WEBVTT - McDonalds E. Coli Outbreak, Boeing Earnings 0:00:02.440 --> 0:00:09.119 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:09.160 --> 0:00:13.280 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:13.360 --> 0:00:16.320 Eastern on Affo card playing Android otto with the Bloomberg 0:00:16.400 --> 0:00:19.640 Business App. Listen on demand wherever you get your podcasts, 0:00:19.960 --> 0:00:21.640 or watch us live on YouTube. 0:00:23.280 --> 0:00:25.880 Let's go right to the man himself, Michael Halen. He's 0:00:25.920 --> 0:00:28.360 a senior restaurant analyst for Bloomberg Intelligence. He's been all 0:00:28.400 --> 0:00:31.680 over busy, busy day today with the McDonald's news, with 0:00:31.800 --> 0:00:36.680 the Starbucks earnings. Hey, Mike, let's start with McDonald's here. Boy, 0:00:36.720 --> 0:00:39.440 if I were a long term shareholder of McDonald's I 0:00:39.520 --> 0:00:42.280 think I'd be buying stock here today because nothing's fundamentally 0:00:42.479 --> 0:00:46.360 changed other than this short term, really unfortunate incident out 0:00:46.440 --> 0:00:47.280 in the West. 0:00:49.080 --> 0:00:49.239 Yeah. 0:00:49.240 --> 0:00:50.840 I guess the question is going to be how short 0:00:50.920 --> 0:00:51.360 term is it? 0:00:51.800 --> 0:00:51.959 Right? 0:00:52.760 --> 0:00:56.040 Obviously it was a tragedy. Somebody's passed away. You have 0:00:56.200 --> 0:00:59.400 ten people in the hospital. That number could expand in 0:00:59.520 --> 0:01:03.480 the coming weeks. So yeah, I guess it's going to 0:01:03.560 --> 0:01:06.200 depend on when customers are going to feel comfortable going. 0:01:06.160 --> 0:01:07.200 Back to McDonald's. 0:01:07.240 --> 0:01:09.880 You know, we think, you know, we think that some 0:01:10.040 --> 0:01:13.720 negative sentiment could linger. Obviously, this company has gotten ahead 0:01:13.720 --> 0:01:17.200 of itself in terms of pricing, and customers, especially low 0:01:17.240 --> 0:01:21.240 income consumers have pushed back by visiting less this year, 0:01:21.400 --> 0:01:24.040 and so, you know, I think the timing of it 0:01:24.720 --> 0:01:27.120 was kind of bad in terms of where the stock's at. 0:01:27.240 --> 0:01:29.200 I mean, the stock's been ripping higher over the last 0:01:29.240 --> 0:01:29.760 couple of months. 0:01:29.800 --> 0:01:33.080 It makes us think that they finally kind of hit 0:01:33.200 --> 0:01:35.640 on value and we're able to track people back with 0:01:35.720 --> 0:01:39.320 this five dollars meal in the last quarter, right, but 0:01:39.520 --> 0:01:42.199 with the stock near all time highs man, that's that's 0:01:43.720 --> 0:01:46.600 you know, I guess that's a decision consumers investors are 0:01:46.600 --> 0:01:47.440 going to have to make today. 0:01:47.840 --> 0:01:50.720 So for the next earnings report out of McDonald's, do 0:01:50.760 --> 0:01:54.920 you expect any type of hit either to the sales 0:01:55.080 --> 0:01:57.640 or any earnings metrics that has to do with this 0:01:57.920 --> 0:01:59.200 equal y outbreak news? 0:02:00.040 --> 0:02:02.520 So this is gonna be, uh, this is gonna impact 0:02:02.520 --> 0:02:04.320 a fourth quarter. So we think this is gonna have 0:02:04.440 --> 0:02:08.960 a meaningful impact on the fourth quarter and it'll probably 0:02:09.080 --> 0:02:11.720 bleed into early twenty twenty five as well. We think 0:02:11.760 --> 0:02:13.840 traffic and Samsar sales are going to get it a 0:02:13.960 --> 0:02:17.679 hit because you know, I've been on TV four times 0:02:17.720 --> 0:02:20.639 already today. I'm sure all the major outlets are covering 0:02:21.840 --> 0:02:25.000 this story. And so it's gonna turn a lot of 0:02:25.040 --> 0:02:27.200 people off from McDonald's. And I think there's gonna be 0:02:27.240 --> 0:02:28.959 a lot of people out there that just may not 0:02:29.280 --> 0:02:32.120 feel safe eating in their local McDonalds. So I think 0:02:32.120 --> 0:02:35.440 it's gonna it's gonna impact sales and traffic and earnings 0:02:36.880 --> 0:02:37.959 for at least a few quarters. 