Story stocks, momentum stocks, hyperventilation stocks, consensual hallucination stocks, financial engineering stocks: anything but reality.
You see, Tesla is different. It just reported another doozie, a loss of $408 million in the second quarter, after its $702 million loss in the first quarter, for a total loss in the first half of $1.1 billion. In its 14-year history, it has never generated an annual profit.
It has real and popular products and surging sales, but it subsidizes each of those sales with investor money. And here’s where it’s different this time: investors don’t care. They dig how the company has been consistently overpromising and underdelivering. They dig the chaos at the top. They dig everything that should scare them off.
Yeah, its shares plunged [TSLA] 11% afterhours today, but that takes those shares only down to where they’d been on May 1. Big deal. Shares are down 32% from the peak. But their peak should have been a small fraction of that. Even today, the company is still valued at over $40 billion.
Tesla lacks a viable business model in the classic sense. Its business model is a new business model of just burning investor cash that it raises via debt and equity offerings on a near-annual basis because investors encourage it to do that, and love it for it, and eagerly hand it more money to burn, and they’re rewarding each other by keeping the share price high. It’s just a game, you see. And nothing else matters.
Then there is Boeing [BA]. It just reported the largest quarterly loss in its history of $2.9 billion due to a nearly $5-billion charge related to its newest bestselling all-important 737 Max, two of which crashed, killing 346 people, due to the way the plane is designed. The flight-control software that is supposed to mitigate this design issue is not working properly. And a software fix that is acceptable to regulators remains elusive.
The plane has been grounded globally since March. No one, especially not the regulators, can afford a third crash. So today, Boeing announced that it may further cut production of the plane or suspend it altogether if the delays continue to drag out. This is big enough to start impacting US GDP.
The entire 737 Max episode has been tragic from the first minute, and the cost in human lives has been huge, and it has cost and continues to cost billions of dollars to deal with, among calls that the plane should never fly again.
And what does Boeing’s share price do? It dipped 3% today and is up 2% from a year ago, before all this happened. In essence, two crashes and the grounding of its bestselling plane, and the potential suspension of production of this plane, and its uncertain future … and the stock has ticked up over a 12-month period.
Instead of spending the resources necessary to design a modern plane from ground up, Boeing kept basing its new models on versions of its many-decades-old 737 airframe that wasn’t designed at all for what it is being used for today. This was a decision Boeing made to save some money and pump up its share price.
But here we go: From 2013 through Q1 2019, Boeing has blown a mind-boggling $43 billion on share buybacks (buyback data via YCharts):
Blowing these $43 billion on share buybacks has caused Boeing to have a “total equity” of a negative $5 billion. In other words, it has $5 billion more in liabilities than in assets. This company is out of wriggle room. If it can’t borrow enough money to make payroll, it’s over.
But nothing matters.
If Boeing had invested some of this money that it blew on share buybacks to design a new modern plane from ground up to replace the ancient 737 airframe, these tragedies could have been prevented, and Boeing wouldn’t have this nightmare on its hands. But the corporate cost-cutters and financial engineers, rather than real engineers, had the final word.
Markets don’t care about any of this. They don’t care about real engineers either. They love corporate cost-cutters and financial engineers. They want share buybacks, and if something bad happens, they’ll overlook the $5 billion to pay for the fallout because it’s just a “one-time item.”
And now Boeing still has this plane, instead of a modern plane, and the history of this plane is now tainted, as is its brand, and by extension, that of Boeing. But markets blow that off too. Nothing matters.
Companies are getting away each with their own thing. There are companies that are losing a ton of money and are burning tons of cash, with no indications that they will ever make money. And market valuations are just ludicrous.
A tiny maker of fake-meat hamburgers and hot dogs with just $40 million in sales in the last quarter, its best quarter ever, generating $6.6 million in losses, after 10 years in business, Beyond Meat [BYND] has a stock price that values the company at $12 billion because it will change the way the universe operates, or whatever.
Anything goes: story stocks, momentum stocks, hyperventilation stocks, consensual hallucination stocks, and financial engineering stocks that generate mind-boggling share prices that give these companies incomprehensible market capitalizations, and the mere mention of “fundamentals” gets naysayers ridiculed and thrown out. It’s like the whole market has gone nuts.
In the most important US market of the Tesla Model S and Model X, the plunge in registrations far outpaced their already stunning global decline. Which opens a whole new question. Read… Californians Sour on Tesla Model S and Model X
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I guess that tells you what people think of the Fed and the Dollar. Why? Boeing will never go bankrupt. TBTF and would be bailed out. Fact.
I’ve been wondering about the form of backstop. The business is important, but are the investors? Take GM for example – the US gov seems to appreciate the importance of keeping the institutional knowledge, seeing as they wiped out the stockholders and kept the business.
Yes – I am sure the bailout of GM and in keeping the UAW (one of the biggest campaign contributors for a certain party) from getting a scratch from the bankruptcy and upending 100 years of contract law had nothing to do with it.
In other fake news. Jon Corzine is still a free man and is back at it in hedge funds. I am sure that was all about keeping “institutional knowledge” around too.
GM Bond holders got the hair cut ( Unions got to be rescued!) but NOT the BANK Bond holders, courtesy of’ Change we believe in ‘ Prez O
Another smooth talking hypocrite sided with Bankers and Wall St during GFC!
Sure, and Deutsche Bank can be bailed out, but how many times can they do that before the system breaks down?
The system has already broken down. The bail-outs in 2009 destroyed the system. From now on, bankers can make any bad bet they want and in the end, they know they will be made whole. That’s why the stock market is doing what it is doing. It’s the moral hazard that happens when massive losses are off the table.
It’s the destruction of capitalism. But completely unavoidable when the population clammers for “deregulation”.
Fed (and other central bankers) have assured everyone that the downside is covered. Only logical conclusion is currency will continue to be devalued. Equity seems like the easiest safe place to hide.
-it’s almost impossible to write regulations that match the intent. There will be loopholes and unintended consequences.
– regulations have costs associated with them which get passed on to the consumers.
– regulations need to exist to only to protect third party interests not first party.
– way cheaper to stop banks from speculating with others’ money (Glass-Steagall) than to let them and have infinite regulations.
Completely agree with Kent, sadly.
“change the way the universe operates”, LMAO on that one, WR! Might as well laugh as cry. May cry later, anyway. Still gotta have hope, always….that’s hard wired into us humans. Ref; line in “Matrix”.
Only airframes that can be unstable are Military. Saw one at airshow fly length of runway at 30 degree angle of attack, and pretty slow, too. Same, maybe others, went straight up…just for kicks. 1:1 thrust to weight. Software “fix” for that 737 airframe/engines on currently req’d steep climb out will take same Mil-spec hardware/software, and redundancy, or at least closer to it. Maybe make all passengers sit in first #n rows? No point in that, except might work, and keep them flying, anyway. Better than bulldozing of brand new homes in Victorville. Plus Military pilot could eject sitting still at ground level and probably live, just in case. Airliner occupants can’t punch out.
RE: “the population”
Most suitably dumbed down, scared to death by number of the homeless, just blind greedy and plan to get mine and “get out” (to where?), anxiously awaiting the “rapture”, and who knows what else….alien intervention?
“It’s them what dies will be the lucky ones” -Long John Silver
Sorry for negativity, very very sorry.
While it is a fun read, Wolf’s rant is based upon a fundamentally flawed notion.
Stocks are not measures of value or assessments of future performance. Discussions of P/E ratios or debt/asset ratios are mere parlor games for people who need to maintain their delusions that they are “investing” in something of value.
Stocks are casino chips whose function is to provide a registry and score keeping system for the few thousand oligarchs who control almost all of them and find amusement in hiring mathematically inclined underlings to invent ways to multiply them and hide the winnings in offshore accounts.
Regulations also saves a lot of money by not needing to negotiate
Unfortunately we are probably going to find out by actually doing the experiment.
Deutsche Bank is a criminal enterprise. Why would society benefit from bailing it out? It’s not so special it would need “saving” should the occasion arise – unless it is your money laundering institution of choice.
Deutsche Bank should be shut down all together since it can’t or won’t follow the law. This goes for Wells Fargo too for a seemingly lesser evil of charging fake fees and opening accounts illegally for customers.
Please see citibank for example of the fate of criminally inclined, bankrupt banks. DB too can do a 1,000 to one reverse split and it too can soon again be an 80 dollar stock.
Dood. People buying TSLA and BYND don’t even know how to spell F-E-D.
And they sure as hec don’t know what TBTF stands for.
What’s sad to me is the number of smart guys like you that can’t figure out, in the words of a world-renowned cellist I studied with, “how to use these people” and generate some profits.
I recommend options.
If you’re young, and still building wealth, options may be a good strategy. If you are older, like me, and just trying to make a tiny sliver of income while protecting yourself from the massive inflation event on the horizon, owning stocks outright is the obvious path (or productive real estate if you are higher net worth and can afford it).
Central banks are now openly funding government spending with money they conjure from nothing. With the purchase of any and all government bonds, to fund government spending, central banks have eliminated bonds as an investment option leaving only stocks to earn income.
The jig is up, governments (or their central bank proxies) are printing money to fund government spending. They cannot stop printing money to fund governments and the money printing is accelerating and out of control – this is the very definition of the circumstance that leads to hyperinflation.
Obviously a huge number of stocks are zombies that have no value but, because of corrupt accounting rules, they are impossible to identify. This leaves older investors, who can’t afford to fund governments via inflation, only one option – buy an eft of stocks and pray you are left with something (anything) when the dust settles.
The term TINA was invented for a reason, it is real, there simply is no alternative to stocks for income and inflation protection at this stage of the central bank chess game – checkmate.
Buy now because the price is only going up (my humble opinion of course)
Options ‘risk managing’ tools!
I am retired with 50% cash and the rest in long/short positions -ETFs, numerous, worldwide, sector/region/country dividend paying , very few stocks and Vang Mfunds with periodic additions.
On top these I use options both long and short to protect my positions in the long portfolio, elsewhere! Never feared the down cycles or the bear mkts!
Been in the mkt since ’82. self educated!
Sunny sees it.
Van, I’m not young, and stumbling around in the equities is like taking a nice drunken stroll through a minefield with snow shoes on. So dispense with that kind of thinking unless you want to take one in the engine room during the next market disruption.
For income, look at holding solid closed-end funds in tax advantaged accounts, and only hold individual equities in the rarest of circumstances.
Boeing may not go bankrupt, but it might become irrelevant if their planes are deemed unfit to fly and airlines switch to Airbus.
The two paragraphs about Boeing are among the saddest I’ve ever read about an industrial company; Having negative net worth, lives lost, and the financial engineers >>> than the aerospace engineers.
Just bad and sad.
….nothing is real
Strawberry Fields Forever
Buy pot stocks !!!
The lemming effect is what some call it. We are well into it. The frauds of the banksters to transfer wealth to their banks through unnecessarily low interest rates from their “Federal” Reserve are the cause.
Price earnings ratios stopped supporting these valuations long ago, even those that are not inflated. Next financial collapse, we should strike nationwide until the Constitution is amended to allow bills of attainder against banks’ control groups, i.e., the banksters. No prosecutor can get them into a jail as we saw in 2008 to the present.
Make them forfeit all assets. The next collapse will cause the loss of most pensions for the rest of us due to their frauds.
I Got it, Nothing Matters.
Not anymore. It’s too late. The situation is too far gone.
When reality does at long last assert itself it won’t be possible to manage the disaster. It won’t just be a collapse, but a series of collapses, in stages. Nothing goes to hell in a straight line, but they do go to hell, and do a bit of exploring on the way. The distortions are catenated and concatenated, non-linear, matrixed, inevitable, and predictably horrific in result.
And that’s just finance. Civilization’s most onerous debts have only an indirect relation to mere matters of finance, and those can no longer be repaid, or even serviced. They are moral, and ecological. Reality can be misrepresented, and distorted, and delayed, at a price and at a cost. But in the end, it cannot be denied.
All that was needed to bring it about was to let the liars, and the cheaters, and the crooks to have their way, for too long, and with too much impunity, and too much power, and to let their perversions escalate until the whole thing shatters. And now it is far too late to change. They wanted to rule, and they will rule over the ashes.
For some problems, there are no solutions. And nothing matters. Not any more.
Very insightful article and great comment from Unamused. The part on Boeing is the most powerful for me.
If this type of post does not get people who believe there is really not much going wrong today and that things can keep going the way they are, to think twice, I don’t know what else would.
