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Where Boeing Went Wrong

Portfolio Armor's Photo
by Portfolio Armor
Saturday, Mar 16, 2024 - 9:59
A bear flying a Boeing plane as parts fall off of it.

There's No Conspiracy--The Truth Is Sadder Than That

On Joe Rogan's podcast recently, James Lindsey shared a bizarre conspiracy theory that Boeing's recent string of near-disasters was the company committing suicide, to pave the way for a Chinese competitor. As former Trump staffer Darren Beattie pointed out, the truth is actually sadder. 

Here's the full text of Dr. Beattie's post:

I mentioned this is a retarded theory... but it has genuine appeal It appeals to the low-IQ conspiracy mindset which is in high fashion at the moment, and also indulges in the more satisfying cope that the decline is some self-sabotage masterplan rather than a natural result of homegrown poison like DEI, corporate greed, short term cost cutting, outsourcing, and institutional collapse American collapse is homegrown---that's the toughest pill to swallow...

A Homegrown Collapse

Our friend Fischer King elaborated a bit in another X post: 

 

I can explain Boeing quickly. It attained a market dominant position in the USA following the merger with McDonnell Douglas. This made it lazy. It then got new management, which emphasized financial chicanery over top flight engineering, symbolized in its move of its corporate HQ from Seattle to Chicago. The financial geniuses then worked to break the union, shift production away from its trained Seattle work force to places like South Carolina, and outsource production of most plane components abroad - the American work force was left to assemble all these disparate parts rather than produce them here. Software was also outsourced. The end result was lower quality of aircraft, delays in development and production, and even fatalities from crashes. But rest assured the management in Chicago did very well.

Meanwhile, by focusing on MBAs and JDs rather than engineers, top management fell victim to all the pathologies coming out of top schools. This is where the DEI nonsense comes from, which would have been much harder to impose if management were more focused on building good planes than stock buybacks. So the outsourcing, cost cutting, diminishing the original work force - all this is now working in tandem with the sort of diversity/DEI dysfunction visible all over corporate America. It’s a feedback loop that could be fatal to Boeing, and has already been fatal to someone airline passengers.

This is basically it. It’s not an elaborate conspiracy. It’s a tale of greed and dysfunction that you can see all over America.

No Offense Intended To The South

A few commenters took offense to Fischer King's suggestion that moving Boeing manufacturing to South Carolina was a bad idea, but as I pointed out from my personal account on X, the South does not have a long tradition of precision manufacturing--it has a long tradition of cheap labor. 

For example, although BMW assembles cars at a plant in South Carolina, the engines for those cars are built in Munich. Similarly, although Boeing competitor Airbus does some manufacturing in Alabama, the most important and complex part of its airframes--the wings--are built in Wales. 

As it should be. Complex aviation manufacturing should be done where the workers are most experienced and qualified--not just willing to work for less. 

In Case You Missed it

On Thursday night, we posted our current top ten names on our trading Substack. We also posted the final, 6-month performance for our top ten names from September 7th. On average, they were up 44.34% over that six month period, versus SPY which was up 16.61%. That was the 5th week in a row that our top ten names more than doubled the performance of SPY over the next six months. 

Rivian was the worst performer in the bunch. Coincidentally, I saw my first Rivian vehicle in the wild last week. 

 

If You Want To Stay In Touch

You can scan for optimal hedges for individual securities, find our current top ten names, and create hedged portfolios on our website. You can also follow Portfolio Armor on X here, or become a free subscriber to our trading Substack using the link below (we're using that for our occasional emails now).

 

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