Boeing's Nightmare and 2024 Predictions

Boeing’s Breakdown

What happened?

You might have seen a video earlier this week of some poor passengers aboard an Alaskan Airlines flight missing a huge chunk of the aircraft fuselage. Now this is terrifying for everyone directly involved, but probably not quite as scary as it is for Boeing shareholders (that’s a joke).

What’s the bigger story?

Boeing is considered one of the two preeminent commercial airline manufacturers (alongside Airbus), but in recent years has had a series of incredibly tragic disasters associated with their planes - more specifically the now infamous Boeing 737 Max. The most damaging were two crashes of its 737 Max 8 less than five months apart - one in Indonesia in 2018 and another in Ethiopia in 2019 - that killed a total of 346 passengers.

After the tragedies in 2018 and 2019, there was a huge amount of press attention on Boeing - Netflix even made a docuseries called Downfall: The Case Against Boeing, with claims that the company prioritised profit over safety. For a company that has millions of people’s lives in its hands every day, that’s pretty scary. 

This most recent failure was the result of loose bolts on a segment of the fuselage that, depending on the plane configuration, either holds a door or a panel - you would have thought pretty simple stuff. If Boeing can’t be trusted to tighten the bolts, can they really be trusted to build and maintain entire aircraft fleets?

The only winner in the situation might actually be Apple after a couple found an iPhone, which had fallen from the plane - thousands of feet in the air - in their garden and it worked perfectly. The couple even tracked down the owner by finding the flight confirmation email.

What does the future look like?

Clearly, the human aspect of all of this is desperately sad, but from a business perspective, it’s also incredibly damaging. Boeing stock is down 12% since the incident - or the equivalent of $20 billion (almost the same as the entire market cap of Snapchat).

The US Federal Aviation Authority has launched an investigation into the recent incident, that may enable them to look closer at Boeing as a whole and reach some very damning conclusions. The airline industry went through a tremendously difficult period during the pandemic but it doesn’t look like Boeing are helping themselves right now.

I’d suggest next time you fly just check what brand of airline manufacturer you’re on and if you see letters spelling BOEING 737 MAX……maybe consider alternative options.

[Update! Just as I was clicking publish on this newsletter the news came out that a domestic flight, on (you guessed it!) a Boeing 737, in Japan windscreen cracked and had to return to its departure airport - it’s not getting any better for them]

Will

2024 Predictions

I like to start every year with some predictions. So take a look into my murky crystal ball to see some ideas for what might be contained in 2024.

Biggest business winner

Theme: Space
Company: SpaceX

We have spoken a bit about space in this newsletter as both Will and I are pretty obsessed with it. With that said, this obsession is a mixture of childhood wonder but also logic.

There are technological waves that if you are positioned correctly, you can stand to make a lot of money; these include all the big cliched terms you will hear your obnoxious tech friends say all the time. Climate tech, AI, Space and Robotics. They are clichè for a reason; if you are building in these areas, you are much more likely to succeed than if you starting a newsletter (😭).

So back to Space, I believe space is going to be bigger and better than ever because of this graph:

Industries that ride the cost curve downwards see explosions in size and ubiquity. Cars, televisions, and phones all had graphs that looked like the one above.

So, SpaceX: one to watch!

Contrarian bet

Theme: AI
Companies: Apple, Microsoft, Nvidia

I have a two-sided bet with this one.

Building hardware is notoriously hard. Nvidia has a monopoly on GPUs which are the computer chips powering the AI revolution. As a result, their share price has skyrocketed; up 220% in the last 12 months.

This is economics 101; profits are competed away by new entrants. I think one of the big four tech companies will make a move in producing GPUs, and what would usually take 10 years will take 2. As a result, I think Nvidia will have a much tougher time this year as it becomes clear they won’t be the only player creating the hardware layer for AI.

Best performing asset

Theme: GLP1s
Companies: Ypsomed, Catalant, Stevanto Grp

This is a pharma bet on GLP1 weight loss medications like Ozempic and Wegovy. Novo Nordisk is the largest company in Europe due to the popularity of its medication WeGovy.

The popularity of these drugs has meant a global shortage that the Pharma companies are trying to fix. But how?

That are outsourcing parts of their supply chain to other organisations. These are companies like Ypsomed, Catalant, and Stevanto Grp. They do things like fill the pens with the drug or manufacture the pens. I think there is a bigger chance that these companies are undervalued as a result of being downstream of owners of the drugs.

Making predictions can be a bit of a lose-lose, when you are wrong, people think you are stupid and when you are right, it was always obvious. But I think it is fun and if you disagree ping us an email and let us know why.

Jack