to, well, if you want a company with a history of pivoting its business model, this is one of them, right shares of streaming in television, 14-month high, 7 and change if they had taken a share of those 100 million households in password sharing, it would have added $1.8 billion to the revenue with no extra cost, according to loop. >> i think "stranger things 4" distortsed the numbers maybe we have a clip here. >> they obviously altered the

model. they didn't allow you to watch it all at one time, extending it over a two-quarter period. >> i wanted to see more about why they picked microsoft and the circular reason about why they picked microsoft. and, yes, i mean, people are saying, you know what, it's really good. they're only going to do advertising not for the cult programming -- i mean, they better come up with a plan, a real plan other than just a couple of big movies >> don't you think to carl's point and others making it who are more podssitive on the stoc, gaining, the ad-supported platformer will eventually begin to significantly contribute. that may be something that starts growth moving >> "journal" piece today, hyundai saying we'd be interested >> i don't know. i look at disney, which has been brought down 60 points i think

somewhat by netflix and i say what is netflix giving me? the possibility that advertising could be good? the idea that somehow there's a microsoft tie-in and then the "grayman," it better be unbelievable >> i think it goes live friday, right? >> ryan gosling. >> yeah. >> the younger people in my office are raiching about the people who are in it there you go someone said chris evans is in it i thought chris evans was an analyst. do you know his body of work >> no. >> chris pratt >> i know pratt, certainly know pratt. >> i know pratt & whitney and i liked their quarter. i know all the wendys. look, i absolutely understand, it wasn't $2 million loss to, only $1 million loss

i have got companies that are gaining substantially but not gaining enough, whatever they're supposed to be gaining halliburton last night they claimed they were sold through and realized they made a mistake. they shouldn't have said they can add so much more yet the stock was -- had come down from 38 to 29, didn't go up >> rather own met ta at 12 times gap earnings >> yes, absolutely with mark, thinking and talking about the focus being creative i don't know how he would get those headlines. he came on "mad money" and said our focus will be creative it's a news story. but, yes, the answer is absolutely >> there it is >> absolutely i would rather own meta platforms without a doubt. >> that's why i asked the question i kuhind of knew the answer it was a leading question. like twitter we'll talk about -- >> that's between the chancellor in delaware and the chance ler

in germany who's in better shape? >> you're feeling good about the broader market and some of the calls you made in february >> i was joking with david people are like -- i said to david this july 13th would be a low. and the fact is that we had kind of a temporary low, but i will say that if apple does what netflix did, which is not do as bad as we thought, then the rally that i see could easily be undone because apple is. >> i hear different things on apple. >> what do you hear? >> the question whether there's been enough innovation to stimulate significant growth i don't know what you're hearing on the service revenue side, jim. >> it's good every day i keep hearing something different about china. i continue to think that -- today we had an alibaba upgrade. did you see that

>> i did >> winter ending >> don't o worry, love i love this, don't worry that the government called in chiefs and top executives don't worry. is president xi on the call? >> no. >> sure acted like i would >> i don't think it's xi making the call to come in. i think it's one of his deputies. >> you hear a call saying don't worry about executives coming in and you're talking about china, you have some evidence the chinese communist party is not -- i don't think anyone has that this whole period, it is made up of people who think they know what the chinese are going to do >> been negative on china for some time and continue to be >> right. >> but you know what, maybe they don't go as drastic on the covid stuff. travel seems to be opening up more inside the country. you don't have inflation problems the way you do here >> do you think the mortgage

rises aren't important >> i do. it's very hard to understand >> i'm saying i don't like anyone who comes out and says, listen, alibaba, the winter is over it could be whatever was intended >> true. but analysts want to take a position and restate some of their -- >> kudos to cathie wood for buying things no one else would buy. >> but that wasn't real. >> no. >> that wasn't real praise you're talkiing about. >> no. it was dripping with cynicism and sarcasm. >> mau was tiny. >> being a little picayune, aren't we? >> picayune. i like that. i'm saying we have a lot of

misdirection plays this morning worrying me. apple, two different analysts questioning what will happen next week. automatic we have with netflix is to have less bad. i wanted to see big uprises. >> abbott raising the guide. >> but abbott is down huge i saw them up three. as people dug into it, they sent it down three. paypal, shares continuing. not true they're not gaining share. bank of america said they were who are they gaining share from? the likes of paypal. i'm saying after a 750-point day did not make me feel like anything other than things aren't as bad as you think >> this technical chatter, within 30 days of a 52-week low, a year later you're perfectly

positive >> barry williams, the rally be began, and i think there's a lot of capitulation, i'm saying when you have an up 750-point dow, you're going to go down the next day, and yet this morning before the eu came out with a statement we were looking pretty good. obviously, this is a consolidation day. this is not a day where any of the research makes me feel like, you know what, i haven't missed anything we're just going to consolidate. baker hughes reported a number that was netflix-like. >> okay. >> they reported not as horrible a number than i thought. >> less bad? >> less pain as in miserable >> okay. it's not helping the stock at all. >> no. on the one hand, we could be doing well, on the other hand, we could be doing poorly

the research is mixed today, but i like the market. okay >> everything is mixed it's impossible to get a read. it's a very hard market. >> we can get a read and the read is that musk better find some money quickly. >> are we going to have a recession, jim, and how bad will it be? >> two quarters mild recession >> when does it start? >> you're supposed to say -- the consumer the strongest they've ever been and bank earnings saying things are good >> real retail sales having peaked. >> housing worse in 22 years those are not positives. >> meanwhile, the market is trading at 16 times forward multiple high teens 16 maybe 17 1/2 because the numbers haven't come down yet. i like the market but i'm not in love with it. i like it. i did see real capitulation. bank of america says they

haven't, bernstein says they haven't. i don't know we should go we should take a break. >> that's what i mean. it's hard. >> look at that abbott lab >> we'll talk more about that. when we come back, we'll mention twitter again. round one goes to the company and its effort to enforce elon musk's takeover agreement. we'll get to some of this gas situation in europe as well as the eu proposes gas rationing. we'll showing you what uk's nat s ic a dngodgapresreoi tay back after a break to freeze your pain and your doubt. heat makes it last. so you'll never sit this one out. new icy hot pro with 2 max-strength pain relievers.

