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 Stenebek from Bloomberg Radio.
It's another big Dame which we find Boeing once again in the spotlight, this time up on Capitol Hill, the Federal Aviation Administration's top official pledging to hold Boeing accountable for any quality lapses as the agency examines the US plane makers manufacturing processes following a near disaster on an Alaska Airlines flight last month. Here's FA Administrator Mike Whittaker before US lawmakers earlier today.
The events of January fifth, it really created two issues for us, what's wrong with this airplane? But two what's going on with the production at Boeing. And there have been issues in the past and they don't seem to be getting resolved, so we feel like we need to have of a heightened level of oversight.
That's FAA Administrator Mike Whitaker before US lawmakers earlier today. Boeing shares they are up now, but are down nearly sixteen percent since news of the incident. Meantime, another new risk looms, a labor rift ten years in the making, and also yesterday news on some misdrilled holes on the seven thirty seven. Carol, let's get to the interview.
Let's do it with us George Ferguson Bloomberg Intelligence senior Aerospace, Defense and Airlines analysts out there in OURBI headquarters in Princeton, New Jersey. Also back with us Bloomberg News Projects and Investigations reporter Peter Robinson. He's also author of Flying Blind, the seven thirty seven Max tragedy in the.
Fall of Boeing.
He's on Zoom out there in Seattle. All right, FA oversite, what more are we learning? And George, let's start with you about the tone and tenor of the FAA when it comes to Boeing.
I mean, I think what we heard today was the administrator told us that until now it's been largely auditing and not a physical presence at Boeing, and now they're going to have an he's presence or physical presence at Boeing, and it's spirit Arrow systems. I think there's there's still a lot more to be learned here, right, there in the middle of conducting some surveys and such that I think are going to guide what level of oversight they're
actually physically going to have on the ground. But there's absolutely going to be a presence of the FAA again at Spirit and Bowing.
I want to bring in Peter Robinson, the author of Flying Blind, the seven thirty seven Max tragedy in the fall of Boeing. He joins us on Zoom from Seattle. Hey, Peter, just a headline crossing in the last few minutes that Boeing's key seven thirty seven supplier, that's Spirit Ero Systems to tie CEO pay closer to quality. There's a long history of Spirit Aerosystems and Boeing going back many many years. Ultimately it was spun off just about twenty years ago,
close to twenty years ago. At this point, I should say, does tying executive pay to quality? Is that the type of thing that will move the needle here?
I mean, it's certainly something that you would hope does
change CEO behavior. As you pointed out, this is a problem that's been many, many years in the making, where many of these seven thirty seven production problems are happening is at a separate company called Spirit, which Boeing used to own, and it was Boeing Wichita and since then, Spirit has had a very difficult time keeping costs low enough and meeting the pressure to keep costs low as part of as it's positioned in a different part of the production system.
Right, we do have another headline from the Spirit Aero CEO now behaving as if we were part of Boeing. Also that Boeing seven thirty seven MAX nine accident report released by US investigators, so we'll look for some more headlines on that. Having said that, Peter, this seven thirty seven MAX program, why are there so many ongoing issues? It's just because it's the dominant program for Boeing right now, or what is it?
I think it does go back all those decades. It's Boeing's attempt to change its entire production system and it really lost control of the production system. This incredibly important part of Boeing that makes the fuselage was no longer part of Boeing. So when you're dealing with a different company, you have an extra layer of overhead, you have an extra layer of management, you have a lot of wrinkles
in the process. That were there before, And as that headline suggests, if this company were part of Boeing, some of these issues may not have happened. You had a lot of rework happening, arguments over the rework. It created a lot of difficult coordination issues that both companies are still wrestling with.
Peter, does it call into question Boeing suppliers with other relationships as well, and sort of the whole structure of the way that a plane is put together. It's the sum of its parts, and Boeing is doing the ultimate manufacturing. These parts come from all over the world.
It does.
And just referring to another one of those headlines, which is a story by my colleage Julie Johnson, where the machinists are asking for a forty percent raise in their next contract. That's really a result of Boeing squeezing them very hard the last time this contract was negotiated in twenty fourteen, where those workers had to take a four
percent increase in pay over essentially a decade. And many studies have shown that the experience of your labor workforce in aerospace directly affects productivity and there's a strong correlation there and at Spirit, especially after the pandemic, they've lost a number of workers trying to retrain new workers and that's very costly and difficult, and it leads to a lot of work being done out of sequence, which increases the risk of quality problems.