0:02:38.639 --> 0:02:42.400 And Mike, aren't most I mean, like the vast majority 0:02:42.400 --> 0:02:45.720 of McDonald's. Aren't they franchised versus company owned? 0:02:46.919 --> 0:02:50.320 Yes, yeah, they're They're ninety six percent franchised. So yeah, 0:02:50.360 --> 0:02:53.480 the largest impact is gonna be to the franchisees. That's 0:02:53.520 --> 0:02:56.600 a great point, Paul. Franchisees are gonna suffer the most, 0:02:57.080 --> 0:02:59.880 you know, because McDonald's is so heavily franchised. You know 0:03:00.120 --> 0:03:04.359 that they'll take a top line impact, but there's less 0:03:04.400 --> 0:03:07.400 operating leverage in that model, right, and so because of that, 0:03:07.600 --> 0:03:09.639 their earnings aren't going to get hurt. 0:03:09.960 --> 0:03:10.079 You know. 0:03:10.800 --> 0:03:12.280 The last big example of. 0:03:12.280 --> 0:03:12.960 This was Chapotle. 0:03:13.080 --> 0:03:14.919 Chapotle owned all their stores. 0:03:14.800 --> 0:03:17.800 So when their same star sales drop twenty percent twenty seventeen, 0:03:18.080 --> 0:03:20.720 their margins got decimated, right, because there's just a lot 0:03:20.760 --> 0:03:23.079 more operating leverage in the model. So you know, for 0:03:23.240 --> 0:03:25.959 that reason, there's a lot less risk to the McDonald's 0:03:26.000 --> 0:03:29.160 story in this case versus what we saw the Chipotle 0:03:29.320 --> 0:03:29.640 back then. 0:03:30.400 --> 0:03:33.000 So Michael Paul said that he's been ordering the same 0:03:33.120 --> 0:03:36.480 thing from McDonald since high school. I imagine that when 0:03:36.520 --> 0:03:39.040 he first lets going back ordered it, maybe the burger 0:03:39.280 --> 0:03:44.440 was two dollars fifty cent. I want to talk about 0:03:44.480 --> 0:03:49.040 pricing though, How is McDonald's doing right now with being 0:03:49.080 --> 0:03:52.920 able to raise prices with a consumer that is kind 0:03:52.960 --> 0:03:55.680 of constrained by higher interest rates and inflation right now? 0:03:56.920 --> 0:03:59.160 Yeah, it's not just them, it's it's it's all of 0:03:59.240 --> 0:04:02.440 the restaurant, but especially quick service. Thirty percent of their 0:04:02.480 --> 0:04:05.320 transactions are made by low income consumers. And there's this 0:04:05.560 --> 0:04:09.080 ke shaped economy right where if you own assets, right, 0:04:09.200 --> 0:04:10.520 if you have a lot of money in your four 0:04:10.600 --> 0:04:13.000 oh one k and you own a house, and you 0:04:13.080 --> 0:04:18.000 know you're doing pretty good, right, But inflation has squeezed 0:04:18.040 --> 0:04:20.920 the hell out of low income consumers now for four years, 0:04:21.480 --> 0:04:24.720 and they're they're just shopping at the grocery store more often. 0:04:24.760 --> 0:04:26.120 They're cutting back on their visits. 0:04:27.800 --> 0:04:30.000 You know, they're they're cutting back on their checks when 0:04:30.040 --> 0:04:33.520 they do go to the restaurants, right, and so McDonald's 0:04:33.520 --> 0:04:35.840 franchise ease because they're the ones that set the pricing, 0:04:36.839 --> 0:04:39.240 you know, and everyone else in the restaurant industry is 0:04:40.000 --> 0:04:43.200 struggling mightily to raise prices on their consumers this year. 0:04:43.960 --> 0:04:46.120 And you know, and the rising you know, the seven 0:04:46.160 --> 0:04:49.320 since of fifty basis points cut commodity prices have just 0:04:49.400 --> 0:04:52.480 gone up since since September when we started pricing that in, right, 0:04:52.600 --> 0:04:55.520 and so that's a big concern for restaurant tours. 