# 712 – 🧩 Boeing’s new set of troubles – The Average Joe

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    # 712 – 🧩 Boeing’s new set of troubles

    victorlei

    June 10, 2024

    Good morning. Not that long ago, analysts were convinced that the global economy was heading for disaster, but things are looking up now. Data from Bloomberg and Apollo reveals that recession expectations have fallen to their lowest level since Q2 2022. Analysts now estimate the odds of a recession in Europe, the UK, and the US at just 30%. That's a far cry from last year’s predictions — and makes Deutsche Bank’s “100% chance” of a recession look downright foolish.


    SPACE

    Boeing Is Playing Astronaut When It Should Be Playing Mechanic

    Boeing ($BA) airplanes might have issues, but their spacecraft has even more. Since 2010, Boeing has been working on Starliner — a crewed capsule that shuttles astronauts to the International Space Station. In 2014, NASA gave Boeing billions to accelerate its development. But instead, it ran into issues — with launch delays due to failed missions, structural issues, and quality problems.

    Liftoff, at long last: It’s six years and five months overdue, but Boeing’s Starliner finally blasted off on its first crewed mission — a big step toward receiving NASA certification for crewed flights. Starliner will be an alternative to SpaceX’s Crew Dragon capsule, which has been the only certified option to fly since 2020 — but it wasn’t an easy or cheap journey.

    • In 2014, NASA paid Boeing $4.2B to build Starliner — only for SpaceX to beat them to certification with $2.6B for Dragon.

    • While Dragon has had 10 successful flights since its certification, Boeing’s first crewed launch faced problems like helium leaks and thruster issues.

    Worth the F(l)ight?

    Boeing’s space business has faced similar problems to its commercial aircraft business — although, with much fewer customers and flights. After certification, NASA has committed to at least six Starliner flights. However, some, like Bloomberg Opinion columnist Thomas Black, think Boeing should spin off its space business to focus on its aircraft business — before it’s outdone by rivals.

    • The Federal Aviation Administration has slowed Boeing’s recovery by limiting MAX production and delaying certifications for 737 MAX variants.

    • And later this month, Boeing’s CEO will testify in front of a panel investigating safety issues — just months before he’s expected to resign due to the company’s failures.

    It keeps getting worse: After facing a $4B hit last quarter, Boeing expects to burn through billions more this quarter, and won’t be cash flow positive this year. The CEO of Emirates, one of the biggest Boeing buyers, predicts a “five-year hiatus” until the aircraft manufacturer emerges from its crisis. With over 44% of Boeing’s revenue coming from its imperiled aircraft business in FY2024, it’s fair to say that Boeing should focus more on fixing than flying.


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    • Leading financial experts, including those at Citi, are predicting that gold could surge to $3K by year's end.

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    LARGECAP RECAP

    🚗 Elon Musk Could “Leave” Tesla If He Doesn’t Receive $56B Pay Package

    This week, Tesla ($TSLA) shareholders will decide if CEO Elon Musk should get a $56B compensation package, making him the highest-paid CEO in history. It’s the second time investors are weighing in on his compensation, with the original plan deemed “deeply flawed” by a Delaware judge. Now, with Tesla much bigger, the stakes are higher.

    What’s likely? Earlier this year, Musk told shareholders he wouldn’t build AI products at Tesla unless he owned a quarter of the company — more than double what he owns now. Seems like a hard sell, considering his existing proposal is under fire. Luckily for Musk, his OG package is probably getting the green light, especially with retail investors, who own 44% of the company and have been overwhelmingly supportive of authorizing the package. Ultimately, we’ll see what Thursday brings.

    💯 Nearly 100% of Survey Respondents Plan To Increase Data Center Investments, Bringing Back Dot Com Vibes

    If there were ever a moment for AI to peak, it would be hard to find a better Hollywood moment than when Nvidia ($NVDA) CEO Jensen Huang signed a woman’s chest. But the party isn’t over yet. Blackstone’s prediction in January that acquiring data center operator QTS could be their best investment ever is just the beginning. According to CBRE, some of the world’s biggest real estate investors are gearing up for even more upgrades for their data centers.

    • 97% of respondents aim to boost their investments this year, up from 89% in 2023 — with at least 44% of respondents planning to spend over $500M on upgrades this year alone.

    • The CEO of GPU marketplace Hydra Hosttold WSJ that “the fervor to build is probably the greatest since the first dot-com wave.”

    The world revolves around data centers: Even Bitcoin mining companies are pivoting towards data center infrastructure. TC Energy ($TRP), one of the largest natural gas operators, predicts that data centers could significantly boost natural gas demand. Utilities companies have essentially turned into a growth sector overnight. However, the WSJ notes that insatiable demand for data centers has led to shortages in essential components, suitable properties, and the required power infrastructure. So… what happens if all this investment doesn’t yield the expected value and revenue?


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    Markets & Economy

    US job growth surprises: In May, nonfarm jobs surged by 272K despite the slight uptick to a 4% unemployment rate and declining job openings. The Fed is likely to maintain current interest rates amidst conflicting signals. [Read]

    Waystar’s ($WAY) IPO boost: The healthcare financial software provider says its initial public offering has taken in $968M, boosting market confidence after Novelis yanked its share issue days before. [Read]

    Buy momentum, says WSJ columnist: While it may be tempting to buy low, there’s usually a reason a stock is cheap. Instead, investors are advised to look for strong “relative strength” ratings, although not necessarily at their peak. [Read]

    Business & Wealth

    Trump talks revenge: The former President reiterated his desire for retaliation during a convo with Dr. Phil, suggesting that “sometimes revenge can be justified.” Despite Dr. Phil’s caution about the addictive nature of seeking revenge, Trump appeared unconvinced. [Read]

    Major players receive semiconductor funding: Over half of the Biden administration’s CHIPS funding to build or expand semiconductor factories has gone to eight key companies, including Intel ($INTC) at $8.5B, TSMC ($TSM) at $6.6B, and Samsung at $6.4B, totaling over $35B in investment. [Read]

    NBA pay shoots up and up: Dallas Mavericks’ Luka Doncic could breach the $100M per season mark within the next decade, funded by TV networks and streaming services vying for viewership. [Read]

    *Thanks to our sponsors for keeping the newsletter free.


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    DIGIT OF THE DAY

    Market Conditions Help Mint 600K New Millionaires in 2023 To Beat 2021 Record

    The future of fortune suggests that all you need to join the millionaire club is artificial intelligence (AI). Last year, the US welcomed 600K new millionaires, bringing the total to 7.5M and surpassing the rest of the world. This growth is attributed to a strong rebound in the stock market at the end of 2023, increased government spending, and the rise of AI.

    • America’s millionaires now hold a whopping $26.1T — marking a 7% jump from the previous year — and also account for 30% of global millionaire wealth.

    • Despite rising interest rates, many are turning to more aggressive growth assets — with two out of three high-net-worth individuals planning to invest more in private equity in 2024.

    Rich and richer: As the ultra-wealthy get wealthier, competition intensifies among firms managing these fortunes — pushing them to focus on personalized services such as succession planning, tax advice, and concierge services to cater to the unique needs of their high-net-worth clients. The number of Americans worth $30M or more rose 7.5% in 2023, reaching 100K individuals, and their combined wealth soared to $7.4T. However, Elias Ghanem from Capgemini Research Institute warns that inflation, a potential recession, geopolitical issues, and elections could slow down the pace of wealth creation (CNBC).


    EXTRA JOE

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