long-term story. they have total revenues of 18% to 20%, margins are expanding by 100 basis points and the free cash flow growth is 20%. >> we'll keep our eye on the market the dow has been down, right now, down more than 300. "the exchange" is now. i'm in for kelly evans here's what is ahead no landing, the fed needs the economy to soften, but today's retail data showing no signs of it we look at why this could become a problem for the fed and how you want to be positioned in this market right now. this as the banks are back in focus. fitch warning of possible downgrades ahead, including jpmorgan we will debate that. and mortgage rates surging over 7% home builder sentiment dropping

sharply. have buyers reached their limit on how much they're willing to pay for a home but we begin with the market >> john, bottom line, we're just off the lows for the day, down about 0.9% for the s&p and dow jones industrial average we've been down 9 out of 11 days on the s&p 500 if we close lower today. so that is very noticeable the dow industrials, being held up largely by defensive names. some of the other sectors like banks and energy are on the weak side the nasdaq down there, 0.8%. we're down about 5% off of the recent 52-week highs of the nasdaq when you get more than 5%, the technicians start noticing tech has been an underperformer. the dow movers here, take a look the good news is -- johnson & johnson holding up wells, defensive names merck, proctor and gamble holding up.

caterpillar has been weak, energy stocks coming off of their highs after a terrific run. take a look. i think a key chart is the bank stock. they're starting to exhibit negative patterns, what we call head and shoulder patterns there's key corps, it was $10, went to $13. and now it's back down to $10, that's certainly a negative sign for people trying to figure out whether or not they want to accumulate these stocks in the long-term basis. this is true for the bigger ones this is a mid-level regional banks. you see the head and shoulders look there for goldman sachs goldman sachs was $360 it's been trending down here, back toward where is it was in the beginning of the quarter again, that's a head and shoulders chart there. so what's the problem right now?

the market is positioned for a soft landing, so what would cause the biggest problem is if that soft landing got messed around what would mess around suddenly strong growth numbers and higher yields, which is what we are getting those ten-year yields have been moving to the upside that's been a major problem. steve liesman has been talking about the no landing scenario, meaning interest rates keep moving up, and the economy remains much stronger than people anticipated that is indeed what is going on. >> we will talk to this steve liesman of whom you speak. retail sales coming in stronger, spending for the month of july up 0.7%, while spending, excluding autos, the prices of autos coming down, that came in at 1%. and while stronger retail sales might seem great for the

economy, steve liesman argues that the fed needs softer data to prevent a no-landing scenario steve joins in with julia coronado steve, you know, bob teased you up right there retail sales were overall strong, but the consumer was weaker, it was the pros continuing to spend. so is there some underlying consumer weakness in there, too? >> there could be. you want to be careful, because you don't want to take home depot's results as those for the nation, or the nation's results for those of home depot. you wait until you get a bunch of other retailers i'll tell you a couple of things let me repack before i unpack here, john, which is that if you look at what's happened to gdp estimates for this quarter, the

atlanta fed gdp now tends to be on the high side at the beginning of quarters when they start off. but still it's running at 5% mark zanldy just emailed me and told me his number is 4.3% the cnbc update, a much more sober look at what's going on is 2.5% even that number is high i'll explain why if you take a look at where the fed thought they were going to be this year, they had a 1% number built in for their average of all the fed numbers and forecasts. call it the last four quarters, 2.5% on average. why is that important? because it's above potential that is not creating slack, and in the absence of slack, it's hard to be confident that inflation will go down and stay down unemployment, same thing they were looking for 4.1% now they're get ting 3.5%. by my calculations, unemployment

has to be 4.9% for the rest of the year for the rate to afternoon 4.1 by the end of the year so a lot of work to get there. >> so this really flies in the face of what so many, you know, some economists, but expecting rate cuts in the relatively near future, right? i mean, if the economy is still pretty strong, then we might not be talking higher than now for longer, but we're talking remaining high for perhaps a longer time than some in the market have been expecting >> that's what a no-landing scenario does. it does seem on the table the possibility of rate hikes, and they are up a little bit the market is still not buying into the probability of a rate hike this year it's now 35% and also keeps on the table these higher rates for longer, and we start to deteriorate the case for near-term rate cuts,