0:04:55.520 --> 0:04:56.800 I think in twenty twenty five. 0:04:57.600 --> 0:05:01.080 All right, Mike, let's switch gears. Look at Starbucks. Sbux 0:05:01.200 --> 0:05:03.559 is the ticker to put into your Bloomberg terminal stocks 0:05:03.600 --> 0:05:05.880 off about a half of one percent today. It's pretty 0:05:05.960 --> 0:05:08.920 much unchanged on the year, so badly, badly trailing the 0:05:09.040 --> 0:05:10.720 S and P five hundred, which is up about twenty 0:05:10.760 --> 0:05:11.200 two percent. 0:05:11.279 --> 0:05:11.440 Here. 0:05:12.040 --> 0:05:15.000 What's going on at Starbucks here, Michael? 0:05:17.240 --> 0:05:20.600 Yeah, they they played catch up a bit once the 0:05:21.320 --> 0:05:24.240 appointment of Brian Nickel was the hiring of Brian Nichol 0:05:24.400 --> 0:05:27.880 was announced. You know, Brian Nickel started last month, and 0:05:28.120 --> 0:05:29.400 you know, he's moving quickly. 0:05:29.520 --> 0:05:29.680 Man. 0:05:29.720 --> 0:05:33.719 He's making a lot of management changes, and he's aggressively 0:05:34.680 --> 0:05:39.960 making moves to simplify operations. You know, they're going to rationalize, 0:05:40.560 --> 0:05:44.240 rationalized menu items, make it easier to execute, and try 0:05:44.279 --> 0:05:44.680 to bring. 0:05:44.600 --> 0:05:46.400 Hospitality back to the coffee shops. 0:05:46.640 --> 0:05:46.760 Right. 0:05:46.839 --> 0:05:50.040 They want to free up their employees, their partners as 0:05:50.080 --> 0:05:53.239 they like to call them, to get back to knowing 0:05:53.360 --> 0:05:56.160 the names of their customers, right and being able to 0:05:56.160 --> 0:05:58.520 greet them with a smile and friendly service. 0:05:58.680 --> 0:05:58.800 Right. 0:05:58.880 --> 0:06:01.280 And so that's that's going to be job one, and 0:06:01.360 --> 0:06:04.200 then from there they're gonna expand on the marketing side. 0:06:04.320 --> 0:06:09.760 You know, Starbucks has historically only marketed to its rewards members, right, 0:06:09.800 --> 0:06:12.680 and Brian Nicol wants to expand that to everyone, right. 0:06:12.720 --> 0:06:14.560 And we think that's a smart plan. We think they've 0:06:14.720 --> 0:06:17.600 been under investing in marketing for a long time, and 0:06:17.680 --> 0:06:20.760 we expected to pay dividends as early as fiscal twenty 0:06:20.800 --> 0:06:21.240 twenty five. 0:06:21.960 --> 0:06:25.760 What is the company said to explain the seven percent 0:06:25.839 --> 0:06:28.520 decline in same store sales? Because before you came on, 0:06:28.640 --> 0:06:31.200 we were talking about how you have to wait in 0:06:31.279 --> 0:06:35.040 a really long line to get your Starbucks. There's less drive, right, 0:06:35.160 --> 0:06:37.920 if you're doing it. There's I guess, well maybe some 0:06:38.240 --> 0:06:41.040 teams in the store, but there's less people in the store. 0:06:41.120 --> 0:06:43.640 What have they said about really what's driving that decline? 0:06:44.400 --> 0:06:45.359 You know, part of what. 0:06:48.080 --> 0:06:49.920 New CEO Brian Nichol has said this is like it's 0:06:50.040 --> 0:06:54.240 largely about the experience. You know, it's become largely transactional. Right, 0:06:54.320 --> 0:06:57.880 They've lost that customer service feel. They've had the trouble 0:06:57.960 --> 0:07:00.720 executing the orders. You know, a big part of it is, 0:07:01.800 --> 0:07:03.600 you know, and then he also mentioned that, you know, 0:07:03.760 --> 0:07:06.680 all of these new menu items that they added to 0:07:06.760 --> 0:07:10.200 try to bring people in didn't work right. And then 0:07:11.040 --> 0:07:13.200 you know, to your point, pricing has gotten ahead of 0:07:13.200 --> 0:07:17.120 itself at Starbucks as well, and then China China, there's 0:07:17.160 --> 0:07:20.400 a huge price gap between the prices that they're charging. 