All right, we fixed our technical glitch that we had with our George Ferguson. Obviously, glitches are much easier sometimes for us to fix than Boeing. We understand that there are a lot of moving parts and a lot at play. George, of course, Bloomberg Intelligence senior Aerospace, Defense and Airlines analysts out there at OURBI headquarters in Princeton. You've been listening to the conversation here. You do wonder, you know, and we've talked with you before, George, and I just want
to mention NTSB. Now a headline says Alaska Air Bowing Max nine door plug was missing the bolts. So obviously we're just going to continue to get some headlines here. When you think about this program this way forward for Boeing, it's so important, you know obviously that they get it right.
But I also think about the importance as being the largest US exporter right of the United you know, how important it is for the US as a country, as a government that Boeing kind of gets it back together as well.
Yeah, I think it's critically important they are aerospace champion. We want to be a competitor in commercial aerospace, commercial aircraft manufacturing. There's lots of countries around the world that want to be in this business as well. You know, the Chinese want to be in the business with Comac. They're working on coming up the curve in the business. The Japanese do a lot of subcontracting to Boeing. I think, you know, they have one of their own airplanes they
were trying to develop a couple of years ago. They'd like to be in the business. The Brazilians have their their aircraft. Everybody knows that it's high value manufacturing. It's good paying jobs. I think it's good for the you know, the economy of these countries build strength in their engineering talent pool, and so I think it's critical that the US maintains a lead in this business. It's a strong source of economic activity.
George, help me understand a little perspective.
We're good about doing that here at Bloomberg in terms of context, and I think about my dad, who is an engineer aerospace, you know, said it's probably safer to get in a plane than it is to get in your car.
Having said that.
When there's an accident, it really and rightfully so gets a lot of attention. I mean, how do you think about what's happening with Boeing against kind of the broader plane industry.
I mean, is it like, how do you kind of put it in its place? If you will so.
I mean, if you think about sort of the broader manufacturing industry. One of the ways I think about about Boeing is that, you know, I think going back to you know the speaker too, it's you know, it's this is one of those industries where people really really matter. It's not a it's you know, in the US, I think a lot of times we like to build jigs or we use capital equipment, you know, tools that help the worker build a product and help control the quality
as they as we make that product. And that works really well for things like auto manufacturing, where you're putting four hundred thousand units through a factory in a year. These are not factories that are that high a volume, so it's hard to get you know, machine tools customized machine tools to pay for themselves. And sometimes a lot of the curves and situation as you're manufacturing and are really hard you know, to get access to. So it's
hard for a machine tool there too. Actually, you know, the Spirit CEO talked about that today on the call. So it comes down to having really skilled people on the line that can do the job, and that means you have to build into them, you have to train them. You also have to make sure they're strong supervision of them.
And I think before the pandemic we had enough of the older talent pool in aerospace manufacturing that we maybe we didn't need as much supervision, Maybe we didn't need as much training because they've been there for years and years and years. That's turned over since then, and so
now that old playbook doesn't work anymore. Plus a lot more of this supply chain is going international, and now you know, these companies have to control for what's coming out of out of factories in Malaysia and in Korea and in Japan.
Come a lot more complex. Yeah, it is a lot more complex. It's something that we've spoken a lot about, especially now that these engineers. If you're interested in this type of thing. You're not just going to go look at Boeing as a place to work after college. You could go work for SpaceX, you could go work for Blue Origin, you could go work for many of the number of companies down in southern California that are doing
really interesting stuff. Boeing has a lot of competition for talent. Hey, Peter, I want to bring you back in here and just talk a little bit about the defense portion of Boeing and how that kind of changes the story. Last year, Boeing brought in twenty five billion dollars in revenue from defense,
space and security. It's an absolutely huge government contractor how does that change the story about the way lawmakers are thinking about Boeing and what it needs to do to dig itself out of this hole.
Well, I mean, you could make an argument that it's too big to fail. It's so critical to the military and to you know, as George was saying to the industrial base of the country, that there needs to be a solution of some kind worked out. And it's especially telling that Boeing moved its headquarters to Arlington, Virginia, which which perhaps shows where it expects to be spending a lot of its time and resources in coming years.