which are built in for the spring of next year. the fed could lack the confidence that inflation is not only going to go down but stay down if the economy is running with that potential. >> so julie, what do you do here as you play this market, do you accumulate bonds that you plan to hold on to for a while if you're not going to have rates coming down for a while now? >> well, i think the higher for longer scenario is where we seem to be landing here in terms of the data tracking. you know, you've got the consumer is benefiting from this emaculate disinflation they got a boost to purchasing power because inflation is coming down without labor market weakness it's not the job of the fed to kill that, that should be good news they've been wrong about inflation before

it might take less economic weakness to bring inflation down that would be a productivity story that's the key for the earnings season now. are companies telling us that yes, topline growth is moderate, certainly a mott more moderate than it was the last couple of years. but on the other hand, there seems better operational efficiencies to reduce labor market turnover. these are the things that could open up a new phase of the expa expansion, although it would mean that the fed could keep rates higher for longer. they would probably hold here, and we're seeing the long end of the curve really push upward and that can take its toll on the economy over time. >> so julia -- >> that's expensive. >> julia, so often when we talk about stock ticking, we're talking about what to buy. maybe too often. maybe we should be talking about what to sell a week ago would have been a good time to sell the regional

banks. today, the kre is down 3%, around $45, it was up near $49 not long ago after the rally up from the $39-ish range so given everything that's happening in the market right now, maybe it's less clear what to buy but do you have any thoughts on what to sell >> look, i think the greatest vulnerabilities in the economy right now are not so much in the u.s. or the u.s. consumer. it's about the global backdrop the data we're seeing out of china, the data in europe, suggests while the u.s. is a bright spot, there's a lot of weakening in global momentum so companies and industries that are really reliant on that global growth story are probably going to feel the pain of that in the coming fronts i think also, you know, housing is a sector that's gotten a bit

stuck with people not wanting to sell their homes because they have low-rate mortgages. we haven't had the price discovery that we need to have if rates are going to stay here, housing is not an equilibrium. so we'll have sort of the probably fits and starts to this housing adjustment, as we adjust to the reality, or at least what seems right now like the reality of higher rates this cycle >> yeah, with inventory so low, it's hard to see how this unravels julia, steve, thank you. now to another downgrade that could be coming to the banking industry fitch warning it might be forced to cut the credit ratings of dozens of bank, including big ones like jpmorgan our next guest says while credit ratings matter, the timing of this warning and the reasons cited for it are off gerard cassidy joins me with

more i mean, the reasons are off, maybe the timing is off, but giving where valuations are, could this be a signal that they're not going to get a lot richer >> it's very interesting, because the valuations today for the banks are quite inexpensive. when you look at it, you have to remember that due to the accounting regulations, the banks are taking out the underlying bond losses in their available for sale portfolio, and those are government guaranteed securities or government securities. so there's no credit risk. it's a duration issue. the book values will certainly grow as those unrealized things come back into book value. what's also interesting is they are concerned, fitch, about rising rates, and should the fed

be at its terminal rate for fed funds, which may be the case in september, then it's quite positive for the banks, because banks do quite well. >> it's taking a while for banks to start passing along to depositors the benefits of those rates. how much of a discrepancy is there between how well off the largest banks are, and some of the regional banks i know there's a huge spread on the different sizes of the regionals. but even some of the larger regional banks here that perhaps there's going to be active and consolidating the regional banks, what's the risk there >> it are be interesting, because for all of the banks, whether there's a regional and money set bank, when the fed, in the last four tightening cycles, when they reached the terminal rate for fed funds, meaning it doesn't go up any higher, within six months, the deposit rates

