they delivered exactly what i was looking for, that's the kind of revenue growth -- >> a bottle of pepsi and free toes. >> earnings tomorrow. >> pepsi earnings were last week. >> last week >> look for the stock to take out the december high at 186. >> i will see you ael of you in overtime "the exchange" with kelly begins right now. >> thank you very much, scott. hi, everybody, i'm kelly evans here is what's ahead this hour, stocks are shaking off the cpi jitters, the dow is up more than 300 points right now that big inflation reports comes before the bell tomorrow morning. will it show inflation reaccelerating or will it give the fed breathing room we will get you set up for that. plus four unidentified objects shot down in the past nine days, we will look at the companies involved in this unprecedented response, the defense spending and policy impact and also the cybersecurity ainge jool and the health of housing. is the spring selling season

already off to a decent start? we will look at the trends on the ground and the data pointing to, yes, but first let's take a look at those markets. the dow is up 300 points on the nose right now, the s&p is adding 40 and look at the nasdaq up almost 1.5% today up 165 again, this is more continuing the trend we've seen since january 1 with the nasdaq leading the way, 12, 13% gain already this year and that's continuing today technology obviously leading the way, microsoft, solar edge, nvidia leading the gains, microsoft adding 3.5% after its big week, nvidia adding 3% and solar edge a 4% gainer as well energy in the red today, that's been a countertrend. treasuries are on the move let's take a look at some of these yields here. the two year highest level since late november of last year, 454, the ten year 372 the highest level in six weeks all the more notable to see the nasdaq doing what it's doing in light of this. bond yields have been making big moves since the last fed meeting and that strong jobs report and traders say a hot cpi report

tomorrow could spur even bigger moves unless expectations are already too high let's get to rick santelli out in chicago rick, how does this trade look to you today >> it certainly looks as though the markets are starting to get a little more friendly to the notion of tomorrow's inflation gauge as you pointed out in equities right now two year, three year and five year yields are the only yields up on the session. we've seen sevens, tens, 20s and 30s ease back. let's start with the two year note should it close at current levels it would be the highest yield close since 21st of november even though that is correct, it's current level of 4.54 we're still clearly 20 basis below its high cycle yield close which was a couple weeks before that at 4.72 if you look at a ten year since the last cpi meeting you can see that it went sideways until the big jobs report that changed everything and, yes, we hit 3.75 today. as kelly pointed out, higher

than yesterday's high yield, but it has eased off a bit dollar index since the last january 12th release of cpi you can see how jobs report there also seemed to have trumped the effects of that cpi pushing the dollar index higher. twos to tens spread, same thing, since the last cpi report moving much lower, spending a lot of time in the low to mid minus 80s. we know some of these levels we haven't seen in four decades finally maybe the most important market that is weighing the difference between inflation and labor and that's fed fund futures, currently the fulcrum remains in the september contract, it's on pace for 94.80.5 close which would be a new low close implying yet more fed. kelly, back to you. >> just to be clear, then -- in other words, expectations have never been higher for rate hikes, right does it feel like we can still be given a hawkish surprise or

not? it feels like the only surprise we can get are on the down side, the data comes in, i don't know, a little soft, a little muted or something. >> listen, if the data for tomorrow in cpi comes in less than expectations, it gives us a real canary in the coal mine to weigh all the charts i've showed and try to benchmark if the fed's nervousness about inflation versus the stron labor market is going to have any sway with the market because the market's ultimate belief is that they are not as entangled as the fed believes but the last jobs report really put the pressure on. >> we will have more on that in just a few minutes rick, thank you very much. let's get right to the increasing scrutiny on intrusions into u.s. air space in the past nine days we have now downed four separate unidentified objects and china's tone is growing more defiant as it now claims we have sent balloons into their air space, which u.s. officials deny. defense stocks are rallying to multiyear highs today as a