All right, So then the story on the Bloomberg about you know kind of one of the next risks for Boeing specifically is a fight with its largest union, you know, long in the making. So George, you know, they're looking for forty percent pay raises. They're willing it sounds like to go on strike. They don't want to do it. But are they right in these pay demands? And how does that kind of squeeze Boeing even more?
I mean, look, labor is getting these kind of increases, you know, at other places besides Boeing, Spirit Aerosystems. Labor already got their increase as well. They live in an environment that was much more inflationary. They've gone through a patch of inflation that's raised prices, you know, compared to pre pandemic, and so I do think they deserve it. And you know, these contracts only come up every so often. Like you said, it's been a decade in the making.
So their union leaders aren't going to walk away from an increase here just because Boeing is having some challenges. Those workers can go other places, like you said, there's other aerospace manufacturers they can go to there's tech companies up in the in the Northwest. You know, those workers need to get paid what the you know, what the prevailing rate is, and yeah, they deserve it and they're they're probably going to get it.
Peter, come on in on the labor issue and what you think that might mean for Boeing going forward.
You could argue that the leverage is in the union's hands. This time in twenty fourteen, it was very low inflation. Boeing had the work for the Triple seven X which it was threatening to move out of state, and that was seen as a real serious risk to many people in the union, so they, you know, sort of grudgingly went along with the package. Now, you know, Boeing critically needs these workers to dig itself out of this hole.
So it's it's it's hard to see this not leading to the union having a lot of leverage in these talks.
Hey guys, one last question, just got about forty five to fifty seconds left here, George, overhang of this when I don't know, how are you looking at it? Is this going to be six months from now we're still talking about this or six months do you think Boeing will have turned the corner just quickly.
Well, I think the costs are going to last for a while, and you know, the quality needs to be fixed long term. So we'll be talking about this in six months, Peter.
Come on in on that as well.
I also expect to be talking about this in six months that the union contract expires in September.
Peter, I think there's a second book here.
I'm just going to say, guys, certainly a story that is an important one and one that we continue to really appreciate your input. Bloomberg Intelligence Senior Airpit, Space, Events and Airlines analyst, George Ferguson out there on BI headquarters in Princeton. Peter Robison, Robinson, excuse me, Bloomberg News Projects and Investigations reporter, author of Flying Blind.
And if you are just joining us, we should not a headline just crossing the Bloomberg terminal. The Boeing seven thirty seven Max in Alaska air accident back on January fifth was missing bolts. For bolts that acted as a fail safe mechanism to hold a paine in place weren't installed on the Boeing seven thirty seven Max nine jet. That's according to a preliminary report from the National Transportation Safety Board.
You're listening to the Bloomberg Business Week podcast. Catch us Live weekday afternoons from two to five pm Eastern Listen on Apple car Play and then brout Auto with a Bloomberg Business app or want us Live on YouTube.
Well, small businesses the backbone of the US economy. Government data shows that these companies account for two of every three jobs that have been added in the past twenty five years.
Yeah, it's important and the most reading or the most recent reading, I should say, on the small business community. It found that US small business optimism ticked up to a five month high in December, largely reflecting less pessimism around sales, earnings trends and economic expectations. That reading just about one month ago. We're going to get another read a US small business optimism about one week from today. But we actually are going to get one in just about five seconds.
That's because our next guest is a member of that all important engine of the US economy. Very pleased to have back with us, Christina Stemble. She's founder of farm Girl Flowers. It's a business that if you're a listener of viewer of the program, you certainly know it. Well, it's also a business that she bootstrapped some twelve years ago and is built into a thirty million dollar business. She's joining us here in the Bloomberg Interactive Brokers studio. Christina, Welcome back to New York.
Thanks thanks for having me. I love talking about business, the business of flowers.
Well, how is he here? How is the business of flowers? How is your world right now?
Yeah?
I mean we're gearing up for Valentine's Day, which is always a lot of pressure. You know, it's the second largest holiday of the year for us, so there's a lot of anticipation.
Remind us what percentage of your revenue comes from just Valentine's Day.
It's lower than you think. It's about fifteen percent, but Mother's Day goes up to about twenty percent.
Okay, so that's five thirty five percent of all of your revenue from two different days.
Yes, in two weeks.
Basically are those the two biggest holidays?
Yes?
Absolutely?
All right, So okay, a favor like back out the holiday stuff because right, there's expectations around that.