for these banks stopping going higher however, the cash flows coming off of the securities portfolios and loan portfolios, continue to be reinvested at higher yields than the current portfolio that they're coming to, and as a result, the margins improved so therefore, i think you're going to be -- should the boeing yield curve be accurate and you see fed fund rate cuts next year, the subsidy banks are the biggest beneficiaries, because they have passed on the rate increases to their customers already. >> you say when the fed starts cutting, we were just talking about that with steve liesman and julia. it might not come as soon as some hoped when you factor that in with the commercial real estate issues that we see with office and multifamily residential, suspect

that a danger on the books of some of these regional banks that makes this different for what we have seen in previous cycles >> well, it depends. again, higher for longer, as your prior folks were talking about. that's quite positive for the banks. once we get the terminal rate, and let's assume for a moment that 5.5% to 6% through all of '24, that is very positive for the banks, because the cost of funding stops going up, but the yields continue to rise. >> but what about for the borrowers who have these loans out on commercial real else state that will need to roll them over. if it's bad for them, it's not good for the banks for long, right? >> yep so great point now let's go to the commercial real estate borrowing. if the borrower has a mortgage

on the property taken out five years ago, now they have to refinance in a 7% market, it's more difficult but the banks don't foreclose on properties like that they work with the customers, the customers have to come up with maybe more cash for equity as the down payment. or they have to build out different tranches of debt on commercial real estate with the big defaults, because they're not cash fle owing, tha' a big problem. most of those are not in the banking industry, but the shadow banking industry that's where the problems are happening right now. >> is that something to watch here then, is that supply of commercial real estate on the market, if people throw their hands in and say more and more are willing to take the hit here

and do this for less than we paid and supply comes on to the market then all of a sudden, a lot of people, including some banks, have a problem, right? >> i would say that's fair what you are going to see as those properties are foreclosed upon, they're going to be sold at fire sale prices. already there are alternative asset managers that are building up their war chests, dividing these properties at 40, 50 cents on the dollar. they're refurbish them and be in competition. that will be an impact but that doesn't happen over six months that's a multiyear kind of change but will it bay on property valueships and the banks yes. since the last collapse, we don't see that happening in the commercial real estate market, or the banks

>> i guess we'll see what happens first, significant rate cuts or supply of some of this real estate coming out of the market gerard cassidy, thank you. >> thank you, sir. coming up, berkshire hathaway betting on the fortunes but the threat of higher waves continues to weigh on sentiment. we'll speak with the first vice chair of the naahb who is himself a builder. plus, stocks are not red that is party why our market cap says being selective matters now more than ever he'll join us with his top picks ahead. "the exchange" is back after this my cpa told me i wouldn't qualify for the erc tax refund, so i called innovation refunds.

their team of independent tax attorneys will work with your cpa to determine if your company is eligible. [whip sound] take the first step to see if your small business qualifies. you got this. let's go. gobble gobble. i've seen bigger legs on a turkey! rude. who are you? i'm an investor in a fund that helps advance innovative sports tech like this smart fitness mirror. i'm also mr. leg day...1989! anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq-100 innovations. i go through a lot of pants. before investing carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com.

nice footwork. investment objectives, risks, charges, expenses man, you're lucky, watching live sports never used to be this easy. now you can stream all your games like it's nothing. yes! that's what i'm talking about. [ cheers ] running up and down that field looks tough. it's a pitch. get way more into what you're into when you stream on the xfinity 10g network.