result and it all comes as the president is preparing the largest pentagon budget in history. morgan brennan is here with more on the companies likely to benefit from all of this roman swiezer has a look at the political fallout and a mitt yuran will weigh in on the security angle as we try to figure out what, if any, sensitive information has been compromised. morgan, let's start with you what do we know? >> what do we know in terms of these unidentified objects there's still more details to come, we don't know all that much. i will say the u.s. air space and defense ita hitting a multiyear high school, although some defense stocks are under pressure investing digesting a rapid succession of shootouts of unidentified objects it was three in three days now you have this report that the biden administration may propose the largest u.s. budget ever, defense budget ever, and that's after pentagon comptroller mike mccord told "politico" he expects the top line figure to be, quote, a bigger number than congress had

provided last year congress appropriated the fiscal 2023 budget in december, lawmakers authorized $858 billion a nearly 10% top line increase it was $45 billion more than th biden administration had requested as well and that is the key here, that we're expecting this budget on march 9th and what is requested versus what actually makes it into the final numbers that are appropriated by lawmakers can be -- there can be a differential but it does speak to the fact that you have this heightened geopolitical situation, you have an administration that's looking to keep defense spending on the current trajectory and you have a gop majority in the house that has said that they want to put the focus on spending cuts for the broader government budget in general. a lot of question marks here more defense spending, going to be good for all the defense players if we see it. >> the other way to look at the fact that stocks are at their highest level since 2020 is to say the defense stocks have yet

to recover where they were before covid they've kind of been lagging as a group. every time we see these headlines we see these stocks tend to rally but the sustain ability -- i mean, i'm not saying there is a major bear case here, obviously spending is what it is, but you wonder a little bit about kind of jumping in on these headlines when to your point there's still some, you know, bills that have to be run through congress to see how much which actually are going to increase this number by. >> and i think that's part of the take away for investors, specifically investors in the aerospace and defense sector on the heels of the chinese perspective spy balloon from eight, nine days ago, that was shot down eight or nine days ago and these three unidentified objects that were clearly noticed and shot down in the wake of that situation and the fact that pentagon officials are on high alert now and combing through radar data in a much more aggressive way speaks to the buoying of the defense budget the question is how much higher can it go from here? if it does, in fact, go higher

versus flat lining versus when you're talking about software and the increasing role that some of these new technologies are going to play in future warfare and future deterrents whether you do need to be spending that much more. this is all up for debate, not to mention the timeline to actually get a budget passed on time, which history would show is probably unlikely. >> not expeditious morgan, we appreciate it. let's turn to washington where my next guest says like many others he is a little surprised the white house and defense department haven't been more forthcoming with congress and the public about what's taking place here let's bring in roman it's good to see you murky times. what do you make of it >> hi, kelly yeah, definitely strange days indeed and just to point this out, at the height of the cold war we didn't have four unidentified objects entering north american air space let alone shoot them down. so this is a very peculiar period in time i'd also say that there has been

sort of radio silence from the administration about the salvage, recovery, investigative efforts about the acknowledged or alleged chinese balloon and then obviously you've got the three most recent unidentified objects and, you know, there's certainly questions in congress from lawmakers on both sides of the aisle and then certainly the general public as well, again, not to dawn a tinfoil hat but the social media does tend to blow up with these things and the administration needs to get out in front and assuage the fears of the public and communicate with congress better >> what's the most plausible explanation that you currently hear and what are the implications for investors >> well, look, these are -- these may not all be the same thing, right they could be different things i think that's perhaps one of the troubling aspects. it could range from chinese surveillance to unidentified objects, weather balloons or corporate projects in the

atmosphere, you know, or some of the more orwellian descriptions, but, i mean, even from a general aviation perspective having things flying around, you know, 20,000, 40,000 feet in altitude, that's unsafe and that's the administration are downing those things because it's unsafe so it raises questions about commercial air travel. i'd say we're just about ready to kick off that budget debate that you talked about in washington and i would say that the group has underperformed, you know, since the gop kind of came out with wanting those -- you know, what would be potentially 10% spending cuts and really when you look at the backlog in spending, the two years ago the budget was up 7%, last year up 10%, as morgan mentioned. with our cowan research we estimate there's $37 billion in funds for ukraine that haven't been put on contract for some of the large defense primes the pump is primed and as soon

