Boeing rising and what that means for your money

Good morning! 👋  

We finally got the selling I was looking for yesterday as short-term traders took profits off the table and shook the weak money out while reducing risk ahead of the holidays. Today, they’re back on the gas with more money in their pockets and, of course, plans to do it all again. 

Beating these merry marauders isn’t difficult. 

The secret is picking battles they have no interest in fighting and using tactics that take away their advantage. 

Stuff we talk about all the time. 

Here’s my playbook. 

1 – Toyota skids 

Shares of Toyota got hammered in the pre-market this morning after announcing a recall involving 1M+ vehicles including Toyota and Lexus models made here in the US. (Read) 

This, on top of news yesterday that Toyota’s subsidiary, Daihatsu, has halted all shipments after an investigation found problems with airbag control units. Also - think shades of VW’s scandal here - that airbag control units used in the testing process were different from those used in production models. (Read) 

Predictable. 

I can imagine shares dropping from ~$180 to $160 without too much trouble if traders smell blood in the water. I’m not sure they will though. 

There are bigger fish to fry.  

Trying to eke out $20 on a company like Toyota may take months whereas they can induce, err, benefit from a $20 wash in a stock like Tesla which is considerably more volatile much more quickly. 

2 – The real reason Paramount & Warner Brothers are talking  

I described Paramount as a dumpster fire fueled by a mountain of debt in an interview with The Verge last February, observing that the company will struggle to make ends meet or need to find a strategic partner. (Read) 

Seems I may have been on point. 

News broke overnight that Paramount and Warner Bros could be in merger talks. 

The media is spinning it as a logical, synergistic move that will help both networks save on cash, result in greater negotiating leverage with cable platforms including Charter and Comcast, and provide a broader platform for airing NBA games. 

The real reason is likely far simpler. 

Survival. 

Most consumers are sick and dang tired of the streaming wars and the industry is on the verge of being commoditized as subscription fatigue sets in. 

Anybody who owns any of these stocks best be leery. 

3 – Boeing rising  

Boeing stock has jumped 48.76% off last October’s lows and now appears ready to run some more based on a large Lufthansa order and news that Chinese deliveries may resume after a 4-year 737 MAX freeze gets kiboshed. (Read) 

It’s at $262 and change as I type but I can see $327 or more this time next year based on nothing more than a broader market climb.  

While another ~25% to the upside sounds great, the question you’ve got to ask yourself as an investor is "what are the alternatives?” 

There are all kinds of ways to handle the situation ranging from taking profits to selling just a few shares and finding something else interesting that could move higher, faster, farther. Or, if Boeing is working for you, hanging on. 

Keith’s Investing Tip: What I want you to think about is this… missing opportunity is almost always more expensive than trying to avoid risks you can’t control. For example, investors who went to the sidelines earlier this year because they thought 5% treasuries were unbeatable have paid a terrible price when compared to stocks like Apple and Nvidia that have returned 55.78% and 239.09% respectively YTD according to Google. Many of those same folks now find themselves thinking 5% doesn’t feel so good in retrospect. 

4 – Burned investors ask, “where were the auditors?”, court says “who cares?” 

The Wall Street Journal has a great story this morning that’s being almost totally ignored by the mainstream media. (Read) 

Burned investors sued, asking “where were the auditors?” who presumably should have alerted shareholders to undetected problems. To which the court responded, “who cares?” 

This is a BIG deal because the public looks at audits as a sign that the company is not cheating or engaging in malfeasance. 

My take is as controversial as it is blunt. 

That’s bull___. 

Audits are all but worthless for the simple reason that nobody ever went broke on accrual accounting.  

Repeated control failures back me up. Case in point, recent PCAOB data (Public Company Accounting Oversight Board) suggests that 55% of all audits are defective. Fully 1/3rd are so defective – translation: screwed up – that the auditor shouldn’t have issued an opinion. 

That’s understandable. 

Studies show that accountants experience a drop in revenue for every flaw they highlight while firms that don’t flag similar flaws tend to grow faster. (Read) 

Studies also suggest that companies tend to avoid association with auditors who are critical of their clients. 

What’s an investor to do? 

Simple. 

Stick with world-class companies making and selling “must have” products and services the world can’t live without. There’s no guarantee the numbers aren’t cooked but consumer demand will likely guarantee that Apple never turns into Nikola, for example. 

Just sayin’. 

5 –  MCD buy, sell, or hold? 

Unka Ronnie is on a tear with MCD stock having jumped 18.56% since last October lows according to Yahoo!Finance. 

Many investors are wondering what to do now that it’s looking toppish and flirting with resistance at $300 a share. 

Super simple. 

MyPOV: The company continues to grow, has a killer app, a rock-solid loyalty program, and is embracing technology in every area of the business… substantially all of which result in higher revenues and growing profits over time. 

I hope I am smart enough to buy more. 

Bottom Line  

I've always believed that anybody can be wildly successful in the stock market with the right information, education, and tactics. 

Learn! Find a mentor. Learn some more!  

Every day is a new opportunity. 

As always, let’s MAKE it a great day – you got this! 

Keith 😊 

PS: Please note that our offices will be closed tomorrow, Friday December 22nd, so that our team can spend a little extra time with their families. We’ll be back next week and look forward to seeing you then!