Im Andrew Ross Sorkin with joe kernen and melissa lee becky is off again we are about 111 points up now s p 500 looking to open about 11 points higher. Flip is around and show you we are at. 952. Still under the six handle i always wonder what the bond vigilantes are thinking now relative to our little equity world. Worth noting we are still 3 well away from the february record highs some highlights. The ceo of Tractor Supply, auto nation venture capitalist, treasury secretary mnuchin, house leader and twitter ceo. A huge lineup straight ahead thats a big show yeah. You guys always have a big show but this is particularly large. For you because you are here people said, melissa will be on book her i think they wanted to do it for you but i think they were scared if they didnt do it of me thats the feeling they got they didnt want to disappoint you. I doubt it thats nice to say but i doubt it im not a scarey person. Im not. Maybe to you nows this morning out of washington. Reaching Common Ground with the relief package and the plan reportedly includes 16 billion in testing a compromise for the white house that had opposed new testing 100 million going to schools mostly for k12 schools with plans to physically reopen reportedly considering an extension of enhanced Unemployment Insurance at a rate of 100 a week that is now at 600 a week that expires this month well talk to Steven Mnuchin about that this morning about this deal. A big beat for tesla reporting the fourth con security quarterly profit that could clear a hurdle now a lot of investors making a bet on that. Maintaining the target despite the 2020 shutdown and plans to build the next factory in austin texas. More on teslas results. We should talk about it. Fascinating to see it hit the numbers. You are right about automotive revenue you see them saying well it is regulatory credit. The thing that always strikes me when i hear these comments. Thats something if they pulled it out of thin air should be allowed. Theyve done this quarter after quarter. You may discuss whether or not actual business of making and selling vehicles they are allowed to do that. They did that to the tune of 48 million. Here are the numbers within the numbers. They did beat the street to a wide margin. The estimate was within 3 cents profit that is the Third Straight quarter they posted a profit well talk about that in a bit lets talk about the announcement involving austin, texas where tesla will be building the next assembly plant. Near tex near austin, just outside the city limits. Where theyll build the cybertruck, semi, model 3 and model y for eastern u. S. Here is elon talking about texas giga the location is five minutes from Austin International airport and 15 minutes from downtown austin. It is about 2,000 acres. We are going to make it a factory that is stunning it is right on the colorado river. Well have a boardwalk where there will be a biking, hiking trail. It will be an eco logical paradise the fact that tesla has reaffirmed its target of delivering at least half million vehicles this year thats a dramatic increase where they delivered 367,000. It does clear the path for tesla to be included in the s p 500. We wanted to show you what tesla has done in the past year compared to the s p 500. A lot to talk about. I know a lot of people will complain about those regulatory credits. It is legal. Theyve done it quarter after quarter. So phil, stay where you are well continue this conversation and do the bulls and the bears right now. Senior analyst he has a sell rating on this stock and 100 price target. How do you think about a stock on a morning like this they did beat and there is an idea they will be part of the s p. A lot of money would come into this stock sure. Thanks for having me we raised our price argue et last night to 1,220 weve raised it from that 1,100 target we think the stock has really become decoupled from fundamentals that growing risk on the story phil is right on the credit. The 428 million is more than double the average the line item that is really where they beat and where theyve posted a gap profit on the quarter because of those credits. If you look at the release, their Free Cash Flow was down 30 year over year their reported cap x was at the highest level in two years because of the new factory in austin, texas will follow. They are entering that cycle where we will become more caution on the story coming out of the spending cycle. They are entering that cycle now where we think the Free Cash Flow will be depressed on the spending occurring in the next several quarters derek and phil can weigh in on this as well. Explain how these credits work so everybody understands what we are talking about and to the degree of the controversy and that some investors will look at this and say, you know what, this is not selling cars and how sustainable selling those credits over the long term would be it is sustainable essentially where they can sell those to other automakers that are not producing zero emissions. So that is how it works. That is very difficult to that line item that will vary quarter to quarter that average is 183 million here they did 428 million over the last four quarters. Thats a big reason weve seen these beats and was the driver of the beat for the Second Quarter. The other question i had, if they did get included in the s p, almost by default that will push the stock higher at least in the short term, no . On our issue with that, there has been a lot of buying leading up to this, really since the Second Quarter production since that early report in july. There has been a lot of money coming into the stock. A lot of Retail Investors and funds buying it in anticipation of this. Essentially, they would have to buy the stock in order to add it we do think they would add it where the market cap is far and a way the Largest Company in the s p 500. The largest is facebook. We think it will be added later this year. Thats what a lot of investors have been playing. That is a big question of how the stock has become decoupled and why they are rerating to sell on friday the Short Interest has really come down. If you look at the shortages only at 7. 