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all right. time to talk twitter versus musk of course yesterday starting right around 11:00, we had that hearing and it went twitter's way, it would seem they'll have a trial versus musk to enforce the merger agreement in october don't have the specific dates. chancellor mccormick saying five days will be allocated to said trial. she also said -- and the beginning got a lot of focus from people late yesterday and this morning she said twitter seeks specific performance. we talked about what that means. of course it essentially means forcing him to buy the company twitter seeks specific performance and it is not at all apparent that damages could constitute a sufficient remedy to twitter very important there that indication that damages aren't enough certainly being taken as a positive by those who

believe that she will rule in twitter's favor. who knows. we have a trial yet to come here she went on to say while the transaction remains in limbo, the larger the cloud in the company and the larger the irreparable risk to the seller, a delay threatens the risk of irreparable harm to twitter. we should go to trial in october. an interesting back-and-forth because focusing more on the larger issues in terms of basically saying you don't even have a right to the information let alone to pursue this claim that we are somehow hiding the number of bots that we know are on the platform versus what we say there are. don't even have the right to get us to give that information under the merger agreement going on to say here, what we have here is a buyer looking to

conjure on an exit ramp for a deal that simply does not have one. that is what they argued as for musk's lawyers, they say, listen, twitter wants to continue to shroud and secrecy the issue regarding their less than 5% spam and false account representation as long as necessary to get this deal railroaded through guys, this comes down to what the judge will decide in terms of that. i would come back to the idea that it is not necessarily even a case about the number of fake accounts >> right >> it will begin with the idea of whether, in fact, that information is even something that should have been delivered under the merger agreement beyond what was already given by twitter and then whether or not, in fact, that can be argue that would they misled, intentionally misled, then whether it represents a material adversary. a lot of heavy lifting on the part of the attorneys here to

try to prove a case. >> i thought it was interesting once again to read in twitter's response it just seems like that not only is there remorse here, but musk didn't pay any attention to what they gained. wasn't that kind of shocking to you. >> >> that's what they continue to say, we gave plenty of information and even seemed to review it, which, again, goes to their contention this is not at all about -- that it's a sideshow, it's simply about him trying to get out of the deal. >> yes and i think there's also -- if i didn't know any better i would think that he from the very beginning made the mistake early on and then kind of got caught and then used this, something about the -- they showed him even the spam he didn't bother to look. >> i know. by the way, real quickly, one final thing, jim there was something that had

been redacted, the original complaint that was in the exhibits that indicates twitter expects to report a second quarter 2022 revenue miss of about $100 million to help better understand the state of twitter, he would like to review the following information. that came out -- >> taking numbers down. >> yeah. not much but -- >> does anyone think -- this cuts again to the fact if musk walked away -- >> what would the stock be exactly. >> high 20s? mid-20s? back to the price many companies looked at the buy. >> that is a question, what's the downside risk. >> right >> especially given some of the revisions to the ad market forecast morgan stanley yesterday bringing numbers down again after doing it last month. >> we'll talk more about that. >> that's the faang problem. too many of them are involved --

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all right. we get started with trading on this hump day as we like to call it, 2:30 from now. >> i thought this company was indicative of the first block.

a piece by bernstein, cummins down raided to market perform. number cuts are not bully priced in you have a stock down 40 points and yet somehow people think it's not done yet and that the numbers are substantially too high and that they're going to get cut big and there will be a big inventory problem. that is the key once we start getting into earnings season inventory problem, things not selling as well, china not that strong we have to cut numbers will people care i think the answer is so far is if you cut numbers, you -- why i -- why i temper my bullishness, this is difficult with the industrials that have problems, watch the stock. if it goes down big today, the industrials will have problems >> cummins has always been one of those names we focus on in part for that reason >> it's pretty indicative of industrial america and worldwide.

i'm concerned. i think they're the best there is if their numbers are too high and the stock goes down, then you have a whole different template than with netflix where oh, you know, the stock is down by -- >> let's see >> they say early signs that the customers will be -- we use the word oversaturated with an engine inventory. >> wow and that really worried me >> adam jonas at morgan stanley looking at allied financial's auto credit. >> man, i know >> one more signal in his view that at least at the low end, auto customers who finance -- >> very significant. auto finance is very high. we know no doubt that there is -- demand destruction from -- >> yeah. >> be aware there's a lot of damage undercuring while values

are going higher even as i like the stock market but -- >> the cancellations were very high. >> very high very high. [ bell ] >> at the big board, halyeon. at the nasdaq, fazeclam. i think that's two days in a row. >> i think glaxo is interesting because, david, do you remember how heated it was? [ inaudible ] i just thought when j&j reported yesterday they had a very slow consumer product number. there were supply constraints on

some of their most important areas. i thought these guys maybe one day they'd be one company because the consumer business is good for j&j, how nice would it be for them? >> a merger, now a public company. >> right they're ringing the bell >> what i'm referring to as well is unilever made that, again, moneyed approach that didn't go anywhere >> no. >> can't shoot straight. >> some belts on the board now >> that could make a big difference [ inaudible ]. >> haleon? >> let's call the whole thing off. >> another gershwin business no other show gives you that

understand these stocks -- everyone wants to be in fast pharma, right? glaxo, fast pharma for years people wanted the consumer business and were worried about the up and down of pharma >> it was a very stable -- >> i think the acquisitions from biotech have changed i think that the breakthroughs for cancer are changing. now look at that, that's not a stock going down a lot haleon. >> that is a result of the haleon splitoff. >> haleon? >> i'm calling it haleon >> someone sent, what, $10 million to come up with that name and that's what you do? >> hale-yahoo. >> jim, you mentioned cancer merck is off a trust here on failing in phase three on head, neck, and cancer studies. >> interesting maybe they need seagen even

