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Kit Darby, President of KitDarby Aviation Consulting, on the DC plane/helicopter crash. Sylvia Jablonski, CEO and CIO of Defiance ETFs, to discuss her outlook for the markets. And Steve Man, Bloomberg Intelligence Global Autos and Industrials Research Analyst on Tesla Earnings
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I want to get more on this with Kit Darby, President of Kit Darby Aviation Consulting on this, Kit, it's so interesting when we hear from officials that the helicopter crew was fairly experienced Sean Duffies and the craft was absolutely preventable.
What are the questions that you have right now?
Well, thanks for having me. The first thing, of course, the primary charge to pilots on both sides, both aircraft and helicopter and VFR conditions which you know without cloud you're able to see, is to see and avoid. So in this case, one complicating factor is that the communications to the helicopter and the airplane were on different frequencies, so the situational awareness would go down a little bit, especially for the airliner not knowing that the tower was talking to this other aircraft. The vision requirements, you know, seeing avoid means you can see. We've learned just recently that the helicopter was using night vision goggles. So those are designed to allow the helicopter to operate in a very low light situation without any extra illumination, but it also limits the field of vision and it has a tendency if you do get a bright light to bloom or to obscure what you're looking at. So at least one of the pilots in that aircraft, perhaps the one on the side of the airliner, since it came in from the side, could have had been using night vision goggles, could have had a vision problem. But even without the night vision goggles, we're looking at a light at night, So it's easy to see the light at night, but it's hard to tell what that light's doing, how fast it's going, where it's going, you know, climbing or descending. So that's a very difficult against the backdrop of city lights to know what you're seeing, either with or without vision goggles.
Kid based upon your experience, how long do you think it will take the NTSB to figure out what happened and be able to communicate that to us.
Well, if the voice recorder and the flight recorder are found and available, and I would expect them to be in good shape, we'll have a lot of information very quickly. That preliminary report should be accurate within a month or so, and then, of course the full report often takes a year or more. But the preliminary report with the information we have, video evidence, flight recorders, voice recorders, eyewitness reports, We're going to know what happened here pretty quick.
As we.
Turn towards Reagan reopening at eleven am. There have been a lot of questions from the press to officials, is it safe to fly? What kind of precautions in this kind of scenario would be taken to ensure that?
Well, this is extremely rare, almost random. A reminder that we people regularly at six hundred miles an hour at thirty thousand feet coast to coast, twenty times safer than we drive ourselves to the airport at sixty miles an hour. So I mean this is a wonderfully safe system. Thirty million flights worldwide. Some of our major airlines have a million flights, one airline a million flights a year. So there is regrettably a big exposure when we have that much activity, and this particular airport very congested, all the military services, many of the airlines operating in very close proximity. You know, this would be a likely place for something to happen, But for another accident like this to happen very very rare, and certainly shouldn't discourage anybody from getting on an airliner and going where they need to go. The odds are, you know, below a lightning strike kit.
I guess what I've learned this morning. I think a lot of our listeners and viewers have learned as well.
Is a couple of things.
One just how busy the DC airspace was. I just kind of figure, if it's not New York, La Atlanta, you know it's okay, But A it's very very busy. And B the mixture of commercial and military I kind of feel like makes DC airspace a little bit unique. How concerning is it or what precautions do you think are taken in that airspace? For again, military and commercial to be in such close proximity so often.
Well, there are a lot of rules. I mean, I've flown military aircraft in that airspace, although I was flying airplanes, not helicopters, and it was very, very congested. However, there are rules that separate airplanes from helicopters, commercial from military, and those rules are followed every day, thousands of times very successfully. Something didn't work here, I mean the last thing they said was I have the aircraft in sight, and the question is how do you hit something you see and have agreed to avoid. I'm not sure the airliner would have had the helicopter in sight. But there's a real quandary here about We know the rules and the rules were being followed right up to the last minute, and then something broke down. So confusing for me, and I don't know that anybody could make sense of it yet, but soon, Kit, I think.
For you and everybody else, also confusing. You've been in this industry for over thirty years. Can you give us some context. You gave great color in terms of what it's like to use night vision, different frequencies. How hard is it or easy is it to move a helicopter going one hundred miles per hour?
It's pretty maneuverable. Helicopters do things that airplanes don't do, and that they can hover and go very slow. But when they're flying cruising, they're very much like an airplane. And both of these aircraft would be very maneuverable if they saw each other and understood the relationship speed, distance, what needed to be done. They're both very maneuverable and could have avoided each other with the right visual information. You know, I would e quate this the driving at night. How much less you see at night than you do in the daytime. And that's part of the problem here, I believe, is they're knowing what to do with what they see. Helicopter probably had the aircraft in site. Airplane probably did not have the helicopter in site.