welcome back to "the exchange." mortgage rates holding above 7%, and now they're back front and center for the home builders diana? >> well, john, builders are blaming high er mortgage rates for a drop in buyer sentiment. in august, it fell 6%, the first drop in seven months and the lowest since may when it last rose to 50, which is the line

between positive and negative sentiment. rising mortgage rates, high construction costs due to a lack of workers, and not enough buildable lots are the big issues but the 30-year fixed hit 7.26% today, according to mortgage news daily rates have been over 7% for several weeks, making home buying less affordable of the builder's index, current sales conditions fell to 57. sales expectations dropped four points to 55 buyer traffic is down six points to 34, that one well into negative territory the builders also said they're going back to incentives again the share of builders cutting prices rose in august to 25% from 22% in july and the share of builders using all types of sentiment rose to 55%, higher than july, which was 52%. but still lower than december of last year, when it was 62%

and just one more factoid. the demand for fha loans to buy new homes is continuing to rise, meaning first-time home buyers are trying to get into new construction, john >> makes sense, i guess. in some cases, new is more available, if not more affordable >> in all cases. now for more perspective on where the builders go from here with a builder joining us is carl harris, from the national association of home builders carl, how long can this go on with the builders giving incentives to lower prices enough to make up for these high interest rates >> well, thanks again for having us always good to talk about home building and home builder issues we're hoping it's not going to be going on much longer.

we saw the hmi go down every month last year. good to see it rise this year, but with what's going on with the fed and the rising rates and the cost of financing, it's pretty tough so we're really hoping that it's not going to be strong we're hoping the fed chair will pause for a while and let everything kind of smooth out a bit. >> even if we get a pause for a while, but these rates stay pretty high, which is the scenario we're talking about now, how far into '24 can this situation last, if we get more inventory on the market, and some sellers willing to accept lower prices, might that change the overall dieynamic in the market >> it could. but we have seen a lot of people wanting to stay in their homes longer

so we have seen the new home market take a larger share of the houses available for sale. so we captured a big part of the market, new home sales versus existing homes, because people are just unwilling to give up that 2.9% financing and think that they're going to go for 7.26%. >> but that's what i wonder, one of the ways that this could start to unwind is that a few more people say okay, i'm going to put my home up for sale and maybe we'll down size and that will make it feel better so we'll have to pay more than we wanted, but we'll get a smaller place and make due if that inventory comes on the market and people have a choice, whether they go new or used, i imagine certain builders are going to be at a disadvantage. is that going to matter more based on the tier of how much the homes cost or more based on geography? >> it's been really tough the last few years since the pandemic, we have seen

prices rise on new homes 36% a lot of that has to do with the availability of products, appliances, an available workforce. builders have had a tough time, so we are going to have to compete. so wherever the sales occur, it opens up a home for somebody else >> what about the airbnb, verbo, home away factor it seems like there are a certain number of homes out there that are not occupied all the time the owners of those homes expected to get cash flow off of them and keep them they don't have to keep those home it is the market isn't going to be friendly to them is that something you think about? is it a regional issue >> it is a regional issue, but it is a market driven issue.

for those that purchase those for whatever reason, either investment or to live in themselves, we're really about creating housing choices for all. >> how is your home buyer different right now? who is buying a house home is it more people who are upgrading because their pay has gone up and their family has grown, versus they just want more space, is it more necessity driven how has that shifted over the past five years? >> we've seen it shift you've seen a lot more down sizing or right sizing, meaning that we have seen people who have capitalized on the great appreciation that occurred in the marketplace, and now they want to have a house that's best suited for them. and then there are the growing families that need the five bedrooms, three-bath home. but in the last couple of years, the increase has been on the

cash buyer, so the cash buyers are running center now so we are looking at those who are happy go for the financing or the 30 years. >> that's when the rates come back in. carl, thank you. >> thank you coming up, new filings revealing which big name investors want in the big tech rally last quarter we'll break down the trend and trades and here is a look at the sector heat map with all 11 groups in the red. energy, materials and hexcng iba aer "t ehae"s ckft this go better... together. burger and fries... soup and salad. like your workplace benefits and retirement savings. with voya, considering all your financial choices together can help you make smarter decisions. voya. well planned. well invested. well protected.