5 a year ago, it was 23 that has contributed in the runup to the stock price that is less of a factor Going Forward and the stock moving higher before you go, talk us through the new factory in austin curious if you think any of the bruhah in california over reopening led to going to texas or was it always going to take place in texas is. Alwait was always going to t place in the eastern half of the u. S. It was always going to take place in another place of the u. S. If you look at the geographic foot print, texas makes perfect sense. In terms of taxes and talent, location for logistics it all makes perfect sense people will say, they could have expanded in fremont, california. Have you seen that plant they are landlocked there. They put up those tents and added a second one in the parking lot there. They are wedged in then the question becomes would you buy a second location in california why would you do that when you can reexpand and all investors will try to do that to a certain extent thank you i love having these conversations with you you just know so much about so many things. Thank you, guys. Programming note, Texas Governor greg abbott will be on tomorrow and well talk about that new giga factory with him and well talk about the latest coronavirus outbreaks in that state. Numbers just in from dow ink. The company is announcing a restructuring that will see it cut 6 of its work force and sell uncompetitive assets. It samaims to save 300 million year with that move. Coming up, microsoft shares are under pressure this morning. Well talk about the companys quarter and the new legal action it faces in europe from competitor slack a few of the Companies Reporting before the opening bell today well be watching. At t, travelers, American Airlines and Southwest Airlines all in the next 60 minutes keep it here you are tuned to squawk box. Even if their shares cost more. At 5 a slice, you could own Ten Companies for 50 instead of paying thousands. All Commission Free online. Schwab stock slices an easy way to start investing or to give the gift of stock ownership. Schwab. Own your tomorrow. Schwab. Save without even leaving your house. Just keep your phone and switch to xfinity mobile. You can get it by ordering a free sim card online. Once you activate, you only have to pay for the data you need, starting at just 15 a month. There are no term contracts, no activation fees, and no credit check on the first two lines. Get a 50 prepaid card when you switch. 5g is now included with all new data options. Switch and save hundreds. Xfinity mobile. Welcome back to squawk box. Yesterday, slack accused microsoft by forcing users to install teams because it is bundled. Blocking the usage and making it inoperable with other software there is a perpetual question that at some point, microsoft is just going to kill us. Microsoft fired back against slacks complaint saying, quote, with covid19, the market has embraced teams in record numbers while slack suffered from its absence of video conferencing. In response, slack said microsofts comments are untrue and shows how microsoft can only view microsoft from their walled in garden. The bruhaha and now legal debate will continue. Melissa. Microsoft reporting a surge in revenue driving demand for its product to support their woerk trend. Nadella saying originalizatioga that embrace that will continue faster one of those that we saw was quarter on quarter sequential decline. How concerned should one be on this particular line item in the context of microsoft as a grow story . Absolutely. The first thing i would say, melissa is that in many ways, this feels like a little bit of kn nitpicking after building in the pandemic, we were able to beat by a billion and a half last night. Discussing what each side wanted, it feels like we are cutting hairs. This is the business now analyzing over 20 billion in revenues i dont know any businesses growing 50 while doing 50 in annual revenues. This is not something i believe will shake out active Money Managers last night was not a thesis breaker. I think microsoft would prove it would be one of the key winners of the new paradigm to work, live and play from home which you saw in their extraordinary gaming results last night. Still in tact but other Small Businesses given the run it has had. Operating margins came in a little light productivity and business came in a little light. Right now, that stock is priced in at 10. 2 price to sale at what point do investors step back to say, what am i paying for . Priced to perfection and Small Businesses given the valuation, should investors overlook them . I think the beauty of the Business Model has always been so diversified that it has been facing very natural problems if you look at what microsoft cited as lower issues. Impacting the search result. As gdp would contract in lower quarters you also saw linkedin jobs report you also saw tremendous strength in those areas of business gaming was incredible. Pcs were also very strong with windows as well. The reason stock is priced for perfection it is a machine operating on not always firing at once. Taken as a whole this is a company that grew 13 year over year at 38 billion in quarterly revenues despite the fact that we are in a worst Global Pandemic than weve seen in years i think it is phenomenal thank you for your in sights. Coming up, controversy over bill ackmans comments accusing this network of replaying his teach that was apparently only 15 seconds long. Going into the break, Warren Hathaway sharing that it bought more than 800 million of bank of america shares raising its stake to more than 11 squawk box will be right back. Hey, our workers comp insurance is expiring. Should i just renew it . Yeah, sure. Hey there, Small