But in general, when you look at the US.
Consumer, how have they been ordering just kind of on every other day or just normal days, if you will.
Normal days are down. I wish I had the optimism that the reports are showing right now and that I think. I think I'm optimistic about next year, So I think maybe that's where something's coming from. Like you know, after COVID, post COVID, I think that there's been so much change constantly, and like, you know, where are we going to settle out? And I think, you know the economy right now, we're in a gifting market, so the gifting holidays are especially
important for us. We have to do really well in those gifting holidays because the everyday consumer isn't isn't consuming as much, they aren't sending as many gifts since we're in the gifting space.
When did you notice this change?
I mean twenty twenty one. I mean we've been going since twenty twenty one on this, so you know we were.
Jumping the size finding since twenty twenty.
One, Yes we have, but intentionally so we could still mean intentional intentionally we're focusing.
You know, I'm really.
Excited to see the market change a bit from growth at all costs, you know, all like small businesses, startups, everything they ay was all about growth at all costs. Just have those top line revenue numbers grow exceedingly fast. And now we're focused on profitability. So and I feel like everybody has kind of changed their ways a little bit since we're bootstrapped.
What is it?
Wait?
What is it that Zuckerberg says? The Year of efficiency?
Yeah, but I mean it's carrying, it's bleeding into this definitely with layoffs you see still happening, you know, at a pretty rapid rate. People are you know, it's it's you have to be efficient. You have to run very efficiently to make you know, make any profit this year.
Remind us about your staffing and your supply chain, Like, give us an idea of what that picture is.
Our supply chain has changed four times since twenty twenty, so we are constantly changing it to adapt with what the market demands are and supply chain availability is. So twenty twenty we had a boom. You know, we're over sixty million and twenty twenty is you know.
I said flowers during the pandemic. Yes, yea, yeah, and we all probably did. And people to send I know, I know you can send flower bread, wait, bake bread.
Baked bread, drink wine, send flowers.
Wine, souredough and flowers, sotead of this. That was the year, right, So I think you know there was that, but supply chain was really hard, so then you have to shift and go closer to the flowers. We're buying a lot more in North America at that time. Now we still are buying more North America closer to home.
Was that because planes weren't coming so sore they're not. These are not planes that are exclusively filled with flowers. These are planes that sometimes have people on them, yes, And it's hard to shift this stuff if those planes aren't flying.
Absolutely, So unless you're going to charter a plane from Europe, you know, when there weren't as many planes going twenty twenty, you would have to figure out other ways to get flowers, you know too, So we were literally in box trucks picking up flowers that time, you know. And then you know things have shifted. Supply chain's gotten better, but everything's
gotten more expensive. So then you're also you know, outbound transportation, you know, went from about twenty six percent of our revenue to forty one percent, right, spike really just you know, I would let you know, I guess I don't know if I should say those, but I think it's also linked to stock prices for those companies in twenty twenty. If you look at those for you can you know.
Go there, because I've stations with some publicly held companies as well, and just talking about prices like why are they still so high, and smart people scratching their head and just wondering where the folks are keeping prices high because they can.
I mean, I think that things have gotten more expensive. Labor is a lot more expensive, so I mean I know that personally for with the our company, so I can imagine at the transporation companies it's the same when you're paying a lot more than you were a couple of years ago, where you know, wages have inflated much quicker than they did in previous you know, decades, So
you know that has to be reflected. And I think, you know, American consumers have been taught by certain large companies that shipping should be free, but it's not free, and you know that that good good has to pass a lot of people's hands and a lot of trucks and auto planes and.
Aut of gas, especially if you're shipping something that's perishable and that has to get to a destination within a certain amount of time or else it's not going to look or smell as good labor market.
Can you find all the workers you want?
No?
You know I should say yes, But you pay more, You pay a lot more for the same same job.
I have wages gone up as a cost of doing business for you guys, I would say about thirty percent.
Okay, you know, twenty five to thirty.
Percent since twenty twenty.
I think, yeah, it started in twenty twenty and it's continued to rise. I also think professional labor has gone up as well. It's not just wage level that's gone up in prices. Also, working from home, I think productivity is in question sometimes.
A little bit.
It's harder.
It's just not that you know, people aren't working, it's just really it's not efficient. You have to have six meetings to get things done that would take one.
Is that what you're doing at Farm Grow Flowers? Are you hybrid? Are you remote?