georgia governor brian kemp fired back at former president donald trump after he announced a conference in response to the latest indictment. kemp posted a screen shot on truth social, and the governor wrote on x that the georgia election was not stolen, and that there is no evidence of election fraud the u.s. is seeing a record increase in homeless people this year, as the pandemic fades. "the wall street journal" reviewed data that showed an 11% jump, the biggest recorded uptick since the government started tracking numbers in 2007 non-profits and government agencies say the surge highlights pressures around the country, including rising costs, lack of affordable housing, and the opioid crisis. youtube will start removing false claims about cancer treatments as part of its

medical misinformation policy. the platform will prohibit content that promotes cancer treatments proven to be harmful, ineffective, or content that discourages viewers from seeking medical treatment. this is the latest update to their policies, which prohibits claims about vaccines and abortions. >> bertha, thank you coming up, the market's wall of worry is growing according to the next guest but he sees a path for the s&p 500 to hit 5,000 by next summer. we'll ask how we could get there, and how to position, next

my cpa told me i wouldn't qualify for the erc tax refund, so i called innovation refunds. their team of independent tax attorneys will work with your cpa to determine if your company is eligible. [whip sound] take the first step to see if your small business qualifies.

(fan #1) there ya go! that's what i'm talkin' about! (josh allen) is this your plan to watch the game today? (hero fan) uh, yea. i have to watch my neighbors' nfl sunday ticket. (josh allen) it's not your best plan. but you know what is? myplan from verizon. switch now and they'll give you nfl sunday ticket from youtubetv, on them. (hero fan) this plan is amazing! (josh allen) another amazing plan, backing away from here very slowly. (fan #1) that was josh allen. (fan #2) mmhm. (vo) for a limited time get nfl sunday ticket from youtubetv on us. a $449 value. plus, get a free samsung galaxy z flip5. only on verizon.

welcome back to "the exchange." stocks lower today with more scrutiny of u.s. banks and more

growth concerns out of china both are items on my next guest's wall of worry, which he says have been better than feared so far. and while we may need to pull back, the rally is real. for more on where we go from here, how you want to be positioned, thilet's bring in m next guest great to have you, jeff. so let's talk about these worries here 12%, you think we could be up a year from now. you're going to have to convince me on this one >> i don't think it's a straight shot to up 12% at all. in fact, yeah, we've been one of the few voices, john, it's not positive, i think it's measured. we've had a 4500 mprice target o the s&p 500 by year end 2023 going into the year we felt that way.

i earnings are going to implode and we'll have a major recession, that was the story. the way we saw it, it wasn't great, but it was middle of the road, and there was not evidence of that. so our message was, if the prior three years have taken you to well above your allocation target to stocks, cut back to neutral or normal. don't sell down below that don't buy into the dip, but go back to normal and enjoy the ride that we thought would lean towards that 4500 level >> are you still at 4500 for year end you just expect a really great start to 2024. >> i do. i think we didn't see it as swift as it was. i wouldn't have expected to be at 4500 by now but we are. so we enjoyed the ride, and we also said to folks, don't just run the value in defense like a lot of folks were suggesting have that blend of growth and value. but yeah, i think we're probably

going to just trade water and active selection will be very important if you are looking for returns and positive territory for the balance of the year in any meaningful way but through 2024 mid weayear, wr thinking 4800, 5,000 >> i don't see how you get there without big tech remaining strong or even getting stronger, and it's so overweight versus where it normally is what keeps that going? >> you know, big tech, we're neutral on big tech. we have outperformed in the strategy so far, our most aggressive strategy, pretty handsomely by being a little underweight in big tech, the mega eight broadly, technology looks really good consumer discretionary also has been on fire >> so the russell has to run like crazy is this in effect a bet on small

and mid caps you still think the s&p is up 12% a year from now? >> you can argue -- there's all kinds of statistics that can support that point i can tell you of a number of stocks, about 40, 50, up 100% this year, and they ain't apple. >> give us some specifics. >> okay. so there's just a plethora of them you have tesla fits in that group, but outside of the mega eight, you have decker, bookings, royal caribbean. people are cruising again, for goodness sake, and they are spending, drinking, eating, having a good time so there is a lot within tech. i would call out pal alto, synopsis >> they have earnings coming up. >> they do as apple and these others are looking for designing their own chips, synopsis fits right in

