School me on investing...

OK, I think we are agreeing that the nosedive for Boeing stock was pre-mature.....???....I've got my eyes open.

I left Boeing in 1999 for Lockheed. I have checked the stock and read financial articles almost daily, till this day.....I considered recent happenings an opportunity.

I completely agree with your near future concerns.

OK,....I think.....no offense but confused here...

I guess I just have confidence in the company. I've watched the planes roll off the floor, and watched the stock at the same time. I see things have adjusted back down some today.

I'm not a former Executive, just an engineering Tech, and I hope my comments are not offensive to any financial guys.

I've been thinking about my comments about financial tech....I know it matters, but the best analogy I've come up with is along the lines of a High-Res screensaver or photos of beautiful flowers, compared to being out working in the garden with the same flowers. Both are beautiful, and both have advantages, but I prefer the garden......Its just not the same.......I guess the "best" would be great pics of flowers you have personally cultivated.....I believe theres just more to it than running a numbers analysis.

Kinda like comparing a bike racing video game to the real thing.....maybe I'm off here.

I hope we are agreeing, but I am confused by your 105 and 17.

 

We can agree that for the most par Boeing makes world class products.

But we are on opposite sides of valuation. For every buyer there is a seller at market price. I'm betting their stock falls over the next 6 months. Apparently many investors are which makes the put options quite expensive. You are a buyer and thinks $180 is a fair valuation.

Only time will tell which outlook is correct.

Like racing, investments has an engineering/quantitative side and a feel side. Research shows the feel side underperforms the quant side by a significant margin over the long run. In the short run, single stock short period of time, anything is possible.

 

Generally agree. Whats a put option?...also still no clue on your 150 and 17.

Where we differ, IMO, is where the "Engineering" side belongs. I dont consider financial evaluations as Engineering. I consider actual Engineering as Engineering. Do we agree there?.....I can say, without a doubt, that Boeing's "Actual Engineering" has positively contributed to my comfort level with the stock. The Engineering, and how many times its applied in production, is without compare in the world. That is part (ALOT) of the reason for my support.

Interesting conversation.

As far as which side of the equation I'm on and the 180......I've bought in the 30-40, and 98 ranges. I've held and sold for 30 years. Is that considered long term?.....if its "would I buy at 180?" Probably not, because I dont need to.....but do I think it should go up from there? Yes.

I've made at least a hundred thousand dollars from Boeing stock over the 30 years. Are you saying I'm doing it wrong? Or are you saying that your financial analysis is showing that shouldnt be happening? If yes, sounds like a possible problem.

Again, interesting conversation....opening monday should be interesting as well.

 

Also, I've applied the same "process" with Lockheed (LMT), but on a much larger scale....because I was employed there longer.

I do the same with both every day (Almost). I dont view my 401 every day, just a general look at the stock price, and skim headlines basically.

Funny story.....When LMT dipped into the 20's, both my 401K's were managed by the same company (Citibank I think)......I actually attempted to transfer my Boeing into LMT....they sent me a check for my BA balance....I signed it and sent it back....and they put it BACK in the BA acct!.....I was furious at the time. I didnt notice it until statement time. LM had just been awarded the F22 production contract, and was climbing faster than BA.

So, by their mistake, I defaulted into most of the BA stock I have now.

Again, if I'm doing something wrong, I'd like to better understand it. Have I just gotten lucky with both?

I dont really look at any other stocks. I've been tempted by some of our subcontractors stocks, but then I didnt feel as secure. I'd go audit their quality processes, see the NCR's generated by their parts, and never felt secure with the risk.

This also elevated my confidence in BA and LMT.....We caught the problems, we shielded our final product and Engineering.

For both BA and LMT, as a stockholder, what has recently boosted my confidence is the shedding of pension liabilities. HUGE.....how does something like that show up on your financial eval?....not accurately fathoming the depth of that could cause problems for any financial model.

 

Pension obligations are balance sheet liabilities. Pension assets is the money set aside to cover those pension obligations. The net of those 2 numbers can be found on the balance sheet.

Even the simplest of financial metrics and models utilize balance sheet analysis. When I say simple, I mean accounting or investments 101.

Google quantitative finance. The quantitative skills required, and salaries paid, make engineering a mid-level technical discipline in comparison. And that's not a rip on engineers, my son is 1/2 way to an aerospace degree. I'm just not sure many completely understand what quantitative finance is all about.

I will answer your BA/LMT specific question later.

 

this is a classic example that plays out in my company daily. a smart, experienced, engineer, understanding the technical aspects of the core value/work product of his business and not understanding "the business" of his business at all. i've seen it a million and one times, and you see it most often with "25 year experienced senior engineer gets promoted to project/program manager and doesn't understand how to even read a budget, make a forecast, make a cash flow, understand schedule and external input risk to his cash flow, stakeholder engagement, market influences, market competition, global economic factors such as tariffs/agreements/wars/supply chain and how they affect his delivery, etc...". Its very hard to find somebody who can bridge both worlds.