as we get into some of the budgetary details, if any of that overhang lifts, certainly it's going to bode well for the companies. >> do you worry about people buying the group now on these headlines primarily? you always think about when people bought all the oil and energy stocks last year at the peak anytime this stuff is gobbling up headlines if anything it's kind of a sign at the top, the fact that we've only gotten back to pre covid levels for this group as a whole give me a case for investors that you think there could be sustained outperformance here and not just the usual kind of quiet, you know, performance that they've really been on display for lately >> sure. well, one, i mean, i think most people would look at a multiyear scenario for the conflict in ukraine. european defense spending is off the charts, japan has doubled its defense budget i talked about the growth in u.s. spending and certainly the backlog in ukraine the other thing i think most

managements have reported over the last several quarters that supply chain, labor issues are sort of abating and have been consecutively over the last couple of months so the group is starting to operate better and deal with some of these things and then you've got the idea is defense going to grow even modestly, again, republicans on the hill most of the national security minded ones have been pretty adamant about 3% to 5% real growth per year to deal with geopolitical competitors like china, like russia, iran seems to be pretty volatile these days and you can never discount what north korea is going to do from one day to the next. >> sure. >> i do agree with your point, but i do also think there is a pretty good long-term setup into final question, let me circle back to your opening comment about the cold war and how we didn't see this intrusion into our air space even then. does that suggest that this is not being handled with the level of seriousness you think it requires >> no, i think it's being

handled probably very seriously it's just this is a complex problem, you know, you have the criticism that the administration underreacted in the first case, allowing the balloon to get all the way to the east coast, and then you have a concern that there's overreaction but, again, there's a lot of things that go on in the world, whether it's in our atmosphere or in space and if there's not an eyeball or a camera on it it's not going to happen so we don't know what's going on or how serious this needs to be. you have to hope obviously national security officials are treating it as such, but that doesn't mean they are necessarily disclosing that to the public for one reason or another. i think that's one of the things particularly that lawmakers will focus on over the next few weeks. >> would be nice to get more clarity. roman, thanks so much. we appreciate it. good to see you again. >> great to see you. thank you. >> it's not just the traditional defense names by the way that have been rallying as tensions rise the cybersecurity stocks are up about 20% in the past month. my next guest is ceo of tenable

and is here to maybe shed light on whether any sensitive information might have been breached thank you for coming in. welcome. it's great to have you here. listen, i mean, are you privy to any kind of special information about this situation as a ceo of this leading cybersecurity company, what's going through your mind as you're watching all of this reports trying to process it all? >> sure. there certainly are cybersecurity concerns when you look at the equipment that may be found and when we get a final report on what equipment was being carried on board with these -- these objects, we will know a lot more about what type of communications maefb intercepted, what type of information may have been collected. certainly it is cause for can earn. >> right so, i mean, the problem is the premise. if the premise is this was definitely is spy balloon i could ask you a bunch of questions, if the premise is it just drifted off course or this has been happening for a while and we are only wising up to it, they point to different areas. what would be your main questions if you had a chance to examine the objects? >> i think the question is they

were drifting off course and over very sensitive areas, it seems highly unlikely. and the things we want to know about these objects are more about the communications equipment that was on them what sorts of sensing equipment are they able to intercept, what are they able to intercept, what were the things of greatest interest, what were the signals of greatest interest to the adversaries. >> you know as well as anybody what information people can get through the internet, let's say, through hacking physical infrastructure and that sort of thing. why a spy balloon? what can an aerial image o aerial surveillance offer that perhaps current fire walls or internet systems aren't allowing someone to penetrate in order to get at that kind of prized information they might be looking for? >> if you have physical proximity you can do a lot of things that are much easier to do than trying to do them at a distance so you could mick preliminary cell towers, you could mimic

communications equipment, you could intercept communications and understand what content is going through. any sensitive information, any information about operations, any information and tlemt friday about what's occurring in that area, how systems are configured those would be the kinds of things you could intercept and understand with a spy balloon. >> even in the digital age there's still some value in good old fashioned spying >> for sure there's value in good old fashioned spying perhaps even more so in the digital wage because of the amount of information, the richness, robustness of the information you can collect and use. >> so also implicit in all of this as we figure out what was the deal with that balloon and the other objects and so forth, is the relationship between the u.s. and china as it relates to are companies doing business with them, are we going to ban tiktok, all of these kinds of things, what's at stake for a business like yours in this relationship do you need this relationship to go well so that supply chains, for instance, aren't disrupted or do you need this relationship