0:07:20.480 --> 0:07:23.320 Sometimes they're charging three times as much as as some 0:07:23.440 --> 0:07:26.280 of their smaller competitors like Luck and Coffee and k Coffee. So, 0:07:27.400 --> 0:07:30.400 you know, prices has also been a big part of 0:07:30.480 --> 0:07:33.080 their issue, and it's something that they're they're going to 0:07:33.120 --> 0:07:33.920 address right away. 0:07:34.320 --> 0:07:38.640 You know, I've seen some crazy graphics in various articles 0:07:38.640 --> 0:07:41.880 showing the permutations of the different orders that one could have, 0:07:42.040 --> 0:07:45.240 and if you're bar barbista. There's it's virtually impossible to 0:07:45.360 --> 0:07:47.600 learn all these Is there a sense that they kind 0:07:47.600 --> 0:07:50.560 of simplified just the menu a little bit? 0:07:52.360 --> 0:07:57.840 Yeah, that was They issued a video yesterday after the close, 0:07:57.880 --> 0:07:59.840 and that was a big point of emphasis. It was 0:07:59.880 --> 0:08:02.720 like making the jobs of their barista is a lot 0:08:02.920 --> 0:08:05.640 easier and their employees a lot easier, right, And so 0:08:06.200 --> 0:08:06.840 you know when an. 0:08:06.760 --> 0:08:08.920 Employee stressed, it's very hard for. 0:08:08.960 --> 0:08:11.400 Them to provide the customer with a good experience, right. 0:08:11.480 --> 0:08:12.920 So this all flows downhill. 0:08:13.040 --> 0:08:16.040 So making the barista's jobs easier. 0:08:16.880 --> 0:08:20.280 Making it more and more enjoyable environment for them is 0:08:20.360 --> 0:08:23.360 going to flow down to the consumer, and then it's 0:08:23.400 --> 0:08:25.679 going to result in better traffic and same source sales. 0:08:26.400 --> 0:08:28.160 We don't have a ton a ton of time left, 0:08:28.280 --> 0:08:30.840 but I was curious to get your thoughts, you know, 0:08:30.960 --> 0:08:34.600 Brian Nichols said. The company said that they're pulling back 0:08:34.679 --> 0:08:38.280 this guidance because the CEO needs more time to kind 0:08:38.320 --> 0:08:41.040 of think through all this. How unprecedented is that just 0:08:41.200 --> 0:08:41.840 thirty seconds? 0:08:42.600 --> 0:08:42.720 Uh? 0:08:42.800 --> 0:08:44.040 No, it would be This is very common. 0:08:44.120 --> 0:08:47.040 Any any good CEO, we're worth his soul is gonna 0:08:47.400 --> 0:08:49.719 is going to suspend guidance. So they have more time 0:08:49.760 --> 0:08:52.200 to get their initiatives in place. This is a huge company. 0:08:52.240 --> 0:08:54.800 It's going to take a long time for momentum to 0:08:54.840 --> 0:08:56.120 start building in the right direction. 0:08:56.240 --> 0:08:58.720 And this is a wise move, all right. 0:08:58.840 --> 0:09:02.599 Michael Halen busy busy analysts today here with Starbucks McDonald's 0:09:02.600 --> 0:09:06.360 in the news. Michael Halen, senior restaurant and food service 0:09:06.360 --> 0:09:10.400 analysts for Bloomberg Intelligence, joining us from the BI office 0:09:10.520 --> 0:09:12.040 in Princeton, New Jersey. 0:09:13.640 --> 0:09:17.520 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:09:17.640 --> 0:09:20.680 weekdays at ten am Eastern on applecard. 0:09:20.160 --> 0:09:22.880 Play and Android Auto with the Bloomberg Business App. 0:09:23.040 --> 0:09:25.840 You can also listen live on Amazon Alexa from our 0:09:25.920 --> 0:09:30.559 flagship New York station Just Say Alexa playing Bloomberg eleven thirty. 0:09:31.760 --> 0:09:34.240 Family Graffeo sitting in for Alex steel On Paul Swinging. 0:09:34.280 --> 0:09:36.199 Were live here in our Boomberg Arrective Brokers studio and 0:09:36.200 --> 0:09:39.040 we're streaming live on YouTube as well. Bowing back in 0:09:39.080 --> 0:09:42.640 the news again today with some earnings not a good 0:09:42.679 --> 0:09:44.839 cash flow story, stocks down three and a quarter percent. 