more >> that $40 billion number discussed is enormous. >> they have a bigger pipeline. >> i know a number of merck holder who are like, yeah, pay something, but why 40? that's too much. they'll never be able to generate the kind of growth that justifies that price >> this is a monumental price. >> it is. >> if i were a merck holder, i would want to know a lot more about what seagen has right now. they have a bunch of trials but trials can fail. david, merck doesn't have the urgency they did this fail but i come back and say take a look at what pfizer had, the big earnings they had. and they're buying good things more than $10 billion. >> they got the vaccine revenue and cash to put to work. that's an enormous number. they have been they've been buying things pharma pays big prices

but, you know, when you're $40 billion is far more than these bites that -- typically merck have taken, which are huge premium deals for relatively small countries and dollar amounts. >> i biohaven is additive. what would seagen do in terms of distribution hate to see that run be given up >> the criticism of big pharma would be they wait too long and pay too much they're afraid to buy these things when they're younger companies, when they're perhaps more fairly valued because the drugs have not yet been proven >> not this generation but -- a trial and there was a death in the trial. so, i mean, anything's possible. i think seagen -- i met with dr. siegle years ago and they had potentially unbelievable work to beat cancers

david is right about price >> novavax get cleared by the cdc. casinos doing well cruise lines, three, four-week high as the cdc says these guys can manage it on their own >> i always felt they were pretty much taking that view anyway do you know much about disney's cruises? >> i know people enjoy them. i mention the fact that they're packed >> fun for the entire family >> i just meant they're doing incredibly well, but nobody cares. i mean, netflix's cruises are just empty >> you like to come back to disney a lot i've noticed. >> because i've been wrong about it and that's why i like to talk about it >> you like to talk about things you've been wrong about? >> yes. >> will you continue to be wrong or at some point be right?

>> i have a feeling i will be right. i'll tell you what, because i think that disney paid too much -- >> for fox >> that whole -- meantime they jacked the price up of one of my favorite apps, espn plus, so i'm going to take the button >> month to date it's tripled the s&p's gain >> can we bury the eiger story >> i thought we did yesterday but you brought it up again just now. >> that's true. >> do you want to buryover it or talk about it? >> hard work and what you can accomplish, okay all right? >> yes >> i'm trying to change the narrative from eiger versus

cheypeck >> there are these new journalism modes they talk about zazloff and eiger versus -- >> the media likes to cover the media. >> the combined market capital of all these companies is not equal to anything close to tesla. >> we haven't spoken about tesla once i think tesla is going to report -- >> tonight you may be right about that. >> tesla is -- what you want to do, you want to lower the bar, not like netflix did, but when you say you have factories that are furnaces for money, if it turns out they've only burned half the money, then you have to buy. >> you were less bad >> right >> less bad is good. >> maybe only one is a furnace >> i think it was bernstein yesterday said preannouncements haven't been all that active, so we're relying on a lot of these hunker down memos from big tech,

super bad feeling tweets from musk, the money burning furnaces line >> i think that every single -- faang, someone is taking something for every one of faang. isn't that amazing >> it may be justified >> alphabet has advertising. >> meta. >> you've got amazon, a piece today about how some of the parts are worth more because amazon retail is so bad. >> zero. >> netflix, minus 2, minus 1 we're supposed to love it? >> right >> alphabet being hurt by advertising? i mean, what kind of -- this is not a group that you want to -- this is about mana, not man from heaven but man from hades. >> man from uncle. >> what does uncle stand for >> i don't know. >> where was rush headquartered? >> i don't know that either.

generational thing >> the 13th floor of the empire state building >> really. >> yes >> because nobody knows there's 13th floor >> right >> jim, if you're that worried about tech, do you go back home to energy? we made note of these conocophillips comments about supply crunch returning. we haven't talked about europe's situation yet. >> energy is a terrific thing to talk about i want to discount baker hughes. i had jeff miller on from halliburton yesterday, and there's been an eight-year drought of real drilling he says you go to the middle east, they have to start drilling like crazy. there are -- i have a company on tonight that talks about drilling more, we need lng plants to get over there what about freeport with the fire in there? any better >> referring to the private company freeport, one of the major exports of lng they had a significant fire. they will not be back and

running at freeport until october. >> unbelievable quarter. >> v did you not feel like if putin wanted to he could -- you know, with the alibaba winter over >> could cause a seriously difficult winter >> i don't think you stop supporting ukraine because you're hot, but people die from cold >> they're talking about not just this winter but the following winter because you don't want to deplete your stocks -- >> a rel challenge for europe. we've talked a lot about decisions they've made, including decommissioning nuclear power plants >> very hard to recommission >> not a good idea >> a new plant this morning. "the journal," this piece about saudi production they're doing 10.5 million maybe can go to 11 million they said they can't get above

12 for more than a few day ps. >> they can't, burr they can drill more i remember the nuclear thing, it was like there was this moment after chernobyl where nuclear reactor four blows up, and gorbachev says i want that thing online tomorrow. they're not easy to put online, particularly when you just crush them and yet there's -- there's a lot of crosscurrents going on. it is natural gas that they need >> we're not talking as much about oil. >> no. >> i know a couple times that's been misunderstood we're talking natural gas in terms of power generation in europe oil is a separate story. that said, oil is reflecting people discounting the possibility of recession right? isn't that what it is? >> that's demand destruction, which when you read reports about theme parks they talk about demand destruction even as disney sold through. i have to admit -- what was it,

i mentioned comcast. >> what about comcast? you're kwhis perring now >> theme parks >> theme parks are great let me see this. key bank >> the theme parks, it will be if reed hastings is right about television >> can't get into the theme parks. it is what people do that is what people -- when you ask what people have done once covid ended, i mean, one of the writers -- great editor i have for our club, kind of the club newsletter part of cnbc.com, came back last week and said you would never know that there was any sort of pandemic obv obviously it's hard to get any commitment it's why i continue to argue for another theme park that you dismiss. you dismiss my argument for another theme park located strategically between colorado and texas. >> i did i don't know why >> are you on the board?