They often try to say after crisis hit that no one really saw them coming. This kind of article and this site in general will be a testament that there were plenty of folks that did.
Actually having a lot of cash matters.
Cash is fiat money and its fate IN THE EYES OF THE POPULACE is uncertain – it may fail as a useful medium of exchange.
Historically, the populace has rediscovered precious metals, primarily gold, in such times and an informal valuation for exchange is established. Today, it might a a 77% silver dime for a loaf of bread, etc.
Eventually, gold becomes the basis for a new fiat currency, agreed upon within governments, e.g., the Bretton Woods agreements post WWII, made necessary by the destruction of axis fiat money.
Ah, the hospital accepted my cash, the car dealer accepted my cash, so did CVS, Whole Foods, Costco, Amazon, etc. etc. Vanguard also welcomed my cash and so did Treasury Direct and the IRS. Any doubts?
I used to think that precious metals would work in a crisis and who knows, maybe they still will work. If you look at Venezuela as the latest example of a hyperinflation, they are all getting by with debit and CC. You can’t carry cash because of volume & weight issues.
I saw a Vlogger called Indigo Travels on YT and he just did a trip to Venezuela.
Gold hasn’t been “coin of the realm” for a long long time. When it is, I’ll go along with the King.
I don’t know.
The traditional “keep your tinder dry” was invented in an era with a gold-backed dollar.
Today, the annual $trillion plus deficit should be seen as a direct swipe on the dollar’s purchasing power. Let me put it this way: the US GDP was $19.39 trillion in 2018. $1 trillion deficit spending is a pretty damn significant percentage of that, if not a very big percentage of all dollars in existence.
Secondly, keeping tinder dry only makes sense if valuations become reasonable – i.e. in line with historical averages. How likely is that to happen when everything is bubbled up so far? And how would anyone know when is the right time to buy? The adage about falling knives comes to mind.
Nail on the head. You are a wise man.
The government will continue to waste money, in a huge excess of what they collect in taxes, and the Fed will fund this wasteful spending with more magic money.
Hyperinflations are not fantasy, they are real events that occur in the real world when governments print money to piss it away. When the event occurs it will have seemed so obvious, it is a wonder so few can see it now.
I’m close to retirement, it’s nice that I can buy stuff with cash today, but if I can’t buy stuff with it in the future it has little use for me.
Cash is trash.
Thanks, I don’t feel quite so guilty about my post above, now.
You nailed it!
The money wasted on stock buybacks could have designed a new aircraft.
With the inevitable bear market and contraction, Boeing will be under immense pressure.
Boeing builds swords for the king. Boeing isn’t going anywhere.
Boeing isn’t going anywhere until blockchain and the age of trust create relationships globally where swords are pointless and rendered useless. Boeing’s Remote controlled planes do exist, how controlled is the question. Friction between parties will look very different to today’s frictions. Boeing’s electric propulsion tech will contribute to the new transportation system which is coming alongside the space ports already being built . Mother Earth and her fragile protective layer from the sun will decide if we get there or an intervention will arrive sooner. The future is undecided. Just as oil companies have diversified to renewables, digging oil out of the ground will appear as antiquated as the 122m Idaho shortest runway. Runways are a thing of the past and so too are planes using oil. Electromagnetic and interdimensional transport futures are ahead if we can but get there and at last leave alone the diverse Earth inhabitants and species to flourish and be wild again without noise or pollution or interference. The EW Chain is just one example of how markets will become decentralised on this current time line. Kings – is that concept antiquated too?
The ultralight Beaver (Canuk designed) I flew at Elsinore in the 80’s could land, stop and take off again on that 122M of runway, easily. Maybe even 3 times. But it’s not everyone’s cup of tea.
Digging oil out of the ground is going to continue unabated until green energy and batteries weigh less than kerosene and avgas. It ain’t gonna happen before 2050 or later. Thorium powered aircraft are more likely than green and battery powered planes.
Until such time as the world is conflict free and inhabited by peace-loving unicorns and care bears, companies like Boeing will continue to exist if for no other purpose than to build swords.
As all of mankind’s physical production relies on products derived from the refining of crude oil, “digging” oil out of the ground will be an essential aspect of our existence for many decades to come.
And blockchain is a sucker’s bet, suitable only for dinosaurs like IBM to run vaporware commercials about non-existent solutions during golf on Sundays.
As for your definition of antiquated, whatever. The rest of your screed was just utter nonsense.
Well put; thank you for a refreshing “other” look at our future.
Boeing management and shareholders may feel the king’s axe, however…
Just so we’re clear…
Boeing’s management, having gorged themselves on stock-based compensation plans turbo-charged by tens of billions in buy backs, and having outsourced critical engineering to offshore entities employing borderline morons at $15 or less an hour, should be forcibly boarded onto a 737 MAX, and auto-piloted into a small debris field after a short AI-guided aerobatics demonstration.
Any left over seats can be filled by management teams of other US corporations that have engaged in the types of activities.
Citizen just suggested first constructive solution to this problem.
“Anything goes….It’s like the whole market has gone nuts.”
Add to the list the margin debt which last year reached $627 billion, an all-time high. $100 billion more than in 2016. The margin debt in June was $575B. Below last year’s top but still beyond nuts!
(Got the figures from Edward Yardeni’s company, Yardeni research, https://www.yardeni.com/pub/stmkteqmardebt.pdf )
Thanks for the great article.
Thanks Old Dog…what was the margin debt levels in 2007?
I know that margin interest rates for retail accounts have gone up a lot since 2006, when the rates were close to the Fed funds rate. See margin rates at one large discount brokerage firm here: http://www.tdameritrade.com/pricing/margin-and-interest-rates.page
Buying on margin really makes no sense these days.
Great piece Wolf,have been getting flashbacks from 2000 (Web Van) for a while now. it is truly stunning to watch. the complicity of the financial Media in promoting this Craziness is especially galling. so here we have a Co that makes Vegetarian Hamburger patties and it is propagated as some revolutionary product. I can remember these being available since the 1970s in health food stores. My gut feeling is there is so much “Money” sloshing around the world right now that EVERYTHING is being bought no matter how bad. this will be “corrected” as always. Keep some substantial funds ready to deploy to go short and you will do VERY well. the hard part is the timing of course as i can happen very sudden at ANY time. thanks for keeping your Readers at the Pinnacle of Developments as they evolve. we are in un charted Waters with a Monster the CBs created they may not be able to control.
“…Keep some substantial funds ready to deploy to go short…”
‘Ready’ in the banks? Where ever & when ever bank failures begin they’ll ripple around the globe like a tsunami.
In my little corner of the universe bail-in legislation was quietly introduced about 18 months ago and hardly anyone is aware of it. When I go into banks I bring the subject up, just for fun and get mostly blank looks even from ‘managers’.
I’ve thought about buying puts, but then there’s the timing, so for me it’s about silver – because of the GSR – and gold and silver miners. Then wait for the blood on the streets moment.
Yep, that’s biggest problem buying PUTS!
Time and TREND has to match with one’s strategy. It worked so dandy during GFC!
BUT not when the ‘BAD news is GOOD”!? The whole investment matrix I learned is upside down since ’09!
But I think those times are coming in the months ahead!
I’m interested in puts myself, I’ve been researching charting and market indicators and such – timing is certainly everything.
As of now, I have a few small option plays, 2 are straddle (just move the price either way) and 1 is bullish. I also have a good bit of money in 2.25% short term CDs waiting for a better time to jump in.
My sense on this is that stocks, while fragile, have more room to run. When we see less companies at 52 week highs and consumer staples outperforming consumer discretionary, we can start thinking puts. Until then I don’t want to risk my portfolio being long stocks (I’m actually positioned like 70% gold related and 30% bonds), but I don’t want to bet on short term price declines yet either. Patience is key.
The Bail-In thing was introduced in the Federal budget a few years qgo by the Canadian Conservative government. Most people are totally unaware of it.
Not so many are unaware. Just waiting to see how it works though!
Gold, what little corner of the Universe are you in? US, Europe, Down Under?
Things that can’t go on forever eventually stop
%99 of stocks with ridiculous market caps and no to little free cash flow will be just footnotes in history’s dustbins within 5 years
And along with their collapse , investors who are gambling on these stocks will be taken to the cleaners.
R Cohn – you say:
And along with their collapse , investors who are gambling on these stocks will be taken to the cleaners.
“Let our ears hear, what our lips are saying…”
By Definition… Investors, who are gambling..
Are not NOT – Investors…
They will learn the very expensive lessons of history…
I GUARANTEE – that after the Poo hits the fan.. they will all be screaming for Government bail outs (for them)
Happens. Every. Time.
It’s a wealth stripping scheme, pump and dump on a massive scale. The insiders will be cashed out and long gone before the ship of chumps sinks. Unfortunately, the whirlpool will suck all the ‘sane’ investments of the W2 caste’s 401ks down along with it.
All that “free money” for the wealthy has to somewhere – that’s where it goes. The dollar will crash before the stock market does, but the market will follow right afterwards. It will be very scary!
Stocks will recover with the advent of the new currency – the dollar will not.
Currency was worthless in Brazil in 1994. After the sixth new currency (the Real) was introduced and commerce started up again stocks had retained their value. If you owned stocks you survived in the lifeboat to reach shore, anyone who held cash was wiped out.
People become anchored to the idea that currency has value, when the currency losses it’s value they hang on, believing everything is in a bubble, but it’s the currency that is the true bubble and everything else that has value.
The US dollar is the #1 risk-off asset. If investors get spooked on stocks, real estate, etc it leads to short-term dollar strength.
Curious about “new currency”. SDR? BIS has no Military.
Do admire your housing solution though. I lived in old bread van for several years in 70’s, but I could do it on most city streets and run power from friend’s houses. No more of that allowed if caught.
‘The dollar will crash before the stock market does’
unlikely in the near future!
US $ is the dominant global trade currency (60%+), the least dirty shirt hated but wanted all over the World. Study the previous BEAR mkts and where did all the CASH go after the selling? Look at those 13 Trillions in NIRP! compare that with 2.07% yield by 10 yr bond! ( been in the mkt since ’82!)
The dollar’s status as global reserve currency is waning. There are already payment mechanisms in place to circumvent the dollar and limit the reach of US foreign policy (sanctions).
Greater currency diversification is being advised right now due to rising fiscal and trade problems in the US that could leave those holding an imbalance of the dollar overly exposed to losses relative to Asian currencies, the euro and gold.
Keep your eye on this as this is a structural shift away from the dollar as opposed to a central bank policy, one that will extend over time and space regardless of any given political dictats .
Finally, if the FED keeps printing the dollar to fund the govt., it won’t be able to stem the tide of a sudden hyperdeflation event and the world knows this. And it’s preparing now for it.
“Story stocks, momentum stocks, hyperventilation stocks, consensual hallucination stocks, financial engineering stocks: anything but reality.”
What a sheer waste of capital. Not to mention the bubble world that has been created that might lead to devastation that could scar generations. Does it sound like it is going to have a good ending. How come if it is not rocket science to understand this, do the powers that be keep proving Einstein right with such a ridiculous display of insanity (instead of being sensible, accepting you have been wrong and try and do the right thing – may be painful today but will help in the long run like a much needed surgery). Imagine the after effects on society. I wonder how anyone with a conscience can inflict such punishment on average citizen and be smug about it as if he is doing god’s own work. Seems like Devil’s work to me!
Many do understand but dare not speak, because their whole reality would be shattered. We humans need to go through the wringer. Then we start learning and changing.
If you have any sense you learn. If not you will get another beating!
“Beatings” for this sort of thing tend to be administered to entire societies, perhaps even to all life-forms. I, for one, am very tired of getting beaten for *other peoples’* failure to learn.
The sad thing is that the political systems of the western world seem to be totally oblivious to anything unusual in the ‘markets’! I think America could live through a strictly economic/financial collapse. We have been there before. What is different this time is that we face possible political and social collapse where people lose complete faith in the system. This causes lethargy, apathy, and huge amounts of criminal behavior as witnessed in many countries over many centuries. We just did not think it would ever come ‘here.’ Well, we are ‘here’.
Well your half right except it won’t just be America it will be world wide as they have all created so much money and debt that their is no solution or way to pay off the debt and nothing any longer has true value because of it.
Unfortunately I think a total collapse is inevitable their will be no smart place to move wealth be it property, cash, gold, bonds or stocks the whole lot will implode.
The social collapse will leave many unable to feed themselves or their families have access to basic medical care or have any where safe to live. It could IMO trigger the biggest revolution the planet has ever seen as the most dangerous people are those that are fighting just to live and have nothing left to lose.
