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- # 712 - 𧩠Boeingâs new set of troubles
# 712 - 𧩠Boeingâs new set of troubles
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 yearâs predictions â and makes Deutsche Bankâs â100% chanceâ 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 â 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 â with launch delays due to failed missions, structural issues, and quality problems.
Liftoff, at long last: Itâs six years and five months overdue, but Boeingâs Starliner finally blasted off on its first crewed mission â a big step toward receiving NASA certification for crewed flights. Starliner will be an alternative to SpaceXâs Crew Dragon capsule, which has been the only certified option to fly since 2020 â but it wasnât an easy or cheap journey.
In 2014, NASA paid Boeing $4.2B to build Starliner â only for SpaceX to beat them to certification with $2.6B for Dragon.
While Dragon has had 10 successful flights since its certification, Boeingâs first crewed launch faced problems like helium leaks and thruster issues.
Worth the F(l)ight?
Boeingâs space business has faced similar problems to its commercial aircraft business â 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 â before itâs outdone by rivals.
The Federal Aviation Administration has slowed Boeingâs recovery by limiting MAX production and delaying certifications for 737 MAX variants.
And later this month, Boeingâs CEO will testify in front of a panel investigating safety issues â just months before heâs expected to resign due to the companyâs failures.
It keeps getting worse: After facing a $4B hit last quarter, Boeing expects to burn through billions more this quarter, and wonât be cash flow positive this year. The CEO of Emirates, one of the biggest Boeing buyers, predicts a âfive-year hiatusâ until the aircraft manufacturer emerges from its crisis. With over 44% of Boeingâs revenue coming from its imperiled aircraft business in FY2024, itâs 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
đ Elon Musk Could âLeaveâ Tesla If He Doesnât Receive $56B Pay Package
This week, Tesla ($TSLA) shareholders will decide if CEO Elon Musk should get a $56B compensation package, making him the highest-paid CEO in history. Itâs the second time investors are weighing in on his compensation, with the original plan deemed âdeeply flawedâ by a Delaware judge. Now, with Tesla much bigger, the stakes are higher.
Proxy giants Institutional Shareholder Services and Glass Lewis recommended shareholders vote against Muskâs package, calling it excessive.
Teslaâs chair warns that if Muskâs pay package isnât approved, he could âstep backâ or leave to focus on other ventures like SpaceX or xAI.
Whatâs likely? Earlier this year, Musk told shareholders he wouldnât build AI products at Tesla unless he owned a quarter of the company â more than double what he owns now. Seems like a hard sell, considering his existing proposal is under fire. Luckily for Musk, his OG package is probably getting the green light, especially with retail investors, who own 44% of the company and have been overwhelmingly supportive of authorizing the package. Ultimately, weâll see what Thursday brings.
đŻ Nearly 100% of Survey Respondents Plan To Increase Data Center Investments, Bringing Back Dot Com Vibes
If there were ever a moment for AI to peak, it would be hard to find a better Hollywood moment than when Nvidia ($NVDA) CEO Jensen Huang signed a womanâs chest. But the party isnât over yet. Blackstoneâs 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 worldâs 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 â with at least 44% of respondents planning to spend over $500M on upgrades this year alone.
The CEO of GPU marketplace Hydra Hosttold WSJ that âthe fervor to build is probably the greatest since the first dot-com wave.â
The world revolves around data centers: Even Bitcoin mining companies are pivoting towards data center infrastructure. TC Energy ($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 doesnât 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]
Waystarâs ($WAY) IPO boost: The healthcare financial software provider says its initial public offering has taken in $968M, boosting market confidence after Novelis yanked its share issue days before. [Read]
Buy momentum, says WSJ columnist: While it may be tempting to buy low, thereâs usually a reason a stock is cheap. Instead, investors are advised to look for strong ârelative strengthâ ratings, although not necessarily at their peak. [Read]
Business & Wealth
Trump talks revenge: The former President reiterated his desire for retaliation during a convo with Dr. Phil, suggesting that âsometimes revenge can be justified.â Despite Dr. Philâs caution about the addictive nature of seeking revenge, Trump appeared unconvinced. [Read]
Major players receive semiconductor funding: Over half of the Biden administrationâs CHIPS funding to build or expand semiconductor factories has gone to eight key companies, including Intel ($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 Mavericksâ Luka Doncic could breach the $100M per season mark within the next decade, funded by TV networks and streaming services vying for viewership. [Read]
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CHART
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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.
Americaâs millionaires now hold a whopping $26.1T â marking a 7% jump from the previous year â and also account for 30% of global millionaire wealth.
Despite rising interest rates, many are turning to more aggressive growth assets â 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 â 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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