there as a growth driver >> would you be buyers of both >> i would i would. we own them in full disclosure service now would fall in that category adobe, i mean, these are all names that are -- that i think are positioned very well for the drive for activity, the drive for green, cloud, all those things are not going away. >> what do you do with financials, if anything. we're cautious on financials and have been. i would argue that if you believe the u.s. has not been a sufferer in an uncomfortable recession, a lot of folks would say let's go to cyclicals or financials i would say be very careful. go to industrials. there is a capital spending boom if you want cycle, if you want economically tethered growth, go to the industrials and materials. we loved some names there.

>> all right give me two real quick >> united rental and easy. >> appreciate it great to have you. still ahead, some of the biggest investors made some big-tech moves in the last quarter. a closer look at how they played the tech rlyal and ai mania is next no big deal? go on... well, what if you partner with ibm and red hat, use a hybrid cloud solution to connect data across clouds, then analyze all that data with watson. okay, but this needs to meet our... security standards? yup. compliance standards? mm-hmm. so they get the insights they need... yup. in real time... check. ...to make quick decisions? check. aaaand check. that's the solution ibm and a global bank created. what will you create? ibm. let's create.

(upbeat music) - [narrator] what if there was a hearing aid that could keep up with you? (notification dings) this is jabra enhance select. it's a smart hearing solution that makes hearing aids more convenient and less expensive.

it connects with your phone so you can stream calls and music. with jabra enhance select's premium package, better hearing doesn't have to start in a doctor's office. it starts with a free online hearing test you could take almost anywhere, so you can get your hearing aids custom programed for you and delivered in days. from there, you can fine tune your settings with your remote audiology team seven days a week, so your hearing aids work when it matters most. (notification dings) in fact, more than 95% of enhance select premium customers report hearing better with their friends, family, and colleagues. with jabra enhance select, you can get the same advanced hearing aid technology and professional care you expect from a clinic at a fraction of the cost. for a limited time, get $300 off select hearing aid models. visit jabraenhance.com.

welcome back hedge fund managers reviewing their second quarter portfolio moves overnight, but despite the recent tech rally, the world's richest investors seem to be mixed on the sector. leslie dives into those trades for us in today's tech check >> the tech spider etf xlk gained 15% during the second quarter. many of the hedge fund managers rose higher, adding to their big-tech stakes in the three months through june.

apaloosa boosted exposure, persian square added to its alphabet stake third point, though, paired back its stake in alphabet, opting for large buys in amazon, taiwan semi, nvidia and microsoft according to hfr, it was the best performing strategy group among the 28 strategies they studied. tech funds returned 3.4% in july alone, knocking out gains of 15% year-to-date that's three times better than the afternoon performance of a huge fund. going along with tech has been the most crowded trade for the fort month in a row. so it's a popular trade, but also a crowded trade, so maybe

the good times are due for some kind of pullback >> i'm wondering who is thinking differently here versus, you know, following the crowd. so they're buying nvidia, alphabet, apple, who wasn't? i guess the question is, where do they go from here but b, that was unexpected and maybe smart at the same time >> tiger global historically has been a very tech oriented firm the top buy for the quarter was apollo they were selling out of big tech, the biggest sales were all the major big tech names biggest buy was apollo also thinking differently, but keep in mind these are snapshots, we don't know how managers are positioned on the short side

but we do sometimes see puts so michael bury did have a sizable put position so maybe a little bearishness there. it could also be a portfolio protection my colleague reached out to him but i don't believe she's heard back from him. >> betting against the s&p overall is a bet against big tech >> yeah, exactly value for those trades is about $1.6 billion combined. again, we don't know if that's necessarily hedging individual stocks or if it's an actual directional play or bet on where he sees those two indexes going. >> we just heard from somebody who thinks the market can still run from here, and somebody who