I am beginning to understand why there are so many huge underground bunkers for those in power to retreat to now as those responsible won’t be able to hide anywhere but there.
Here’s a fix to the problems facing Boeing, Tesla and Beyond Meat
Merge Tesla with Boing. Redesign the 737 Max to be run 4 Tesla X using solar power Boeing could take all the grounded 737 Maxs, attach 2 Teslas per wing, cover the top surface of the wings and cabin roof with solar panels.
It won’t get off the ground but it might just roll down the highway nicely.
Each passenger is served hamburgers made with Beyond Meat. With the addition of all the solar panels, Musk’s Solar City gets a much needed boost. Tesla is saved. Boeing goes back into production and since nowadays airlines only serve nuts and dreck in the dining car, Beyond Meat would be a welcome treat I’d prefer a rack of BBQ unicorn but that might be asking too much
See—I fixed it
Aw, to hell with this. Just take me out back and shoot me. Everything is so screwed up I don’t know if I can’t take it any more :-)
Naha— Just merge Boeing with Beyond Meat and banish all the executives to Yellowstone Park where there is an oversupply of hungry wolves.
If you think your solution as a frequent flyer is to never fly on a Boeing Tin Can again I can show you photos of failed Airbus 300 rudders that exhibit the same kind of engineering proficiency as the bean counters who specified a single O ring for the Space Shuttle boosters.
The “powers that be” (or “god” etc) that decide the ratio of intelligent to dumbarse people in this reality are the ones that have botched it (from the perspective of the intelligent). If the dumbarses massively outnumber the intelligent, then you will get chaos because dumbarses can’t see in big picture terms. On top of this, the modern “academic system” has done an excellent job of turning out brainless consumertrons. There is a thing called “the arrogance of ignorance” that makes the ignorant think they are right, even in the face of blatant contrary evidence. There are whole generations that think that the stockmarket can only ever go up (they’ve never seen a proper bust cycle). If these generations are in the majority making these “investment decisions”, then this little shindig will only stop when the money runs out. Any bets as to how much [real] “sucker cash” is still left out there? Of course the federal banksters can just keep printing more. Time to dust off the history books regarding what happened in the Weimar Republic in the 1920s.
Wolf keeps bashing Tesla, but how smart is being able to stay in business 14 years without making a profit. I think Musk is a genius. Most businesses couldn’t stay open two months without making a profit.
Anyway, keep funding your/their 401Ks and re-electing the same bunch year after year.
I agree, Musk is a genius, I’ve said this before, for the very reason you mention, and for a few others, such as putting EVs on the map. For the latter, he deserves huge kudos. No one before him has been able to do this. He created an entire industry.
Nortel Networks didn’t produce a profit for over 10 ten years. The company went into bankruptcy protection in Jan/2009. All the divisions and IP was sold off. Nortel is known now as the “biggest pump and dump” in Canadian history. During the high tech run, Nortel was buying companies, acquiring land for expansion and building factories.
When the high tech bubble burst, Nortel was sitting on $1B in cash and bleeding $1B per quarter. Cisco was sitting on $18B in cash
Tesla seems to following the same Nortel trajectory: “We remain on track to launch local production of the Model 3 in China by the end of the year and Model Y in Fremont by fall of 2020. We are also accelerating our European Gigafactory efforts and are hoping to finalize a location choice in the coming quarters.” What happen to building the factory in China having acquired the land? All of this expansion activity occurring as the we enter a global recession.
I find Tesla’s 1Q and 2Q 2019 cash flow numbers very suspicious. They are burning through the cash from their most recent financing. I smell an accounting scandal coming in the next 6 to 12 months.
Hmmm, Nortel died because it stupidly went into China along with all of the other fiber telco guys. And the killer is usually IDed as Huawei, and to a lesser extent ZTE and the other Chinese manufacturers.
I am not sure how much Musk is risking by opening up in China, mainly because there are already so many Chinese EV companies, but we will see, if Tesla collapses, it won’t be because of China.
I used to respect him until it became obvious he was in the business of raising money and not making money. I think you two give him too much credit. Tesla was there before Musk took it over. Musk squandered a golden opportunity to make Tesla a success because he let himself be lead by ambition and ego instead of sound business decisions. Numerous twitter faux pas and PR gaffes has made him the subject of derision, not to mention entire YT channels dedicated to Tesla cars quality control problems. Musk needs to go back to basics and focus his energy on sound business decisions or he’s going to lose Tesla. People are rooting for him to fail and nobody is to blame but him. He can turn it around- it’s not too late.
I think Tesla is doomed.
An EV only comprises of a battery and electric motor and controller. It is therefore very simple to manufacture compared to a ICE (Internal Ciombustion Engine that has an engine, gearbox and all the paraphernalia to comply with emissions.
The battery appears to be 60% of the cost of the vehicle.
The batteries come from China and are made from rare earth, China being the largest producer of rare earth.
China manufactures many more EVs than Tesla.
It will not take Mercedes and large car manufacturers to produce cars more efficiently and more reliable and cheaper than Tesla.
Yeah but Amazon closed at $2000.
I Got it, Nothing Matters.
You are incorrect . What matters is a 0.25 bps or a 0.50 bps rate cut ;-) .
Boeing is dead man walking . They cannot design a new plane . It cost them 60 billion dollars and 10 years to bring the 787 . If they start now a new plane by 2030 ?? . By that time the world is over peak oil and short of aviation fuel to fly . Sayonara .
Yup, the Dreamliner was one bridge too far in a world where productivity matters no more, only debt. No wander it’s going rapidly downhill for the most capital intensive ndustry on Earth.
Speaking of kitten’s lots of “alpha dogs and alpha thinkers” here, South Park is on now, and for a while yet tonite. Wonderful! So I’m signing out.
Corporations don’t care about spending boat loads of profits on R&D & improvement for the wellbeing of society. Improvement that ultimately leads to radical transformation & new innovation which then spurs real inflation. Only the kind of mindboggling artificial asset inflation we’ve witnessed since the Great Recession. It’s all about lining the pockets of shareholders. Greed to the nth degree. Anything and everyone else be damned.
Tesla & Boeing are prime examples in different ways but within the same context. Debt creation the likes of which we’ve never seen was designed to impoverish the many & enrich the few. It’s the grandest of all Ponzi schemes. The whole market has gone nuts & nothing really does matter except except the continuance of the almighty profits…at any cost.
I’m glad you wrote this article. I can feel your exasperation as I read it. All the worst behaviors, everywhere; rewarded. Clearly there’s a corporate debt fiasco unfolding under our very eyes, yet if we point it out we’re all Debbie downers … or something.
At least you’ll have it all on record for when the “who could have foreseen this?” excuses get rolled out.
Prior to reading this article, if you had asked me to estimate the value of Boeing’s stock compared to the December lows, I’d have said it probably is quite a bit lower now because of the crash (maybe 20%). If you had asked me to estimate where it’s trading relative to its 50 day moving average, I’d have said lower given today’s negative headline. I just looked at the chart and it’s about 16% higher than the lows in December and still a few dollars above its 50 day moving average.
Many years ago I read about the massive debt load of Supervalu (which ran the better-known supermarket chain Albertson’s). I think the debt was something ridiculous like 5 or 10 times its market cap, so I wondered why I never heard about this company finally going bankrupt. Reading this article reminded me of Supervalu, so I look it up only to find it has been bought by United Natural Foods. Supposedly, the synergies of the two were supposed to produce great value to shareholders, but its stock price has collapsed around 75% since the acquisition a year ago. But Supervalue shares surged over 50% after the acquisition was announced, so it’s almost like rewarding financial irresponsibility. Taking on a manageable amount of debt can be punished as we saw in the case of Cloud Peak Energy, an American coal producer that had substantially lower debt levels relative to its size compared to competitors such as Arch Coal or Massey Energy. But the more indebted coal companies filed for bankruptcy and after being relieved of their debt burden were able to run profitably at a price point that forced Cloud Peak Energy into bankruptcy. So in our financial system it’s almost stupid not to go for broke and take on maximum debt and maximum leverage.
This Boeing affair is making my hair stand on end.
I am an engineer. Years ago, I voluntarily quit a very well remunerated job, sold everything, packed up and moved to a dilapidated ruin in France that I’m slowly doing up. Don’t ask about my current income. At least my engineering background is still of some use.
The reason I quit my profession can be summarized as: disgust with managers, specifically the beancounting variety. Over the course of my career the notion of “shareholder value” entrenched itself in the companies I worked for. With the foreseeable consequences. More and more short-term decisionmaking based on this year’s profit figures, stock option valuations and bonuses. Less and less weight to arguments having to do with engineering, customer loyalty, social responsibility, whatever. The suits do what they can and the engineers suffer what they must.
When the 737max was grounded, I thought this would be a wake-up call to a system in which financial engineering had become the only engineering deemed important. Finally, a clear and unequivocal message to the beancounters that there really IS an end to only squeezing dollars from a product with little regard for anything else. Adages like “penny wise, pound foolish” resurrected. After all, it won’t be long before Boeing will have lost more money on the 737max affair than it would have cost them to develop a completely new airframe from scratch. Serves them right, I say.
In such a situation, I would expect to see consequences. Like collapsing stock prices. Fired managers. CEO departing in disgrace, if not outright deposed. Announcements of drastic strategy changes. Serious blowback, you know.
But no. Some bad figures are published, some compensation is promised, some corporatespeak issued. The stock price holds up, people are working on the problem, nothing to see here, move along people.
I am completely flabbergasted. And disgusted. I feel like I have been beamed to another universe where different natural laws apply. I am obviously losing contact with reality. Which might be a good thing, actually.
I’m off, got to do some roof repairs before the next rain.
I can strongly relate to this and totally understand your disgust.
I am an engineer myself and my fellow colleagues and engineer friends have complained and discussed about the beancounters and robber-barons taking over “engineering shops” ad nauseam.
Personally, I think this happens in fields/markets that have matured where innovation comes to a crawl. So growth in profit can no longer rely on technical innovation — that’s when they turn to “financial innovation” and bring in the beancounters and cheerleaders.
Well, it isn’t just engineers making moves, or plans.
Engineers see problems and have the skills and training to develop solutions. At least real practicing ones do, and not those who use the ‘ticket’ to rise into management. I would expect engineers would be building their own wood-fired trucks by this time. :-)
I just talked with my sister down in WA, where Boeing is king and a few friends of hers were ex Boeing engineers. She thinks the economy is robust and strong. The media is propagating this story like the self-replicating ticks currently killing cows in the US, and she believes it. Why? Because she has to. Everything is riding on her acceptance of myth and hopium. What else can she do but hope? She and her husband have no options to draw upon, and that is the situation of most people.
And even those, those who have made preps and do not accept the current narrative, will be bloodied, bludgeoned, and shaken as this plays out. We are all in this together and if people show up at your door hungry, we will feed them. My question, are investment bankers and ilk deserving of support when this blows up? Nope.
I use to own an engineering design company, and must say I cleaned up a lot of “shady” design work for multiple companies that thought $15/hour foreign engineering was worth the risk. What I found is the training was not consistent, and there was a lot of bad habits in modeling parts and understanding the American design process. The attention to detail, and fear of liability, was simply not part of their engineering culture. My company would have been wiped out if I released a dangerous design that harmed even one person, yet their companies basically had diplomatic immunity. If their plane sensor design sent 300 people into the ground at 500mph, they did not suffer any consequences. This has been the reality since at least the last 20 years…buyer beware.
But thanks to the fed free money, my income producing “hard” assets inflated over 700% over a very short time frame, to the point where I retired at half the age of most Americans. I switched from job creating design engineer to fed debating financial engineer. I think in 20 years, the unintended consequences of virtually free money will have dire effects to our once highly productive society…unless you define productive as producing something from nothing, and by something I mean free money.
Really nothing new.
See the Ford Pinto issue to see how engineers were overruled by beancounters in the 1970s. And disaster followed then too.
There are still plenty of companies where engineers “rule.”
And as an engineering decision – moving to France to fix a dilapidated house with no source of income?
You’re not the first questioning my decision. In fact, most “normal” people do. After all, they have their careers to worry about. Their mortgage. Their status. Debt service. Keeping up with the Joneses. Whatever.
However, I only have one life, and I do not want to waste it in traffic jams en kowtowing to dumb empty suits.
I have some capital but thanks to the central bank’s war on savers that doesn’t go as far as I hoped. But living frugally I hope it’ll last until I kick the bucket. You really don’t need much, living in a ruin in the French countryside.