0:09:45.840 --> 0:09:49.839 Boeing CEO Kelly Ortberg provided an unvarnished view of his 0:09:50.000 --> 0:09:53.839 company at a crossolads absorbed by challenges ranging from huge 0:09:53.920 --> 0:09:57.080 debt to serious performance lapses that it needs to address 0:09:57.120 --> 0:10:00.160 before it can consider developing a new aircraft. Take it 0:10:00.200 --> 0:10:03.679 Down Force. George Ferguson joins US Senior Aerospace, Airlines and 0:10:03.720 --> 0:10:07.280 Defense anels for Bloomberg Intelligence. So what did you see 0:10:07.320 --> 0:10:10.240 in this earnings release, George? What did you hear from 0:10:10.480 --> 0:10:14.679 new CEO Kelly Ortberg as you think about this Boeing 0:10:14.720 --> 0:10:15.360 story right now? 0:10:16.320 --> 0:10:16.520 Yeah? 0:10:16.559 --> 0:10:18.679 So I think you touched on the most important thing 0:10:19.160 --> 0:10:21.040 we heard on the call. I don't think it was 0:10:21.200 --> 0:10:25.760 that cash burn continues into twenty twenty five, you know, 0:10:25.840 --> 0:10:27.840 that worse than the front half of the year. 0:10:28.080 --> 0:10:30.040 It's not like in the back half of the year cash. 0:10:31.200 --> 0:10:34.600 There could be some generation, but it'll finish the year negative, 0:10:35.240 --> 0:10:37.800 which really leads to me to believe, right, they just 0:10:37.880 --> 0:10:40.120 got to raise They got to raise cash here shortly 0:10:41.200 --> 0:10:44.240 because they don't want to dip underneath that ten billion dollars, 0:10:44.920 --> 0:10:47.280 you know, amount they need to run the company. I 0:10:47.320 --> 0:10:51.599 think also I found it interesting away from his discussions 0:10:51.840 --> 0:10:54.360 on you know, the culture Boeing and how it needs 0:10:54.400 --> 0:10:56.680 to change. I think everybody understands that, we all agree. 0:10:58.440 --> 0:11:01.640 I found it interesting too, you know, A couple of 0:11:01.640 --> 0:11:06.000 analysts went out of him about selling divisions, didn't get 0:11:06.040 --> 0:11:08.600 a lot out of them, I think on on selling 0:11:09.559 --> 0:11:13.200 parts of Boeing to raise money. Look, I know he's busy, 0:11:13.200 --> 0:11:15.120 he's been first couple of days. But my guess is 0:11:15.760 --> 0:11:18.240 they've looked at ways to raise cash, and you know, 0:11:18.480 --> 0:11:21.960 we didn't think there was much potential to sell big 0:11:22.080 --> 0:11:25.240 chunks and raise cash. And it didn't sound like Kelly 0:11:25.320 --> 0:11:27.640 had any of those on top of his list either, 0:11:27.760 --> 0:11:29.000 So I thought. 0:11:28.880 --> 0:11:29.880 It was the most interesting stuff. 0:11:30.160 --> 0:11:33.959 What did the CEO say about the serious performance lapses 0:11:34.200 --> 0:11:36.360 that Boeing has had over the last year. 0:11:37.280 --> 0:11:39.920 Yeah, I mean you know what I heard was, you know, 0:11:40.200 --> 0:11:44.959 the serious lapses. You know, I guess he kind of 0:11:45.640 --> 0:11:48.760 owned up to them as well. But again I think 0:11:48.800 --> 0:11:51.719 we all knew that and that and that, you know, 0:11:51.800 --> 0:11:55.599 he thought companies still had, you know, potential for a 0:11:55.720 --> 0:11:59.920 very bright future. They're part of a duopoly, large backlog, 0:12:00.880 --> 0:12:02.880 and I think he understands that they need to bring 0:12:03.000 --> 0:12:06.199 back the machinist as soon as they can in a 0:12:06.240 --> 0:12:09.440 way where they're happy and ready to build product well, 0:12:10.720 --> 0:12:15.160 and that's the path to success. And so but again 0:12:15.160 --> 0:12:17.839 I think he kind of owned again the problems of 0:12:17.920 --> 0:12:21.280 the company. But we've heard this before, right, I think 0:12:21.360 --> 0:12:23.280 now that the question is how do you change it? 0:12:23.320 --> 0:12:25.360 And you turn it around? All right? The most immediate 0:12:26.320 --> 0:12:29.160 I guess mile post for this company is settling the striking. 