Very good, Kit, Thank you so much for joining us, Kit Darby, President Kitdarby dot Com Aviation Consulting, giving us some informed views and perspectives on aviation some of the challenges that might have been before these two aircraft as a unfortunately crushed in Washington, DC overnight. We'll have continued reporting on that throughout the day. Let's switch gears and get back to these markets again. The SP's up about sixteen points, the now's up sixty eight points, the nastacs up about seventeen points, so a slight lift to the market. Syviat Jablonski joint is. She's the CEO and CIO of Defiance E TFS. So yeah, we were coming off, you know, two great years in the stock market twenty three and twenty four with north of twenty percent total returns there, and we start off with a nice January in terms of performance here. What are you telling your clients these days about their expectations for twenty twenty five.
Yeah, it's good morning. Well, I think twenty twenty three and twenty twenty four are going to be hard to beat, right, they're pretty epic years. But I do think though that you know, we're in a good position here economically. We have two to three percent GDP growth. You know, inflation is kind of coming down. Although we've seen some blips, it's arguably coming down and remaining steady at the moment. Jobs numbers are decent, the inflation figures that we've seen recently are pretty decent. Strong consumer, you know, corporate earnings are going to be interesting this time around, but thus far have been you know, strong in the last eight quarters or so, and so I think that we stay the course here, right. I think the last two years have proven to us that maybe it is time to get off of the sidelines. And you know, when you have like these these big dips like we saw from the Deep seek the Bacle the other day, you know, you kind of go in and your dollar cost average and these are your opportunities to be long equities and get performance. But to answer your question a little bit more specifically. You know, I don't expect a twenty percent year, but I do expect lower, lower double digit returns this year.
What do you make of the market action moves on earnings? I mean, without talking specific names, I mean just the dropping ups. The drop in Microsoft like signa like it's not taking a lot to get really beat up.
Can you put that into perspective for that?
Yeah, I think it almost feels like last season, right where good news was a little bit of a drop, you know, neutral news was a really big drop, and anything that was shy of expectations was just like a complete tank, right. I think that the market just has very high expectations for earnings right now that are you know, somewhat unreasonable, right. I think we got a little bit of kind of like the fire and the tailwinds from AI and you know, kind of this this idea that the FED was going to be cutting rates and things like this. I think, you know, last year was super strong on that, and I think we're kind of setdying out now and so these earnings, particularly from the mag seven, they're going to start tapering off. I think we're going to continue to see positive earnings, but maybe it's not going to be you know, one hundred percent year over year on some of the names. Maybe it's going to be thirty percent year over year, which is still very solid. I think we just have to reframe our expectations on this.
Sylvilly as CEO and CIO of Defines ETFs. Where are you seeing the flows into your ETF complex these days?
Hands down, it's been in quantum computing. I would say that the two most popular traits were micro strategy, and that's really a crypto play, right, so you get a bitcoint exposure through that. But quantum computing has just been you know, an unbelievable.
Story for our firm and for the markets.
Right.
I think it's this idea of like the next generation of AI, the fourth industrial revel lution. In order for machine learning and AI to actually work, you need supercomputers, and you know, quantum competing has this ability to kind of transformed that field. But also just you know, drug discovery, pharmaceuticals, medical research, cryptography, all of these different you know types of sectors that need essentially an upgrade with technology, and so a lot of those quantum names this year, like I on q Ricghetti, and I know that they've fallen back like post Judson Wog a little bit, but I think it's kind of back on the up and up because people realize that this is a technology that's going to blue and flourish. And we you know, we saw about a billion dollars of assets coming to that space and it's been out since twenty eighteen, and you know, it kind of did nothing and then that's where the flows came this year.
Sylvia. We appreciate you.
Thank you so much, Sylviaja Blonci, the CEO and CIO of Defiance E t FS. One of the most interesting stock moves I think I've seen is Tesla. That stock is up one point six percent despite numbers that were not great and any quality beat was a was a light quality beat, like it was a good quarter.
Yet Elon musk job on that stock up on the call.
Steve Man is Bloomberg Intelligence Global Autos and Industrials research analysts, and he joins us, Now, I don't get it. I do not understand what the takeaway is from Tesla's our names.
Yeah, I think you know the volatility that you're seeing in stock this morning, it's I think a lot of the there's been a lot of noise in the marketplace, a lot of focus on the pass but as you know, the valuation of this company is really driven by AI and Robotaxi, and I think you know, Elon Musk basically backed up the truck and unloaded a lot of positive news about AI and about their future last night. You know, they're rolling out the robo taxi in June. We thought it will be two years away, but it's it's going to happen in June, starting in Austin, Texas, in California, and expanding it to the rest of the major part of the country into twenty twenty six. The other thing that was a prize was the Optimist humanoid robot. Now we didn't think that they're gonna start production of that robot anytime soon, but the plan is to do that later this year. And one of the things that they're going to use that for is really to help them cut costs in their production plans.
Steve, could you explain the business model for the Robotaxi.
