Boeing 737 MAX: Latest bad news grounds key airline shares again
WASHINGTON – As you can see in image above, it looks like Warner Bros.’ hapless Wile E. Coyote, Super Genius, has done it again. Apparently, he acquired a substantial position in Boeing (trading symbol: BA) shares last week on spec, expecting they’d head back up, soon. (He likely got that advice from his broker at the world-renowned Acme Brokerage House. But, as with his periodic, failed forays against the Road Runner, Wile E.’s speculative Boeing purchase quickly took a header in Friday trading action. And got hit again Monday with more bad news regarding the company’s still-grounded fleet of 737 MAX jets.
Boeing’s latest “bombshell” revelation
The latest “bombshell” revelation from Boeing involved the surfacing of heretofore unknown (or concealed?) emails from a Boeing test pilot who had serious concerns about part of the new aircraft’s computerized safety system. Fox Business was all-in on this one today, offering the following report plus the detailed 5 minute video that follows.
“Boeing shares were on track for their worst two-day stretch in over a decade after a series of Wall Street firms turned negative on the stock following reports that internal messages showed the planemaker may have misled the Federal Aviation Administration about the 737 Max safety system.
“Credit Suisse and UBS downgraded Boeing on Monday, citing a company test pilot’s revelations on Friday in which he warned about difficulty operating the 737 Max’s MCAS anti-stall system.
“Boeing shares fell 6.8 percent on Friday, and with Monday’s loss were on track to post their biggest two-day decline since June 2009, according to Dow Jones Market Data. Shares closed at an all-time high of $440.62 on March 1, 2019.
The tale of the chart
As a major component of the 30-stock DJIA (Dow Jones Industrial Average), the continuing plunge in Boeing’s expensive shares continues to mute Monday’s essentially bullish trading action on Wall Street. You can see why in the Boeing trading chart below, in a snapshot taken around 2 p.m. ET
Despite the hit from BA shares, the Dow is currently trading up just a millimeter from flatline, + 0.14 percent. At the same time, the broader-based S&P 500 and the tech-heavy NASDAQ are both up approaching 1 percent on the day. Things can and will change, of course, before Monday’s 4 p.m. closing bell. But the difference among the averages is largely due to Boeing’s flailing shares.
Moving on from Boeing, how about that (invisible) China trade deal?
Elsewhere in the wonderful world of non-Boeing US stocks, the market still seems trapped in the bipolar world of wildly varying US-China trade and tariff headlines. The mood is upbeat today, although little hard evidence exists that the serious trade impasse dividing the two countries can follow through on China’s latest promises. Word this morning is that an agreement could get signed by mid-November. I expect, however, that we might witness another act in the Groundhog Day version of Waiting for Godot.
At any rate, the alternating optimism and pessimism has kept the market churning for months, a phenomenon that will likely continue to repeat. (And the action in Boeing shares doesn’t help.)
Schiffy Kabuki grinds on somewhere in a secret US Capitol Star Chamber
Elsewhere, the House Intelligence (?) Committee’s secret Schiff-for-Brains kabuki theater and Leak-O-Rama production continues somewhere in the bowels of the US Capitol Building. That, coupled with a logical yet rather botched US troop reduction in Syria has hit President Trump’s 50+ percent approval rating this week in Rasmussen’s weekly presidential approval poll, bringing Monday’s number down to 45 percent on the day. That will encourage Democrats, who know they can only keep their fake impeachment production going if they can see it’s damaging the President. Who, unfortunately, hurt himself last week with his unconvincing Syria withdrawal plans. GOP RINOs, along with the reptilian GOP Senator Mitt Romney (R?–Utah) and some conservatives are all over the President for this one.
Then, there’s Syrian headline risk…
And yet, one fails to see how continuing America’s pre-failed Obama botch of a Middle East mission helps us or the Syrians one bit in the end. The President needs to pull out of this nosedive one way or the other, or his approval rating will join Wile E. Coyote at the bottom of the canyon.
And if he does, the reaction of the stock market will not be pretty. So here’s to a late-October recovery glide path for the President. He’s escaped all the traps set for him thus far. But this one, perhaps, involves a bit of Presidential hubris. And you know what I think of hubris. It’s a bottomless pit once you fall into it.
Some non-news on our portfolios
As for our portfolios, we’re actually making a bit of money these days, but not as much as we’d like. Preferred stocks, certain utilities and REITs (Real Estate Investment Trusts) investing directly in properties remain a safe haven, at least at the moment.
The problem is, though, that if we really do manage to sign at least some kind of mutually beneficial partial trade agreement with the Chi-coms, these stocks will instantly tank as perma-bulls eagerly scramble to buy all the languishing growth and tech shares they can cram in to their already over-leveraged portfolios.
We do live in an extraordinarily treacherous investment environment. So prudence remains the better part of valor, he says, rolling out that over-used but still useful cliché.
- Headline image: Wile E. Coyote’s over-eager purchase of Boeing shares last week from Acme once again leads to the inevitable conclusion. Cartoon character copyright Warner Bros. Fair use as part of a satirical image.