I am poorer than ever. Happier than ever, too.
+1000. You are a rich man, owned by no one. Suits aren’t the only ones that can pile up debt to leave mouldering. You can always fake your death. :)
Congratulations on your escape. Or should we say manumission? Try not to always toil. Also admire the mines at Baux, and the lavender near Les Mees, and the parfums of Grasse, and les calanques de Cassis, and ride the wild white horses of the Camargue. Not everyone can, and very few will, but now that you’re there, these can be your solace, such as it is.
For us bound to our land, there is beauty, solitude and solace in the Appalachian Mountains.
And Vancouver Island, RD. The salmon will be jumping in front of my house in 1-2 more weeks.
And yes, I try to enjoy this simple life to the fullest. Now is the season for the “fetes de village”, where folks spend the evening eating, drinking and having fun at the long trestle tables under the centenary trees.
For me, it doesn’t get much better than this.
Empires rot (financial as well as political) when there is no accountability at the top. We’re there already.
My first para would be the same as yours, except not France.
I used to lecture both on flight control systems and systems design. There at least 7 major errors Boeing has made with the MCAS, the software being only two of them. I do not see it flying in the US before next year at the very earliest (and maybe never). It will be another year before it flies elsewhere.
Must go also, as I have an entire roof to replace ;)
In medicine x 30+ years.
Bean counters in suits also have ruined medicine.
Medicine became all about how much can you extract from the providers , how little can you provide for the patients.
While the bean counters got rich the rest of us got miserable.
The moment Medicine became business, docs lost! It is Corporatocracy running America. Corporate Medicine has no soul!
Been there, Seen that and also done that. Quit nearly 20 yrs ago and have NEVER regretted it!
Worse the docs are highly divided among themselves, against each other in terms of Foreign vs Domestic trained, Proceduralists ( specialists) vs GP/FP/internist, old vs young, racial/minority bias. you name it! They are willing to throw their brethren to curry or save themselves! 90% are members of BOHICA society ( Bend over here it comes)
AMA, State Medical associations, County Medical Societies are useless nothing more than ‘supper’ club. BTW the growth of Hosp Administrators is 1000% vs 200% for docs in the last 2-3 decades!
This a GREAT medical bean spilling site for non-med lingo speakers.
Don’t let the name fool ya, the Kaiser Family itself sponsors this….some regrets for what happened to their health care notion, I suppose. They were really just about steel & stuff, anyway.
What might “save” Boeing is the MIC……
If you are going to play around with other languages please get them correct.
“What might “save” Boeing is the MIC”
Expect part of boeing to be hived off and go the way of Lockheed and the liability’s to be resolved in a bankruptcy of the civilian aircraft side.
“All the real talent gets siphoned off into the Arts and Sciences. That leaves the dregs to put it all together”. -Bucky Fuller…..a long time ago…..
I feel your pain, and I was just a Tech, like Alex in SV.
Tulips are back in fashion, what am I bid?
A bubble, fresh from the South Seas ;)
“Instead of spending the resources necessary to design a modern plane from ground up, Boeing kept basing its new models on versions of its many-decades-old 737 airframe that wasn’t designed at all for what it is being used for today. This was a decision Boeing made to save some money and pump up its share price.“
This is a classic mistake that most highly successful companies make: they cling to the product/technology/method that made them what they are.
Intel failed with their mobile processors because they were based on their PC processors. Their offerings were bloated and inefficient compared to ARM-based products.
Microsoft failed with the touch-based application ecosystem because they have been clinging to Windows, an OS designed with keyboard and mouse in mind. They added a thin layer of paint on top of Windows and introduced a line of tablets/laptops and expect the whole industry to jump on board the clumsy solution. That didn’t happen. Virtually no developer seriously released or redesigned their desktop applications for touch (most were just unconvincing conversion efforts). Few users use Windows as a touch-based OS. Consequently, Microsoft’s app store is in a pathetic state. They even scaled down their own effort for touch-enable their applications. (Apple didn’t make that mistake (yet) — they didn’t shoehorn a touch-UI into MacOS — despite vocal complaints from emotional and impulsive gadget geeks who are quick to ask for something new without thinking it through.)
Let me be perfectly clear: You haven’t one scintilla of a clue as to which you speak.
I use, and code to, WinOS, MAC OS, iOS, and Android. And I work as a technologist for one of the largest financial services companies in the world.
Windows 10 across all hardware platforms, including phone, is *vastly* superior to anything Apple or Google have built to date and the touch interface in the tablet\laptop environment absolutely destroys the crap that Apple and Google have conned you into using. This also helps explain why the best selling apps across all app stores are Microsoft.
As for your ludicrous statement “Few users use Windows as a touch-based OS” I am assuming you live under a rock and have never seen a Surface, or, for that matter, Windows 10 running on any sort of touch-enabled display – and fully deployable into enterprise computing environments.
The failure of Windows 10 phone is tragic. The OS runs great and offers an excellent UX. However, to get the most out of the OS the hardware requirements are skewed to the high end and this may be the source of its demise. As far as I am concerned, in terms of phone, either Microsoft is stupid on the same level of stupidity as XEROX in the days shortly before the PC revolution – or they have something else in the pipeline.
From a phone perspective, I’ll go back to a clamshell before I buy any iPhone or any Android based device.
Maybe you should get out more and try some new stuff before you just jump out here and spew things that are just malinformed?
Clayton Christensen in his book ‘The Innovator’s Dilemma’ explains exactly how and why companies lose their market leadership to new competitors.
Don’t rest on your laurels or someone will steal them. Told to me by employee number one at Msft.
Ah, yes, a millennial recoiling like a vampire to light at a direct response…
Your response clearly demonstrates your utter cluelessness on the topic. In fact, I bet you haven’t even held a touch-capable windows device, let alone actually used one. Meanwhile, in arms reach I have three Android tablets, two Windows stations (one touch-enabled, the other running 3 4k monitors) and an iMac.
I know of which I speak, broheen.
Lol. I worked for M$FT for a decade. Windows is decades old overbloated spaghetti, completely out of control. I have no love for Apple or Google, but their software is simply newer and therefore slimmer and nimbler.
Agree. Kinda like DEC VMS which was the only one I ever got halfway good at (just command language). Did program my use of an App on IBM 360 (Punch cards), and programmed an 8086 in hex to ad and subtract instructor assigned #s, though. My beef came when I was forced to just memorize menus, plus when tubes and TTL were gone and I had to become a board jockey.
Total Luddite and love my dumb flip phone, very small, easy to slip in pocket. Had to pay extra for it.
Quotes from Adam Smith and Maynard Keynes: ‘There is a lot of ruin in a nation’ and ‘the market stay irrational longer than you can stay solvent’. This can run on for many many years and will.
I must intervene here. I hope people won’t take it the wrong way: this is just a friendly correction.
Boeing did not opt for the MAX series to have more money to use on share buybacks. It’s far more near-sighted than that.
In 2005 Boeing decided to develop a completely new family of airliners to replace all of their existing models, informally called ‘Yellowstone’.
Yellowstone was to consist of three models: Y1 to replace the 737 and 757, Y2 to replace the 767 and the 777-200 and Y3 to replace the 777-300 and the 747.
This family was to make as much use of common technologies as possible, thus reducing development costs and times.
At the time no new narrowbody (or ‘Little Boy’ in Boeing parlance) engine was available to offer serious improvements over the existing CFM-56 used on the 737, to it was decided to give priority to Y2, which became the 787 Dreamliner.
In February 2011 with new narrowbody engines such as the Pratt & Whitney PW1000G in the final stages of development, it was decided to greenlight the Y1, with the goal of having it in revenue-generating service by 2020. This was a very conservative schedule which could have been well met even assuming troubles during engine development.
However in December 2010 Airbus had launched the A320neo, nothing more than the plain old A320 with new engine options. While it promised conspicuous fuel savings over the old variant, it was no match for the proposed Y1 using advanced technologies aimed at cutting not merely fuel consumption but also airframe maintenance costs.
We’ll never know exactly what happened, but in August 2011 the Boeing leadership decided to “freeze” Y1 development and to launch a modest re-engineering of the existing 737 model (the New Generation or NG) provisionally named 737-RS which became the 737 MAX.
The MAX was introduced in revenue generating service in 2017, saving Boeing a measly 3 years over the Y1, but at a terrible cost.
Even before the two deadly accidents the MAX was seen as an “also run” or a “second choice” and several faithful Boeing customers felt like the US company committed what Henri Ziggler of Breguet and later Airbus fame called “the capital sin of commercial aviation”: designing an aircraft after minimal consulations with the airlines that will have to use it daily for years. Airlines wanted the Y1, and big Boeing customers like Ryanair and Southwest wanted a saying during the design phase. Instead they got a lot of compromises and an aircraft they didn’t really want.
But the alternative was either that or get in line for the not-exactly groundbreaking A320neo. Or wait at least a decade for China or Japan to design a remotely palatable narrowbody, if any.
Leaving financial conditions aside, Boeing displayed some nigh-on unbelievable leadership flaws which should have made potential shareholders extremely wary and existing shareholders extremely angry. Those flaws were repeated with the 777X, another masterpiece of flip-flopping and near-sightness which is being rightly punished by markets. Should Qatar Airways or Emirates experience the same problems Etihad has experienced and cancel orders it will be really funny to see how the Boeing leadership will flip-flop its way out of another fiasco.
I honestly don’t know what modern day stock market jockeys are drinking/smoking/sniffing. Paint stripper doesn’t destroy brains so throughly.
Boeing is one of those companies, just like Deutsche Bank, which may be too big to fail but are also too big to bail out. It’s not merely just a matter of government snapping its fingers to make everything right because Wall Street is throwing a temper tantrum.
Boeing needs strong, competent leadership with a vague idea of what they are doing, not these two-bit financial alchemists, and only shareholders can get the right leadership on board.
The 737 MAX should have been named the 737 NG.
Or 737 NFG
You’ve pretty much nailed it with respect to Boeing’s decisions. The 737MAX will remain James McNerney’s legacy. This was his call as President, CEO and Chairman of the Board back in 2011. He owns it. Should we be surprised? Not in the least. He was the first without an aviation background or engineering degree to run the company (B.A. from Yale and an MBA from Harvard).
My only disagreement pertains to your final bit:
“…and only shareholders can get the right leadership on board”.
No, shareholders won’t set anything right since institutional investors are complicit in the short-term decision-making which will serve to maximize profits in the here and now, not five or ten years down the road.
Boeing is just one more vivid example of the void in leadership, ethics, integrity, honesty, humility and common sense that our world faces. Doesn’t matter if one looks for these characteristics in the business world, political arena or religious institutions. They’re not to be found (with rare exceptions).
The world will have to encounter its next big crisis and upheaval before a new Age of Consequences arrives and then great character will rise to the top again.
“… the void in leadership, ethics, integrity, honesty, humility and common sense that our world faces. Doesn’t matter if one looks for these characteristics in the business world, political arena or religious institutions. They’re not to be found (with rare exceptions).”
True, IMO. What’s the individual to do, sans decent leadership?
Abandon it, as best one can, and march to one’s own drummer, away from densely populated places.
“Don’t follow leaders, and watch the parking meters”
-Total Artistic Genius
McNerney also butchered 3M between GE and Boeing. Ask 3Mers about that.
Another of the wreckage executives from GE.
The list is longer than most people think, if you look into the subject.
Another one of Jack Welch’s poison apples, along with Nardelli, Immelt and others. It sickens me how much the vacuous business press used to slather over GE and Welch, his sleazy numbers manipulations and scorched-earth destruction of employees.
The signs were right there in your first paragraph. Every time I see “President, CEO and Chairman”, three things come to mind:
1. Combining the roles of CEO and Chairman is a governance failure and leading indicator of bad corporate decision making to come
2. Unless they occupy the White House, using the title “President” is a leading indicator of a narcissist
3. Combining all three positions in a title (President, CEO and Chairman) is a leading indicator of an insecure megalomaniac … and a small wiener
It’s been pointed out that it’s too late to fix things. Boeing will be an impportant ingredent in the soon- coming global meltdown. The central banksters will be overwhelmed.
MC01 thanks as always for informative and insightful info. And thanks especially for not comparing the Max to previous ‘similar’ situations where ‘the media’ got all worked up about the crash of an early model (Embraer?) to use a lot of composites, or this is just like when ‘the media’ got all worked up about crashing DC-10s when in reality it was faulty maintenance. This situation is unprecedented and is about greed and fraud and regulatory capture and lack of accountability that is evolving from defying logic and financial fundamentals to trying to defy the laws of gravity.