is betting against it. still ahead, co-barlt, nickel, lithium, all critical. but a new report out shows the demand, courtesy of the a "inflation reduction act" might be challenging to meet because of the act "inflation reduct act. that's next. my cpa told me i wouldn't qualify for the erc tax refund, so i called innovation refunds. their team of independent tax attorneys will work with your cpa to determine if your company is eligible. [whip sound] take the first step to see if your small business qualifies. (man) what if my type 2 diabetes takes over? (woman)e first step to see if what if all i do isn't enough? or what if i can do diabetes differently? (avo) now you can with once-weekly mounjaro.

mounjaro helps your body regulate blood sugar, and mounjaro can help decrease how much food you eat. 3 out of 4 people reached an a1c of less than 7%. plus people taking mounjaro lost up to 25 pounds. mounjaro is not for people with type 1 diabetes or children. don't take mounjaro, if you're allergic to it, you or your family have medullary thyroid cancer, or multiple endocrine neoplasia syndrome type 2. stop mounjaro, and call your doctor right away, if you have an allergic reaction, a lump or swelling in your neck, severe stomach pain, vision changes, or diabetic retinopathy. serious side effects may include pancreatitis and gallbladder problems. taking mounjaro with sulfonylurea or insulin raises low blood sugar risk. tell your doctor if you're nursing, pregnant, or plan to be. side effects include nausea, vomiting, and diarrhea which can cause dehydration and may worsen kidney problems. (woman) i can do diabetes differently with mounjaro. (avo) ask your doctor about once-weekly mounjaro.

♪ welcome back to "power lunch. tomorrow marks the one-year anniversary of the inflation reduction act. to mark the occasion, s&p global out with a comprehensive report on the ira's impact on demand for critical minerals like lithium, nickel and cobalt s&p globals dan jurgen is here with a first on cnbc look at the report and the challenges to meet that demand but first our pippa stevens with a look at some of the companies hoping to fill the gap pippa? >> jon, one year after the reduction inflation act, the battery belt stretching from michigan and

ohio through kentucky and down into the carolinas and the southeast. companies are rushing to build out u.s. supply chains for electric vehicles and energy storage. spurred by tax incentive and manufacturing credits, as well as domestic content requirements first, you have lithium minors and processors they're investing heavily into u.s. operations. then there's battery manufacturers like panasonic, lg energy solution. all of which have announced u.s. factories. the automakers themselves like tesla, ford and gm are also now playing a more active role by partnering with minors and suppliers directly in an effort to source supply but battery factory can be built much faster than a new mine and some are warning there won't be enough materials to support ambitious storage goals. >> so what's going to happen

here is it going to cause an increase in the price of these minerals or is it going to mean that they have to change the scope of the law? >> well, the parameters around the free trade agreement is really important because it means that we can source minerals from outside the united states but i think a lot of changes are going to happen to happen not just in the u.s. but structurally if we look at china, they control more than 60% of the lithium refining supply chain. the reality is that the costs there were cheaper, so they have a lock on a lot of these markets. it's not just the u.s. it's also europe and other players also looking for alternative supplies certainly in the near-term, we are still waiting on clarity from the treasury department what qualifies as a entity of concern. right now the industry is still waiting on the final guidelines and then going to take next steps from there. >> a lot of details to work out here pippa, thank you let's talk through some of them turn to s&p globals new report

projecting demand for lithium, nickel and cobalt is going to increase 23 fold by 2035 the report also highlighting, as pippa just mentioned, that meeting that demand will be a challenge under the ira's sourcing requirements. dan jurgen, welcome. so, this reminds me of no child left behind, right i used to cover education. it's like you have these standards that look good on paper, but they actually get harder and harder to meet over time and eventually something breaks that what's going to happen here >> i think actually you got it i mean, we count over $400 billion of commitment to investment to which pippa showed that on batteries. that means billions of dollars additional demand for mineral which is are the building blocks of the energy transition and the challenge here, asyou say, is that the sourcing requirements are on top of the increased demand and the sourcing requirements are basically meant to reduce

