Speaker 1: This is Bloomberg business Week inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business, finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Speaker 2: Don't call it a come back, all right.
Speaker 3: So we were talking, certainly the risk trade is on,
Speaker 3: and it does feel like we're seeing fairly broad based
Speaker 3: buying in today's trade. But if you take a look
Speaker 3: at Boeing, Tim, it's definitely a different tone. Boeing shares
Speaker 3: are definitely down.
Speaker 4: Yeah, six and a half percent as we speak. Investors
Speaker 4: offloading shares, they're absorbing. The shares are a possible fallout
Speaker 4: from this weekend's accident, bowing stock slumping the most in
Speaker 4: more than a year, this after its seven thirty seven
Speaker 4: Max nine model has been temporarily grounded by authorities following
Speaker 4: a January fifth incident that was Friday night involving a
Speaker 4: recently delivered plane. So, Carol, here's what we know about
Speaker 4: the company and its biggest the biggest US exporter, the
Speaker 4: seven thirty seven Max aircraft is a crucial cash cow
Speaker 4: for Boeing, and we continue to report out and digest
Speaker 4: the details.
Speaker 3: Yeah, we certainly do. So let's get to it with
Speaker 3: Bloomberg News aerospace reporter Julie Johnson. She has been on
Speaker 3: it for us throughout the day, in the morning, all
Speaker 3: of it as it was happening on Zoom from Chicago.
Speaker 3: So Julie, a lot coming out. What's the latest in
Speaker 3: terms of what we know about exactly what happened?
Speaker 5: Okay, so just to review the facts really quickly, super
Speaker 5: close scary call Friday night with the Alaska airplane where
Speaker 5: it's called a door plug, but it's a section of
Speaker 5: fuselage blew out a few minutes after the plane took
Speaker 5: off from Portland. Fortunately nobody was killed, nobody was sitting
Speaker 5: next to the section of bailed or it might have
Speaker 5: been a different store. So what we don't so that's
Speaker 5: we know that, and what we don't know is why
Speaker 5: and how the NTSB is on that case. But it
Speaker 5: has revived all these very damaging narratives around Max, the
Speaker 5: Boeing's but working so hard to put to rest following
Speaker 5: two crashes in twenty eighteen and twenty nineteen and a grounding.
Speaker 5: And this is their prize plane. I mean, it's really
Speaker 5: the driver the engine for the company. And so the
Speaker 5: reputational hit is significant for Boeing and it probably is
Speaker 5: going to be longer lasting with this incident.
Speaker 4: What do you mean by that? Longer lasting than this incident?
Speaker 4: Do you mean that? Because I just got to tell
Speaker 4: you from personal experience. I when we covered as you did, Julie,
Speaker 4: the seven thirty seven Max issues following the two crashes
Speaker 4: just a few years ago, Wow, there were so many
Speaker 4: people who were like, I'm never going to fly on
Speaker 4: one of those things, never ever, ever, And now three
Speaker 4: different variants of the seven thirty seven Max are taking
Speaker 4: many different flights every single day without a consumer seeming.
Speaker 5: To care, right, And so I'm not actually thinking about
Speaker 5: the just to be clear, I'm thinking more from a
Speaker 5: regulatory perspective and customer sales and also Boeings. This is
Speaker 5: a huge year for Boeing in terms of getting its
Speaker 5: factories in order, and this also plays into this damaging
Speaker 5: narrative to customers that Boeing's got a flawed product and
Speaker 5: quality problems that they can't get a handle on. And
Speaker 5: do I really want to go down that path with
Speaker 5: this aircraft? I mean, that's where it's damaging.
Speaker 4: So one more point there, real quick, Julie. Yeah, do
Speaker 4: these airlines really have a choice when it comes to
Speaker 4: the air line they buy. There are two companies that
Speaker 4: make these, right, that make planes like this, Airbus, right,
Speaker 4: and there's Boeing And Airbus has the A three twenty
Speaker 4: family that competes with the seven thirty seven Max. But
Speaker 4: I mean, aren't the switching costs incredibly high, like totally
Speaker 4: training new pilots and everything.
Speaker 5: Yeah, they are, they are. And and also Airbus is
Speaker 5: sold out through the end of the decade by and large.
Speaker 5: Boeing large, you know, has a big backlog on this
Speaker 5: plane as well, So switching is not an easy thing.
Speaker 5: But a lot of airlines have mixed plans, and so
Speaker 5: maybe you start to tilt your orders more to air
Speaker 5: Bus down the line. So that's that's that's the big,
Speaker 5: big unknown. In terms of this actual incident, there are
Speaker 5: some very intriguing clues that the NTSB is sorting through,
Speaker 5: and including a main maintenance visit before the plane went
Speaker 5: into service. So, I mean, and so often with these accidents,
Speaker 5: what we think is the conventional wisdom, you know, a
Speaker 5: day or two afterwards winds up being not the case
Speaker 5: at all. So I the inspections are underway on the
Speaker 5: you know, dis fleet, and they could be back in
Speaker 5: the skies within a day or two. And this is
Speaker 5: and so from that perspective, this could start to receive
Speaker 5: very quickly too.
Speaker 3: But it's the reputational, yeah, which is a huge which
Speaker 3: I want to get into. But help help us be
Speaker 3: smart because you know, you know this world. So we
Speaker 3: hear seven thirty seven Max and you know, the hairs
Speaker 3: of my necho up and I think about, you know,
Speaker 3: the two deadly crashes, the seven thirty seven Max crashes
Speaker 3: about five years ago, right, that totally shook confidence in
Speaker 3: the company. And I think I remember Tim and I
Speaker 3: like when they came back and were like what plane
Speaker 3: is it?