We are remote mostly. I mean in facilities people are working, but remote for a professional level.
Okay, oh go ahead.
I'm just gonna say, while we're talking higher cost, how much of pricing or the pricing pressures you are feeling as a business owner. How much can you pass on to consumers or are you are you kind of swallowing a lot of it?
It both.
So we have raised our prices in some things, you know, our core product offerings. We haven't raised those prices in three years. We're probably going to need to because our margins are just so tight. But American consumers also know they're hurting right now. When you it's eight dollars for a dozen eggs, you know they can't spend as much. So it's also making sure you don't price yourself.
Well, Cristis have gone down, have they? Yeah, egg prices.
Okay, seven ninety nine.
But oh you got to stop somewhere else.
Yeah, maybe the free range thing.
I don't know.
Yeah, yeah, in the Bay Area.
I'm in Washington.
Okay, my eggs that were in prison like that. I'm just kidding, quitting job. I don't want the email that I'm going to get.
Okay, now, okay, so let's talk a little bit about we were talking about your supply chain here. Fast forward to twenty twenty four. Where are you getting your flowers?
Now?
All over North America, South America, Europe, mostly I would say, I need to do an audit to see what the percentage is. I would say it's over fifty percent US, but slightly so it's about half and half probably, So you.
Think just like kind of I mean, we talk about this with everybody, this idea of kind of pushing back against globalization or just having kind of near shoring unshoring. It makes sense and probably will continue. Do you think or if all of a sudden it makes sense to buy outside.
You will absolutely.
I mean, you know, you can't get enough flowers in the US of all the type varieties you need, So it's just there's a sourcing shortage of certain varieties. Also, you know, gas prices heating greenhouses in certain areas, especially you know on the East Coast, the heat of greenhouse is way more expensive than importing those flowers, and so the farmers know that and they just don't heat them through you know, certain months, and so you have to subsidize certain.
Times of year.
Hey, real quick, you bootstrapped this company. You have funded it yourself, partly because a lot of vcs passed on this company. What's the exit plan for you?
That's a good question.
We should talk about that for a long time. You know, I built it to sell. I don't know that that's the trajectory anymore for us. So we'll see, you know, building a long term sustainable business. There's nothing wrong with that though, and we don't talk about that. It's not like the sexy, cool thing to talk about in all the magazines.
But that's I think that's because so many of these businesses are venture backed and they have investors breathing down their neck saying, you know, we need our return absolutely.
I actually feel like we're extremely fortunate right now to not have that happening. You know a lot of my friends that are CEOs that have that same story. You know, they are being forced to show some growth numbers or at least a flat year, and our goal is a flat year this year with profit, you know, but there's
no path to profitability. Like overnight, they were like expected to make mom jeans and the low writers again like right, you can't do that, right, and so like they're like, you know, growth at all costs, growth at all costs.
Now profitability?
Well, you know, we've always had to be profit was.
It the owner of froone that we talked about that kin've had investor money come in and then kind of the business got away, and then he got back from nay check. It's more involved in it. So well, when you know or whatever or whatever the next.
Stage to just come back, ye, come back in New York.
I mean we might be a long term business.
I might get here from I would say.
Your workers and your supply chain would appreciate that, no doubt about it.
Good luck on this Valentine's Day.
Thank you, thank you so much, so appreciate it having me.
Christina's Denbel, founder and CEO of farm Girl Flowers.
This is Bloomberg Business. Wait inside from the reporters and editors who bring you America's most trusted business magazine plus global business finance and tech news. As it happened Bloomberg Business Week with Carol Messer and Tim Stenebek on Bloomberg Radio.
All Right, we've got a new stock on our mind on this Tuesday, February six, and that's Forward four chairs off their highs in the aftermarket, but still up about seven point three percent. This as the company beats profit expectations. He's more earnings growth ahead. And listen, they gave an outlook, right, they didn't say we're backing off of it. They gave it, and it was well above with the street was expecting.
Yeah, ten to twelve billion dollars before interest in taxes. That compares with ten point four billion on that basis in twenty twenty three. The result was on the high end of the ten to ten point five billion dollars that the company predicted back in November that Carol was when at lowered guidance following a six week strike by the UAW.
All right, let's see what Ivan fin Seth has to say, Senior partner at CEO over at Tigris Financial Partners.
He's on Zooba in New York City.