Saw CBS news this morning summed up the whole problem in 15 seconds…Boeing is working on the software that caused the 2 crashes…So apparently ‘the media’ isn’t getting all worked up any more on behalf of the past or future victims.
You left out the part where Boeing lobbied the current US Govt to implement 300% tariffs on the Bombardier C series to protect the 737, whereas Bombardier just sold the controlling interest to Airbus in response.
When companies have to resort to tariffs and interference to protect their products, like US softwood lumber producers and Boeing, the curtain is lifted for people to see what really is going on?
Like aging people, you either keep moving forward as much as possible, or you sit back in the recliner and watch yourself slowly die.
What’s next? Tariffs on German autos? Ohhhhh
Insightful post. Thank You. The difference between Deutsche Bank and Boeing is that Boeing has stealth infused technologies not available on the market which were developed in black projects. The fast turnover of contractor staff ensures silo working and no one person gets to see the whole picture thus technologies remain hidden. Of note the discussion around updates to the 737 aeroplane manual ie known technologic capability intentionally omitted. This I believe is the reason that people appear to be drinking/smoking/sniffing. Some people know, some don’t. Those that know lead a few, chinese whispers. And this might explain what we see today, chaos.
Deutsche Bank “Wealth Management” div (or whatever) will remain as
black as Epstein’s “client list”. I’d put money on it.
Chaos will continue as scheduled, at peasant level, anyway
The 737 Max saved Alaska, Southwest and the other 737 fleet flyers untold costs and time to retrain and certify their existing pilots on a new aircraft. It is my understanding that it was the airlines that actually pushed Boeing toward upgrade and away from development of a new plane. Plus Boeing had to worry about pilots being trained on the NEO and thus losing future orders to the A320 NEO.
Correction re: Alaska – they have two 737 MAX 9s on order but no MAX 8s parked @ VCV as SWA has. They also fly the 320 including a few 321NEOs. If Airbus could meet the demand it would be interesting to see if airlines would switch. Massive task for SWA with only 37s in the fleet. Of course the 320 design is not really new, only “less old” than the 1967 737.
Good to see someone is sticking McNerney (and by extension, Welch) with this fiasco, now can a way be found to claw back his ill gotten gains? The road not taken by passing on naming Mulally CEO, a real engineer, not the financial kind.
For all that, Boeing will persevere. There is no way in hell that the Federal government will let Boeing fail. It would be worse than not bailing out General Motors.
As for Jimmy McNerdy… said it a hundred times before, he was the loser of the three way fight for Jack Welch’s spot. He went to screw over 3M before he was promoted upward to fuck over Boeing.
It’s funny, all of Welch’s potential successors ended up being losers. Don’t remember what happened to the other guy, Nardelli I think, but Immelt killed GE.
Nardelli wrecked Home Depot and then Chrysler. It would be staggering to tote up all the capital destroyed by GE management ideology while the purveyors enjoyed plaudits and plutocratic wealth.
The big question is always was Welch successful because he was Welch, and nobody could out-Welch him. Or was it that it was just a fluke due to his rather draconian management style. Or perhaps, he always had a bunch of B players working for him, who had no ability to really stand on their own.
Because his potential successors were all big losers.
“If Boeing had invested some of this money that it blew on share buybacks to design a new modern plane from ground up to replace the ancient 737 airframe, these tragedies could have been prevented, and Boeing wouldn’t have this nightmare on its hands. But the corporate cost-cutters and financial engineers, rather than real engineers, had the final word.”
This paragraph above pretty much sums up why the United States is going a break- neck speed to the trash bin of history, the bin that accommodates far larger and more exuberant Empires of Yore.
Then again Who cares!
All the rats will be deserting the sinking ship anyway.
Agree. But just where will rats go? To Mars with Elon?
Yes, the idea that you can borrow your way out of debt seems to be proving itself false.
The game is called global ZIRP, and it will get even more bizarre.
The game is ‘global deregulated insane speculation’.
Ask the Japanese how that worked out for them 30 years ago!
You can regulate a dog, but not a wolf that’s been living in the wild.
Couldn’t agree more, except IMHO the entire world has gone nuts.
The result of political correct “thinking”, i.e mass hysteria?
Even engineers appear to adhere to “positive thinking”, probably the result of constant brain washing at college and university.
Murphy’s Laws and market corrections are outdated.
My gut feeling is Western Civilization has peaked and there is not much else, except for Japan. But they had chosen collective suicide a while ago.
I believe when the crash hits the Algos will also go nuts.
“My gut feeling is Western Civilization has peaked …”
I agree. I’m an old man, remember well Mom crying when job after job disappeared for Dad during the great depression of the 1930s.
I also remember the renaissance of the 1950, when America was culturally united in the aftermath of WWII.
Our pinnacle as a civilization is past, IMO – it was during the third quarter of the 20th century.
It’s my understanding the algos will no longer go nuts, the bids will simply disappear.
Wolf, what’s keeping it up I say to myself. Nuts is right!
Rampant speculation and the greater fool concept (now called ‘momentum’) is what’s keeping it up…same as ever, with the once difference that the greater fool now may well be a machine running computer code!
It will turn, and when it does it will be nasty.
I agree. It’s all about momentum in the s. market. Parallels what we see in politics: it’s all about celebrity. No concept of quality.
The 737 Max 8 belonging to Ethiopian Air was going 700mph when it crashed in an almost vertical nose-down pitch. It’s hard to imagine anything in the debris field remotely resembled a commercial airliner. The reason it crashed at such a high speed was because the thrust levers were left at full take-off power. Even if the pilots monitored air speed it wouldn’t have changed the outcome. There’s been a lot of criticism of the pilots for not disabling STAB TRIM, or not knowing they should, but the CDR revealed they did disable it.
As for Tesla- it’s been tapping the debt markets for years and Musk has been making unkept promises just as long. Investors know by now that Tesla cannot deliver on Musk’s promises. The market does not support it and Teslas have ongoing quality control issues. So why do investors keep throwing good money after bad? One possible answer is that they expect the Fed will keep buying Tesla stock through its primary dealers. Deutsche Bank has been buying up Tesla stock for months now.
Just a matter of time before central banks enter equity market with both feet.
You mean openly admit to it.
Been reading a few articles lately how the Fed is acknowledging that their plan to blow asset bubble has not worked, but they had to do it because Congress wouldn’t do it’s job of restructuring economy. Not sure about that, but the Fed did get the market trained to keep buying because we are not going to let assets fall in price. My guess is in the next crash, Congress will change the law so the Fed can have even more extreme policy like buying corporate bonds and stocks to keep assets inflated.
Bad monetary policy corrupts a society by basically penalizing rational thought and replacing it with speculation and by rewarding financial engineering over longer term production improvement.
That’ll destroy the USD, the world reserve currency. That’ll be fun…
The 1950’s and 1960’s were the glory years of Keynesian economics where the federal government quietly stepped into the economy during downturns with massive infrastructure projects like the Eisenhower Interstate Highway System and the Apollo program among many others.
This economic system had the effect of empowering labor unions which drove up working class wages, matching any productivity improvements. Coupled with extreme enforcement against monopolies, the economy had high growth, low unemployment, low inflation and high wages. But it also minimized corporate profits.
In steps Milton Friedman. His entire goal was to shift economic power away from the federal government and towards the banks, the federal reserve, and corporate CEOs. And with the presidency of Reagan (and later Clinton), he achieved his dream through a change in the popular myth. Whereby the government stifled the economy and the private sector should be unleashed to create wealth, all under the watchful eye of the federal reserve.
What we are witnessing today is the final results of that very successful campaign.
Govt spending as a % of GDP is higher today – MUCH HIGHER – than in the 1950s and 60s.
Yeah. Massive military spending (tax payer funded giveaways to corporate contractors) and interest on the debt (accumulated to pay these corporate contractors).
Tax rates was much higher in the 1950s.
Government spending is largely defense and healthcare, which is a byproduct of high prices in these sectors, which is driven by rampant corporate profiteering enabled by toothless regulations and monopolies in these sectors, which is a byproduct of the overall shift of political power toward banks and corporations.
Kent’s comment was spot on. Too bad the general public has no idea what’s happening, and the few folks that do (e.g., readers of this site) can’t do anything about it except vote and hope.
yes but the majority of it is spent on rubbish that does not return any asset to the nation or feed the economy.
What is the point of the state providing loan funding for students to study golf course design which returns nothing positive to the Economy as the best golf course designers are old golf pros.
just 1 example of the many bad state investments in tertiary education loans that will never be paid off, or in many case even down.
You should write a book: the history of the American Economy since 1950. Maybe “The Onion” will publish it. It appears to be a little too late for “Mad Magazine”. Whew… have to hold my nose on that one.
Awww, come on. For a mere 4 paragraphs, it wasn’t that far off from including all the major factors of the times. And most certainly was not Mad Magazine material, or a nasal irritant. And you quite obviously got the gist of it.
BTW, would you prefer the “horse and sparrow” Econ analogy from the Gilded Age to Uncle Milty’s “credentialed” agenda?
It’s for sure less sneaky than “supply-side”, neither of which have been very kind to peasants.
And yet again, there is NO such thing as the Nobel prize for economics.
Corporate bean counters and their robber Barron counter parts will soon ask this very question, who is John Galt
I spent a month in the hospital staring at cielings. I asked the nurses how they keep on going despite what they see around them. Their answer is they don’t watch the news and just keep on going. I followed their advice.
If you were ever near death and survived, you know what really matters.
Trouble with that is that kind of ‘head in sand’ thinking leads to all kinds of wrong people floating to the top…and then third-world country status, as those people carve the place up for themselves, their family and their pals.
Vigilance is required.
And you don’t need a near-death experience to realize what’s valuable – just a pause for thought.
About 12 years ago, a young guy I worked with on wall street went through a near death experience. He only had one 7 figure bonus check under his belt, so he was not wealthy. Then, he had a near death experience. He was in the hospital for months. He survives and returns to work. What did he do? Packed his desk and quit work. He told all of us we were wasting our time. He moved to a lake cabin away from the rat race and married a small town girl.
Good. You understand.
I get it. Important life lesson.
Iamafan, I wish you all the best.
He’s fine! According to his comment 2 days ago, he’s out shopping for a new ‘Vette ;-]
Thank you, Wolf.
We had more than 2 feet of snow and I was out snow blowing at night. After it was all done, I had a massive stroke (a head bleed), but the bleeding stopped just before they cut my brain. I was out, totally. When I woke up in ICU, I could not do a thing. Nothing except breathe. I was nursed and after a week I moved up to CCU. One more week. Still zero movement. They moved me down to PT. In the end of the 3rd week, I moved. But balance and dizziness was out of this world.
After 3 weeks of not moving, you’ll cry out of self pity because you hear others waking the corridors of the hospital. I could not even walk to the bathroom. They wheel chaired mt to PT. I did everything and more I was told. You are like a baby trying to learn to walk again.
They knew I was fine when they gave me 10 numbers to add and I beat the doctor that needed a calculator. Obamacare only paid for one month so I went home. Nurses visited my home and made sure I would not fall and hurt myself. But I was determined to walk again without a walker or a cane. I bought a balance beam built of foam and balanced on it again and again and again. It worked. Today I do my whole yard (more than 1 acre) with a walk behind mower. I detail all our cars. I read almost all the gospel from the Fed. Very lucky.
I hope this never happens to anyone. By the way, never skip your blood pressure meds. That was my downfall.
On the investment side, my Dad who is in his 90’s decided to gift me because of my situation. I put everything in Treasuries and did not regret it. I will follow SocalJim’s advise and buy that house near a lake.
Super-glad to hear that you’re recovering from this ordeal.
“House by the lake” sounds good! Make sure it has internet access so you can come to WOLF STREET ;-]
Ozark maybe! Sorry could not resist myself, been binging and re-binging on season 1 & 2, waiting for 3. That is a helluva story… made me stop feeling sorry for my little backache from doing yard work over the weekend.
Well done by you!
4 Trillion bucks of QE had to go somewhere, into ‘real’ assets so why not borrow the money from the banks at zero interest, pump it into the stock market and pocket your slice of the bonuses? When you have criminals running things that’s how it goes.
It doesn’t matter until it does.