Speaker 6: Like?
Speaker 3: Do we want to be on a seven thirty seven Max?
Speaker 3: This is a Model nine? How big? I mean, this
Speaker 3: is such an important, as we said, a crucial cash
Speaker 3: cow for Boeing. How big is it in terms of
Speaker 3: Boeing's business it's balance sheet? How big is it in
Speaker 3: terms of the airlines that we watch so carefully that
Speaker 3: that need new planes or have new planes of the
Speaker 3: ILK if you will, among their fleet?
Speaker 5: Yeah, And I'm so sorry. I should have those numbers
Speaker 5: at my fingertips, and I don't. But in terms of
Speaker 5: contributing to revenues of profit, I think it's in the
Speaker 5: neighborhood of thirty percent of you know, the companies. The
Speaker 5: money that keeps Boeing running comes through this aircraft.
Speaker 3: And that's for uh yeah, keep going, sorry, but.
Speaker 5: Yeah, anyway, it's far and away Boeing's biggest sellers is
Speaker 5: a really important plane on the consumer perspective. I'm a
Speaker 5: little bit jaded because I've just seen this play out
Speaker 5: time and time again over the years, and everybody says, oh, Max,
Speaker 5: no way, you know. Or before it was the seven
Speaker 5: eighty seventh Dreamliner, for a very brief period, we had
Speaker 5: some some hinky crashes involving some airbus planes, you know,
Speaker 5: before social media really got going. But the fact is
Speaker 5: that you offer people better pricing and they quickly, I
Speaker 5: hate to say it, but the concerns seemed to fade,
Speaker 5: and you're most people cannot tell, you know, Steff on
Speaker 5: board a plane. They can't tell an airbus from a
Speaker 5: Boeing from an old generation seven thirty seven to a manage,
Speaker 5: they all they look and feel verysome If you're a traveler.
Speaker 3: So that's they're not Stanevik who like before we even
Speaker 3: go together, if we're flying somewhere for work is like,
Speaker 3: you know, we're flying a bohl blah blah blah blah,
Speaker 3: and he'll know all the details and it'll be like
Speaker 3: where you want to sit and where you you do
Speaker 3: You're it's.
Speaker 4: Really well, you know, when you're on like a plane
Speaker 4: like this. The airbus is a little wider and if
Speaker 4: you're an economy you can really feel it. Anyway, we
Speaker 4: can get Julie and I can talk about that offline,
Speaker 4: which we do sometimes. So Julie, Uh, when you when
Speaker 4: you think about in all seriousness here, I was really
Speaker 4: surprised to hear you say that this these could be
Speaker 4: back in the skies this week. I mean, Paul Sweeney
Speaker 4: is set to take one of these planes to Aruba
Speaker 4: later this week. He talked about it on air earlier
Speaker 4: today and I said, no way, Paul, there's no way
Speaker 4: they're going to fly this on Friday. Am I going
Speaker 4: to be eating my words?
Speaker 5: Yeah?
Speaker 3: I think so wow?
Speaker 5: He just uh they So the design that's in question
Speaker 5: right now, this door plug or this this component that's
Speaker 5: that's being scrutinized. It's been in Boeing planes since two
Speaker 5: thousand and six and and there's never been a failure
Speaker 5: like this. And there was another plug on the plane
Speaker 5: that was intact. So that's code for an installation problem
Speaker 5: or a maintenance error. And it's if it were a
Speaker 5: design flaw, and the NTSB is looking at everything, by
Speaker 5: the way, So but if it is, if it were
Speaker 5: design flaw, that would be a lengthy grounding and and
Speaker 5: it's not looking that way. FAA, you know, has signed
Speaker 5: off on these maintenance procedures that are only h it's
Speaker 5: like four to eight hours.
Speaker 4: So do you think it do you think it could
Speaker 4: be coincidental that it's on A seven thirty seven Max
Speaker 4: and not if these plugs have been used or these
Speaker 4: plugs only used on seven thirty sevens, they're not.
Speaker 5: Just used on seven thirty seven's. Airbots also has similar
Speaker 5: plugs their own design on the larger A three twenty family. Okay,
Speaker 5: so it's it's not a it's not some crazy new concept,
Speaker 5: but it could be a if.
Speaker 4: It's let's say it is a maintenance issue very briefly,
Speaker 4: a maintenance issue or an installation issue, then then it's
Speaker 4: kind of coincidental that it's on a seven thirty seven
Speaker 4: Max and not on a different plane.
Speaker 5: Yeah, yeah, exactly exactly. And and then the questions are also complicated,
Speaker 5: and it's like, well, Boeing tests all of its aircraft really,
Speaker 5: you know, for everything, and the FAA is right over
Speaker 5: looking over their shoulder. FAA signs off on everything on
Speaker 5: a new plane right now, their inspectors are on site.
Speaker 5: So it's like, well, how on earth did you miss
Speaker 5: something that caused this depress pressurization. And so so if
Speaker 5: it turns out that it's Boeing, they're going to have
Speaker 5: to go back and have a real come to Jesus
Speaker 5: moment and with their procedures. If it's not a bowing moment,
Speaker 5: if it was, you know, happened after the plane left bowing,
Speaker 5: then that's a totally different matter. And it's just a horrible,
Speaker 5: horrible coincidence.
Speaker 3: Well, certainly something I know you'll be all over Bloomberg
Speaker 3: News aerop Aerospace Report. Julie Johnson on ZU from Chicago.