to turn more hawkish so people feel an increased need to protect themselves against possible penetration. >> we are a software-based company so we are not dependent upon the hardware or anything from china from a supply chain perspective. we believe fundamentally that every organization has the right to understand their cyber risk and to know what they can do to better protect themselves, and so to that end, to the extent that people feel threatened or feel like they need to increase their cybersecurity spending that's fine. whether or not there's a spy balloon or not the internet is a dangerous place and organizations need to understand, enterprises need to understand what is at risk for them and how they can better protect themselves. >> final, i don't know if this is too much of a pivot, but in this sort of frenzy we're having right now over new ai technologies which are going to be deployed in enterprise with language capabilities to scrape data and use it the way we're currently using internet, what

does that mean for a firm like yours? how do you make sure that you protect that data, maybe protect it from getting disrupted in some way i'm curious how big a deal you think this technology is. >> ai holds great promise. at tenable we use artificial intelligence to help understand what pieces of software and where vulnerabilities might be exploited. it helps our researchers provide better products and better capabilities to our customers. i think when you talk about general purpose ai, being broadly available, i think we're in a very dangerous territory. i think we're going to see the doom and gloom and dark side of ai much sooner than people kaepd. >> why >> we don't have good ethical models around how these technologies could or should be developed and we have almost no control over them. so if you look at chatgpt as an example it's already been jail broken, it's already outside the box, so it's accessing internet

data, they have a jail broken version called do anything now where they bypass the controls that we thought were in place. so when you start collecting information, when you start tapping into the wealth of information on the internet, when you start tapping into social media and you combine that with an advanced ai, really dangerous things can happen. >> do you think they should be shut down? >> well, i'm not going to stand here and say we should shut this particular ai down or that particular ai -- >> it's comical to even ask because we know we can't shut it down, and there are some who have criticized them for putting this out when they did and said, you know, you're polluting the current internet if you want to just create better models in the future but also you're not necessarily equipping people with the tools of how to handle this did they jump the gun? >> ai holds great promise and will be able to do amazing things, you're seeing students, researchers, even ordinary consumers doing really

interesting things with chatgpt. i don't want to stand here and say this is bad, evil, a terrible thing, but i do think if we aren't careful when you look at the lack of controls around some of these ais and the lack of good ethical understanding and how to use them and how they should evolve i think we're on very thin ice and a very dark i had of ai is probably going to come visit us soon. >> listen, you know -- you're supposed to be one of these people, i don't know, it's going to be great. no, not so much. amit, thank you so much for your thoughts today >> great being here. still ahead, could the spring selling season end this housing market actually surprise to the upside? how early demand is shaping up next. plus while we await tomorrow's cpi report there is an under the radar market trend we isn't scenes since 2016 we will tell you what it is and the bear signal it's flashing. a quick check on the markets seeing about a 300 point gain on

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we get into the spring selling season diana olick is here with that story. >> reporter: we've been hearing buzz from agents that things were suddenly getting busy again so we hit an open house over the weekend just across the d.c. line in bethesda, maryland the three-bedroom, two batting home was listed at about a million dollars which the agent called a first-time buyer property folks started arriving before the official start and just kept coming the agent said she also has 40 appointments for private showings >> buyers are back, the agents are overwhelmed with phone calls, the sellers are just not ready, they think spring is later, spring is right now >> reporter: and mortgage applications to buy a home have been rising steadily and red fin reported its demand index which measures requests for house tours hit its highest level since september last week. >> i have a feeling like this kind of craziness about the market is not really going to get better in the near future,

so i think there's no necessarily reason to wait, you just have to -- you just have to buy. >> reporter: and it's that mentality that has evercore isi analyst steven kim upgrading zillow group to outperform and calling a bottom existing home sales and prices in this quarter. kelly? >> wow this jives with what we've noticed around town as well. stick around our next guest is also seeing some demand signs of firmness, black knight data shows a 32% jump in mortgage rate lock volumes last month that snaps a nine-month streak of declines. let's bring in andy walden, he is here for more on this good to see you again. this sounds like it surprised you even >> it did, right i think there's a couple interesting story lines. there is a return in demand, no doubt about it, if you look at our optimal blue data for january you saw a bump and then rates jumped again last week and then you saw them step back in last week's data you are seeing the return in demand but it feels rate sensitive and i think it will be