>> no. i just don't understand your use of time and why you would spend time figuring out where disney should put his next theme park >> jim is the head of development for all corporations >> i'm on the special committee in my mind my mind's special committee. i am right now coming up with plans. >> it is worth noting that netflix is now down after being up >> that's what we were saying. >> sorry now we have it up. it is down and perhaps -- it's a lackluster response either way. less bad as we've said may not be good. and where is that explosion in -- the critics would say you expect it when you pull back on spending and when you pull back on accelerating growth as they had for so many years with their enormous spend

>> eight in the first half so it's unlikely that the second half will see a big bounce in content spend. as we've said, no one wants to put down the gun >> 102 million hours viewed. i don't buy hour viewed per share. that's not what i'm in there for. >> well, they look at things -- for the shows they tell you how many people started watching it and they also look carefully at completion rates how many of their viewers actually went through an entire series i know that because i have a few friends who've produced for n net netflix. it's a constant struggle to get information from them and fully understand the metrics they use. >> and how they curate you, little visibility on that. >> why don't you come up with a microsoft other than they staid microsoft will be working with them what do you have about that?

>> nothing >> expanding their advertising business into premium television and revenue. are you awarp of this at microsoft? are you close to them? >> no. >> i'm telling you, more questions asked than answered. >> easily going with a product on the market but they'll build from scratch with these guys because -- who knows why >> it might end up being a profitable business for them they were pushed for years to do it they said no then finally yes. >> you have a guy like michael packer he's been -- >> dead wrong for a very long time and now he's right. >> he upgraded >> when? >> reiterated his outperform >> a couple months at least. >> when did he upgrade how about the roll, tide there's your answer. he said netflix's position free capital, that would be the only reason why you want to own it. i want growth. this is like charlie the tuna. i don't want tuna with good

taste. >> you want tuna that tastes good >> yes i got tuna with good taste "the gray man. that was like a hawaiian punch >> jim may be right about consolidation today. we're pretty flat on the s&p bob pisani, good morning >> flatish open. dow is underperforming because unitedhealth is down $6. that's weighing on it a little bit. other than that, a flatish open. the bulls finally have a little momentum the s&p above its 50-day moving average, 7%, 8% above the june 16th low for the s&p look at the sectors. they're still picky. this has been the trend the last week or so they're still picky on the growthier parts of the s&p look at cathie wood's ark innovation block, zoom, twilio all up 2%, 2.5% that's been a nice mover consumer discretionary another growth part, tech holding up

better banks are flatish today but prior to that three days in a row here i just want to point out that picking on the growthier parts, this is a big theme for the bulls for the fourth quarter just since the june 16th bottom on the s&p 500 cathie wood's ark innovation, that's not a typo. up another 2%, 3% today. consumer discretionary, technology this is all the growth parts of the s&p and speculative technology meantime, energy down about 7% so you get the point here. we have this rally off the lows, and it's all been based sort of on distracting investors from the current problems, from the high inflation, the aggressive federal reserve, and getting investors to concentrate on that bright shiny object in the future known as the fourth quarter. the bull rally is based on the idea that the macro data is going to improve, the federate hikes will happen in the next

few months there will be cuts in 2023 this is the belief earnings estimates are already lower for key sectors like consumer discretionary, like speculative technology, and prices actually did drop dramatically for tech and banks. 52-week lows two weeks ago, industrials the same and reflected those early concerns if you're looking for imminent signs of doom out there, you know, this comment from j.b. hunt last night on the earnings call was wildly passed around. this was on customer demand. this is shelly simpson we've had concern from customers on having the wrong inventory and where it is located, but i have not heard any customers tell us that there's a downturn coming or anything to plan for a large percentage people say imminent doom, they're not seeing it yet. that's one sign supporting the bull thesis, i think remember, most of this is preld kate on the idea that a recession, if it happen, will be very mild here this is typical of a lot of people if we're going to get a mild

recession, look at key parker at ubs. he keeps pushing tech, improving relative growth, higher quality, stronger pricing power, the rate overhang has peaked. this is the bull position. i think morgan stanley's mike wilson has been more typical of mainstream it's a long way to the fall. we're skeptical of this optimism we think it's a matter of time before fourth quarter 2022 and 2023 margin estimates are revised lower. this is typical of the consensus. again, long way to the fall. carl, back to you. >> typical of mike wilson, that's for sure. as we go to break, let's check bonds. yields down across the board 10-year just around 2.97 we were obviously well into the fed blackout as we are going to watch ecb later in the week and fed next week. we're back in a moment

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only from us... xfinity. jim, what's on mad tonight >> i think it's the foremost spokesperson for stocks and index funds in the country sempra is the most important company, believe it or not, for exporting natural gas. this is a hard-fought -- i just wanted -- >> blackrock, sees fed funds going to five, and setting the record for most money lost in history in six months. >> look, i would say that, a lot of ceo feel that index funds have gotten out of the hand.

they're kind of fixed at a certain percentage they're not i'm not saying that's necessarily wrong >> looking forward to tonight, jim. >> very important. i always say it's not about funds, but i kind of revere mr. fink for the operation he has put together he's a remarkable man, with a great vision, so i can't wait to talk to him. >> we'll see you at 6:00 "mad money" at 6:00 p.m. david solomon is coming up the dow is down 80 (lighthearted music) - "best thing i've ever done." that's what freddie told me. - a person like me needed to get a reverse mortgage to change my life. it was the best thing i've ever done. - really? - yes, without doubt! - [tom selleck] joanne said just about the same thing. - it absolutely is the best thing i ever did.