Speaker 3: Shares of Boeing by the way down six point six percent.
Speaker 3: This is Bloomberg Radio.
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Speaker 3: I feel like we should be playing It's the End
Speaker 3: of the World as we know it, because it.
Speaker 4: Just feels like it might be on the list there.
Speaker 3: The amount of risks that are out there are just
Speaker 3: kind of freaking me out here in this new year.
Speaker 3: And I'm not like someone's like, h chicken little, but
Speaker 3: it just feels like we just talked about climate change
Speaker 3: and it's expected to get hotter than even last year.
Speaker 5: Yeah.
Speaker 4: And then there's, of course the geopolitical concerns that we've
Speaker 4: been highlighting as we closed out twenty twenty three and
Speaker 4: kicked off twenty twenty four. I mean, you know, look
Speaker 4: at shares of Mask today falling because they denied that
Speaker 4: they've reached an agreement with Huthy's to stop attacking ships
Speaker 4: going through the Red Sea.
Speaker 3: The business impact already happening.
Speaker 1: Yeah.
Speaker 3: When it comes to risks over all, engaging and analyzing
Speaker 3: their impact, the Eurasia Group is always a go to
Speaker 3: and the companies report on top risks predictions for twenty
Speaker 3: twenty four puts to a year of grave concern. So
Speaker 3: let's get into it and to some of the risks
Speaker 3: with Eurasia Group Chairman Clip Kupchin. He is at the
Speaker 3: Bloomberg News Bureau in Washington, d C. Cliffs. So nice
Speaker 3: to have you here with Tim and myself. I want
Speaker 3: to say welcome and happy new year, but I feel
Speaker 3: like it might not be a good year. There's lots
Speaker 3: of reasons out there. Is that a fair assessment? And
Speaker 3: is it more than any other year in recent time?
Speaker 3: We just dealt with a global pandemic a few years ago,
Speaker 3: you know, go back in eight we had a global
Speaker 3: financial crisis. We've had some really big things that we've
Speaker 3: had to deal with as an individual, as an American,
Speaker 3: as a global citizen.
Speaker 6: I think what separates this year from recent years is
Speaker 6: the number of wars going on. We have two kinetic
Speaker 6: wars going on Ukraine and Israel Amas and that's a
Speaker 6: lot of wars. I think we have to have ourselves
Speaker 6: why to kinetic wars. But in addition, and the way
Speaker 6: we like to think about this report, there's really three wars.
Speaker 6: It's the two I've mentioned and about to begin is
Speaker 6: the US against itself, which in many many ways will
Speaker 6: be the world's more serious war because it pertains to
Speaker 6: the world's low remaining superpower. Three wars with no guard rails,
Speaker 6: three wars that we think have no leaders that can
Speaker 6: really fix the problem, and three wars where the two
Speaker 6: sides don't even necessarily agree what the war's over. And
Speaker 6: that's really pertains the United States. So yeah, I think
Speaker 6: risk is a thing that we always worry about, but
Speaker 6: this year it's got a real edge to it.
Speaker 4: Does it feel like investors are ignoring the risk out there?
Speaker 4: I mean, we're almost at all time highs on the
Speaker 4: S and P five hundred right now.
Speaker 6: I think on the potential for escalation in the Middle East,
Speaker 6: there's a bit of a head and the sand thing
Speaker 6: going on. I mean, for instance, I would be surprised
Speaker 6: if the US did and hit the Houthi's pretty soon
Speaker 6: in Ena. Wow, how's Iran going to react? You know,
Speaker 6: they'll think they'll do much, but I sure hope they don't.
Speaker 6: I think that's one aspect in which investors have their
Speaker 6: head in the sand. But the bigger one is what's
Speaker 6: about to go on in this country. We're about to
Speaker 6: see President Trump get the nomination in a couple of months,
Speaker 6: and then you know, we're in a new era. We're
Speaker 6: in an era where he gets the media, he controls
Speaker 6: the funding, he controls the TV. You'll pressure on Biden
Speaker 6: to do something on Iran because Trump will be to
Speaker 6: the weight of the right of him on Iran. The
Speaker 6: Ukrainians are going to wonder if they're ever going to
Speaker 6: see another dollar from this country again, which I think
Speaker 6: is a very good question. So I think the main
Speaker 6: risk that at least over the medium term, you US
Speaker 6: isn't going to tank anytime soon. But if we see
Speaker 6: another Trump presidency, I think everybody's going to ask themselves,
Speaker 6: is the US good for its promises? Is the US
Speaker 6: the haven the safe haven for money that has spent
Speaker 6: since the Second World War? Those kinds of questions They're
Speaker 6: going to be.
Speaker 3: Honest, Cliff, I've got to say, you know, this whole
Speaker 3: idea of the US, you know, basically at war with
Speaker 3: itself against itself, and really the division and questioning American democracy,
Speaker 3: And I do wonder what happens on the other side.
Speaker 3: And we're a young nation still, right, and I look
Speaker 3: at some of the older countries, there are oftentimes where
Speaker 3: they're questioning kind of what is going on internally? Is
Speaker 3: there something from history that you think we can draw
Speaker 3: upon to kind of figure out and say, well, this
Speaker 3: is kind of normal in a young country's history, and
Speaker 3: try to figure out and maybe make some conclusions about
Speaker 3: where it goes from here.