All right, what say you, I've in terms of what we just got from Ford cost investors certainly like it. In the aftermarket here, stock still up about seven percent.
Well, we got a lot of positive macro trends for the auto industry. One jobs, jobs, jobs, The job numbers continue to be great, which means people are working, and when you're working, you need a car to commute to work and you have money to buy a car. Number Two, we still have a significant pent up demand cycle that has come from both the recent UAW strike and the shutdown in production that we experienced during the pandemic that the industry really has not yet to recover from, but
is ramping up production. So you got strong demand, you got consumers able to buy cars, and you got GM and Ford. Yeah, both have a significant cash calms in their truck business, which are the best selling vehicles that.
They make strong demand for. What though strong demand for internal combustion engine vehicles like the classic F one fifty, like the Ford Bronco, or demand for evs the.
Ford Brock Broncos still very strong the F one fifty And while consumers and the industry does want to make the transition to EV, unfortunately we need this middle stepping stone of the hybrid cars that are both you know, gas EV powered. As the charge the nationwide nationwide charging network ramps up.
I've been hanging on for a second. Just a headline Crossing Shares a snapper down about nineteen twenty percent here in the aftermarket.
Coy's meaning crushed.
The company coming out with an update saying it's he his first quarter revenue one point one billion to one point fourteen billion. The estimate on the street is one point eleven billion. She he's a first quarter just a even a loss of fifty five to ninety five million, much more than what the street has been thinking about
the estimate loss of thirty two point seven million. Also talking about fourth quarter daily active users four hundred and fourteen million versus an estimate of four hundred and eleven point fifty nine million, So that's a little bit better than forecasts. But that outlook and really that first quarter adjusted ebit a loss has got to be worrying investors.
Yeah, what's interesting though, is it beat on the fourth quarter adjusted ebit a significantly one hundred and fifty nine point one million versus estimates of one elevenking forward.
I know it's like, what have you done for me lately?
And I think the question is what is Snap doing or what is meta platforms doing that Snap isn't doing? Because these two stocks certainly diverging.
All right.
Snapshares down about twenty percent in the aftermarket. They were up just slightly on the year, all right, from Snap back to four do we go? Because Ford up about six and a half percent in the aftermarket following their earnings and an upbeat outlook and also a dividend this first quarter supplemental dividend of eighteen cents of share. We were talking about that with some of our colleagues. Is
this a one time thing? Is it just to kind of appease investors until they kind of get the product mixed right?
Well, I think that they both GM and Ford have a now significant amounts of returning of cash to shareholders driven by the tremendous cash flow that they have from their ice and dropped vehicle business. And that again shows the strength of their cash flow and the confidence in their cash flow, and as they have enough capital to both returned cap money to shareholders and continue to invest in their ev transition.
I will say, looking at the press release, they talk operating cash flow fourteen point nine billion for all of twenty twenty three. They say solid adjusted free cash flow of six point eight billion was significantly better than the company's outlook of five to five and a half billion. Ford's balance sheet remained strong, with nearly twenty nine billion in cash and more than forty six billion in liquidity at the end of the year. I'm reading just straight tim from Ford's press release.
Hey, Ivan, do we get to the point in your opinion where in the next in any time in the next few years, we're going to see the same number of evs sold as ice vehicles sold by a company like Ford.
Well, both Ford and GM had predicted that more than half of their auto production by twenty twenty five the end of twenty twenty five would be ev They both kind of walk this back, But we have both the auto industry trying to move forward to increasing the mix of evs to fifty percent and eventually one hundred percent, and then bumping up against government mandates that from in many cases by thirty thirty five they will only be able to sell evs, and both Ford and GM have
kind of projected that they wanted to get to that level before twenty or by twenty thirty, which both are not far that far off. So you have the industry wanting to move in that direction, the in theory, consumers want to move in that direction, and the companies want to move in that direction.
Yeah, they talk about Ford model at ease wholesale and revenue. We're both up at double digit for your rates. They also say by the end of twenty twenty four to sixty percent of Ford Blues global vehicle lineuple have been recently refreshed and they also talk about hybrids and they they sold about seven hundred thousand hybrids worldwide over the past three years. We're expecting double digit hybrid growth again in twenty twenty four.
You know, Ivan, We've.