I'll say this again... Boeing will survive because the US Gov't wants it to, irrelevant to 737MAX or this recession we're about to be in, or any future cancelling or placing of orders. HOW it survives will be the question.

And lastly I'll say this... there are plenty of companies out there right now, as well as companies gone past, that have GREAT products and great product engineering, and they fail. Happens every day.

 

That's my exact space...bridging both worlds.

 

I hate to post this because it's a simplified version that might get attacked by a finance quant. But here goes because we need to start somewhere.

25 year return with dividend reinvestment:

Enron -100% : Bad pick
Sears: -99.x% : Bad pick
BA: 7.77% : Solid pick on a non-risk adjusted basis
SP500 ETF 8.37% : Great overall pick including risk
LMT 11.92%: Great pick on a non-risk adjusted basis
AMZN 30.6%: Best pick of these 5 choices on a non-risk adjusted basis

Risk! How do you know if you've picked an Enron, Sears, BA, LMT, or AMZN except in hindsight? You don't absent inside information, which is why to reduce portfolio risk you need to diversify. SP500 ETF is diversified like many other market ETF's. I read recently that 22% of SP500 growth over the last decade has been in 5 stocks. That's 5 of 500. Are you good enough to pick those 5? Many hedge funds try, most fail.

So, to answer your question...your investments have been a mixture of luck and skill. You picked very solid, blue-chip companies to invest in. Your picks have proven right mostly due to the reversal of the peace dividend. But, on a risk adjusted basis...even your LMT has underperformed the SP500 ETF. Also, in hindsight a better single company pick would have been AMZN.

I'm compelled to state these and all my posts on this subject are my interpretations and opinions only which in no way represent my employer.

 

Mine too. I understand the technical enough to make it digestible for executive leadership and help guide the strategic operation of the firm while being able to go the other way and help PMs address their programmatic hurdles and understand their constraints and how to solve their problems. I don't know how to describe my job any more and have joked with my senior VP about it. "Fixer" i guess, but not quite sure how to resumesmith that.

 

Internal Sr or Executive Consultant

 

That's right you only get to know the kind of information that makes you money ahead of time if you are in congress or your wife is.

 

Thanx for the input. I understand the main intent.

Is that 7.7% and 11.9% per year?

No offense intended on any of this guys....

Assets vs Liabilities.....How are you forcasting when pensioned people will die? That seems kind of open ended to me, and the key to the equation.....serious question....do you plug in life
expectancy, and then throw dollars at a wildcard? You are literally banking on that right? That is probably more of a question for the Feds, since they set the required funding numbers (?).

This may seem like finance 101, but an unquantified X at the end doesn't seem so simple to me.

This is a good example of what I'm saying....you talk about it like it is an absolute KNOWN, accounting or investment 101, but its not....you are taking (and representing) an unknown as a known. After you finance guys do this, other executives take it as fact.....Then in the end, the little guy gets screwed because you were off, but in defense sometimes didnt even know it.....its when they know they are doing it that bothers me.

They have closed the other end (beginning) of the process, which had to help greatly. Also, the end of the process (death) will only be going down, so that has to help, but its still open-ended.

In the positive column, when a pensioner dies early, that has to help alot, maybe before ever seeing a dime. How do you guys quantify that?

I am a Project Manager, and build the schedules......including manhours, budgets, and spans.....but I'm not an accountant.

Where we get into trouble is when people who don't know the processes start driving spans, schedules, budgets, and costs.....that happens.

Where I see the 2 worlds coming together (bridge the gap) is Quality Engineering and Process control. I wear that hat too.

What I'm saying is those great companies that fail, some of them were helped in that direction by someone not knowing the processes, and making or reading a spreadsheet, and making poor decisions or assumptions.......What really matters is what you do with that information....and frankly, I've seen that information flawed.

The USG doesn't "want" Boeing to survive....it "needs" it to survive.....but we will have to disagree that this will be the only reason BA survives. I believe the free market will be a major contributor to survival. The "How" would be a fun process to be involved in.

It really is a "Chicken and the Egg" scenerio....Process changes will drive number changes, or number changes may drive process changes.....The latter is more dangerous, and is more likely to cause the demise.

Gents, I dont "dabble" in stocks for "fun". You could throw numbers at me on some tech stock that show for CERTAIN it will be HUGE, but sorry, you aint getting my money. I only bet on what I know. I "dance around" in that box alittle, Defense products not just aerospace, but sticking to what I know has served me quite well.

In reading Sdivers numbers, I see him saying....yes, you should have done well....correct?

Great conversation gents.