The stock letters for Boeing are BA
They should read MBA. There fixed it
BA is the DOW as it is a price weighted index. The elephants have to keep it up
In the air with their algo software MCAS
The markets are under going long term distribution. The internals are weakening and there are fewer soldiers leading
Do I fore see a 2000 or 2008 crash? No
When there are enough bagholder and retail muppets for wallstreet to unload on then a 25 to 30 percent correction may take place. As of now BA is very precarious and a drop to 280 might happen before the end of the year
What a sad tale What have we become
It is much more than publicly traded stocks. Most of Silicon Valley is the same story. Many SV companies are not viable and only exist because of easy money. This is all due to excessively easy central bank money. It has been this way for more than 10 years. Better off owning SoCal beach homes … a hard asset that has a solid return.
If we check out the global flow of capital, we see that the center of power and capital has already shifted East – Asia, is now the global power house of Capital – Now, look at the RATE of growth… Asia, is now, and will be, the Global Powerhouse of the planet. I don’t think the USA will be that important moving forward.. I think the power has already shifted, and now.. Perception is slowly catching up. Perception is important to all markets, perception and related expectations. I believe, we are approaching a major tipping point…
There is slow de-globalization occurring ! IF EM mkts can manage their debt levels, that’s where the growth is for the next decade or two!
I am buying(nibbling) local companies via country- small cap ETFs! This is game changer
Everything has been stopgap measures so we can get to nuclear fusion. Once that arrives humanity will be saved. Hopefully they can keep the wheels on the bus on long enough to get to 2025.
Sending fossil fuels rockets into space for exploration is just a useless waste of resources but once nuclear fusion arrives we can go anywhere.
Boeing…. What might be ok software practice for some web site is not acceptable when peoples lives are on the line
“Increasingly, the iconic American planemaker and its subcontractors have relied on temporary workers making as little as $9 an hour to develop and test software, often from countries lacking a deep background in aerospace — notably India.”
This is the practice everywhere in everything. I have been a contractor at a certain well-known PNW sw company, and contractors do all the real work.
I worked a project that brought in another contractor to work with me. Fresh of the boat woman from India, unfortunately incompetent, clearly untrained. Fortunately, a fulltimer had the presence of mind to get rid of her. It came out the company was paying $100/hr for her. She got $10/hr.
I saw this all the way back to the 1980’s and it is now worse than ever. One of the the big temp companies in India has videos showing how they train them, it’s mostly to pass the interview. nothing on doing the job.
I think the smarter managers have gotten wise and no longer believe the hype of “they’re smarter than us” and “they speak English!”. Still racist, because the only reason for the accolades are to justify using other humans.
That woman was the last of the incompetent offshore contractor I’ve seen at the great PNW behemoth, but in the decade before, they were everywhere, making disaster after disaster the few competent people left were expected to fix, in addition to their own unreasonable workload. The very first job I had in 2005 was a real eye-opener: hundreds of people to make a not that complex web app, and they couldn’t really do it.
When some people pay millions to have lunch with Buffett, you know there’s a big part of the World that’s gone mad.
Nothing matters because the Powell “U-Turn” is coming, and it’s going to be Yuge.
The winners in all this will be pension holders, guaranteed by governments, enforced by judicial rulings, and collected on the backs of these “investors” even if they lose a bunch, or they won’t have a place to sleep at night. Realize the actuarial value of a $50,000/year pension is $1 million, which may be invested in Boeing to meet that obligation, but it doesn’t matter if they lose, since you will end up paying for yours and their losses both.
Actuarial value in year one, based on 5%. This being a ‘fixed income’ example, I assume you want near 100% security of your $1 million, Yes? Oh, and if inflation is 3%, then you actually need to get 8% so you can reinvest 3% or else your $50K per year shrinks quickly ($38K after 10 years).
Reality is more like 2.5% on your Vanguard account, of which they skim 1% for no good reason, so you are going backwards quickly.
Agree .gov defined benefit pensioners are the winners and the rest of us are forced to be speculators and are pissed off.
(1) Depending on the starting age, you can very well buy a pension for less than 20x the annual payout. These are called annuities.
(2) Vanguard doesn’t skim 1%. Their fees are down in the 0.1% or below. Unless you are specifically buying actively-managed funds.
You can’t get an inflation adjusted annuity at that price (or any price). Your annuity is worthless as soon as inflation hits hard but a government pension is inflation adjusted – priceless.
I have self directed/managed, Market based annuity account over 25 years at Vanguard!
Grown nearly 3x on the risk adjusted return basis. That’s my long term health care account!
Van: Yes, you can. I’ve priced them out in the past. Obviously it costs more with inflation protection, and it might only provide partial protection, but every intelligent annuity purchaser has that concern so the market provides a solution.
A number of years ago, I saw the term “crapification”, as in the crapifcation of American or modern capitalism. It’s not just Boeing. For example, call centers anyone? Does anyone have a better customer service experience going through a call center vs. a knowledgeable and helpful service department?
And it is microwaves to telephones; lawnmowers to garden shears; cable TV to homeowners insurance. In every instance, quality has gone down because the bean counters and Wall St. have demanded it.
“It’s like the whole market has gone nuts”
Or… It’s like someone with limitless funds is buying stocks outright to hold the market up. I find it remarkable that so many bright people refuse to entertain the idea because “the fed doesn’t do that”.
Not long ago you would be laughed at for insinuating that the fed would give money to foreign banks… Well, they have and a considerable sum. What if behind closed doors financial markets were deemed a “matter of National security”? You reckon that might explain the $21 trillion missing in DOD accounting?
Next you’ll tell me there’s no gold at Fort Knox …
The Bail-In thing was introduced in the Federal budget a few years ago by the Canadian Conservative government. Most people are totally unaware of it.
Dave, can you point me to more info on this, please?
The S&P 500 dividend yield pays more than German bunds. The ECB and the Fed may cut rates further.
Boeing and the government should get a plan of action in motion before it is too late.
The electric grid can not support an electric car in every garage. The little Toyota Prius was popular when the price of gas was high. Now the price of gas is low and people want large body SUV’s and minivans. Tesla can not earn a dime. They do not have the range of a gasoline operated vehicle. Some college kids drove nonstop from New England to Florida for spring break. Pit stops along the way.
It would be different if money mattered. However, if you have billions to spend, you have to spend it somewhere. Example; a friend of mine was some time ago working for an insurance company reporting to the CIO. He walked in with the bad news: The real estate portfolio was bleeding hundreds of millions. The response: You think that’s a problem? I have gobs of cash coming in weekly and I have to find a place to spend it. Seems to me that banks and institutional investors alike find no appeal in traditional lending or investing (real business), they just like the glitz and glamour of spending cash and talking about their victory: finding clever undiscovered niches to pour cash into. Might as well have a conversation about the Martians that are taking over the planet Kolob as far as I’m concerned. Help me Obi Wan Kenobi, you’re my only hope.
The trouble with centrally controlled money is you have to be able to trust the controller. Trust that they don’t issue too much, or too little, and not to favour one part of the economy over another – benefits should accrue to all parts as equally as possible (not an easy task). An alternative is to have money that’s not centrally controlled, money that’s controlled by no one. But best of all, I think, is to have both forms of money available (plus the myriad of hybrids in between perhaps?) and let the market decide. Isn’t that how free markets are supposed to work? I mean a monopoly of the money supply is the mother of all monopolies, isn’t it?
Anyway, it hardly matters, as things are already moving in that direction. Much of it being done under the guise of fintech, DLT, CBDC and , of course, BlockChain. I’ll not mention the other B word (and no, I don’t mean Brexit)
I guess the historic wealth & disposable income for American workers & consumers who are working more than ever & shopping too (as well as paying off their debts) – due in great part to the President’s economic policies – has nothing to do with strong equities; and I guess the constant churn of some firms going lower and others going higher (wasn’t that Selma Hayek?) has nothing to do with fizzles & burn outs amongst the winners? So…am very confused by those who don’t/can’t/won’t see the forest from the burning bushes. Best…PJS
Financial engineering will never make up for the steady loss of real capital — engineering expertise, machine tools, factories, experienced skilled tradesmen, scientific knowledge, etc..
As a resident of Michigan I have witnessed first hand the shipment of the machines that created modern American prosperity to China for scrap metal prices. I have seen an entire generation of skills, instead of being passed on to the next, robbed of their promised secure retirement and thrown on the same scrap heap.
I was told in Econ 101 that the purpose of financial markets was to create real capital for businesses to use in building the future. Folks, what we have been doing instead is just plain insane. We have spent the last decades watching the few at the top eating our seed corn, having a great party enjoying an illusion of wealth, while creating the real wealth that could create that future is ignored. Profit has been had selling our future for scrap metal, but sadly that is a one time deal.
India is graduating more engineers than the US. Trump is played as a fool by China. And some days I am glad I’m an old man and may not be around to see how bad things can get if we don’t change our foolish ways.
Thanks Wolf for an excellent post.
You could not have stated it more perfectly.
I am an old engineer who also happens to be able to build almost anything and have many friends who have similar skills ( not bragging just stating ). Have tried many time to pass on these skills to grand kids, cousins, nephews, and other youths. No they are only interested in their cell phones, x boxes, computer gaming. My 15 year old grandson couldn’t even fill a bike tire with air without me having to show him. When asked to pressure wash the deck his response to his mother was “why do I have to do this can’t we hire someone so i can play on my computer”. Time is coming when the knowledge and experience of the “old timers” will be lost, don’t know what will happen then.
“….experience of the “old timers” will be lost….”
Every time an old person dies a whole library (and experiences) dies with them.
This article has hit many “nerves”.
More than 200 responses…one of the largest?
I was born in 1930 and have seen many, many changes……was thoroughly disgusted in the aftermath of the ’08 crash. We had a chance to get our financial ideas in order and we capitulated to ‘financial terrorism” by our government leaders.
The idea of “free-market” capitalism is a wet dream that will produce some nightmarish offspring.
If the “commons” can’t prevail anymore we are truly lost as a society.
We are living today in political/societal/financial tyranny.
“Inequality” is supposed to stimulate creative thinking.
It’s really not working.
Tesla is down 10%. Boeing is down bigly too. Beyond Meat is Pets.com part Deux.
Everything else is looking good because the economy is in excellent shape despite what the doom and gloom brigade say.
@ just some random guy
The doom and gloom brigade huh?
Reminds me of one of my favorite quotes:
“The power of accurate observation is commonly called cynicism by those who have not got it.” – George Bernard Shaw
” “The power of accurate observation is commonly called cynicism by those who have not got it.” – George Bernard Shaw ”
In the internet age it seems troll armies are being tasked with attacking those who post accurate observation’s.
An ominous sign.
As was stated by the Emperor Claudius, towards the end of his reign : “Let ALL the poisons that lurk in the Mud .. Hatch Out !”
Doesn’t that pretty much sum up our collective predicament .. that the poisons are now having their day ??
Will the 737 Max ever fly again?
Some interesting observations in this article.
Boeing crashes planes and the economy. An economy built by financial engineers, not mechanical engineers. Just look at the NPR graph the other day showing college degrees. The number of business majors more than doubled and the number of engineers other than computer engineers is languishing, with likely the majority now Asian nationals. Business majors are qualified for nothing other than sales careers.
Have you heard the saying The business of America is business? That was said by the President Coolidge in 1925. And it is still true almost 100 years later.
Why would any American kid want an an engineering degree, when he/she will have to compete with H1B near-slave labor? Smart kids know business degrees is where the money lies.
So what do we do?
Slowly shift our 401k (457) into funds that are mainly composed of government bonds?
Fidelity manages my company’s 401k plan, and they do indeed let you buy Treasury Bonds with no fee involved. You can buy 90 day T-Bills and have them roll over without lifting a finger. There are pages on the internet showing you exactly how to do it. Good luck!
Just a small bleat from a bean-counter (retired). I have been controller and assistant controller for several small/medium sized co’s over the decades, mostly single proprietors, partnerships, or closely-held corporations. I admit that I have pretty well zero experience in big corps w mgmt, shareholders and all that, which may be very different.
I was tasked by the owner/managers to crunch numbers. The engineers crunched, well, whatever they crunch. It was the owner/managers who made the decisions, I just supplied $$ values and *always* warned about the seductive nature of to-the-penny prognostications vs. the (real-world) findings of engineers, production managers, plant managers, and such hands-on types. Even sales types. In *no* case were us bean-counters empowered to make the decisions, and in *every* case, the decisions were made by owner/managers, based on the input of us accounting, admin, production, and sales/marketing types.
Please do not blame we who are only one type of messenger among many. It is the task of management to manage, if they are bedazzled by the (spurious) specificity of numbers, I can only take that as one more evidence of the perils of innumeracy. (ie, see Wiki https://en.wikipedia.org/wiki/Numeracy).