Talked about this on air that in terms of the automakers, you know, they're just kind of adjusting. Maybe they're not giving up on EV's, it's just the timetable maybe is changing. And then they're just kind of addressing the product mix that their consumers want.
And it looks like.
They are being rather flexible and that's a good thing that they can do.
That Is that fair?
Yes, And I think maybe that both Ford and GM were overly aggressive in their schedule to make the transition to evs, and both the market, consumers and the industry in general is not ready for full EV so they're going to have to increase and even Mary Barra on her conference call last week said that they are going to ramp up hybrid production has to help with the transition.
So ideally, I think that really will meet a lot of demand because consumers want to go electric, but they're not ready to go all electric, and the charging infrastructure is not there to support an all electric auto industry.
What do the what do automakers need to do? What does the US government need to do for the charging infrastructure to get there? I mean, we have gas stations on pretty much every corner in the US that's taken generations to build up. What do they need to do for the same to have the same thing for evs?
Well, we need three things. Is one, the availability of the charging network, the availability of chargers, and more important, the availability of high speed chargers and the technology on board the vehicle to charge faster and for the charge to last longer and over time, you'll see the batteries will you know, go farther on a charge. You'll be able to at least get you know, an interim charge. In many cases they're talking on a three hundred mile battery,
you know, one hundred miles within you know, twenty minutes. Uh, And you're going to see this network of gas stations I believe eventually evolve to a place where you can charge and then spend a little bit more time than the five minutes it takes to buy a tank of gas. You're gonna need you know, fifteen twenty minutes to charge your vehicle. That's why a lot of the gas stations that have restaurants and convenient stores and places to sit.
So all this is gonna come together. I believe that you see a lot of new gas stations being built with convenience stores and more consumer services within them.
They're gonna become like airports. I can see it, brother, Mack.
Journal.
No, but you let me drive?
Oh no, no, no, no, honey, please, I'll.
Excuse me.
I want to drive.
It's a good question to trying.
This is the drive to the globe.
Prong, Tim thing well by around yeld it don on Blueberg Radio.
All right, everybody, just eighteen minutes left in today's trading session. It is time for the drive to the clothes.
You know.
Speaking of driving crazy, I think what really drives us crazy in twenty twenty four so far, Tim, this year is not necessarily what's going on the equity side of things, but it's the treasury trade.
I mean, here we are driving you crazy.
Well, you know we're back what we're at four forty on that two year note. We've moved down a little bit, but the last two days have just been wild.
Is that ten year looking.
Tenure we're looking at fourh eight, So we're staying above that four percent mark.
Yesterday it was four point one five.
We've been higher, right, And our own Mike mackenzie was talking about going to four and a quarter on that ten year.
Yeah, he's Scott folks who he knows the folks for ready to buy when it hits When I say, when if it hits four and a quarter this cycle?
And is that ultimately the peak when it comes to the tenure?
All right, lots to get to not just treasuries but obviously important, but also on the equity side of things. Really, how investors are thinking in general about the investment environment. Let's get to it with Liz Young, she's head of investment strategy. It's so far she jose Us on Zoom in New York City. Hey, Liz, good to be talking with you again. How are you and how do you think about this environment? What is kind of top of mind when you think about investing right now?
Yeah, well, thank you for having me. Good to be back.
One of the things that I think is happening right now is, you know, we spent most of twenty twenty three looking around the corner for a recession that didn't happen, and now in twenty twenty four, it seems like the market is declaring that it's never coming. And I don't think either of them will prove to be correct. Obviously, we were already wrong about twenty twenty three having a recession.
To twenty twenty four, the idea of we've already accomplished it and we have the soft landing it's occurring, I don't think that that's going to end up necessarily being the case, although today that is how it feels and that is what the data is suggesting. But the idea of the business cycle not really being over yet because we haven't started cutting rates, We've just had the hiking cycle, and we're still seeing a lot of late cycle behavior.
In the markets.
I just don't want investors to declare premature victory soft landing and be caught flat footed.
Well.
One really smart sign of how investors feel about whether or not we've got victory is what's been going on with money markets, And I think about the headline we got on February first, money market fun assets reached six trillion dollars for the first time. It's a very clear signal from the investing community, but kind of how they feel about taking on risk. What are you seeing on the SOFI platform that shows the tolerance the risk tolerance among investors.