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good wednesday morning welcome to another hour of "squawk on the street. i'm carl quintanilla along with david faber. trying to consolidate some of the yesterday's strength and very strong breadth. we're at session lows at the moment in a few moments, a very big

interview with david solomon diana has olick news >> good morning, existing home sales in june felt a much wider than expected to a seasonally adjusted rate of 5.12 million units. that is down 14.2% year over year, fifth straight month of declines the street was looking for a less than 1% drove these below the full-year 2019 pace they numbers represent closings, so contracts likely -- mortgage rates were rising, but didn't shoot over 6% under june 1.26 million homes are for sail, and representing a three-month supply that's the first annual increase in three years, but it is still tight. that is keeping the heat under home prices. median price in june, $416,000 that's a new record, up 13.4% year over year, but that annual

gain is shrinking. activity continues to be stronger on the higher end of the market where there's more supply sales of homes pries between $750,000 and a million were up 6% the highest end is clearly weakening, though. we had been seeing much bigger gains on that high end so, david, not a great report. there may be worse yet to come >> yeah, it does feel that way diana, thank you. we are 30 minutes into the trading says here are some of the big movers. baker hughes shares are down.

you see shares are under significant president bush finally you may recall a week or so ago, many games stocks were losers when macau closed now many of benefiting, because casinos will reopen on saturday. that's amid a drop in covid infections netflix lost nearly a million subs, but short of the forecast last quarter. john blackledge has a target of 325, keeping a buy on netflix. john, great to have you back that's one of the most aggressive targets i have seen what do you like

>> yeah, i think if we just take a step back and look at a quarter. it was better, and we got good inside, and like the the subloss, a little less than a million, better than the 2 million loss, and -- it was better than we thought it was going into it, which was flattish, though a bit below us in the street. and the lower subcount, but existing -- 17 million in cash content spend this year. that's going to be flat the next

couple years that was 6% better than what we had, so taking it all in, we did say on the price target and outperform >> how patient do you think a buyer today is going to have to be before password-sharing retch other other revenue starts making a meaningful clang to the trajectory >> carl, we're pretty close. we got a lot of good information on the upcoming adds here, and a little less on the password-sharing crackdown it's going to start early next year in a couple large advertising markets, like the u.s., that as over 40% share of digital advertising. i thought we got good color in a couple areas

last month we are talking about it we published research that said, hey, the ads can generate $17 a month, with $10 a month in ad revenue. that is a function of, you know, the ads will show and the premium cpms they were get because of the great contents. the other thing that the company called out last night, it could atracked more subs it suggests there's an interest and we freed it about -- when they launch it next year. >> john, i want to talk about free cash flow for a second. >> a bit less to fuel growth down that day will really come,

or is it here? >> it is here and it's coming. >> they said $18 billion in cash content spend. that's going to be flat next year and the following year. i think we had like $19 billion next year, $21 billion in 2024 we have free cash flow more than doubling last year recall during the pandemic, the spend on production slowed down. they got to about a 15% free cash flow production we think over time the margin will get to about 30%. >> some estimate 80% when you start looking at sharing accounts certainly growth could be

challenged >> we only have them adding about a million or less subs in uk in the next couple years. the password sharing is going to come in the next year. they're testing it in several countries, and they have done fairly well converting they didn't give us the conversion account that will go a long wayto, you know, kind of increasing the number of paying users >> thank you, john kayla tausche is the goldman sachs gathering, and she has a special guest with her

kayla? >> reporter: good morning, david. that summit is happening at nationals park in southeast d.c., we're joined by david solomon, one of the headliners the mood on main street general is not joyful. of the small businesses you hold 61% say the country is headed in the wrong direction. 89% want action from washington, what do you feel you can accomplish >>. >> i this small businesses are such a vital part of our economy. they've had a rough ride

now i think people are concerned and looking for support or ways to weather through the next speed bumps coming so we tried to bring these businesses together, to give them an opportunity to network, talk about some of the common issues, but give them a chance today -- this is our advocacy day, to bring some of their issues to representatives, so we have a number of congressmen and senators meeting with these small business owners today to listen to that advocacy. >> 93% of small businesses see a recession in the next year you asked economists, they say there's always a 1 in 6 chance of a recession in any given year what are your odds >> that's surveyor you're pointing to is maul businesses say they're concerned about a chance of recession. >> but it's because of the pain

here experiencing. >> absolutely. recession is painful, particularly on small businesses i would say our economists put out there's a 30% of recession in the next 12 months. a 50% chance over the course of the next 24 months that's a high probability. i'm not a good speculator on odds, but as we give our business and giving advice everywhere, we're suggesting the chance of a recession is higher than in quite some time and everybody needs to be cautious, but it's uncertainly and there's no way you can predict exactly what the future will bring. >> at what point do you think banks will start laying people off? >> i think you have to watch the trajectory you just watched earnings come through. they weren't as good and robust as they were in 2021 and 2020,

but there were exogenous stimulus what the fed is doing to try to have an impact on inflation. >> reporter: we're 150 basis points into that cycle yesterday, then the economy can start growing again. what happens between now and then >> well, i think it's unclear exactly where the fed will go and exactly what, you know, the coming 12 to 24 months will bring, but i do think we'll see tightening economic conditions which will slow down growth, and what period of time you get things into balance where the economy can start growing and moving forward i think is very uncertain. that's why we continue to be cautious. >> there's a war still going on in ukraine

goldman was one of the first banks to exit its business in russia, do you think there would be a period of time where america will return to russia, or is it closed permanently for business >> it's significantly closed to american business the financial institutions have moved away we have shut down our business in russia and continue to unwind the legacy of what we had there. i think it will be a long, long time i'm not good at using words like never, but right now russia is very economically isolated i expect that to continue for some time. >> your predecessor there's stuff for the government to do you talk to policymakers, do you

get the sense that any real progress is being made >> i think that's a good list of things that certainly could be helpful, moving our economic in this activity moving forward i think policymaybers are focused on trying to take action what we need is some bipartisanship to bring together and make some decisions that are a little bit more longer lasting, a bit more of an investment in the policy grounding to help us move forward not just for the next six months, but the coming decade. >> if a refiner came and said biden administration said we need to refine more, would you finance a facility that had been shuttered for several years? >> yes we finance energy in all different ways i've got very clear, said purly we -- and i've also said publicly that i believe in u.s.

