Boeing Wins Contract For Next-Generation Jet Fighter

Summary

WSJ What’s News: Summary of "Boeing Wins Contract For Next-Generation Jet Fighter"

Release Date: March 21, 2025

The latest episode of WSJ What’s News, hosted by Alex Sosalev, delves into major developments in the defense sector, market fluctuations, and significant corporate and political news impacting global and U.S. landscapes. This detailed summary captures the key discussions, insights, and conclusions presented throughout the episode.

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Boeing Secures Historic Fighter Jet Contract

The episode opens with breaking news that Boeing has been selected to build what may become the most expensive fighter jet in history. Announced by President Donald Trump at the White House, the new fighter jet, designated the F47, is intended to serve as a cornerstone in deterring China’s military advancements for decades to come.

President Trump, addressing the press at [01:30], stated:

“The F47 will be the most advanced, most capable, most lethal aircraft ever built. An experimental version of the plane has secretly been flying for almost five years, and we're confident that it massively overpowers the capabilities of any other nation. There's no other nation. We know every other plane. I've seen every one of them, and it's not even close. This is a next level.” [01:30]

Despite the Pentagon not releasing official cost estimates, experts estimate the total research, development, and acquisition costs could exceed $50 billion. Lockheed Martin, Boeing’s main competitor, had been in contention for this contract, but Boeing ultimately prevailed. The decision's timing was influenced by the transition from the Biden to the Trump administration, which saw a shift in defense priorities.

Germany’s Defense and Infrastructure Investment

The conversation transitions to Germany's recent authorization of a substantial 1 trillion euros ($1.1 trillion) spending package aimed at bolstering its infrastructure and reducing military reliance on the U.S. Bertrand Benoit, WSJ's Germany bureau chief, provides an in-depth analysis at [02:50]:

"It's not necessarily going to be a big fight. It's more going to be technically complicated. So you have two things. You have a 500 billion infrastructure fund which is limited in size and in time. It runs over 12 years. And then on the other hand, we have the military spending. And there what you have is unlimited in time and in scale..." [02:50]

Benoit explains that Germany has decided to allow military spending exceeding 1% of GDP without being constrained by existing fiscal rules, enabling unlimited military investment contingent on investor willingness to fund it. When asked if American defense companies would benefit, Benoit clarifies that initial plans favored U.S. hardware investment. However, the current sentiment shifts towards supporting European, particularly German, defense industries due to perceived declining U.S. commitment to European security.

Market Reactions and Leveraged ETFs Collapse

The episode then covers the U.S. stock market's response to these defense developments. Following the fighter jet announcement, Boeing’s stock rose by over 3%, while Lockheed Martin’s shares declined by nearly 6%. Major U.S. indexes (Dow and S&P 500) saw marginal gains of approximately 0.1%, with the Nasdaq up by about 0.5%.

A significant portion of the discussion focuses on the crash of leveraged exchange-traded funds (ETFs). Jack Pitcher, WSJ markets reporter, explains at [07:02]:

"Part of the reason for that is investors looking to get rich quick, people who are attracted to gambling with their money. Some of these ETFs can have huge gains and losses in a single day. And for most of the last two years, it's been huge gains. People have flocked to these products and they make it easy to make really large bets on a single stock or a stock index." [07:02]

Leveraged ETFs, which use borrowed capital to amplify returns, saw their assets under management increase by 51% to $134 billion in the year ending January 31st. However, recent market downturns have led to massive losses, with some ETFs down by 80% from their highs. Despite significant losses, net inflows remain positive, suggesting that many investors are holding onto these funds in hopes of recovery, unaware of the long-term divergence from their intended daily leverage goals.