dependence on china. so, what's going on right now, figure out, how do we -- we only can do things with free trade countries. do we get a quasi free trade agreements with europe and japan and other countries that will enable some flexibility so that these very rigid requirements don't lead to a shortage. >> on the surface the thing to do is bet, okay, these minerals are going to be in great demand. so surely the price of them is going to go up so, you know, trade commodities and bets that the price will go up this is a global market. not everybody has these same restrictions so, is that necessarily going to happen is the price of these minerals necessarily going to rise? >> well, let me put it this way, certainly going to be pressure on supplies. one of the things in our study, we looked at 127 mines built we saw that basically if you started today a major mine for minerals, it would not come

online until 2040s so that tells you if you're going to have all this demand increasing, there's going to be pressure on supply and that means competition. not only with china, but also with europe. and we have to work around these fta things in order to achieve these goals. so that's why we say, it really is a big challenge getting the rules to function is going to be very significant to be able to attain these goals. >> how great is the risk that we're wrong about what demand is going to be like in 12 years could technology shift in such a way that some of these minerals are less in demand, not that there's no demand for therjs but less in demand than we today expect >> that's a great question i think with any forecast it's a very good thing to say, what will you be wrong about. so what would make this -- these kind of expectations number one, would be much slower economic growth. disruption in the world economy to break down of the globalization. number two, would be certain bli

a drive for recycling. that will take time and money to do it and permitting issue so the thing that you're pointing to is innovation because certainly what's out there is find an alternative solution and i think even as, you know, automakers and others, where do you get your supplies in people will look what are the alternatives how else do we work around this? this may come from left field and surprise us. but we are dealing with a fairly short time frame and, innovation generally takes longer than that the incentives are there. >> let's talk about lowering incentive risks here the best bet would be on companies that invested in mines that are going to come online within the next three to five years and probably the technology and demand picture might not change that much over the near term. so regionally and even when it comes to companies, you have a sense of who has the most mines

for these critical minerals that are about to come online but not online yet >> i wouldn't want to get into specific companies but i think what you've seen the big miners are focussing on optimizing output from existing mines. they're going to be look at acqui acquisitions, add ones and so forth. there doesn't seem to be -- there's not a big appetite, maybe this goes to your point, to really start big new mines somewhere in the world because also these involve long negotiations with governments, permitting is not only an issue in the united states, it's an issue around the world so, i think it's going to be people who optimize. i've been with smaller miners in the united states. i've been meeting with them recently in washington wonder ie any countries on the bubble might be encouraged to make a

free trade agreement based on this we have to leave that for another time dan yergin, thank you. speaking of materials, do not miss our exclusive interview to talk about the bid making to buy u.s. steel that's 4:00 p.m. eastern on "ermeovti." that will do it for "the exchange." "power lunch" starts after this quick break.

together, we built something truly beautiful in the true iconic notion of what america is all about. ( ♪♪ ) this is our task. this is our mission. we have a clear focus, and we have the ability to be agile and innovate. it takes years of dedication to get us to this milestone. it is all because of you. never doubt that a small group of thoughtful, committed citizens can change the world. it is the only thing that ever has. ( ♪♪ ) to be a woman leader, it's not so easy. but it's easy if the passion

and the love is coming from your heart. the new york stock exchange is the symbol of what america is all about. the potential of capitalism, the potential of the american dream. the only way you can move a society forward is a true expression of freedom. ( ♪♪ ) ( sfx: stock exchange bell ringing ) ♪ welcome to "power lunch," everybody. i'm tyler mathis kelly is out with me for the hour is courtney reagan good to have you coming up, a fitch in time fitch putting banks on notice that even the likes of jp morgan may get a downgrade. moody's downgrading multiple names in the space but is fitch too late to the party here plus, shop till they drop? the newest data showing the consumer is holding strong, but for how much