Stocks are up because any prudent investor has to own SOME hard assets as an inflation hedge. Assets underlay the stocks, especially if you are buying raw materials, manufacturers, etc.
The Fed has gone crazy with the stimulus, but legislators will not stop them because they are crazy too.
The problem with holding bonds and CDs is that robust inflation could evaporate your wealth in a decade. Many people are seeing robust inflation now. Ask anyone who wants to buy a house.
As crazy as it is to own stocks right now, it may be just as crazy to own bonds, depending on how long the Fed and legislators remain delirious but walking.
I guess you didn’t see the Wolf columns that show how the ‘corrections’ in the market keep wiping out all profits in stock prices in the last few years. I’ll take my bonds at 3% or 4% interest against zero profit or even losses in stocks. The only way to make a profit in this stock market is by having perfect market timing, of buying in at the lows, somehow knowing that the correction is now over and that this wasn’t a bigger crash, and then knowing when to sell at the highs. Because when the Wolf’s charts show that corrections keep wiping out all gains, then its only the people with such perfect timing who can make any money. Me, I know I have lousy timing. And in this market, and investor with lousy timing who buys late and then gets wiped out by the correction is losing money, and the steady investor who stays in only breaks even as each drop wipes out years of gains. I’ll take my 3% interest as the only deal in town, which is how the bankers rigged the system to be.
Why not gold under these circumstances? Looks like the central bankers are hitting the panic buttons. More frightening this time around given their resources are strained as it is.
That said, the only course of action is to reverse course as we seem to have a bigger runaway train this around as compared to 2008. QE4EVER, NIRP is all one can see in the horizon
Fold may go up but there’s no reason it has to in an inflationary environment. Nobody needs it, as opposed to production assets, which will always have value for production. I own a little gold, but I’m mostly in ST debt and some stocks waiting for the wind that blows the Fed off its tightrope.
The only thing that could bring the house down
Is if the us buck was no longer the reserve currency.
I am not hoping for that.
I really don’t get it. I’m in UK but from that nation that allegedly sends you all those infamous 419 Advance Fee Scam letters, but I still can’t understand what’s going on in the Land of the Free and the Brave. Surely it can’t be the Land of the most being the Gullible and the Ignorant those letters seem to imply it most likely is!?
I don’t mean you all though. Even I’ve gotten smarter just reading Wolf! But can someone explain to me how so much wool is being pulled over people’s eyes for so long? I just feel I’m missing something!
1) Boing on LPSY.
2) FB daily showing a Bearish Divergence. On weekly, FB failed to
breach the big red candle open from July 23 2018, and plunged.
3) The software sector led the NASDAQ charge. Loaded with
babies guppies co, born less than 2Y ago, with puny annual sales, never making a dime and deep water negative retained earning deficit. They all went vertical, since Dec 2018(L). The software whales, like Sunopsys and Candence Design, also went vertical in the last 7M.
4) GOOGL weekly, from Apr 2019 huge open gap @ 1296.97 it plunged within 2M to 1027.03, or $270, but the reaction was only 48.7%, up to 1158.58. The downtrend is strong. The next stop is…
5) Since Sep 2018(H) @ 2050.50, AMZN lurched down $743, but
managed to bounced backup, stopped by Oct 2018(H), despite lucrative defense contract.
6) SF after the death of the richest man in the world, 1902 John Mackay, who owned Comstock gold mining stocks in Nevada, had a devastating earthquake. It might be repeated, with a different type of earthquake and the destruction will be worse.
As Hannibal (George Peppard) was fond of saying on the A-Team — “I love it when a plan comes together”.
Plus Boeing suffered the humiliation of having their stooge at Department of Defense replaced by a Raytheon stooge.
Mark Espers was just a career stepper at Raytheon.
Disappointed, this would have been the perfect article to use “plethora”.
I love the way the corporate press is covering up for Boeing. I saw a headline on a financial news site yesterday that referred to Boeing’s “grounding crisis” as the reason the stock dropped. So, according to the corporate financial press (the same people who told us often that Enron was great), the crisis is because Boeing’s planes have been grounded. The larger crisis, that Boeing took advantage of a corrupt political system that means money buys favors to get an obviously absurd, fox guarding the hen house, arrangement of self-certifying to get Boeing’s planes cleared to fly in the first place. And that Boeing then went further in then cutting corners, producing obviously unsafe planes where key systems had no backup, and even dared to charge extra for some safety features. Boeing is probably lucky that ONLY two planes crashed. But hey, if you read the news, its only a “grounding crisis”.
We are told that America needs the death penalty to keep bad guys in line. Well, the Boeing case illustrates that we need a Corporate Death Penalty for corporate mass murderers who kill hundreds of people in the name of profits. We need deterrence against corporate criminals, thus we need a corporate death penalty. Perhaps a symbolic corporate guillotine should be erected on the mall in Washington. And a Boeing symbol should be mounted on a pike where the lobbyists can see it every day as a reminder of what happens to those who betray the nation and kill people.
Up is down, down is right..that’s how it feels right now with the market. I wonder, say 100 years from now if there’s still a functioning society in place, economic historian will look back at this time and come to the conclusion that this is the type of insanity that caused the big catastrophe. Similar to how we can pretty much see what caused the great depression or the the 08 crash..just feels like this is all building up to the next great hindsight moment for the future.
K, like… you guys had me scared. But I checked with my 12,000 close friends on Facebook, and I’m reassured that my Qwest, Solyndra, Bitcoins, TSLA, and BLM Investment Securities LLC, are all going to be fine. “Genius” just takes time to generate dividend checks.
Wolf – Great article and comments are too, although I didn’t have time to read them all.
But I wonder if sometime in some future column you could address the role of the “Algos” in keeping everything overpriced. If software can be poorly written for airplanes, it surely can be poorly written for stock pricing.
Blaming the algos for this crazy market is too easy. These algos are used by funds, and the money that is in those funds — buy, buy, buy — is helping produce this phenomenon. It’s human beings that decide they want to be in the stock market. It’s algos that decide what, when, and how.
You have to give me credit … when the second 737 Max crash happened, I commented that this was a big big story. BA was at it’s all time high. But, my comment was deleted because it did not match the story I put it under.
There are lots of big stories happening all the time, and some people insist on posting them here and posting a link, and I just delete them, no matter how big. Happens several times a day, every day. This is not what this comment section is for.
You need to understand. Wolf is ALWAYS right.
He is not looking for dissenting comments – even if they are backed up by facts that should at least make him re-examine his position.
What he is looking for is sycophants.
He already drove Banker off here because he didn’t like what banker posted.
Wolf reminds me of the Soup Nazi on Seinfeld.
Ready or Not,
Happy? Feel better, having called everyone here “sycophants?”
Generalfeldmarschall Richter der Internetnachrichten.
Kein Internet für dich. Hau ab!
WOlf just had some simple rules for posting, and it causes his discussion section to be readable (your post included).
Wolf, do you think that the predominance of passive investing combined with algorithmic trading could explain much of this? It seems to me that there are no more adults in the room to do real price discovery based on fundamentals.
As an engineer, like so many others here, I see positive feedback loops aplenty, and that’s never good news.
By the way, here’s an interesting screed on passive investing: https://dailyreckoning.com/free-riding-investors-set-up-markets-for-a-major-collapse-2/
I was a wall streeter and worked at the some of the largest firms on the street. When QE transaction hit the market, two things happen:
1) Cash needed to be re-invested rises from the QE operation and at the same time
2) The supply of securities in the market falls from QE removing cash bonds
So, you have cash being re-invested in a smaller universe of available securities. Some of that money finds it’s way into the equity market.
That is what drives the SP higher.
Just a few years ago, I sat on the front lines of a major equity operation, and whenever QE transactions hit, I watched a flood of cash and derivative orders sweep through … we made a lot of money loading up on holdings before the QE transaction. It was like free money.
Front running the Fed’s announcement and the ‘Bad news is GOOD’, were all so EASY $$ for the picking, right?
I wonder what’s next? The PLAN for earnings recession? QE4 will solve it?
I believe that the prevalence of stock buybacks, combined with index mutual funds and HFT, has long rendered all stock market behavior, irrational.
You may know this already, but the absolute number of shares in the US stock markets has declined every single year since at least 2002.
This is due to the combination of stock buybacks and mergers.
The US economy is a cesspool of monopolies, monopsonies and outright fraud, sustained primarily by the exorbitant privilege of the dollar in the form of ginormous military spending and endless deficits.
Throw in the health care cluster***k, and the picture is complete. The amount of money Americans spend on health care, over what they would spend in a 3rd world nation like Luxembourg or Switzerland, is sufficient to pay for 1.5 military budgets including all the extras like the VA and special appropriations. That particular sinkhole is entirely suffered by the natives.
And now a word about business ethics.
Business schools teach their students that their ‘ethical responsibilities’ are exclusively to their shareholders, to ‘maximise shareholder value’. Not to the public. Not to the laws. Not to their suppliers. Not to their customers. Not to their employees. And either you do that, or you do not climb the corporate ladder, and you do not become CEO.
A few highlights:
The US war of independence was partly motivated to protect the Peculiar Institution, as the British parliament was then legislating its prohibition, but also to overcome British prohibitions against seizing native lands to the west of the original colonies. The predations of empire are still enshrined in the US Constitution. As the native Americans in the plains states supported themselves on bison, these were almost made extinct so as to remove their ability to resist conquest.
During WWI, Vickers, the British company, sold military hardware to the Germans, and Krupp, the German company, sold military hardware to the British, both with the full knowledge of their own governments.
Western bankers funded the Bolshevik revolution because the Tsar wouldn’t play ball.
[US labor history: deferred.]
[US child labor history: deferred.]
[War is a Racket, Smedley Butler: deferred.]
In the 1940s Alfried Krupp requisitioned captives by the trainload to work unpaid and unfed in his ordnance factories, to replace the ones stacked up in mass graves on the grounds. He was duly convicted, but his sole-proprietor empire was restored to him after four years in a comfortable prison.
Documents published internally by their own engineers show Exxon-Mobil has known since the 1970s that climate change due to fossil fuels would be obvious by 2019 and, unless curtailed, would inevitably result in an open-ended global catastrophe. The information was suppressed while the company bought up and suppressed alternative technologies to protect profits.
Alan Greenspan himself admitted that the invasion of Iraq, which destroyed the lives of millions, was for control of Iraqi oil.
I have a few favorites.
Prohibition on the use of tetraethyl lead, the anti-knock gasoline additive, was successfully fought by the oil and auto industries for fifty years, even though it was long known to be poisoning essentially the entire population of the US – and still is. Freons, the refrigerants, were known for decades to be destroying the ozone layer on which human life on Earth depends, and its prohibition was also successfully fought for decades by corporations. The developer of both, Thomas Midgley, is believed to have “had more impact on the atmosphere than any other single organism in Earth’s history”. He was strangled by a contraption he designed to help him get out of bed after he became disabled, and was widely honored for his contributions to corporate profit.
Through suppression of information and corruption of government, industry has made it impossible to regulate carcinogens in the US. Present projections indicate that given present trends nearly everybody will die of cancer before the age of fifty within the next few decades, unless climate change roasts them alive or starves them with crop failures first. So do not eat the food. Do not drink the water. And for heaven’s sake, don’t breathe.
Similar summaries, documented and cross-referenced, presently run to several hundred thousand pages, and compiling them is not expected to ever be completed.
If you’re interested in short-sell opportunities, current projections indicate human civilization will begin serious decline about 2026 and finish up before 2060. As the Tralfamadorians say, so it goes.
“All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.”
– Wealth of Nations
Actually business schools only teach shareholder god philosophy because accounting guidelines and practices dictate it. In 2019 the Audit function of the big 4 are slowly (by December and onwards) being split out of the consulting and accounting services, encouraging smaller players into the market, and opening up competition. At the same time the powers that be are also quietly rewording the accounting principles which have removed the purpose of accounts for mainly shareholder in the first instance. They are hoping the world doesn’t notice that the accounting policies led to the crash in 2008 and subsequent business malpractices seen over the last 10 years. Things will get better. The lessons are being learnt. They will not flail in public due to revolving doors sickness in the industry where if they punished one, they would need to punish all. So to summarise, the best MBA in the world has been at the mercy of the accountant report at the end of the year. Controlled and manipulated by the invisible power of investors. So much change is now possible. Generation Z only have a whiff of it, but a few good men will run with it and see that change is implemented.
wow. i love when you have time to write like this. thank you.