Jack Pitcher further elaborates on the inherent risks:

"A thing about these funds that not everybody understands at first is they use borrowed money to create a leverage return over a period of one day... It can start going down so much that if an investor held them the whole time, it's going to be very hard for them to ever recover to their original investment, even if the stock is going up quite a bit again." [07:57]

Oil and Gas Industry's Uncertainty Under Trump

The episode shifts focus to the oil and gas industry's reaction to President Trump's policies. Initially, the industry celebrated Trump's victory, hoping for regulatory rollbacks and increased production. However, current sentiments reveal growing unease due to trade policies, steel tariffs, and permit regulations. Colin Eaton, WSJ oil companies reporter, discusses at [09:10]:

"The oil and gas industry really does love the rollback regulations and they say they're going to pump more oil. But the concerns now are everything else in terms of trade policy, the tariffs on steel. They're also concerned about the job cuts related to agencies that permit their projects..." [09:10]

Eaton highlights that the primary concern revolves around the administration's apparent desire for lower oil prices, which are detrimental to the shale industry’s profitability. The industry's preference is for legislative stability over fluctuating executive orders to ensure long-term investment certainty.

Columbia University’s Compliance with Trump’s Conditions

In an exclusive report, the episode unveils that Columbia University has agreed to President Trump’s stringent demands in exchange for the restoration of $400 million in federal funding. The memorandum reveals requirements such as banning masks, empowering 36 campus police officers with arrest powers, and appointing a senior vice provost to oversee specific academic departments.

This agreement follows intense negotiations between the university and the government’s Task Force on Antisemitism. The move has sparked concern nationwide, with many educational institutions fearing similar demands. This development underscores the heightened tensions between academic freedoms and governmental oversight.

Upcoming Segments and Closing Remarks

Alex Sosalev concludes the episode by previewing upcoming segments, including a markets wrap-up and a deep dive into the U.S. healthcare landscape, particularly focusing on potential Medicaid cuts under congressional debate. The episode wraps up with acknowledgments to the production team and a thank you to listeners.

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Notable Quotes:

• President Trump on F47 Fighter Jet: “[...] This is a next level.” [01:30]
• Bertrand Benoit on German Defense Spending: “[...] Germany will be able to spend as much on the military going forward as investors are ready to lend to it.” [02:50]
• Jack Pitcher on Leveraged ETFs Risks: “[...] if an investor held them the whole time, it's going to be very hard for them to ever recover to their original investment...” [07:57]
• Colin Eaton on Oil and Gas Industry Concerns: “[...] They prefer the Trump administration try to push these things through the legislative route, through Congress and submit some of this stuff in law.” [10:03]

This episode of WSJ What’s News provides a comprehensive overview of significant defense contracts, market dynamics, industry uncertainties, and the intersection of politics with education, offering listeners a nuanced understanding of the forces shaping current events.

Transcript

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[Alex Sosalev]

Boeing wins a contract to make what might be the most expensive fighter jet in history. Plus, the oil and gas industry was excited about a Trump presidency. Now it's feeling less certain.

[Colin Eaton]

President Trump has certainly signaled that he wants his administration to be all good for the oil and gas industry. But it does seem like there's going to be tension along the way.

[Alex Sosalev]

And investors poured billions into leveraged ETFs. Now their value is plunging. It's Friday, March 21st. I'm Alex Sosalev for the Wall Street Journal. This is the PM edition of what's news, the top headlines and business stories that move the world today. Boeing has been selected to build what may turn out to be the most expensive fighter in history, a sophisticated jet the Air Force believes is vital to deter China's military in the decades ahead. President Trump announced the new program at the White house today.

[President Trump]

The F47 will be the most advanced, most capable, most lethal aircraft ever built. An experimental version of the plane has secretly been flying for almost five years, and we're confident that it massively overpowers the capabilities of any other nation. There's no other nation. We know every other plane. I've seen every one of them, and it's not even close. This is a next level.