energy dependence -- >> reporter: the companies say the money is not there, are they being disingenuous >> i think it's more complex than that. there's no question that institutional capital has been reallocating or shying away and that has an effect i think we have to think about -- and we have to make sure we have our independence here and new temperature knowledges think doing both is important. >> reporter: howofficials at the house and the administration are -- visitor logs show you met with a top biden aide a couple times early in the year. is the white house soliciting input from your companies?

>> on occasion i have met with steve, as you suggest. i haven't had a lot of dialogue. i think the administration is certainly focused on inflation and the economic environment also business people, people running small businesses i've learned a lot here the last few days, asking business owners what's going on, where do they feel pressure. so there's a lot you can learn being out and talking. hopefully that informs good policy actions over time. >> reporter: as far as you personally, you've donated to dave mccormick

when you're thinking broadly about the mid terms, what outcome do you think would you best for business? >> i'm not a political prognosticator i have and the firm consistently supports candidates on both sides of the aisle i'm a true centrist. that's what i've always been, but i'm watching the elections as everybody else, and i think four months is a long time from now. we'll be watching closely in november. >> and important way to keep adding to this conversation. we're so gritful to your time today. david solomon is the chairman and ceo of goldman sachs guys, back to you in the studio. as we go to break, take a look at the road map, including cathie wood shutting down one of our etfs >> plus an exclusive with one of twitter ace largest shareholders, this as elon musk

and at the company head to a five-day trial this october. n edalstetffcompany is turning suus wl re oices into recsidential properties

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cathie wood shutting down the ark transparency fund. it's her first closure, it

includes teladoc spotify and more though, as we said, david, 12 million in assets, a fraction of the big one. >> yeah, that's almost unfair. we have picked on her enough, haven't we >> you're right. never mind. >> never mind. good luck, cathie. way to go. still to come, an early victory for twitter. it was branded a five-day trial in october we're going to discuss it with one of twitter's biggest shareholders, right after the break. don't go anywhere. this thing, it's making me get an ice bath again. what do you mean? these straps are mind-blowing! they collect hundreds of data points like hrv and rem sleep, so you know all you need for recovery. and you are? i'm an investor...in invesco qqq, a fund that gives me access to... nasdaq 100 innovations like... wearable training optimization tech.

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yesterday a delaware court granted twitter an expedited trial over musk's termination on the sale of the company. our next guest says twitter will

be successful. nice to have you here. >> thank you, david. it's a pleasure to be here. >> let's go to the key question. why do you think twitter will be successful in getting chancellor mccormick to say you have to buy this company. >> because he signed a contract he would spend $54 a share to buy it, and twitter hasn't done anything wrong i can elaborate on that. >> please do what have they not done wrong? >> i haven't seen anyone sign a merger agreement and literally two weeks later try to manufacture an sure they were well aware of before they signed the merger agreement in an attempt to evade their obligation mr. musk knew about the bot

issue, it was fully disclosed in twitter's filings, and in fact he suddened it was one of the reasons he wanted to buy twitter, which is to rid them of bots nothing has been changed in twitter from the moment he signed the agreement until the time he tried to wiggle out. it's unlike any other merger dispute i've seen in my career >> unique? >> unique. tiff anyone/lvmh, we had a pandemic, at least lvmh was able to concoct a reason the french government was supposedly ordering them not to go forward and purchase tyson, there was claimed an adversarial effect and simon and talman >> again we're talking about the

pandemic every mall in america was closed, so you can't make a legitimate argument that something was changed. >> you do sound a bit like the lawyer for twitter, in terms of arguing his case yesterday, but what gives you the confident that chancellor mccormick will also order specific performance? why not go in a different direction in some way or encourage the parties to settle? there isn't clear-cut precedence for specific performance >> that's where i think i'm going to disagree with you. >> please. >> in every major public case, where there has been a dispute about whether a buyer was supposed to close or not, there is in general an award of specific performance or a decision that the acquirer is not required to close. that's because -- and chancellor mccormick actually said this yesterday when she ruled largely in twitter's favor in a request

to expedite the trial that money damages would not suffice. >> what did you take that to mean >> if you think about it, the damages are not to twitter, but twitter shareholders if the deal goes through, they will receive $54 a share if it doesn't go through, to a large extent because of the market as well as mr. musk's constant criticism, those shares will trade down into the 20s somewhere, so it's the shareholders that are damaged. there's no ability under the merger agreement to get damages for the shareholders in delaware, which is most of the fortune 500 is incorporated, has always tried to protect the companies and its shareholders that's why there's a history of them always enforcing a contract with specific performance. >> now we have also gone down this road previously, the judge said specific performance, murph says no. in fact, i had a former judge

said, they won't go there, because they won't be able to enforce it is that of concern to you? >> i've heard two pieces of misinformation in the media, and respecting her as much as i can, that that's a piece of misinformation specific performance is an extraordinary remedy, but it happens in delaware, and judges -- all judges, especially the chancellor of the chancery court in delaware are used to having their orders followed they'll not make a special order for elon musk, because they're afraid he's too rich to follow their orders they have extraordinary powers if someone chooses not to follow their orders they can fine them massive amounts a day. they could in theory put someone in jail -- >> you said it, not me. >> yes, i said it, not you, but more important than either of those things -- and i don't