Speaker 6: I can't think of a democracy. Look, I mean this
Speaker 6: is kind of unique. You know, we have a guy
Speaker 6: running for president in a democracy who tried to curtail
Speaker 6: to be nice to him democracy. Last time we saw
Speaker 6: this movie, I think the only analogy, and it's not
Speaker 6: from distant history, but what happened to Hungary after Victor
Speaker 6: orbon really got his mits around it? Well, you know,
Speaker 6: he's Hungarian democracy? Ever going to rebound? Polish democracy? Did
Speaker 6: Hungarian democracy? I don't know. I don't know. So there's
Speaker 6: a real question as to how much we can absorb,
Speaker 6: how much damage the US can take the second time around.
Speaker 6: I don't think history is a very good guy, because
Speaker 6: this is really very ahistorical and rather unpresidented.
Speaker 4: What would be your message to politicians because I think
Speaker 4: I don't know.
Speaker 3: I think that people.
Speaker 4: Within Trump's party, I've been very surprised to see the
Speaker 4: way that they've rallied around President Trump after January sixth,
Speaker 4: twenty twenty one. There are many many politicians out there,
Speaker 4: including those running against him, who would support him to
Speaker 4: be the nominee. What would your message be to these
Speaker 4: folks who studied at some of the nations in the
Speaker 4: world's most premier colleges and universities, who have law degrees,
Speaker 4: who see no problem with another Trump administration.
Speaker 6: First, I would say, don't take what you have for
Speaker 6: granted anymore. This is a very fragile democracy that was
Speaker 6: invented by a bunch of geniuses. When you think of
Speaker 6: how they sort of controlled human nature and the greed
Speaker 6: that's within all of us, but set up these hunks
Speaker 6: of balances, and no, we can really get away with it.
Speaker 6: But it's fragile, and it's fragile to a huckster, to
Speaker 6: a really good politician like Donald Trump, who can you know, kirk,
Speaker 6: who can feed, who can feed scared people and make
Speaker 6: them induce them to vote for him. So I would
Speaker 6: tell politicians to to sort of get real and be
Speaker 6: very jealous of what you have, first of all. But secondly,
Speaker 6: I think the rest of us here have to really respect.
Speaker 6: Wouldn't be the word, but be very cognizant of what's
Speaker 6: going on in this country. That you know, I go
Speaker 6: home to Wisconsin. When I go home to central Wisconsin
Speaker 6: and talk to people and of the vote for Donald Trump,
Speaker 6: and these are church going, god fearing, good people. Give
Speaker 6: them their money. I give it all back in the morning.
Speaker 6: They're very honest people. They're scared, they're misguided, they get
Speaker 6: bad information. But I think all of us have to
Speaker 6: sort of see this guy's legitimate and then sort of
Speaker 6: look within ourselves and say, how did we get here?
Speaker 6: Because we're not a very good were not a very
Speaker 6: good place.
Speaker 3: I felt that way about the uprising and the siege
Speaker 3: at the Capitol, Like I want to understand these people,
Speaker 3: Why are they doing this? Why are they I kind
Speaker 3: of want to understand why someone thinks that way. I
Speaker 3: don't walk around in their shoes, and they don't walk
Speaker 3: around in my shoes, but I kind of want to
Speaker 3: understand how do we do that?
Speaker 5: Though?
Speaker 3: Where people in terms of how they get their information,
Speaker 3: it is often a chosen source, one source, which can
Speaker 3: lead to kind of this vacuum, and it can potentially
Speaker 3: be a vacuum of misinformation.
Speaker 6: Well, we all got to make an effort, and I
Speaker 6: didn't you join you today, come on to radio or
Speaker 6: tell stories. But I'm going to share one quick second
Speaker 6: one with you. So I was on vacation during COVID.
Speaker 6: It was in West Virginia, and I called the Central
Speaker 6: Committee of the Republican Party of Xyz County. It was
Speaker 6: a real county and it was a real conservative and
Speaker 6: I kept my fifteen year old son. We met with
Speaker 6: him for lunch and it was the most fascinating three
Speaker 6: hours I think I've had in a long long time.
Speaker 6: These far right Republicans felt like they had succeeded from America,
Speaker 6: felt like nobody in Washington cared what they thought about.
Speaker 6: And they said I was first person in Washington that'd
Speaker 6: ever seen. And I think there's an actual conversation to
Speaker 6: be had somewhere. Nobody's trying. These aren't necessarily bad people,
Speaker 6: they're scared people. But I think there's got to be
Speaker 6: some kind of trust between these two poles that are
Speaker 6: just widening and widening and widening. There's got to be
Speaker 6: someplace in the middle where we can have a conversation.
Speaker 6: Because we all are decent people, we all come from
Speaker 6: the same founding fathers, but nobody's trying right now. We're
Speaker 6: all just getting further and further into our nativistic corner.
Speaker 6: So the trend line's not good. I don't think it's inevitable,
Speaker 6: but it's not good.
Speaker 3: Well, you may have not come on to tell stories,
Speaker 3: but we certainly wish you did, because we feel like
Speaker 3: it's very realistic now in terms of what's going on
Speaker 3: and really resonate in place to some of the risks.
Speaker 3: As you say, the number one risk that you guys
Speaker 3: have identified as the US versus itself, which is just wild,
Speaker 3: come back soon, come back. So do you think we'll
Speaker 3: get twenty seconds come out in a better way or
Speaker 3: it's fifty to fifty at this point.
Speaker 6: Well, let me say that there are really good stories
Speaker 6: out there, and Mexico after O Shinbaum is going to
Speaker 6: be I think a really good president of Mexico, mode's
Speaker 6: going to get re elected. India is headed in a
Speaker 6: good direction. There are good stories, and I think we
Speaker 6: should you know, next time I come back, maybe we
Speaker 6: can do the good news because there's good news.