[Alex Sosalev]

The Pentagon hasn't released cost estimates for the program, but experts say the total research, development and acquisition costs could top $50 billion. Lockheed Martin had been vying with Boeing for the contract. The fighter's future had been in doubt after the Biden administration opted to leave the final decision on how to proceed to the incoming Trump administration. Elon Musk, the billionaire and Trump ally, has publicly campaigned against manned aircraft, which he had said were, quote, obsolete in the age of drones. Germany's parliament has authorized a massive spending package that includes as much as 1 trillion euros, or just over a trillion dollars in civilian and defense investments to build up its infrastructure and reduce military reliance on the U.S. the Journal's Germany bureau chief, Bertrand Benoit, is here to tell us more. So how would this work? On a practical level? The incoming coalition government seems to be split on a number of issues. Right.

[Bertrand Benoit]

It's not necessarily going to be a big fight. It's more going to be technically complicated. So you have two things. You have a 500 billion infrastructure fund which is limited in size and in time. It runs over 12 years. And then on the other hand, we have the military spending. And there what you have is unlimited in time and in scale. So essentially what the Germans have decided is that any spending that is higher then 1% of GDP is not going to be subject to the fiscal rules that the country has. And so essentially, Germany will be able to spend as much on the military going forward as investors are ready to lend to it.

[Alex Sosalev]

Yeah. Let's talk a little bit more about this money used for defense. Are any American defense companies expected to benefit from this?

[Bertrand Benoit]

That's a very interesting question because initially we had an interview with Friedrich Mehrz, who was in line to become the next chancellor just before the election. And one of his messages at the time was that he would encourage German military to invest more in US hardware. Now the tables have turned a bit because there is this sense that the security of Europe is no longer a priority for the US and therefore that perhaps Europe should be looking after its defenses on their own. And that means supporting their own defence industry. And there's a higher likelihood that given the choice, the procurement will go to European defense companies, and this being Germany, to German defense companies.

[Alex Sosalev]

That was WSJ Germany bureau chief Bertrand Benoit. Thank you, Bertrand.

[Bertrand Benoit]

Thank you, Alex.

[Alex Sosalev]

It was a week of big swings for US Markets with the impact of the Fed's decision to hold rates steady. And concerns over the effects of President Trump's trade policies continue to loom. Today, though major US Indexes ended the day slightly higher. The Dow and The S&P 500 both rose about 0.1% and the Nasdaq was up about half a percent with the news about the new fighter jet. Boeing ended the day up just over 3%, while rival Lockheed Martin was down a little less than 6%. You heard in this morning's show about the severe disruption at London's Heathrow Airport. Well, the effects have cascaded to airline stocks. European carriers like iag, the parent of British Airways, Ryanair, Air France, KLM and Lufthansa all saw their shares go down. Heathrow, one of the busiest airports in the world for international traffic, said that some flights have resumed, but it expects significant disruptions for days to come. Coming up, Wall Street's newest roller coaster trade, the leveraged single stock ETF, is plunging that's after the break.

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[Alex Sosalev]

The recent market dip has been bad news for many investors, but few more than those invested in leveraged exchange traded funds, or ETFs. These are funds that use borrowed money to amplify their bets on one or more assets. And that's meant that record highs in stocks have meant big money. According to morningstar, in the 12 months ending January 31st and assets under management in leveraged ETFs jumped by 51% to $134 billion. But now several of the most popular leverage ETFs have erased most of their value in a matter of weeks. Jack Pitcher, who covers markets for the Journal, joins me for more. So Jack, people have been really into these leveraged ETFs since last year. They've been riding the rollercoaster of the market, taking bigger risks. Now they're losing a lot of money, right? Why is this happening now?

[Jack Pitcher]

Part of the reason for that is investors looking to get rich quick, people who are attracted to gambling with their money. Some of these ETFs can have huge gains and losses in a single day. And for most of the last two years, it's been huge gains. People have flocked to these products and they make it easy to make really large bets on a single stock or a stock index.

[Alex Sosalev]

So have these big losses deterred investors or scared them off of using these leveraged ETFs?