think this is going to happen. i think the odds are incredibly low and really not even a risk factor, is the court has the authority to appoint an administrator that, if mr. musk won't close, mr.musk's new administrator appointed by the court would have the authority and be forced to close on his behalf, which means in theory could have control of the tesla shares. >> it's an interesting outcome, but it's elon musk he's not played by the rules in his entire career, and has had success frankly for almost we never see for a businessman. this is how he rolls why do youty to buy shares and buy shares and become one of the largest shareholder, when you're dealing with musk, who is so completely unpredictable. >> because -- well, one, i can make 40% in the next four months by owning those shares on twitter. that's a lot of money. two, i don't believe elon musk is above the law this is a simple case, david,

where nothing has changed at twitter, and he's coming up with a concocted reason to not follow through. is there a chance of a settlement >> is there a chance for settlement yes. boards of directors, if they are offered an able to settle, they often take it, but one shoutout to the board at twitter, they have done everything right when mr. musk came in, offered them $54.20, as soon as he had definitive financing, they got the deal done in a weekend they have steadfastly upheld their bargain with a merger agreement and shout-out to bret taylor specifically, he's led the entire board to do whatever they need to, tofu fill their fiduciary obligations to get all their shareholders $54.20,

despite mr. musk causing havoc at twitter. >> there's a lot of down side here what do you see happening if, in fact, you are wrong? >> well i don't think i'm going to be wrong. >> not answer the phone that day? >> no, i always answer the phone. if i'm completely wrong and the court does not order specific performance, given the damage mr. musk has caused, given that crypto is, you know, a decent part of twitter's digit 58 advertising base, and we all know what's happening with crypto, i would say the stock will go down to the low to mid 20s. >> do you want to buy this, and he said yes. is that a concern? >> no, it's not. i've read the tyson opinion.

it was a opinion for specific performance. i've read most of all of the other opinions, and i think delaware law is really clear here. >> matt, nice to have you on, and it's nice to have someone talk about it from the investing side bertha >> here's your news update at this hour. the texas commission that regulates the licensed law enforcement officers, says it lacks the authority to hold those involved in the school shooting accountable a senator is requesting the senate committee to review the investigation, to assure it's aggressively reviewed. president biden is expected to announce a set of executives actions on climate change. he will touch on the domestic wind energy industry, and

funding to protect communities facing extreme heat. the roll-out follows failed efforts to strike a deal on climate change in the senate charlotte hornets' forward miles bridges is facing felony domestic violence and child abuse charges. prosecutors filed one felony count of injuring a child's parents and two felony counts of child abuse. bridges is expected to be arraigned in court tomorrow. >> bertha, thanks so much. bath and body works under pressure today the company says customers have become more cost conscious shares down some 3%..5 we're back in two.

netflix shares are popping up p reporting back-to-back

subls sub losses reed hastings on the earnings call says he remain bullish on streaming dominance and the end of linear television >> definitely the end of linear tv over the next five, ten years, so very bullish on streaming. then our core drivers are just continues to improve and then, of course, we'll talk later on the call about monetization and how that's improving. so tough in some ways losing a million and calling it a success, but we're set up very well for the next year let's bring in a former executive both at netflix and hulu simon, great to have you back. >> thanks. >> part of the consensus is revenue, better late than never, and some believe it could move the needle >> i absolutely think it will.

looking at the revenue that 28 billion in ad revenue there versus $28 billion on net flex, so there's all that additional ad revenue that can deliver, plus the broadened addressable market, that think netflix might be too expensive on a monthly basis. there's a pricing tier that could be half of what it currently is >> do you think not expanding content spend means that churn is a higher risk, or not they did mention that churn is back to pre-price hike levels. >> no, i think, as you're well a ware, a number of guests already mentioned, they did mention the content spend is at the upper limit and will remain stable for the next couple years. there's more than enough money to buy best of breed shows, commission amazing films and tv

shows all around the globe, so i don't think that's in any way a driver of change on the conference call yesterday, there is tremendous engagement with the lineup of content. >> we mentioned the journal piece suggesting there are some brands interested in getting onto netflix do you think microsoft was chosen because they're the best ad partner or there's secondary motives at play? >> i think there's secondary motives. first of all, they're not a competitor and i think there is -- the one word that i thought resonated on the call yesterday was collaborative. i think there's an opportunity for both businesses to develop, and i think both will be well o complementary areas. >> simon, you mentioned, you know, obviously creating

compelling content it would seem to do it on almost a monthly basis to prevent serious churn. do you think they can? how do you judge what they've been ability to do they have plenty of movies that don't move the needle. >> absolutely, but i think we look at netflix under a harsh are light, because it was first, the largest. i think there's a tendency to be critical of the content, but these -- many people will be aware that "the great man" is launching later this week, so you have to -- in the coming weeks or month, so i think float flicks is very good about not only having a very robust calendar, but also communicating to the audience, this is what is coming up, this is something to look forward to. i think they are well positioned, and perhaps we look

too critically in comparison with some of the other services. and the other thing, what was referenced on the earn call yesterday, there's a nielsen reportt netflix has 7.76 screen time, which is the highest level that they're seeing in terms of what people are viewing each week. clearly the content is resonating >> yeah, as reed said, of course, the end of linear tv to the competitive said, i'm curious what you think it's a different conference than it was a couple years ago. we go on and on. is it a more competitive market they'll have to live with? >> absolutely, but again, i think they are doing a good job of that.

the other services don't have the same volume of content, they don't have the same release rate in terms of refresh you are content. we're spending more time with these services, so we are going to continue to have two, three of these services. we are going to scale back the linear viewing time, and again, as you said, reed is already referencing that, so i think the trend is in place. netflix is the leader, i think they'll continue to be the leader, but at this time i still don't see from the competitors as broad and robust a content offering >> we'll see if that changes obviously they're going to try, but in the meantime netflix shares pretty much a three-month high on the heels of that report the last two did not necessarily go that way. simon, thanks. simon gallagher. >> thank you. still to come. how one company is repurposing empty wall street offices. we'll speak with the ceo of