Speaker 3: All right, Okay, promise, promise you open invitation, so appreciate it.
Speaker 3: You raise your group chairman, Cliff Kupchin joining us from
Speaker 3: our bureau in Washington, DC.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 1: Just say Alexa play Bloomberg eleven thirty. Oooh the wear
Speaker 1: that outside is frightful, but the fire is so delightful.
Speaker 1: And since we've no place to go, let it snow,
Speaker 1: let it snow, let it snow.
Speaker 3: Well, De Martin for you, everybody, let it snow, Let
Speaker 3: it snow. You might have played that around the holidays,
Speaker 3: but you know, we thought maybe a storm this past
Speaker 3: weekend might have brought us a little snow. It didn't
Speaker 3: for those of us here in the New York metro.
Speaker 3: So maybe further out west in New Jersey, but not much.
Speaker 3: Our ground's certainly too warm and to make anything stick.
Speaker 3: But it's very different him from what I grew up with,
Speaker 3: and I grew up just outside New York City.
Speaker 4: I know it bums you out.
Speaker 3: You love snow, I love big time.
Speaker 4: Also skiing out west, you saw the pictures from December.
Speaker 4: There was very little snow in places that typically have
Speaker 4: lots of snow. We saw selloff in Velle Resorts stock
Speaker 4: last week actually as after a downgrade as a result
Speaker 4: of that. Bloomberger Opinions. Mark Gonglof notes that storms will
Speaker 4: keep happening, but the long term trend is warmer winters
Speaker 4: with less snowfall, which will bring severe consequences such as
Speaker 4: water shortages and lost economic activity. We love reading Mark,
Speaker 4: even though sometimes Mark it's not so happy, but we
Speaker 4: always end on a high note.
Speaker 3: Okay.
Speaker 4: Mark is Bloomberg Opinion edaries with us here in our
Speaker 4: Bloomberg Interactive Brookers Studio. You can read Mark's story and
Speaker 4: more from Bloomberg Opinion on the Bloomberg or at Bloomberg
Speaker 4: dot com slash Opinion. It's not pretty, Mark, because when
Speaker 4: you think about snowfall, it's connected to a lot when
Speaker 4: it comes to our ecosystem and our economy.
Speaker 7: Yeah, I'm the opposite of Carol. I really can't stand snow.
Speaker 7: But the more I studied snow, the more I realized
Speaker 7: how much we're going to miss it when it's gone.
Speaker 7: It does so many things for the economy. It's about
Speaker 7: a twenty billion dollar industry, the sort of ski, winter snow,
Speaker 7: winter sports, adventure industry, tourism. But beyond that, it also
Speaker 7: the snowpack in the mountains. It melts slowly and so
Speaker 7: it provides key water sources during like the spring and
Speaker 7: summer months, and particularly out west where they're maybe going
Speaker 7: through a drought or this will provide them the water
Speaker 7: they need. So there's not a lot of snow, they
Speaker 7: don't get that much water. It's important for biodiversity. Plants
Speaker 7: and animals love it. Winter wheat needs it, fruit and
Speaker 7: nut trees need it. I could go on and on
Speaker 7: about all the things that snow does beyond just look
Speaker 7: good and bring back, you know, feelings of nostalgia. But
Speaker 7: it's also it is kind of a bummer just generally,
Speaker 7: I think, just to see it change, and it has
Speaker 7: already changed over the decades. There's just less snow generally,
Speaker 7: the snow seasons are shorter, and that trend looks set
Speaker 7: to continue well.
Speaker 3: And yeah, I mean we used to build igloos and
Speaker 3: you know, tunnels, and it's just kind of crazy. We
Speaker 3: just had so much snow and it stayed with us
Speaker 3: for weeks, if not months, it didn't go away. Having
Speaker 3: said that, you know, this idea, I always think about Mark,
Speaker 3: you know, years ago, people just you talk about water
Speaker 3: being some precious important commodity that we could run out of,
Speaker 3: and I feel like, maybe not, but it feels like
Speaker 3: we are certainly having conversations around that for certain areas
Speaker 3: of either our country or just around the world.
Speaker 7: For sure, the Colorado River and California and so much
Speaker 7: Panama Canal. Well, there's that, you know, And I've just
Speaker 7: been talking about the US so far. But this also
Speaker 7: applies to Europe. We've seen rivers running dry in Europe.
Speaker 7: They also depend on a lot of snow melt. This
Speaker 7: goes all the way across to China, but particularly in
Speaker 7: the northern hemisphere. And unfortunately, the colder the places are,
Speaker 7: the warmer, the faster they're warming, and winter is warming
Speaker 7: faster than other seasons, and colder places are warming faster.
Speaker 7: Now some of these colder places will still get snow
Speaker 7: because one of the weird things about climate change is
Speaker 7: that the atmosphere holds more water because it's generally warmer,
Speaker 7: and so if you're far far north and you get
Speaker 7: a storm, you'll get dumped with a lot of snow.
Speaker 7: The Great Lakes end up Chicago get end up Dump
Speaker 7: with a bunch of snow because the Great Lakes won't freeze,
Speaker 7: but that causes lake effects snow to be heavier. So
Speaker 7: it does weird things. But overall the trend is less
Speaker 7: of this stuff, and so we need to plan ahead
Speaker 7: for that. We need to figure out how we're what
Speaker 7: we're going to do.