Oh, and I did reinvest dividends until just recently....1 or 2 yrs ago.

 

I'm pretty sure that's driving the big run up in Boeing recently - because Seattle is a hotspot, they're forecasting that as many as tens of Boeing pensioners could die early. They're assuming that windfall will be used for a massive stock buyback program.

 

Talk about betting on the Grim Reaper!

Come on SB, No way....seriously?.......nothing personal, but seriously??????...thats frikkin spooky if that's real. It will affect the bottom line.

Didnt someone (PScook?) mention or link they stopped any buyback recently?

If THATS true, that is desperation.

 

Ok, thanx I'm still confused with the percentage # and 25 yrs.....but Thanx.

One of the other "staples" in my portfolio is an S&P 500 fund.....so I guess I'm making the right moves.

See, Amazon is a good example of what I was saying.......You guys could tell me all day long to buy Amazon, but I wouldnt, because I dont know their business.

I guess I've been lucky to be involved in good businesses, and that has paid off.

For my Dad, it was IBM....he hired on in 1963 I think.....I can still remember him spreading stock certificates out on the bed like playing cards. ......I can remember playing with punch cards as a kid too.......Yea, get off my lawn

 

Yes those are annualized returns, if you held that equity for 25 years with dividend reinvestment.

 

The same way insurance companies do, using actuarial science to predict life span averages over the population. In fact, many insurance companies perfrom the calculations for the company with the liability. These get re-forecast on a regular basis, just like expected returns on the asset side get re-forecast. And yes, the company and pensioner are banking on that.

This is a big part of the reason many/most companies switched from defined benefit plans to defined contribution plans. A defined benefit pension means the company is on the hook for the agreed upon pension payments, short of renegotiation or bankruptcy. Traditional pensions are defined benefit.

A defined contribution plan is when company helps put away money for retirement, often in the form of a 401k match. However, the company has no future obligation for any shortfalls to projections. But not all is bad news for the employee either. 401k is your money not the company. If they go bankrupt you don't lose your pension, assuming your 401k is NOT in company stock.

 

OK, I thought so but wasnt sure, thanx

Oh yeah, I completely understand a defined benefit plan .....for awhile there, I was accruing Lockheed pension (I was salaried tho, so it wasn't "as Defined" as the union guys. how much per month per year of service is part of contract negations) and Lockheed was also matching 6% of 401K contributions....some of the older plans were even better, including free medical coverage.....PLUS the employee stock fund.

So essentially, everything I mentioned concerning death and liabilities is done before any figures get to you, correct?.....that makes me feel better in some ways. I generally understand the federal oversight, but where, in your experience, do they fall as far as accuracy?.....do you trust the numbers you get?....or kinda roll your eyes, okay, whatevs....????....I KNOW they are not conservative.

I knew insurance would come into this at some point......I've witnessed those guys "Bridging the Gap" you and SWP mentioned earlier.

Before Boeing and Lockheed, I worked for BP in Prudhoe Bay Ak.....theres another "Sloper" on here, but cant recall his name, lives in Ky I think.....anyhow....

Hartford Insurance, Steam Boiler Division, had reps on-site during shutdowns and major overhauls....if those guys (ASME Authorized Inspectors, "AI's") didnt buy into what you were doing, how you were fixing or maintaining, it didnt happen. They reported to state and feds, and naturally insuring the facility, had major skin in the game.

Hey, on that note, if any of you financial guys need someone to go into a manufacturing facility, and "birds eye view" their manufacturing processes for "liability"...holler at me. My speciality is Non-Destructive testing (x-ray and the like) and Welding....those 2 tie into alot of industries....seriously, I'd most likely be able to tell you if there processes are in order, and that would lead to their "numbers".

Good conversation, and I appreciate the info.

Glad to hear my "start at the core" approach is leading me in the right direction.

Thanx Sdiver.......learned alot here.

Hey, I didnt mean to "hawg things up" here.

 

puts???? SQQQ, its such a crap shoot, I'm not really a gambler, have my vices, rum and women. I'm a cook and work hard for my money, so never have played the if you make 5 k or loses 5 k its the stock market. If I lose 5 grand it's a serious blow and don't gamble that way. Been getting into it, bought some on Friday to early and was watching it like a fool. Not rich so when I see -100 dollars up and down in 2 minutes time it freaked me out. I already have issues always keeping cash based upon not being to get cash and at this point its stable. I'm in all cash 90 grand looking to reinvest for the long term but stocks as well. Ended up bailing out mid day Friday even though in theory its going to drop, but the same theory that when you announce that unemployment is at a stupid record high, only to go up, the fed is throwing money to anyone to put a bandaid on , the world is in an unprecedented pandemic, and the stock market makes no sense

 

It’s not true (I was fucking wit ya ).