A year ago @Porter_and_Co published a dire warning about a mega-cap American stock. This was the only mega cap stock we told investors to avoid. And it is no ordinary business. It is America’s most strategically important company. We said it would soon “collapse.”
Our January 27th 2023 headline? COMING SOON: THE BOEING COLLAPSE. How did we know? For the last 20 years there hasn’t been a company in America that’s embraced more bad ideas – from financial engineering to ESG – than Boeing.
In 1997, Boeing merged with fellow aerospace manufacturer McDonnell Douglas in a $13 billion stock swap. It was a match made in hell. Boeing was known for quality, and McDonnell was known for financial engineering – with a focus on cost cutting and the company’s share price.
Although the Boeing name survived, it was the McDonnell Douglas attitude that prevailed. McDonnell CEO Harry Stonecipher, who took over day-to-day operations at Boeing, immediately took a carving knife to Boeing's highly-paid engineering staff.
And in May 2001, Boeing management made a physical break with its engineers: manufacturing headquarters stayed in Seattle, while corporate moved to downtown Chicago, 1,700 miles away. That split symbolized the growing distance between builders and bosses.
To say that the company’s engineers were disenfranchised doesn't describe it: Boeing’s entire culture was erased.
CEO Stonecipher even bragged about what he’d destroyed: “When people say I changed the culture of Boeing, that was the intent, so that’s run like a business rather than a great engineering firm.”
Today both Boeing’s CFO Brian West and CEO David Calhoun are formerly senior GE finance people. And they’ve done to Boeing what they did to GE: Destroy the balance sheet.
From 2010 to 2019 Boeing spent $44 billion (!) on buying back its own shares, while adding $50 billion in debt. This reduced the share count by 23% and sent the stock price up 200%. But the underlying business...?
Bean counters can't build airplanes. And Boeing’s planes started falling out of the sky. As a result, free cash flow plunged to negative $4.3 billion annually by 2019.
Today bankruptcy grows more certain. Cumulative net income over the last three years is negative $20 billion. And the company has $52 billion in total debt. Interest expense is currently $2.5 billion a year, but will move much higher as Boeing's debt will be downgraded to junk.
But -- never fear! Investors have nothing to worry about with one of America's greatest and most important companies spiraling towards bankruptcy (like their planes spiraling towards the ground) because Stephanie Pope will save the day!
Stephanie Pope is the chief operating officer of Boeing. She holds a bachelor’s degree in accounting from Southwest Missouri State University. And an MBA from another intellectual powerhouse, Lindenwood University. She has zero engineering background.
Why would someone with this kind of background be placed in charge of operations of the world’s leading aerospace engineering firm? Maybe because she is the executive sponsor of Boeing’s Women Inspiring Leadership, a group dedicated to “increasing gender diversity awareness.”
Boeing’s planes keep falling apart. These outcomes are the results of years and years of bad ideas – starting with the intentional destruction of Boeing’s engineering culture, followed by GE-style financial engineering, and now the company’s full embrace of modern Marxism – ESG.
Like we predicted a year ago, Boeing is going to collapse. When its debt gets downgraded, the stock will drop by more than 50% to below $100. And then, just like we warned about GE and GM, this once impregnable icon of capitalism is heading for bankruptcy.
Is this just piling on because of a freak accident? Nope. We reiterate our call two weeks ago. On December 22nd Porter & Co. updated its “Naughty List” – a list of 10 stocks we predict are going “straight to hell.” The first company on our list? Boeing.
Boeing is a wonderful metaphor for our entire society. When we promote people because of their political views (or their race, or their sex) instead of their competencies, we get planes that fall out of the sky. When will the madness end...?
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If you're trying to understand why gold is going parabolic, please read this thread. This is also why the 52% of Americans who do not own financial assets are being destroyed. What is the real rate of inflation? And, absent the Fed, what would interest rates be...? A 🧵👇
The Chapwood Index tracks the real-world price fluctuations of 150 consumer items in the 50 largest U.S. cities. Unlike the government's CPI, the Chapwood Index avoids hedonic adjustments and substitution biases. It's a real index, not propaganda. As an example, the CPI rose 3.5% in 2023. But in Boston, the Chapwood Index shows that the real cost of living increase was 13.6%.