Speaker 3: And we're doing that right. Well, sorry, we'll starcasm, right.
Speaker 7: Yeah, I mean unfortunately. I mean we are to some extent.
Speaker 7: I mean we're in the Colorado River area, those states
Speaker 7: and the federal government are trying to bang out agreements
Speaker 7: to use less water. Arizona is, you know, taking present
Speaker 7: care of its precious water. So there are on the
Speaker 7: local level things that we're trying to do, But the
Speaker 7: biggest thing that we need to do is to sort
Speaker 7: of put the brakes on heating up the planet. And
Speaker 7: that is moving a little more slowly.
Speaker 1: Are we doing that?
Speaker 6: Mark?
Speaker 7: Are we heating up the planet? Are we not eating?
Speaker 7: Are we putting the brakes on heating We're we're tapping
Speaker 7: the brakes gently when we really kind of need to
Speaker 7: be slamming them. I think, yeah, well, you know.
Speaker 3: I was just thinking about, like Mark story than we
Speaker 3: that other story that you and I like we're floating
Speaker 3: around with that, how scientists are already getting ready for
Speaker 3: a record breaking heat once again this year.
Speaker 4: Yeah, So Mark, connect that to us to climate when
Speaker 4: we think about temperature and weather and climate, because I
Speaker 4: think there's a lot of confusion out there, Like if
Speaker 4: there's a big storm this year here in New York,
Speaker 4: guarantee you'll have people on Twitter who are saying and
Speaker 4: politicians even who will come out and say yeah, Trump
Speaker 4: Trump has done this in past years saying, oh, where's
Speaker 4: you know, where's the global warming? Yeah, that sort of thing.
Speaker 4: So to make the connection for us talk about the trend.
Speaker 7: Yeah, and I've gotten them in my email inbox all
Speaker 7: day to day. You know, hey, it's snowed here by me,
Speaker 7: I mean that the thing is that you know, it
Speaker 7: snowed like a foot in upstate New York. It's it's
Speaker 7: still going to snow next. This year could be the
Speaker 7: hottest year on record because partly because we have an
Speaker 7: El Nino weather pattern going on, the weather is crazy
Speaker 7: and it's unpredictable, and climbing is very chaotic and complex.
Speaker 7: So you have to look at very long term trends,
Speaker 7: and so yes, we could hit a record high in
Speaker 7: temperatures this year and then go back down next year
Speaker 7: when Lenina comes back or whatever, and we could have
Speaker 7: big snowstorms and the these things will keep happening. But
Speaker 7: the thing is that they're going to happen less often
Speaker 7: and the weather will become more chaotic. But you can
Speaker 7: look at the long term trends and see less snowpack,
Speaker 7: less snow when it falls, heavier snow when it falls
Speaker 7: because it's just wetter, more rain. You can look across
Speaker 7: the United States and see more rain than snow. Just
Speaker 7: on and on with those things that you see, and
Speaker 7: the global temperature is also creeping up steadily when you
Speaker 7: look at the averages over the long term.
Speaker 3: I think the trends are so clear. So when you
Speaker 3: think about policy and smart policy, how does it have
Speaker 3: to be developed? Is it state by state or does
Speaker 3: there need to be kind of a federal You look
Speaker 3: at the United States to say, hey, folks, and there
Speaker 3: is I'm sure, but I mean even in a deeper
Speaker 3: way of saying, we've got to think about this as
Speaker 3: a nation in terms of where water supplies are or
Speaker 3: where there aren't or where there's going to be significant changes.
Speaker 7: Yeah, I mean it's a whole of economy kind of solution,
Speaker 7: and you know, you have to have government providing some incentives.
Speaker 7: You know, the green energy industry, you know, renewables evs,
Speaker 7: they all have a certain amount of momentum and they
Speaker 7: are growing, and there is the if we want to
Speaker 7: get toward more positive stuff. You know, there is possible
Speaker 7: for like hockey stick like growth in these things, but
Speaker 7: they often need assistance or encouragement from bigger governments. And
Speaker 7: that could be state governments like California, which is obviously
Speaker 7: would by itself would be one of the biggest economies
Speaker 7: in the world, but the federal the US government, all
Speaker 7: of these things are sort of working together to sort
Speaker 7: of provide these incentives to help get private money involved
Speaker 7: too for these solutions.
Speaker 3: Does it make you worried, Well.
Speaker 7: For sure, yes, it makes me worried. But again, I
Speaker 7: guess if I'm trying to be optimistic about it, it makes
Speaker 7: a lot of people worried, and it's making a lot
Speaker 7: more people worried now than it did maybe ten years ago.
Speaker 7: And so you are seeing more money and more attention
Speaker 7: going to these things, and when people when people see
Speaker 7: the effects firsthand, when we see wildfire smoke in the
Speaker 7: streets and we you know, we can't breathe and we're
Speaker 7: running out of water. People, it sorts to focus people's minds,
Speaker 7: sort of focuses people's minds on solutions.
Speaker 4: You talk about that a lot, Carol, that you know,
Speaker 4: over the summer, seeing those red skies like with something visceral,
Speaker 4: you know. But I don't know if it makes us
Speaker 4: change our behavior, maybe it makes us change the way
Speaker 4: we vote. I don't know.
Speaker 3: I still don't have an av Yeah.
Speaker 4: Yeah, but you also didn't buy a new car in
Speaker 4: the least.
Speaker 3: That's true.
Speaker 7: They're very expensive. And so it's problem when problems like
Speaker 7: this we need to solve.