a bumpy road as we move throughout 2023. >> i just don't understand how the difference between 6.5 and 7% on a mortgage rate is really unlocking that much. it almost feels like people are insensitive not hypersensitive to these rates, but you tell me. clearly i'm wrong. >> i think there is still sensitivity. when you look at the pricing i think there are borrowers priced out by marginal movements in overall interest rates i think there is a psychological impact to some degree with rates rising and falling as well certainly a bump in january, i think it expected -- or it went above what some of us were expecting in terms of overall volumes. >> the other thing, diana, that i've heard from realtors is them saying, look, there is a decent amount of demand but people should list their homes early if they want to capitalize on it. are we pulling forward demand possibly could it seem like we are off to a good start but then it doesn't continue, diana? >> reporter: no, not from what i saw, this demand is not going

away, there were hoards of people going into that house, the problem is there is no supply on the market and the realtors are begging people to list their homes they're saying to people right now, look, spring started already, get your home out if you want to sell itnow interesting what you were talking about, mortgage rates, the folks i talked to did not seem so upset about the 6.5% rate, they said it's down from 7.5% in the fall, they were kind of used to the 6 now believe it or not even some cash buyers i spoke to said there are so many other cash buyers in the market they are not feeling like they have any kind of advantage. >> i think that's absolutely true andy, as i was driving through town there was backup on a road there's not usually backup on i thought that's odd, it was 1:00 on a saturday afternoon. it was because there was an open house and there were cars backed up trying to get into the driveway this house want on the market, its not like the crème de la crème and that tells me to diana's point there's demand if this bears out what does it mean for demand, for prices for the market for the next couple of months do you think

>> i think that the interesting part, diana touched on this as well is the supply component here we are seeing a deficit of supply and it's actually gotten worse. we saw 25% fewer homes listed in january than we traditionally do and we saw our deficit of inventory go from 38% to 43% you have demand coming back and there are fewer homes for sale out there. when you look at what that could mean for the spring buying season you could see hardening of prices that had been falling in the last six months to round out 2022. >> which would be crazy, which would be -- feed into in narrative about the fed that certain things aren't softening inches they were supposed to thank you so much. we will loo he have it there. still ahead, the american labor market has a pretty big problem, whose solution might be the only thing that could stop the fed from further re athikes. ahead on "the exchange." don't go anywhere. go wind turbines. go gorgeous reliable grid.

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welcome back to "the exchange." a nice rally today for the nasdaq take a look at shares of toast, a tail of two fintech firms, toast is up 6% after key bank raised the price target from 30 to 26. the stock has doubled off the recent low and is less than 20% away from the 52-week high toast having a nice session. meanwhile paypal the worst performer in the nasdaq after bmo cut the price target and paypal is trading at 80 down two-thirds of 1% today the firm maintaining the outperform on the stock but paypal is coming off its worst year as a public company the shares are still down 30% from the recent highs so the

headwinds remain as they don't even get this one day pop, down two-thirds of 1% let's get to tyler mathisen for a cnbc news update. >> there is no indication that terrorism was the motive when a u-haul van struck eight people critically injuring two of them in brooklyn, new york this, morning. that's what law enforcement officials are telling nbc news, although they say the investigation is ongoing they say a man of asian descent in his early 60s it s. in custody after police chased the van for several miles and use add cruiser to pin it against a building a driver is dead after colliding with a moving train in texas in morning, at least a dozen railcars derailed but there was no one else hurt happily in that incident. and the district attorney in fulton county, georgia, says she will not appeal today's order by a judge releasing portions of a grand jury report on accusations of election interference by former president donald trump and some allies. that clears the way for the report's introduction and

conclusion to be made public on thursday, but any recommendations for or against indictments will remain sealed for now. kelly, back to you. >> i will see you soon, tyler. thank you. still ahead, the countdown to cpi is on, but my next guest says even if it helps the market to rally the rally to be short lived. and during february cnbc is celebrating black heritage through the stories of some of our teammates, contributors and leaders in business. here is robert smith >> today one of the primary barriers to accessing opportunity in the african american communities in internet connectivity reliable, affordable and fast internet access is something many of us take for granted, however, approximately 40% of black households don't have access to high speed broadband internet and approximately 80% of exist in deserts. the internet is and a necessity.

