Stocks remained in the grip of a low-grade euphoria Monday, lightened by what is being referred to in the news as a ‘thaw’ in trade relations between the U.S. and China. No one expected much to happen on the trade front, and nothing much did — other, perhaps, than a weekend during which there was no appreciable escalation in the tariff war. In this euphoric phase, stocks have generally wafted higher whenever the news was not as bad as it might have been. Tesla, for instance, appears to have sold around 93,000 cars in Q1, a number marginally sufficient to give bears pause about increasing the size of their short positions. They took a brutal beating in June, but it seems predictable the stock will finally turn down with a vengeance when the last Tesla naysayer has been drawn-and-quartered. His epitaph will read: “See, I was right!” And so he eventually will be, since the auto manufacturer’s profit margins are tacking into a perfect storm that will feature competition for the first time from other high-end car makers; a phase-out by 2020 of a tax credit that as recently as Q4 2018 provided a $7500 subsidy to buyers; and a sales mix that will start skewing more and more toward less expensive Tesla models.
Honor Among Thieves
It is Boeing, however, that has shown itself to be inured to all manner of bad news, even sensationally bad new. In this respect, the aircraft manufacturer’s shares are in a class by themselves. It’s not merely that the company is too big to fail, or that when it sells passenger jets to foreign buyers, the transactions have more impact on America’s trade deficit than ten thousand farmers. No, it is simply that Boeing shares are so firmly entrenched in exceedingly strong hands that to break ranks with the group and bail out is to risk being ostracized by the world’s smartest money. There is honor among thieves, as the saying goes, and the dollar value of upholding the honor of Wall Street’s most prodigiously-capitalized sleazeballs is beyond estimation. Thus do institutional investors cover their ears, eyes and mouths in unison when the headlines shout of Boeing’s malfeasance in the death of 346 passengers in two separate 737 Max crashes since last October; or more recently, about how the 737 Max fleet is likely to remain sidelined at least until the end of the year; or that Federal prosecutors have subpoenaed records related to the 787 Dreamliner. All of these stories together had less dollar impact on the stock than the short-squeeze rally triggered by news on June 18 that Boeing had broken a 737 Max sales drought with an agreement to sell up to 200 copies to British Airways. Through it all, Boeing is currently trading within 20% of all-time highs, presumably maintaining altitude until the bad news blows over.