Business owner. Pie insurance here with some sweet advice to stop you from overpaying on workers comp. Try pie instead and save up to 30 . Thirty percent . Really . Sure get a quote in 3 minutes at easyaspie. Com. That is easy. So, need another reminder . No, im good. Reminder for what . Oh. Ho ho, yeah need workers comp insurance . Get a quote in 3 minutes at easyaspie. Com. Welcome back to squawk box. Billionaire Hedge Fund Manager the first tv interview when he issued a warning that had rocked the Investor Community health is coming. Okay ive never had this experience before in my life. The closest is the financial crisis when i said things are coming bad stuff is coming. This is a feeling like ive never had. A tsunami is coming. You feel it in the air if you remember, throughout the rest of that day, markets fell sharply less than a week later, ackman disclosed a profit of 2 million after he sold his bets against the market this of course raised eyebrows we asked him about it yesterday and he addressed his dire comments and a few other market headlines. My comments were not dire i said if we do nothing well be dire we are more long we made the decision to go long. I blame cnbc it took 15 seconds for my interview. You ran around scaring you ran it all day and all night. Look at the bullish message i made sch is im buying stocks right now. What an advantage does, it damages some and helps other look at microsoft. The markets are a reputation of the most successful, most capitalized dominant companies in the world there is no market for the private familyowned business. That market is down 80, 90, some cases 100 we are bullish on the economy. I am cautious over the next bullish time anything bill ackman seems to say causes lots of reaction emotional reaction i think there was a lot of reaction to those comments in march and to those comments yesterday. Im curious where you guys land on it. I think people listen to what they want to listen to in all of these interviews ive gone back, read the transcript maybe im more sympathetic i know he had publicly declared prior to going on tv in march that he had these short positions. I thought that was known he wasnt asked about it at the time on air. If he was asked, he would have disclosed it one other comment, which is, i think and this is something that has been a problem for myself. People dont want people to talk about panicking the quote unquote market or the public frankly, im of the view that had we panicked the public a little more we may have saved some lives there is a distinction of panicking about the health issue and about the markets. I think if you really listen to what bill was saying part was about the markets and part was about the health issue which is demonstratable. Im a little more sympathetic. If you can compartment it that way, you can. 150,000 people dying is hell we did go into hell. If you look at that on the other side, that was an overreaction even being down 35 on markets obviously. Maybe we go back down. We never know how events will play out i was wrong about the market his tone that day. For him to come out and say it was 15 seconds his tone the quivering of his voice talking about his father dying he was virtually in tears going back. We had the conversation in makeup i remember it well, andrew we were focused completely on the absolutely horrific scarey tone of the entire piece i love bill ackman general growth, he is a genius herbal life, he was not. Jcpenney, he was not he pushes the envelop. He calls it good hygiene he gets as close as you can get. You got to hand it to him. Hes the one flying around on a g 6, not us. Not that that makes a person great. There is lots of times i thought billwas on the wrong side of things i would say things he was smart about, now we can get into what the comments were, he was right about this at least what he was doing with his money what he was doing with his mouth, if you think that was different. Im suggesting if we are listening to the fact that if we are buying at the time, which wouldnt want to listen to bill ackman went on in march and sounded scarey because he knew he had shorts on and yes, he said he was bullish on the markets. He was on tv chatting up the scarey part of things. Thats what the critics are saying he was buying the stock and the position not only was he covering his shorts he was able to go into the other stocks he was interested in at a lower price. Exactly i dont know about you guys, i remember listening to that and we talked about it the next day. There was confusion if you were paying attention deeply. He said, here i am buying these stocks im buying these companies and yet he thinks hell is coming it was a mixed message but i dont think people saw it as a mixed message. On the way, on the stack front, air b b ceo said they were approached by a spec about going public remember bill ackman spent a lot of time and used air b b as an example. Keynote 45 minutes. When you are talking to ackman, that silver tongue, you are hypnotized yes, bill. It never happened. You ask him about valent how can you acquire a position in alergan he talked about it and you go yes, bill. Hes so smooth, you know i think we saw that yesterday. Silver tongue, its like yes, bill it is cnbcs fault because we put you on its our fault look, the thing about bill, hes only trying to hit home runs hes either going out of the park or he strikes out swings for the fences the dire warning was on cnbc so i guess it was the Networks Share responsibility for putting him on anyway, well see thanks guys for the conversation coming back, well talk Southwest Airlines crossing the wires. The numbers and reaction well hear from at t and travelers and reaction on that straight ahead a huge lineup still to come including ceos of Tractor Supply, auto nation and well talk about stacks an all of that venture capitalist who always makes news by just opening his mouth. And treasury secretary Steven Mnuchin foll