welcome back as investors look to history for

indications about our next move, they're running into both extremely bullish and extremely bearish signals. mike santoli is a look with which might have a wrong that are usually more reliable, mike. >> yeah, kelly, i mean, both market bulls and economic pessimists let's say have these traditionally almost foolproof data points on their side. when it comes to those people who are bullish on the stock market here, much different than people looking at the economic indicators because they are basically saying the inferred message of the market itself so far in january, four months off the low, up from the bear market, you have a series -- this cluster of breadth and momentum indicators that have triggered, they're narrowly defined, very specific, it's purely technical gauges of supply and demand that have lined up in a way that's caused some people to say, look, this is the kind of thing that a year later the market has always been higher or six months later the market has always been higher, the way the market behaves coming out of a major downturn

you can't say why, maybe the market is sniffing out a benign economic environment, we priced a lot in in last year's decline. that's off to one side on the other side, kelly, as you very well know and have chronicled there are all of these precursors of recession that are right in front of us on display, the deeply inverted treasury yield curve, the economic indicators getting down to a threshold which is almost always followed by recession as well as things like the fed, loan officers survey and all of these things that seem to create this high level of confidence that a recession waits for us somewhere out there. i will put out there the way to reconcile this perhaps is that we are in a strong patch for the economy, maybe the no landing scenario takes hold for a little while and the stock market can seize upon that until perhaps either the fed has to be more hawkish or the economy just simply does isuccumb.

>> no matter what the signals are indicating my next guest is getting bearish, not even a cooler than expected cpi report can help this year's gains stick around matt, we haven't seen you in a little while welcome. yeah, what is it that has you convinced that this is a head fake >> well, it's the -- i mean, if we do get the cooler cpi number the market will almost certainly bounce a little bit further but i don't know how much longer it can. the biggest thing is because of valuations it's not just price earnings ratios which can be -- people can play in the earnings, but they can't play with their sales. you look at priced sales reich joe of 2.3, that was what we saw at the top of 2000 and much higher than what we saw at the top of 2007. forget about what with he see at bottoms. every single bear market since world war ii has see a ratio

fall to at least 15 times earnings i think that the markets can't stay at this kind of level for an extended period of time kwout qe, without massive levels of liquidity in checks which we are not going to get at this point -- my point is that the big thing when it comes comes down to the economy, even if we don't fall into recession when you have a market trading at 19 times it earnings it has to come down to fair earnings. what happened in 2000 to 2003 we had one of the mildest recessiones in history yet the stock market got clobbered it started at extremely high valuation and takes longer for it to get back down. we weren't as highly -- extremely overvalued last time -- this time but i think it has -- >> mike santelli i hope that that period is indicative. some have said the reason why '07 was so much worse was because of leverage, because it wasn't straight through the

banking system and maybe we can come out with something like the dot-com example where we lose $12 trillion of wealth and the economy barely makes a ripple because of it. >> right that absolutely would be a relatively constructive outcome but one that you might hope for if in fact you think we need to have some kind of downturn i do go back to maybe relying on the idea of this is a relatively singular economic cycle, i'm not saying the rules don't apply, i'm just sayingthe sequencing seems to be off somehow, right so everyone says the markets never bottomed before you got into a recession that's true, but this market was down 25% when earnings were at their peak and, you know, the yield curve hadn't yet inverted. you had some kind of reads and lags that are very hard to decipher and i do agree if you have a dismantling of the high value nasdaq stocks and a trillion dollars goes out of crypto and all these other things happen off the to the side and it doesn't impact the real economy because it was