0:12:29.280 --> 0:12:31.480 Today is the day the rank and file out there 0:12:31.520 --> 0:12:33.280 in the Pacific northwester they are going to vote today, 0:12:33.760 --> 0:12:35.160 and he consents us how this might go. 0:12:36.720 --> 0:12:40.160 I'm not seeing any I mean, I'm I'm in the 0:12:40.240 --> 0:12:43.120 camp that it looks like he has a pretty good 0:12:43.160 --> 0:12:45.600 shot of it, because again, I think, you know, I've 0:12:45.640 --> 0:12:48.079 talked before that the union's been out now for about 0:12:48.120 --> 0:12:51.280 a month, so I'm sure they're starting to feel the 0:12:51.320 --> 0:12:54.240 pain of not having a paychecker at least a paycheck 0:12:54.280 --> 0:12:56.920 as large as they're used to coming in. They're pretty 0:12:57.000 --> 0:13:00.240 close to the terms that I think they're all looking for. 0:13:00.520 --> 0:13:02.599 The union might have been looking for forty percent. I 0:13:02.679 --> 0:13:05.800 think they'll get. You know, thirty five sounds pretty darn close. 0:13:06.200 --> 0:13:07.600 I don't know if you really want to hold out 0:13:07.600 --> 0:13:11.040 for the extra five percent. And they sweetened up some 0:13:11.160 --> 0:13:13.640 of the four oh one k matching and some bonuses, 0:13:14.160 --> 0:13:16.720 so to me, it feels like they're pretty darn close 0:13:17.320 --> 0:13:20.199 and given the timeline, since they last all work, it 0:13:20.320 --> 0:13:22.040 kind of feels like he might get it tonight. 0:13:22.360 --> 0:13:25.439 All right. So the long term challenge I think for 0:13:25.520 --> 0:13:27.760 this company, and I actually just happen to know a 0:13:27.840 --> 0:13:31.160 couple of you know, long time really right out of 0:13:31.200 --> 0:13:35.360 college engineers at Boeing, and it goes to that culture 0:13:35.400 --> 0:13:39.600 issue of you know, the engineering first, maybe not necessarily 0:13:39.720 --> 0:13:43.960 profitability metrics first, but engineering first, that there's a belief 0:13:44.000 --> 0:13:45.920 in at least by some that the company needs to 0:13:45.960 --> 0:13:49.280 get back there. A does a company believe that? And 0:13:49.440 --> 0:13:51.760 B is there any sense that they can actually do it? 0:13:53.160 --> 0:13:53.319 Yeah? 0:13:53.360 --> 0:13:56.440 I mean I do think they can. I think it again, 0:13:56.520 --> 0:13:58.920 it's going to take a wholesale I think change in 0:13:59.080 --> 0:14:02.839 attitude here. I do know people as well inside Boeing, 0:14:02.920 --> 0:14:06.079 and I hear a lot of stories about you know, 0:14:06.559 --> 0:14:09.880 non engineers running around with clipboards trying to figure out 0:14:09.880 --> 0:14:13.599 how to manage programs that are very technical, you know, 0:14:13.960 --> 0:14:18.760 in very technical programs. And so I think it will 0:14:18.800 --> 0:14:20.400 be hard to change. And I think they can't lose 0:14:20.480 --> 0:14:23.440 sight of profitability. And I think even Kelly, as he 0:14:23.520 --> 0:14:25.680 tells you we got to get back to engineering and 0:14:25.760 --> 0:14:29.120 a manufacturing culture, he's canceling the seven to sixty seven 0:14:29.240 --> 0:14:32.960 because he thinks the prospects for the future aren't as good. 0:14:33.040 --> 0:14:34.720 Right, he said, Look, this program was. 0:14:34.720 --> 0:14:37.480 Coming to an end anyways, let's just get distractions away 0:14:37.520 --> 0:14:40.160 from us so they can't lose sight of profitability. But 0:14:40.240 --> 0:14:44.360 they yeah, they have to get back to engineering prowess 0:14:44.600 --> 0:14:45.880 and manufacturing skills. 0:14:47.360 --> 0:14:52.200 The stock is down almost forty percent or over forty 0:14:52.240 --> 0:14:56.240 percent the year to date. Is there a sense in 0:14:56.360 --> 0:15:00.360 the investor community that this is we're near the bottom bowing? 