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