Speaker 3: Come back soon because I know that this is something
Speaker 3: we certainly interested in. We know the audience is Bloomberg Opinions,
Speaker 3: Mark on left joining us here in studio. This is Bloomberg,
Speaker 3: Brother Marc.
Speaker 6: A journal.
Speaker 5: But you let me drive?
Speaker 4: Oh no, no, no, no, dry please, I want to drive.
Speaker 6: It's a good question.
Speaker 1: This is the drive to the clothes thing. Well by
Speaker 1: Don on Bloomberg Radio.
Speaker 3: All right, everybody, we've got about eighteen minutes left in
Speaker 3: today's trading session. But we've got stocks at their best
Speaker 3: levels of the session, as you heard from Charlie, at
Speaker 3: more than two percent on the Nasdaq, a three hundred
Speaker 3: and nine point gain in the DAW up more than
Speaker 3: two hundred points, and one point four percent higher on
Speaker 3: the S and P five hundred. Everything is awesome to
Speaker 3: is that?
Speaker 1: Is that true?
Speaker 3: I mean a little sarcas.
Speaker 4: Yeah, I know.
Speaker 3: Well, we're going to talk about it later when we
Speaker 3: talk with the Eurasia Group, right, because they've.
Speaker 4: Got everything is not awesome should be the title of
Speaker 4: their twenty twenty four note. There are a lot of
Speaker 4: risks out there.
Speaker 3: You goo to run for your bunker.
Speaker 4: Hey, let's see what Michael Sheldon is thinking about all this.
Speaker 4: He's executive director and chief investment officer at High Tower
Speaker 4: RDM Financial Group. Michael joins us on Zoom from Westport, Connecticut.
Speaker 4: Once again, Happy New Year, Michael. I think I can
Speaker 4: still say that we haven't spoken in a few weeks.
Speaker 4: How are you?
Speaker 5: Thank to you?
Speaker 1: Thank you?
Speaker 4: How are you thinking about this?
Speaker 5: Well?
Speaker 2: I think it's nice to see the market rally here
Speaker 2: after a couple of days of profit taking. I think
Speaker 2: sort of looking ahead to twenty twenty four, they're certainly
Speaker 2: going to be a number of twists and turns, But
Speaker 2: I think the bigger picture for US is, for example,
Speaker 2: going into twenty twenty three, most most economists investors were
Speaker 2: not so optimistic. They were looking for maybe a recession
Speaker 2: or a downturn in the economy, but that really didn't
Speaker 2: play out. The economy and the markets were extremely resilient
Speaker 2: last year, although the rally was really led by a
Speaker 2: few stocks until later in the year. But I think
Speaker 2: heading into twenty twenty four, I think more investors are
Speaker 2: sort of moving on, moving into the camp that we
Speaker 2: could ultimately pull off a soft landing. So right now
Speaker 2: we're in the glass half full sort of category as
Speaker 2: opposed to the glass half empty, And there are certainly
Speaker 2: some positives out there, but obviously there are some head
Speaker 2: Windso where it's early in.
Speaker 3: The year so far, it is early in the year
Speaker 3: so far, certainly no doubt about it. And yet I
Speaker 3: feel like there's some interesting offerings out there for investors,
Speaker 3: and I want to kind of run it by you
Speaker 3: in terms of what your investors are asking you about
Speaker 3: and what you would kind of say. We just talked
Speaker 3: about a spot bitcoin etf IF and when everything goes
Speaker 3: through interns the approval, will you be recommending that to
Speaker 3: your investors? And are your clients and investors asking you
Speaker 3: about it.
Speaker 2: We haven't had too many questions about bitcoin, to be honest.
Speaker 2: Occasionally from time to time. It's not something we've really
Speaker 2: gotten involved in. I think for bitcoin, it's it's always
Speaker 2: been tough to sort of get your head around how
Speaker 2: to value that.
Speaker 3: Amen, hallelujah, totally in that camp.
Speaker 4: Well, you got to do is to free casters, Michael.
Speaker 4: You got to take the free cash flows from bitcoin,
Speaker 4: and then you've got to find the discount. Right, it's
Speaker 4: pretty Oh wait the lot come to you for that.
Speaker 5: Yeah.
Speaker 3: So no, you're not getting a lot of questions about
Speaker 3: it now.
Speaker 2: We really haven't. I think for us, we're financial advisors,
Speaker 2: so I mean, ultimately it comes down to we're dealing
Speaker 2: with high network individuals. We put together a financial plan,
Speaker 2: we figure out the rate of return they need to
Speaker 2: meet their long term investment objectives. And our job is
Speaker 2: to build diversified portfolios. And we don't want to stick
Speaker 2: our neck out too far. But over time, stocks have
Speaker 2: tended to be the best way for investors to build wealth.
Speaker 2: So we want to diversified portfolios, and that's sort of
Speaker 2: how we're looking at this year.
Speaker 3: Will that diversification include private equity. Blackstone raising one point
Speaker 3: three billion for its first private equity fund for rich individuals,
Speaker 3: so achieving one of the biggest initial halls for a
Speaker 3: fund of its kind despite a delayed launch. We've had
Speaker 3: a lot of conversations about folks wanting to kind of
Speaker 3: democratize access to private equity. Is that something that you
Speaker 3: would recommend that there's a place in a portfolio for
Speaker 3: your investors and are they asking about that?