[Jack Pitcher]

There's plenty of investors who bought these last year, and now some of them, depending on the ETF they're in, are down 80% from highs. We can look at the inflows and outflows from these funds, and we're actually still looking at net inflows for the year, meaning people have put more money into them than they've taken out of them. Granted, there could be lots of people holding these funds that are sitting on huge paper losses. They just haven't sold and realized those yet because they're probably hoping they go back up.

[Alex Sosalev]

What's the longer term picture here?

[Jack Pitcher]

A thing about these funds that not everybody understands at first is they use borrowed money to create a leverage return over a period of one day. A problem with these funds is that if you hold them for a longer period, which they say that they're not intended to be held, the performance can start to diverge pretty substantially from their stated daily goal. That's because if it starts going down a lot, say you had $10 and the leveraged ETF fell by half in a day and now you have five dol. Even if there's a big rise the next day, your investment has already gone down so much that the percentage gain is having less of an impact on the way up. There can come a point where these go down so much that if an investor held them the whole time, it's going to be very hard for them to ever recover to their original investment, even if the stock is going up quite a bit again.

[Alex Sosalev]

That was WSJ markets reporter Jack Pitcher. Thanks, Jack.

[Jack Pitcher]

Thank you.

[Alex Sosalev]

When Donald Trump won the election, the oil and gas industry popped the champagne. Now it's debating whether the glass is half full or half empty. Colin Eaton covers oil companies for the Wall Street Journal. Colin, what is making oil and gas companies wary now?

[Colin Eaton]

The oil and gas industry really does love the rollback regulations and they say they're going to pump more oil. But the concerns now are everything else in terms of trade policy, the tariffs on steel. They're also concerned about the job cuts related to agencies that permit their projects. So they're all about permit reform, but they see a need for people to be in the seats to issue permits. The big concern has been the administration's apparent desire for lower oil prices. Those prices are unworkable for the shale industry as we know it today. That's a big concern and it's been one that they haven't really talked with Trump directly about yet.

[Alex Sosalev]

So what would people in the industry like to see?

[Colin Eaton]

Overall, the big concern for them is the uncertainty that comes with all this. There aren't a lot of oil and gas companies that make an investment and have a payout in just four years. A lot of these are big long term investments and they'll need certainty for a long time. So rather than, you know, a flurry of executive orders, they prefer the Trump administration try to push the these things through the legislative route, through Congress and submit some of this stuff in law. So it's a lot for them to think about right now.

[Alex Sosalev]

That was WSJ reporter Colin Eaton. Thank you, Colin.

[Colin Eaton]

Thank you.

[Alex Sosalev]

And we exclusively report that Columbia University will agree to President Trump's far reaching demands in negotiations over $400 million in federal funding he revoked this month. That's according to a memo from the school to the administration. Colombia has agreed to ban masks, empower 36 campus police officers with new powers to arrest students and appoint a senior vice provost with broad authority to oversee the Department of Middle East, South Asian and African Studies, as well as the center for Palestine Studies. The agreement follows a tense week of meetings between the government's recently created Task Force on Antisemitism and the university's board of trustees and president. Schools nationwide are watching Columbia with alarm, and many fear a demand for similar concessions. And that's what's news for this week. Tomorrow, you can look out for our weekly markets wrap up, what's News in Markets? Then on Sunday, we'll be answering your questions about how the US Health care landscape may change and what that may mean for you as Medicaid cuts are being debated on Capitol Hill. That's in what's New Sunday. And we'll be back with our regular show on Monday morning. Today's show is produced by Anthony Banci and Pierre Bienname, with supervising producer Michael Kosmides. Michael Lavall wrote our theme music. Aisha El Musleam is our development producer. Scott Salloway and Chris Inslee are our deputy editors. And Falana Patterson is the Wall Street Journal's head of news audio. I'm Alex Osola. Thanks for listening.