supported by decent consumer balance sheets, that's great, maybe that's our way out the other piece about valuations is this continues to be skewed by the largest company the equal weighted s&p 500 got down to 13 times earnings. >> wow. >> 13, 14 late last year the mid caps are still basically there. so my point is i'm not trying to make kmuss for it, but you could have two ways out, the average stock does better than the index or forward returns are just not that good. >> and, matt, that's what's fascinating. i don't think mike or i want to be the people who get up and say this time is different, but, i mean, its in some ways in many obvious ways it is so could any of these persuade you could fael less bearish if this one is just going to be a little bit different than your typical game book? >> you say it's never different this time it's always a little different this time of course. i think, again, it goes back to what happened in the late 1990s,

we had this huge influx of liquidity back then for many, many years i know art cashin has talked about this, back then that was more behind the scenes to solve the problem with y2k. when it was solved they saw their wealth in the year 2000, liquidity disappeared and the market went down this time it was a massive liquidity to save us from the pandemic which basically shut down the local economy, now that that's being pulled away it will take longer for it to unwind and it's just like it did back then. i'm not calling for the same kind of 50% decline in the s&p and 80% decline in the nasdaq because it wasn't as overvalued. i think when we compare apples to apples the liquidity situation is such that the only way we could stay at 19 times earnings is if we have more -- you know, a new qe program, nor liquidity. i don't see that in the offing even if the fed pauses at some point. >> mike, we have to go, but i don't know if you saw what dave

zerbos was arguing that we would have been in for a harder landing already if a lot of these losses weren't happening on basically the fed's balance sheet. that they bought so much of the stuff that's under water, they have the standing reverse facilities and all the rest of it are they basically undermining their own intentions to get -- to slow the economy here because of the bloated balance sheet, because they are now the buyer of last resort in the whole system. >> there's absolutely a level of risk absorption that's happened, i definitely don't put everything on that idea right there, but i wouldn't discount the fact that, look, they were late in doing anything on the balance sheet and here we are only half a trillion down. >> exactly michael santoli and matt maile, we appreciate your time. still ahead, this rare earth stock up more than 32% this year, could be pushed higher on an announcement from age maar aumar. wl reveal both of those names next when covid hit, we had some challenges. i heard about the payroll tax refund that allowed us

to keep the people that have been here taking care of us. learn more at getrefunds.com.

welcome back we have a news alert on ford's electric vehicle plants. last check had the stock up 2% phil, what's happening >> ford confirming what started leaking out over the weekend it will be partnering with the chinese ev battery firm catl to

develop and open a battery plant in south central michigan, total investment $3.5 billion. in order to make sure that the batteries coming out of this plant qualify for ev tax credits, remember, these plants can't be foreign owned in order for the batteries to qualify, here is the ownership structure, ford about own and operate this ev battery plant, catl will be licensing its technology to ford so complete ownership to ford with catl as the licensee. opens in 2026, expected to create 2,500 jobs. lots to discuss about this announcement and this agreement with catl with ford ceo jim fa farley, he is coming up next hour on "power lunch," with he will talk to him about this investment and really the elephant that's in the room, kelly, which is how confident can you be that a partnership with a chinese ev battery firm is not going to face some resistance in washington given the environment that we are in right now? >> exactly. >> we will talk with jim farley at 2:30.

ford shares just under 2% gain still ahead forget a four day workweek or unlimited vacation days as an incentive to get workers, a report says there is a systemic is shift working that will make the labor market more challenging. headlines out of washington, john kirby of the national security council holding a news conference about the downing of that fourth high altitude object over the weekend says the white house is assessing what it was but the u.s. determined china does have a high altitude balloon program for intelligence dwaergt kirby went on to say the u.s. is not flying balloons or any other craft in chinese air space pack after this. back after this.