0:15:02.240 --> 0:15:04.720 So look the other day, I think Monday, when you 0:15:04.840 --> 0:15:09.720 saw the announcement of you know, the next proposal for 0:15:09.840 --> 0:15:13.640 the union and a vote coming, you saw the stock move, 0:15:13.760 --> 0:15:17.160 and so I think that that alone is an indicator 0:15:17.280 --> 0:15:21.160 that you know, look on Wall Street and financial markets, 0:15:21.760 --> 0:15:25.520 hope hope is eternal. And there are some folks out 0:15:25.560 --> 0:15:27.320 there that saying think they see value in this. 0:15:28.080 --> 0:15:29.560 When do you if they do come to market with 0:15:29.640 --> 0:15:32.160 either debt or equity capital, George, when do you think 0:15:32.200 --> 0:15:34.000 that'll be now that they've got the earnings behind them, 0:15:34.160 --> 0:15:35.320 Seemingly they have the green light. 0:15:36.360 --> 0:15:39.400 I think that they want to see the vote tonight, right, Okay, 0:15:39.440 --> 0:15:43.760 So my senses it's come in late this week, next week. 0:15:43.840 --> 0:15:45.200 I think they want to see the vote tonight and 0:15:45.240 --> 0:15:47.400 figure out what they think they need. Right if Kelly 0:15:47.440 --> 0:15:49.440 doesn't get the vote, if the vote doesn't go his way, 0:15:50.000 --> 0:15:51.720 it's going to be a larger chunk coming out of 0:15:51.760 --> 0:15:52.440 the coming out of. 0:15:52.440 --> 0:15:55.800 The high see you're saying, yep, makes sense, all right, George, 0:15:55.840 --> 0:15:58.880 thanks so much once again, and for give us a 0:15:58.920 --> 0:16:01.520 few minutes of your time. George fur He's a senior aerospace, 0:16:01.600 --> 0:16:04.160 defense and airlines animals for Bloomberg Intelligence. He's been our 0:16:04.240 --> 0:16:07.400 go to voice here on really the last several years 0:16:07.440 --> 0:16:10.040 on Boeing when they've had these you know, really serious 0:16:10.600 --> 0:16:13.640 safety issues and doors you know, flying off airplanes and 0:16:13.720 --> 0:16:16.440 things like that, cracks in the wings, and so they 0:16:16.520 --> 0:16:18.440 really need to, obviously, as they've been saying for a 0:16:18.480 --> 0:16:22.040 long time, get that focus back on quality. But now 0:16:22.080 --> 0:16:24.400 they've got the I guess the shorter term issue of 0:16:24.760 --> 0:16:27.880 managing this strike here, which again is well, I guess 0:16:27.920 --> 0:16:30.280 into its fifth week right now. So they will have 0:16:30.400 --> 0:16:34.280 a critical vote the machinists tonight. Will they support what 0:16:34.360 --> 0:16:37.440 their union leadership has agreed to with the company and 0:16:37.680 --> 0:16:40.880 end their strike. So again a key key vote today 0:16:41.160 --> 0:16:43.800 for the striking workers and for the company, and for 0:16:43.920 --> 0:16:45.800 the industry. And you think about all the supply chains 0:16:46.240 --> 0:16:49.520 that fall back from Boeing, all the suppliers that supply Boeing, 0:16:49.760 --> 0:16:52.200 they're pretty much on standby waiting for this thing. So 0:16:52.360 --> 0:16:54.440 it just affects a lot more people and a lot 0:16:54.480 --> 0:16:57.480 more companies than just Boeing. So keep an eye on that, 0:16:57.520 --> 0:17:00.000 and that'll be breaking news tonight in Bloomberg. Will certain 0:17:00.080 --> 0:17:01.080 they cover that as well. 0:17:02.560 --> 0:17:06.400 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:17:06.560 --> 0:17:09.520 weekdays at ten am Eastern on applecar. 0:17:09.080 --> 0:17:11.800 Play and Android Otto with the Bloomberg Business app. 0:17:11.960 --> 0:17:14.760 You can also listen live on Amazon Alexa from our 0:17:14.840 --> 0:17:19.200 flagship New York station, Just say Alexa Play Bloomberg eleven thirty. 0:17:20.560 --> 0:17:22.520 Let's talk about the market. Chare Carol Pepper joined his 0:17:22.560 --> 0:17:25.040 founder and CEO of Pepper International, Carol, A lot of 0:17:25.080 --> 0:17:28.480 folks have been climbing this wall of worry about the stocks. 