Something that few people are aware of is that some of the stock market averages use statistical tricks to make them look better than they are. The Wall Street Journal calculated the PE ratio of the Russell 2000 at 295 in 2016. Many calculations round any PE above 60 down to 60, and additionally ignore companies losing money. You might see a PE for the Russell 2000 of something like 30, but it’s likely not accurate for these reasons. Also, companies report earnings per share, not overall, so you could have declining actual earnings, but reported as increasing due to reduced share count. Much of the financial media has negative information content, you know less after reading something than you did before you read it.
– Spinning around SPX make investors dizzy. SPX need refferals for MRI & CAT Scan.
– All sectors rotate around SPX.
– Checking their breadth :
1) Sectors > 2018(H) :
XLP, XLU, XRE & XLK.
2) Sectors < 2018(H) :
XLV, XLF, XLI, XLC, XLE, XLB & IWM.
– Barca Messi : centrifugal forces keep us spinning around & around, all the way down.
I want to question Wolf’s read about design flaws, versus glitches in electronic overrides? I have not heard this, the problem (in the media) is always a software problem. Nobody takes the airplanes flight profile to task. Plead ignorant to this, but media context does not support the phrase “that the plane is unfit to fly”
Not sure if this the best explanation, but it’s easy enough for non-engineers like me to understand:
“Boeing designed the system after discovering during flight testing that the 737 MAX engine placement—higher and farther out on the wing than on the previous generation—could pitch the plane upward in certain conditions, increasing the likelihood of a stall.”
Wolf got is right. In order to save fuel consumption as AIRBUS 320 NEO, they constructed bigger fans. But the bigger fan construction nearly touched the ground , so they moved them as described. This caused some stability issues which they tried to compensate for with the mentioned software MCAS.
I have been informed by a pilot I know.
This theory is supported by a video of one of the crashes, showing the aircraft in an extreme pitch-up mode, stalling , and crashing:
That video is a fake w.r.t 737-Max. Four engines on the wings, two each side. Someone had forwarded it to me as well, and i immediately called them on that fact.
Good observation. You’re right – two engines per wing. I deleted the link to the fake video.
Wolf’s story is powerful but anecdotal. There has always been a slimy underside to the stock markets and to human business dealings generally. Is it really worse now than in the past? How would you know? There were tons of dumb companies in the 1990s too. And in the 1960s.
Even if it is worse, that is not necessarily bad in a historical context. Wolf highlighted the corporate over-reach which seeds creative destruction and subsequent rebirth. There are good reasons why one finds very few companies over 50 or 100 years old in the markets. But the markets, and the economy, historically do just fine – even as every enterprise eventually fails – because new ones grow up and do well … at least for their own time in the sun.
Thank you, Doctor Pangloss; glad to see you are still with us.
Is it really worse now than in the past?
You’re joking, right?
Try comparing the size and scale of companies a hundred years ago to those now. The motivations of greed and lust for power are the same, but the capabilities of the available tools are vastly enlarged and enhanced in size, scope, type, and technique. We’re very conservatively talking an order of magnitude here at the least.
Also compare the type and reach of human activities generally, not only related to business but also to the destructive capabilities of modern militaries.
Seventy years ago no one had scaled Everest. Now it’s an amusement park with people lined up for it.
Seventy years ago humans could not raze the planet. Now they can peel it like an orange.
Seventy years ago the modern technological capabilities of mass data, mass surveillance, and and mass control did not exist at all. Modern tools can now easily enable the establishment a permanent global totalitarian state.
And so forth.
You’re deeply disappointing. You present yourself as an educated person but seem completely unaware of these facts. How is that possible? Shall I speculate on the nature of your motives?
Unamused, given your previous trenchant observations on the end of society through climate change/environmental collapse, and questioning Wisdom Seeker’s motives, it may be more an issue of ignorance being bliss.
As I see it, economic collapse is really the only thing we can hope for to save us, because that stops the global rape machine.
After that, we can be more like the previous commenters who left the meaningless rat race to live simpler lives with small town girls.
You presented nothing to refute my point. Your “size and scale” claim is factless opinion. The monopolies and corporate abusers of the past were every bit as capable as those of today, because human nature does not change, and the history shows it. Look at how the railroad robber barons operated in the 1880s – with telegraph and rail-mobile offices, Jay Gould was impressively well organized and ran a national empire. They didn’t need a mobile phone or the internet to dominate, they just needed to be more capable than those without their tools. You can also look at the abusive labor practices in the food and garment industries in the Progressive era through the 1930s, or the manufacturing robber barons of that same time. Absolutely nothing has changed in terms of corporate domination and monopolistic abuse of customers and workers.
And yet today life is generally better for everyone. Unless you’d prefer to live in a tenement without air conditioning, no communications device, $5 for a phone call (today’s equivalent of a dime in the 1900s), contaminated food and so on?
As for seventy years ago (1949 for those unwilling to do the math) – Earth not only had mass surveillance (monitored lines and inspected mail) but it had actual totalitarian regimes spanning nearly half the planet and billions of people: Soviet Russia dominating communist Eastern Europe, Maoist China… It was the height of the Cold War!
And yes, with nukes in 1949 humans COULD have razed the planet, and with strip mining they were peeling it like an orange. That hasn’t changed either.
What eventually precludes totalitarian states isn’t technology (or lack thereof), but the consent (or lack thereof) of the governed. The communist regimes of the Cold War didn’t fall because they lacked the tools to be totalitarian, they fell because enough people changed their minds.
As for questioning motives – Why do you refuse to see the good side of anything?
And yet today life is generally better for everyone.
That’s a howler. Tell that to the 22,000 children who will die tomorrow of starvation and preventable disease. Make sure they know they deserve it.
And yes, with nukes in 1949 humans COULD have razed the planet, and with strip mining they were peeling it like an orange.
Baloney. Only the US had an atomic bomb in 1949 and only a few of them, and the hydrogen bomb wasn’t invented until 1952. Comparing the tens of thousands of nukes now to strip-mining then is patently absurd.
Absolutely nothing has changed in terms of corporate domination and monopolistic abuse of customers and workers.
Bizarre. What was the equivalent of the internet data collection in 1970? How does union membership compare then and now? Spy satellites? Shall I go on? What, you need a list?
You’re entitled to your own opinions but not your own facts. You need to change your handle from ‘Wisdom Seeker’ to ‘Agnotologist in Chief.’ Yes, that’s a word. Look it up.
Why do you refuse to see the good side of anything?
Because I know how it ends. And I know how people like you are causing it. And I know why.
Facts it is, then. Per OurWorldInData.org:
Extreme Poverty is down in the past 70 years from 75% of the world’s population to just 10%. Child mortality is down too, from 25% to 4% dying before age 5.
Basic Education is up in the same period from less than half to 86%. Literacy up from below 40% then to 85% now.
In 1940 less than 10% of the world’s population lived in a democratic society. Today that number is 56 percent. Sure, democracy is still “the worst form of government – except for all the others”.
Of course we can do better, but those “22,000” children you mention would have been a much larger number 40 years ago, both as a share of total population and in absolute terms as well.
I could go on but this thread is stale and I’m sure we’ll have more chances to discuss. I actually agree with your critique – we’ve had good conversations in the past – I just don’t agree with your hyper-pessimistic doomsday outlook.
TINA is unfortunately alive and well.
The fixed income market is getting pummeled and no one really cares…..
I have heard the latest rumors of outright purchasing of corporate bonds and equities, ie monetizing the remainder of the financial markets, if the current monetary tools do not work out this time around…..
– If u got a stroke while out in the snow, one of your baby clogs
lost its grip.
– If u move to a lake, there is no emergency room to save u.
– Those who trade don’t sleep at night, drink coffee & alcohol
and eat a lot of junk.
– Money , doctors, pharma will rehab u. You are the only one
who can save yourself.
– Ear God food instead of junk food. Walk/ jog on the grass in
your back yard.
– Mix it up with X2 books :
1) Andreas Moritz
Timeless secret of health & rejuvenation.
2) Douglas N Graham
The 80/10/10 diet.
– They will open your eyes, but filter them out.
Andreas Moritz died of undisclosed reasons at age 58. I think I’ll pass on those timeless secrets.
All the guys who wrote books on diet and running, NEVER made it past 70 y!
BP is the silent killer and NOT to be taken lightly. I am MD(retired) Both my father and 2 elder brothers, never took it seriously, skipped medication and passed away, needlessly prematurely!
Don’t forget the multi tasking modern life style , the leading cause of STRESS!
Your comment couldn’t be any further from the truth!
For anyone who read this misinformed (at best) comment, look up Dr. Ruth Heidrich. I believe she’s in her 80s. After cancer in her 40s, she changed her diet and continued running. She has written multiple books on the subject, such as “Lifelong Running”, “A Race for Life”, and “Senior Fitness”.
IT’S -ALL- ABOUT THE DIET.
YOU SIR/MADAM, ARE PART OF THE PROBLEM.
I have doctors in my family and they go off the rails when a patient tries to take their health into their own hands, so I am qualified to make the ^above^ statement!
After spending two hours reading every single comment and finding this one at the bottom, I felt obliged to inform readers of its inaccuracy!
NoName – his comments on BP are still true.
I got my education with Global Crossing and this market is looking familiar. Maybe another dot com bust in the making?
Stock prices are ‘built’ to go higher.
I’ve watched many tech companies in the last two quarters
soar on meeting reduced guidance.
So they made less money than last year, but because they ‘matched their own guidence’ the share price is entitled to go higher. Of course the analysts all reduced their guidance too, so beating the street is an easy game.
So, year after year a company can make less money, yet the stock goes higher.
But let’s get real, this is all just a symptom off too much easy money sloshing around. It certainly is only going to get worse once the Fed starts cutting. Beyond Meat will be a $50 billion dollar company in two years.
Re Tesla, didn’t Amazon go through many years in the beginning before it ever made a profit, basically living off of investors before it took off? Not saying the same ending will apply to Tesla, but who knows.
interesting posts. If the stock market climbs a wall of worry, we are just getting started, and it has a lot more to run. Only when the last bear has thrown in the towel will it turn, and what a splendid turn it will be.
When the last bear sprouts horns.
I’m on record here of stating we are in a cyclical bull market, it has a couple years left to run……While everyone was crying in December I was buying….it was a great setup……the problem is there are just too many bears to feast on for bulls as well as the US is the only place to buy equities in the world…..so much foreign money flowing in it makes the invasion of illegal aliens looks minute….
geeze ed why the long face.. spoiler alert, the calls are coming from inside the house, we are the monkeys that wont stop pulling the handle. planes, markets, bux crashing wont end it. only when the planet will not support it will it end. more tiny atoms for our bus to mars, what a great idea, tell quaid I said hey. show of hands.. how many remember when ‘nuke the whales’ was just a stooped t-shirt? long loin cloth and cave crayons (can we skip the snb’s next time)? cheer up tomorrows Friday, we get to drink beer.
Real corporate profits (after tax), Q1 2012 – Q1 2019: -6.9%.
Real corporate market capitalization, Q1 2012 – Q1 2019: +67.9%.
Source: BEA (which sees all tax returns).
The market has been smoke and mirrors for quite a while. The BEA has been recording it. But Wall Street, and the millions of mindless minions, refuse to see.
Wall Street and the Christian fundamentalists have combined to create the Faith Based Economy.
Nothing like buying back your own shares when the major market indexes are already trading one hundred years in the future today.
Share Buybacks = Chapter 11 Bankruptcy
“Beyond Meat [BYND] has a stock price that values the company at $12 billion”
Ha, that figure is sooo 48 hours out of date … ‘investors’ frantically bidding up share price added another $1 billion to market cap each of the past 2 sessions, now over $14 billion. This is one of those “we lose money on every sale but make it up on volume” Ponzi-market ‘success stories’ that every rational brain cell one has is screaming “short the crap out of it” but Wolf rightly cautions will almost always end in tears for the shorters, because the Next Big Thing delusion nearly always outlasts the expiry on the put options. It’s the classic buyer-side market asymmetry: owning shares in a company comes with no expiry date, but shorting it does.
Wolf, you can either play with the cyclical bull or watch it….
The US is the only place in the world to put money to work today……and foreigners are all over it…..
14 year on average for cyclical bulls to run, end of Trumps second term will be the time to buy puts
Me and most investors have been making bank for quite a long time as bears just get eaten alive….
This article is one of your best ever, Wolf. I had this fuzzy feeling that something was amiss at Boeing, but you nailed it. They literally replaced engineers with financial engineers (the same error GE made).