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welcome back to "the exchange." we have seen this trend playing out over the last few months inflation is cooling and the job market is still really tight a new report from kkr suggests that will continue to be the case no matter what the fed does for more let's bring in jeff mckay. good to see you again. i wish we were here to talk about better news. and your point about how this is a structural problem means should the fed be hiking rates to fix the labor market? >> i think there are a couple points here. one is the fed uses their

interest to slow cyclical things like housing but the fed has raised rates almost 5% and the unemployment rate has gone down. >> that's crazy. >> so what's happening there >> what we see in the u.s. is lower participation. a lot of people 55 and older exiting the workforce and ultimately slower immigration. but it is not just a u.s. phenomenon this is happening in europe. china's population is contracting in japan overall, it is like we're hitting a wall a bit on the demographic story. it's been exacerbated by covid and what happened there. >> kind of brought it forward maybe. you should never say the central banks should try to fix that, right? all the things you talk about, all of this from personal experience the need for child care, care for older people that might be leaving the workforce to take care of their parents, those are big structural problems that require a lot of private and public resources to fix. so it doesn't seem like that would involve the central bank at all. >> well, there is monetary

policy ultimately we will have a higher resting heart rate to where short rates are. >> you think >> i think so because even though they can slow the goods part of the economy, which is happening right now, it is harder to do services. how do you fix this problem? one is we have been investing around fertility clinics in europe child care child care in the u.s. is four times more expensive than it is in any other part of the world the third thing is you have to get more women working and that ultimately gets back to child care and how you run your home and everybody has a different story there. >> right. >> the final thing is you need to get more people 55 and older staying in the workforce the u.s. when you look at the covid policy, the u.s. was the one country that said, okay, we will allow layoffs but we will go direct to the consumer with stimulus europe put the stimulus in the hands of the employers and their

unemployment went up less than 100 pay sis points. >> so basically we compounded the error because we paid people not to work. but in europe and japan, they paid the companies to keep the workers. >> what do keep want they want to have a job. they want to work. we have been spending a lot of time about how do you get people engaged so they want to stay there. automation, and making them more higher value added through technology. >> if you don't have enough workers, you have to add the bots are you investing for that other than thinking through the fact that rates have to be higher for longer to keep wage gains down, what are the kind of places where, hey, these could be secular growth stories? >> i think a ton of worker retraining it's been a huge investment for kkr. fertility. software companies that make supply chains more efficient the labor arbitrage between asia

and the u.s. has narrowed. how do you invest your own real estate, your own infrastructure. ultimately warehouses, that's been a big area of focus for us. the most important we can do is what we're doing to engage our employees and letting them be owners in the business what you see is the attrition goes down, satisfaction goes up. you end up with a better outcome for everybody. >> you guys as the investor in all these different companies all around the world have an interest in making sure you have good workforces to make sure you get good performance the best way is to make those workers basically shareholders of the company as well if you are doing that as such a scale, does that incentivize people enough? >> i think so. if you look at our 200 portfolio companies, we have almost one million employees. that's a major business. how do you treat them? how do you work with them? if we're in the right verticals for growth, you can drive

different outcomes there is definitely a caution in the piece we put out, but there is an optimistic story which is you need more worker training and you need to be in the verticals where people feel engaged to be in the bark worse. >> what if i said we're a couple months away from a big downturn? >> i think the data is bearing out, that employers are not going to shed employees the way they did in the past the time that it takes to get a worker, particularly in the services industry, is a lot longer so what you are seeing is less attrition. the workers may want to leave because they may want to leave because they see a better opportunity, but it will be less of a case for employers. >> other than the implications for the fed, i hope you're right. that would be a massive balance of power shift could you imagine? >> yeah. i think there is a secular change going on and the piece is worth taking a look. thanks for spending the time with us. >> good to see you again really appreciate it

with kkr coming up on ""power lunch," we have a winner that's tyler mathisen getting ready for next hour. ryan reynolds himself will be there. a will give him that trophy were looking forward to that next hour. stay with us here on the other side of this quick break thank you! like your workplace benefits and retirement savings. with voya, considering all your financial choices together... can help you make smarter decisions. for a more confident financial future. hey, a tandem bicycle. can't do that by yourself. (voya mnemonic.) voya. well planned. well invested. well protected. go. go lights. go big city lights. go spotlights. go stadium lights. emerson software helps clean energy become reliable electricity.

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hi, everybody. and welcome to "power lunch. alongside kelly evans, i'm tyler mathisen a big announcement from ford ford spending $3.5 million on a battery plant. the company's ceo about to join us for an exclusive interview. >> plus, we are crowning a stock draft champion, and the winner, guys, is winning in everything ryan reynolds. thanks to his selection of netflix, he cruised to a victory. ford, by the