The Federal Reserve targets a 2% inflation rate to balance growth and price stability. The federal funds rate is set to influence borrowing costs and cool or heat the economy. A common framework for "what the rate should be" is the Taylor Rule, a formula proposed by economist John Taylor in 1993.
r=r∗+π+0.5(π−π∗)+0.5(y−y∗)r = r^* + \pi + 0.5(\pi - \pi^*) + 0.5(y - y^*)r=r∗+π+0.5(π−π∗)+0.5(y−y∗)
I believe we’ll see a major bankruptcy within the next 5–7 years at the retailer Target (NYSE: TGT, $87.28). A 🧵
Why does anyone go to Target anymore? Amazon provides virtually everything Target sells, typically for less—and delivers it free to Prime members. For bulk items like furniture and for fresh groceries, Costco consistently beats Target on both quality and price. And for basic, immediate needs, Walmart still undercuts Target.
But that’s not the only problem. Even bigger is the erosion of Target’s in-store experience, once a key competitive advantage. Target used to be a pleasant place to shop: clean, organized, and staffed by knowledgeable, friendly employees. Today, the stores feel increasingly “ghetto-ized.” Shelves are locked up, the parking lots attract loiterers, and employees appear disheveled and demoralized. The store atmosphere is reminiscent of K-Mart in the mid-1990s, right before its irreversible decline.
My personal portfolio is currently up 46% year-to-date. But that's not what matters. What matters is how it's up 46%. Over the past month, I've only had one down day. Just one. (See the portfolio's daily value chart, below.) I want to teach you exactly how to build a portfolio like this. This is especially important if you believe that stocks are too risky for you. They're not -- but only if you know how to do this. A 🧵
Last fall, I introduced the concept of a "permanent" portfolio to the subscribers of my newsletter. This strategy was taught to me in the mid-1990s by my friend and mentor, the libertarian philosopher, Harry Browne. He pioneered the idea of using non-correlated assets in single portfolio, to produce "permanent," consistent returns no matter what's happening in the markets, or the world.
According to Harry, a portfolio's core assets should be, in equal measure: stocks, bonds, gold, and cash (short-term T-bills). His reasoning was simple: in an inflationary world, value will constantly be stolen by governments via fiat monetary inflation. That process necessarily involves the inflation of these core assets.
Philip Morris ($PM) has created more profits for investors than any other company in the history of capitalism. Most people know why the company is doing so well now - Zyn - but they don't understand how $PM works.
Let me show you. 🧵👇
$PM has been one of my research company's top three picks since September of 2022. It's up over 100% in our portfolio; it's up over 70% year over year; it's up 40%+ year to date. Today it reported shipments of Zyn rose 53% (!) year-over-year as it expanded capacity.
Revs are up 5.8% and profits rose 16%, to $3.5 billion in the 1Q. $PM is transforming from a tobacco company in secular decline, to a nicotine branding business that's growing fast. That's why the company is doing well, but it's not how. And the how is incredible...
Someone should ask Trump if he remembers the Irish Potato Famine. A 🧵to explain the dark side of tariffs. 👇
In 1845 roughly 1m Irish peasants died because their main domestic food source, the potato, was wiped out by phytophthora infestans, an algae that causes potatoes to rot and die. While the immediate cause of the famine was a pathogen, that's not why a milllion people died.
The famine was caused by tariffs. Irish peasants worked on British estates. Their wealthy owners ensured high prices for their crops with "Corn Laws" (tariffs) to restrict importing grains, while selling their production overseas. How'd that happen? See if this sounds familiar...
@WarrenBuffett should retire and Berkshire must be restructured. A 🧵
You'll recall in Buffett's legendary speech about the SuperInvestors of Graham-and-Doddsville that, despite buying different companies, all of the value investors outperformed the market by a wide margin.
The SuperInvestors had a real edge: they had both informational advantages and a better mental model. And so, on average, they beat the market easily. Warren Buffett was the best of this generation of investors and, for decades, he too beat the market easily. But lately?
Since the GFC in 2008, Berkshire has made six major acquisitions: Precision Cast Parts ($32.7B), BNSF ($26.5B), Pilot Flying J ($14B), H.J. Heinz ($12.1B), Dominion Energy ($9.7B), and Lubrizol ($9.2B). Total initial invested capital: $104B