Yeah, Initially, what they want to do is mimic what Weimo is doing. So they're going to produce robotaxis and they're going to be for higher the revenues will be generated and will go straight to Tesla, and then down the road they're going to open up to current Tesla vehicle owners and the plan is to do it like an Airbnb style where the owner actually can rent out those vehicles.
When we talk.
About the quality of any kind of beat, what was circulating in my world was the greenhouse gas gas emissions credits, uh, and that was a big reason why we saw the beat for Tesla. But that's easy to strip out, like at some point that goes away, it gets less.
We don't need it. So what do you make of that?
Uh? You know, they they've always been getting credits, so it's not anything new. But what really drove the lower margins in the fourth quarter is really the relaunch of the Model Y Juniper, the update of the Model Y. They're actually clearing out the inventory of the old Model Y. It's gonna they did that in the fourth quarter. It's you're gonna see some of that in the first quarter. So first quarter margins will be a little bit bumpy. But you know, they're they're increasing uh incentives, better deals on leasing just to clear out that inventory. But what we're hearing so far is uh. You know, anecdotally the you know, I think on the global level, China and in the US, there's been a high demand or a high order rate interest in the new model. Y. So we we we we are are positive and we are bullish, more bullish on that on that new product for next year and the year after.
What is the AI play for Tesla stock?
Well, look, if I stepped we step back a little bit. They're actually in the transition into a razor razor blade type of business model, right. I think you know, they've they've sold a lot of vehicles. They've been cutting costs on building cars so they can sell more and more of these vehicles. But the real revenue and profit generator is the AI is the robo taxi. It's the full uh full self driving platform. And we heard it last night from the company. You know, they're going to roll out robo taxi and it's it's sooner than I think a lot of people were expecting.
How much of it do you think is the stock movement related to Musk's relationship with President Trump in DC versus underlying fundamentals. I realize that might be an unfair quiet to ask a stock analyst but just in terms of how you model the relative.
A lot a lot, because it's I think it goes hand in hand part of this.
Uh.
You know, one of the things that again, the valuation of the stock is really on AI is really on pushing out the robo taxi and you know, with you know, now with Musk being you know, closer to the administration. Uh, the thinking is that you know, the the government is gonna actually deregulate or or make it easier for Tesla and and their rivals to actually roll out even more robo taxis uh, in in the in the country.
So let's go back to the old car business. Any metrics there that stood out to you about cars? Actually, yeah, exactly. I hate to answer the question, but yeah.
The question actually act actually there is I think the market is not picking this up, is not fully digesting this. This piece of news is that they actually is you know, once they roll out the model Y, once they roll out the cheaper, new, cheaper vehicle. Uh. This year, I'm hoping to drive higher volume. Their fixed cost is going to drop significantly. They just told us last night that you know, basically you know, using its existing line without new capex, They're going to able to actually produce thirty thirty three to thirty five percent more vehicles. Uh so, so they don't have to use that you know, they can actually conserve that cash and and spend it on AI.
We're just like there yet basically we're not there.
I think that when the volume comes up, increases from the new models, then we'll see the benefit of you know, that rationalization of their line and and and the reduction of capex.
How close are we to getting that cheaper model that Paul wants to buy us?
So far it's still uh, it's still on schedule for the first half of.
This year, first half of this year. Do we believe that timeline?
I mean, we haven't seen. The thing is, we haven't seen any pictures of it. Yeah, And I mean that's that's how Tesla has been doing. Like, for example, then launch of the new model why the redesign and Model hy they really really didn't show any pictures of it until really the last minute. And you know, they've they've been talking about it. They reiterated that last night, so you know, you know, my thinking is that they will.
What's the thinking these days, Steve in the marketplace among investors, maybe even among TESLA about the demand curve for evs. Where kind of are we are we in momentum of the demand? What's the thinking out there?
Yeah, there's a big debate. I think, you know, we're on on the camp of uh that you know, if the seventy five hundred dollars tax credit in the US is eliminated, Uh, there's still going to be demand for EV's. I think EV's are here to stay. They're still going to be demand for EV's, but it's gonna hurt some of the competitors that are not profitable in making EV's. So it may lead to example like Ford, you know, basically exiting kind of exiting the EV market, and we might see some of the the rivals do the same thing. For example, Volkswagen is actually not launching any more new EV vehicles in the in North America. So you know, if that's the case, you know there's potential that tests like a game more market share.
Now that we've gone through a bunch of earnings for the automakers, GM in particular sort of highlighted the risk of tariffs on Canada and Mexico. Who do you think is best positioned in the car world to weather a tariff storm.
I think for for the US automakers, any US amakers are more vertically integrated in the US will actually benefit. Look, it's gonna hurt everybody. Tesla is not immune to it, but it's all relative. I think. You know right now, Tesla doesn't build any vehicles in Mexico or in Canada. But you know the Big three do they and they do a lot of it in Mexico.
All right, Steve, thanks so much. Appreciate that. Steve Man, auto analyst Bloomberg in intelligers talk about the Tesla earning. So let's go down to Washington, DC, the US Senate Select Committee