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welcome back with more employers and employees deciding to make work from home a permanent situation, many office spaces are empty our next guest is in the process of creating a revitalization but converting old office space into residential apartments you may know silverstein from rebuilding the world trade center in the last 20 years. what are you doing now >> well, some office buildings become obsolete, so a smart way of adaptive reuse is to take those office buildings, or

sometimes a hotel building, and change it to a residential use we're taking some buildings in new york city and changing them into apartments. there's always a shortage of rental hows in new york city and other cities around the nation this is a way to responsibly use these buildings. >> from an architecture standpoint, certainly structures are less accommodating of this kind of revitalization is that the case in the way they're constructed? the 1960s buildings in midtown, perhaps not as easy to divert? >> correct not every building can be reused, but many can >> rents are as high as they've ever been, but strangely people living here don't seem to want to go to the office. it also depends on the long-term

economic health of the city. >> what's great about reusing the building, you're not creating new steel or concrete, so socially and environmentally it's very responsible. you're not starting the cycle from scratch where we're digging foundations. from a scheduling perspective, it's a faster cycle. >> one argument in the past couple weeks is the techs backing off their expansion plans. >> down at the world trade center and many other building where he tami candidates, so our buildings are probably physically 50% occupied, even though in the high 90s leased. they're starting to come back. i would say at the end of last year we were probably in the 30s and 40s, and hopefully the 70s by the end of this year. >> is the expectation there will

continue to be demand for class a office space, given how many businesses will not require their employees -- >> absolutely. they'll use the office differently. they may not be in the office five days a week, but people have to be in the office to interact how do young people learn? >> at the same time, it's not happening. how many bosses want their people to come in, and they're not showing up >> we're seeing it happen. it's slowly coming back. >> it is finally, these neighborhoods down here obviously has changed into a more residential neighborhood can we ever imagine where midtown and other areas will become more residential neighborhoods? or does it take so much time and effort to create those services it's unlikely? >> that's the great thing about new york you can create a 24/7

neighborhood anywhere. >> marty, we appreciate you stopping by. thank you. >> thank you very much coming up next hour, wyche catch up with the former ceo of twitter. we'll be right back.

watch bitcoin. up more than 25% so far in july. of course, total crypto markets above a trillion dollars markets rallying 'll off the early lows. wesee how much this can be sustained when we come back. don't go away.

[ ominous music playing ] it's here.

are you ready? let's go baby! [ screaming ] what happens next? you'll know soon enough. if and it's a big if, ee lon mus is being allowed to walk away from the twitter deal, even if he had to pay that billion dollar reverse break fee, he could leave up to $8 billion in cash our robert frank will explain. robert >> good morning, dave. elon musk net worth fell by $120 billion from the peak last year. his big problem if he is forceded to buy twitter will be liquidity. his latest financing plan for twitter requires him to come up

with $33 billion in equity even with some outside investors he would likely have to sell up to 10% of his tesla shares or some spacex stock if he is allowed to walk away, however, he could actually wind up with $8 billion in cash that is because he sold $8.5 billion of tesla shares back in april. he also has about $2 billion in cash from last year's sale so those both those sales by the way very well timed coming just before big price drops in tesla's shares so even if he pays a breakup fee, as you say, 1 to $2 billion or more, he could wind up with up to $8 billion liquid. he is also done well on the tesla sales and twitter shares he sold tesla at $883 now trading at $736. so if he bought them back today, he'd have a $1.5 billion profit. his twitter shares which he bought at $36 now up over $200

million. so at least until october elon musk is sitting on an $8 billion pile of cash if he wins, he'll not only be the richest man in the world, david, but also the most liquid. and as you say, all of that is a very big if. >> yeah. i don't know if you listened to my last guest. >> yeah that, was great. great interview. the. >> thank you will be ordered by the court i think, listen, you know, it's the liquidity side that is more interesting in many ways what is he going to do spacex is a private company. would he really look to sell a $125 billion value the last time they raised any money. an enormous value there. and/or more tesla shares but robert, that's kind of where the pressure may really come and be brought to bear on him. another reason to keep close eye on that trial in october, right? >> yeah. i was surprised. but yesterday when we had that ruling, i sort of thought given how one way the judge was her

wording was that tesla shares would sort of come under some pressure yesterday and they increased and they're up again today, i think. so that was surprising and so either the tesla investors have already priced in the potential sale of those millions of shares that he would have to sell to rauz that $33 billion, or they're just not that worried about that possibility. >> yeah. maybe they'll wake up to it when it becomes more of a possibility. >> finally, i would say if they ever came to a lower price that twitter agreed to, nothing says his investors stay with him. they get the right to -- they invested on one price. they didn't necessarily invest on another that investor group that came in >> yeah. that's right and, you know, no the to mention all of the banks that wind up that $13 billion presumably as you have been reporting, they're still in hard to get out. >> they are. >> but also hard to raise other equity you know, he was out there raising more investors beyond

larry ellison and right before he called it off so it will be interesting to see if he goes back on the road to raise more or if he can. >> if he can yeah as i said, again, if it were to get a price pay, he has to do it all over again robert, thank you. we'll keep a close eye on all things musk and twitter related. right now that, does it for us on "squawk on the street." >> happy wednesday welcome to "tech check," i'm jon fortt. today a broad tech rebound nasdaq up 5% over the last week. growth names like zoom and data dog topped double digits off the lows so is the worst behind us? we'll discuss. plus, it is thestock of the morning. the more on netflix and whether it is the end of an era of single minded spending this hour finally, don't think we forgot about twitter. will former ceo dick