Speaker 2: So most of what we do is individual stocks, mutual funds,
Speaker 2: and ETFs, but for clients where appropriate, for high network
Speaker 2: clients of a certain level, where they can afford the
Speaker 2: illiquidity that comes with alternate private investments or alternative investments,
Speaker 2: we do market those either private equity, private real estate,
Speaker 2: hedge funds. But again it's client by client where appropriate,
Speaker 2: and a lot of these products do have illiquidity, so
Speaker 2: that's something you have to be aware of.
Speaker 4: What about Apple, How are you thinking about Apple right now?
Speaker 4: It's actually hired today by more than two percent. Jefferies
Speaker 4: though out with a note that says iPhone sales in
Speaker 4: China are set to fall double digits. A lot of
Speaker 4: concerns about China, a lot of concerns about slowing revenue
Speaker 4: growth for the company. How are you thinking about it?
Speaker 4: Would you recommend it?
Speaker 3: Two downgrades last week?
Speaker 2: We well, well, I apologize, but we're not allowed to
Speaker 2: mention individual stocks. But what I would tell you is
Speaker 2: that we have held that in our portfolio, probably for
Speaker 2: more than a decade along and we're big believers in technology.
Speaker 2: We own many of the large megacaps, so in a
Speaker 2: lot of our in a number of our portfolios we
Speaker 2: held I think four of the seven megacap companies from
Speaker 2: that did so well last year. So many of our
Speaker 2: clients are benefiting from the AI and the technology. We
Speaker 2: do believe in technology over the long haul. I think
Speaker 2: AI is probably in the early innings. In terms of
Speaker 2: individual stocks, it's sort of case by case, but clients
Speaker 2: should have a fairly healthy waiting and technology because that
Speaker 2: represents the growth part of many client portfolios.
Speaker 3: Well, that's interesting too, because I do feel like some
Speaker 3: of the conversations we had at the end of last year,
Speaker 3: despite everybody saying okay, magnificent seven. You've had your run.
Speaker 3: It's time for broadening out. We did see a broadening
Speaker 3: out late last year, and I think it's safe to
Speaker 3: say to some extent continuing to this year. But they
Speaker 3: also did say it doesn't mean you pair back on
Speaker 3: those magnificent seven because, as you just said, that's the
Speaker 3: growth part of our economy.
Speaker 1: Yeah.
Speaker 2: I mean one of the things we try and talk
Speaker 2: with our clients about it's time in the market, not
Speaker 2: timing the market that really helps you build wealth over time.
Speaker 2: So I mean some of these stocks, some of these
Speaker 2: large KEP technology stocks, are going to have pullbacks from
Speaker 2: time to time, but trying to time the short term
Speaker 2: swings in these stocks is really very difficult. I think
Speaker 2: you really want to have some exposure in tech and
Speaker 2: try and find the areas within technology broadly that will
Speaker 2: do well over time.
Speaker 4: So that said, if you missed the rally that we
Speaker 4: saw at the end of twenty twenty three, you've got
Speaker 4: a client who has cash to deploy. How do you
Speaker 4: deploy that?
Speaker 2: Well, there are a couple of options. We're relatively optimistic
Speaker 2: for this year. You've had the unemployment rate below four
Speaker 2: percent for twenty three straight months, wages continue to rise.
Speaker 2: Lation is coming down. Corporate profits were flat last year
Speaker 2: and they're currently forecast to be up about ten percent
Speaker 2: this year. So I think there are some reasons to
Speaker 2: be positive. There are certainly some headwinds. Geopolitical events around
Speaker 2: the world are one of them. Valuations are not cheap.
Speaker 2: One of the big question marks really is the timing
Speaker 2: and how many rate hikes or rate cuts excuse me,
Speaker 2: we'll get from the Fed this year. But I think
Speaker 2: overall they're probably at this point more positive than negative.
Speaker 2: So for clients that are very nervous but looking to
Speaker 2: get into the market, you could what we call dollar
Speaker 2: cost average, So you start to put some money into
Speaker 2: the market now, maybe wait a month or three months
Speaker 2: and add some additional money. If you're looking out many
Speaker 2: many years, ten years, twenty years, thirty years, really trying
Speaker 2: to time the market is not worth the effort on that.
Speaker 2: But again, it all does come down to an individual's
Speaker 2: financial plan.
Speaker 3: Hey, one last question, as we talked about the broadening
Speaker 3: out of the rally, you shared with us some notes
Speaker 3: We've talked about this with our Gina Martin Adams. I mean,
Speaker 3: we are looking at ninety one percent of the stocks
Speaker 3: in the S ANDP. We're above the fifty day moving
Speaker 3: average at the start of this year seventy seven percent.
Speaker 3: We're above their two hundred day moving average. You share
Speaker 3: that data with us. We've had some similar from Gina
Speaker 3: thirty seconds left here that broadening out is a healthy
Speaker 3: sign as long as we don't get recession real quickly.
Speaker 2: Yeah, I think that. I think that definitely is a
Speaker 2: healthy sign. If we continued the way we were last
Speaker 2: year with a small number of stocks outperforming the market,
Speaker 2: I think that would limit the markets upside we've seen.
Speaker 2: Adding to what you said where we've had several days
Speaker 2: where the advancing versus declining stocks has been above five
Speaker 2: to one, and until things get really exuberant, I think overall, well,
Speaker 2: that can be short term anti climatic, this type of behavior.
Speaker 2: Longer term, I think it's healthier for the market.
Speaker 3: All right, great check in covered a lot of ground.
Speaker 3: Michael Sheldon, thank you so much. Happy new year for
Speaker 3: me as well. Executive Director, chief investment Officer at High
Speaker 3: Tower RDM Financial. On Zoom from Westport, Connecticut.
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