Intel, Boeing and the Death of Blue Chips

Intel, Boeing and the Death of Blue Chips. www.watchdogonwallstreet.com

Episode Transcript

Speaker 1 (00:00):
The Watchdog on Wall Street podcast explaining the news coming
out of the complex worlds of finance, economics, and politics
and the impact it we'll have on everyday Americans. Author,
investment banker, consumer advocate, analyst and trader, Chris Markowski.

Speaker 2 (00:16):
Intel, Boeing, and the death of blue Chips. Greg greg
Columnus for The Wall Street Journal had an interesting piece.
Was interviewed yesterday a couple of places as well, and
he talks about what's transpiring at Boeing and Intel, and

(00:38):
he describes it as a national emergency. And he writes,
he said a generation ago, any list of America's most
admired manufacturers would have had Intel and Boeing near the top.
Today both are on the ropes. Intel has suspended its dividend,
it's slash jobs and capital spending. It's a takeover target.

(01:00):
Boeing been hobbled by investigation into crashes and mid air mishap.
Production delays. We've got to strike going on. A breakup
or bankruptcy are no longer unthinkable. And he talks about
the market valuation of these companies having fallen by half. Okay,
he's saying it's not just a disaster for shareholders but

(01:22):
this is a disaster for the nation. He talks about
the competition we have going on with China again, saying
that both countries pushing for tariffs and subsidies and whatnot.
He says, whatever their merits, these measures don't address the
fundamental problem that Boeing and Intel represent. The US still

(01:44):
designs the world's most innovative products, but it's losing the
knack for making them. At the end of nineteen ninety nine,
four of the ten most valuable US companies were manufacturers.
Today none are. The loan rising star Tesla is ranked eleventh.
And they talked about how Intel and Boeing were the
gold standard and manufacturing and groundbreaking products and whatnot, and

(02:08):
neither of them fell to cheap foreign competition, but to
their own mistakes and their culture evolved to prioritize financial
performance over engineering excellence, which also brought down who general electric. Yeah,
it's something that I talk about here often, and you

(02:29):
have to look at it when it comes to certain
companies and where they're spending their money. How are they
spending are they investing in research and development? Is there
too much of a focus on the short term and
short term gains and this quarter's numbers, worried about what's
going on down the road. Intel actually passed on making

(02:50):
chips for Apple's first iPhone. They passed on that, so
it wasn't going to be profitable enough. Wow missed out
on the boom and artificial intelligence. Boeing thought it would
be cheaper and faster to add more efficient engines to
its seven point thirty seven rather than completely redesign or
replace the airplane that didn't work out too well did

(03:14):
it anyway? These are problems that both of these companies made.
The issue here, and I think Greg fully understands this
is that these companies, due to the fact that they
are so tied in to government, the natural EBB and

(03:35):
flow of things, they're in essence too big to fail companies.
I mean, Intel's got a ton of money from the
Chips Act. Boeing was a defense contractor, got a lot
of people in government working over there. That's problem. That's
a that's a major problem, and that's where we're at.

(03:57):
The reality is, again, I'm not scared by this. I
don't think that this is any sort of national security
concerned by any stretch of the imagination. If you let
companies fail Greg, he's talking about Boeing an intel. I
wrote about this back in two thousand and seven and
I've talked about it on the show. Is a column

(04:18):
entitled even blue Chips Die, And basically I started the
column off saying, we predict, we at Markowski Investments predict
Walmart and General Electric will no longer exist. Remember this
is two thousand and seven. This is before General Electric
really flew off, fell off the table. So that's right,

(04:40):
you heard it here first and people, So how could
you say that to Dow components, cornerstones of our economy,
titans of industry at the time, no longer be in business.
Well they're not the first and they're not the last.
And I always like to talk about this. Sixteen oh two,

(05:01):
the Dutch East India Company was established to carry out
various colonial activities in Asia and the Pacific Rim. Very
first blue chip, first company to issue stock, first multinational corporation.
You want to talk about a blue chip. This company
paid an annual dividend of eighteen percent for two hundred years. Yeah, yeah,

(05:24):
but it went bankrupt, went bankrupt. Joseph Schumpeter talked about
him before. Creative destruction describes a process of transformation that
goes hand in hand with innovation. His ideas that capitalism
creates entrepreneurs that in turn invent, which then follows for

(05:48):
economic growth while simultaneously destroying value of existing companies. Creation
builds and destroys, and trees don't grow to the sky.
That's just how it is. Someone using history as a
guide is going to do it better, and the bluest
of blue chips will be no more. Again, this is

(06:09):
something that you really need to pay attention to when
it comes to companies and what they're doing. Are they
just spending their money buying back their shares. Nothing wrong
with buying back shares if you see value, But they
better be spending a ton of money on research and development.
Was it an interesting story talking about Apple and the
type of things that they're doing in the money that

(06:30):
they invest in new products, and they have an area
there where they're working on various different things, and the
people working there they know that the overwhelming majority of
the things that they're working on are never going to
see the market, but they keep plugging along, they keep
looking to get better, they keep investing. When companies stop

(06:53):
doing that and they end up becoming financial engineers well,
not going to turn out too well. Watchdog on Wall
Street dot Com