0:17:28.520 --> 0:17:30.200 Book get the S and p F twenty two percent 0:17:30.400 --> 0:17:33.080 this year. What are you telling people who are concerned 0:17:33.119 --> 0:17:35.560 that are saying, oh boy, this market's too far over 0:17:35.720 --> 0:17:36.240 its skis. 0:17:36.280 --> 0:17:36.880 What do you tell them? 0:17:37.840 --> 0:17:40.080 I tell them relax, First of all, it's not too 0:17:40.160 --> 0:17:41.080 far over as skis. 0:17:41.160 --> 0:17:42.879 There's a lot of good news in the market. 0:17:43.080 --> 0:17:46.040 And really, as you guys know, I manage money for 0:17:46.119 --> 0:17:48.479 people with over one hundred million dollars, and we're starting 0:17:48.520 --> 0:17:52.000 to plan what should we be doing post election, post 0:17:52.080 --> 0:17:54.560 the next rate cup, because that's really where you want 0:17:54.600 --> 0:17:57.760 to look. Just like Wayne Gretzky said, don't skate to 0:17:57.760 --> 0:17:59.720 where the puck is, skate to where it's going to be. 0:18:00.040 --> 0:18:03.119 So we need to stop being focused on the election 0:18:03.359 --> 0:18:06.840 and terrified whoever wins it will be a fareom free election. 0:18:07.160 --> 0:18:09.520 There will not be another January sixth, I don't believe. 0:18:10.080 --> 0:18:11.920 So that means we really should be focusing on what 0:18:12.080 --> 0:18:14.200 is January twenty five going to look like and what's 0:18:14.240 --> 0:18:16.680 going to happen after the next rate cut, And that's 0:18:16.720 --> 0:18:19.160 all good news. The market is pricing in the fact 0:18:19.160 --> 0:18:21.960 that we will have lower rates, the election will be 0:18:22.040 --> 0:18:24.760 finally out of the way, so whoever's in will know 0:18:24.960 --> 0:18:27.400 how to position ourselves and there will be a relief rally. 0:18:27.920 --> 0:18:30.560 So you want to be looking during these fearful days, 0:18:30.600 --> 0:18:32.680 these worried days, what can I buy that I don't 0:18:32.720 --> 0:18:34.879 have that will do well in the good times, because 0:18:35.040 --> 0:18:38.640 believe me, the good times are coming no matter who wins. 0:18:38.760 --> 0:18:41.680 I think we'll have a really strong first quarter next year. 0:18:41.800 --> 0:18:45.040 And so let's position for that, which to me means growth. 0:18:45.200 --> 0:18:48.480 Let's look at growth again because you know during fear days, 0:18:48.560 --> 0:18:51.720 growth is what goes down. You see the nasdak drifting 0:18:51.800 --> 0:18:54.200 lower when people get scared, and then when people are excited, 0:18:54.640 --> 0:18:57.720 the nasdak shoots up. So when it's down, this is 0:18:57.760 --> 0:18:59.399 the time to look at your portfolio and say what 0:18:59.440 --> 0:19:01.360 am I under invested in? How do I get into 0:19:01.440 --> 0:19:04.240 the strong names that will do well when we're past 0:19:04.320 --> 0:19:04.760 the election? 0:19:05.880 --> 0:19:08.320 So what does growth mean to you? Is that mag 0:19:08.440 --> 0:19:12.120 seven or is that taking on a new I guess definition? 0:19:12.200 --> 0:19:12.720 Do you do? 0:19:12.760 --> 0:19:13.200 You prescribe? 0:19:13.320 --> 0:19:16.000 No, I think it's bag seven. I think it's in video. 0:19:16.119 --> 0:19:17.919 I think it's things that are going to be working 0:19:18.240 --> 0:19:21.240 as we go into the future. So that means artificial intelligence, 0:19:21.840 --> 0:19:24.639 big tech, The big leaders are going to stay strong 0:19:24.720 --> 0:19:28.280 and get stronger. Names like Starbucks will come back, McDonald's 0:19:28.320 --> 0:19:31.520 will recover from this blip of you know, bad onions, 0:19:32.200 --> 0:19:36.040 and so I always say be bet on the big 0:19:36.200 --> 0:19:39.160 growth names because that's really where you're going to see 0:19:39.200 --> 0:19:42.240 the turbo charging when things are going well. And don't 0:19:42.320 --> 0:19:45.520