Well, you know what's interesting about the money market trade is that you can sort of slice it two different ways. You could say, in a very straightforward sense, money is going into money markets. That must mean people are scared, when I really think it's more about a rational investment decision. So if you're going to be able to get five percent in a money market, and I'll throw things like
short term treasuries into that too. If you can up a five point two percent coupon on a six month treasury, why not, right, that's sort of that's a rational investment decision. So, while rates are still in this range, and as we've seen you talked about at the beginning of the show, as we've seen the ten years stay above four percent. Now there's a lot of volatility, but it's still pretty high. So money markets aren't necessarily right now sending.
The signal to me, at least that people are scared.
I think they're sending the signal that people are trying to make money in income generating assets.
And as rates fall.
Whenever the Fed starts cutting, that's when money markets start to become less attractive. But that'll be the telltale sign is if people take money out of money markets and put it into other income generating assets, or if they take it out of money markets and put it into really risky assets or growthy stocks in the s and P.
Five hundred, for example, what do.
You think happens to those money market funds?
Well, to be honest, I mean, I'm surprised that it continues to run. I'm surprised that the balances continue to rise because I don't think that they've necessarily got more attractive since the end of last year. But if we continue on this path where the soft landing looks evident in the sense of okay, the labor market hasn't cracked, inflation.
Has come down. If we were on a path where the FED was.
Going to start cutting rates in March and this data still seemed good, that's where I think money market funds lose some assets and it goes into risky assets because that would be.
Supportive in that environment that has changed.
We have now all but priced out a cut in March and expecting a cut maybe in June. Maybe maybe it's may, but it continues to get pushed further and further out into the future. So I think the longer the market expects the FED to wait, the more nervous people will get about them waiting too long to start the cutting cycle, in which case, if and when money does come out of money market funds, it stays in some other safe haven asset.
What other safe haven, though, would you expect it might go if people are really nervous.
Gold.
I think gold it's obviously seeing quite a big run. But if people are worried about the value of the dollar, if you see rates come down very quickly and the value of the dollar come down very quickly, you want something that's a store of value, and gold continues.
To be that option.
I think you might also see money still flow into treasuries, and you might see money flow into longer term treasuries if people start to get worried about the data. You might also see things like the really defensive parts of the stock market. Utilities has legged quite a bit this year. You might see utilities catch a bid. Consumer staples has seen some of that, and even parts of healthcare. If people aren't quite ready to completely get out of the stock.
I feel like the world would have to be coming undone if everybody was running to the exits and throwing stuff into gold or even utilities, right Like, I just feel like it would have to be pretty dire.
Is that fair? I mean, Liz, is that how you would see it?
I don't know.
Well, it doesn't have to necessarily be a rush, right It could happen just in sort of a slow fashion where people are slowly taking money out of something that isn't quite yielding what it used to yield and putting it into something else. But they're not ready to go all in on the risk table. So I don't think
it necessarily has to be a big flood. I do agree that in order to see some huge rush to the exits out of the equity market, especially after a time where momentum seems to be pretty strong and there's clearly buying appetite out there.
You would need a catastrophic sort of data.
Print, or or a few months in a row where things went bad, or you would need some kind of headline. Now, of course, that's always a risk that continues to be a risk. But I don't think we've solved all the problems and we have question marks about a lot of things still remaining.
Hey list, we're seeing shares a Palenteer up by thirty percent right now. We're reminded by ounmandeep Sing a little earlier that Palanteer was a meme stock, and I'm wondering if you're seeing any sort of memestock behavior on the SOFI platform that reminds you of where things were in twenty twenty twenty twenty one one.
I don't think we're at that point.
I think, you know, obviously, the market has seen a handful of stocks really lead the way, and it's interesting that the Magnificent seven has now become sort of the Magnificent four, and we've got a news stock in the mix.
So it continues to narrow.
And it's just the idea, not necessarily, I wouldn't call it meme stocky, but the idea that you've seen double digit moves in some of these names over really short periods of time.
Some of those moves have happened over a month.
Some of those moves happened over a two trading day period. When you see moves that big on news, that maybe doesn't justify a move that big, it starts to feel like excessive risk taking. And the thing about that, though, is right. Momentum is strong, it'll continue until it stops. And if you can call that time, good for you.
But most people can't.
We know the rules or what everyone has always said about market timing.
Hey, Liz, thanks so much. Be while Liz Young, She's head of investment Strategy.
This is the Bloomberg Business Week podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from two to five pm Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal