What to know today

  • We’re still at lofty heights.
  • Straighten up and fly right…
  • The US has a crude and strategic advantage.
markets

How Long Can This Go On?

Great question, I’m glad you asked…

OK, OK, let’s not get ahead of ourselves, especially coming off a day when most of the widely watched equity indexes put up a bunch of red numbers.

But the S&P 500 is still less than one percent from a new all-time high. The 5,200 level, as Mish Schneider highlights in her Weekly Market Outlook, is a critical one right now.

And both Mish and Ryan Detrick noted on Monday that when December, January, February, and March close higher, April closes higher too.

That factor is even more pronounced during presidential election years.

S&P 500 returns in April, the second quarter, and the final nine months of the year when November, December, January, February, and March are higher.

There’s not much to say about Monday’s price action without resorting to hyperbole.

“More sellers than buyers” is what happens sometimes, especially when investors, traders, and speculators are waiting for something that’s not happening until the end of the week, and on a market holiday no less.

Maybe some took note of Chicago Fed President Austan Goolsbee’s statement in an interview with Yahoo Finance Live that three rate cuts in 2024 are “in line with my thinking.”

Others may still have in mind Atlanta Fed President Raphael Bostic’s comment from Friday that he now projects a single rate cut this year, and later than he previously anticipated to boot.

As Goolsbee also said in response to a question about a June rate cut, “Everything is always on the table or off the table."

The question Mish asks in her Weekly Market Outlook is, of course, how long can this bullish trend continue, particularly in the face of higher market yields.

“So far that has been the case,” Mish notes. 

Here’s the relationship to watch, according to Mish:  As long as the S&P 500 is outperforming long-term US Treasury bonds, people are going to take that as a healthy sign. 

deep dive

Can $BA Straighten Up and Fly Right?

Boeing has been in a tailspin since the 20th century.

Whether Dave Calhoun sized up his golden parachute and just wanted to jump off or looked at the indicators and pulled the ejection handle are both good questions.

The Boeing $BA CEO’s impending departure is part of a larger shakeup affecting both the board and the C suite. Chairman Larry Kellner and the head of the aircraft manufacturer’s commercial division, Stan Deal, are also exiting.

Shares spiked Monday morning, trading as high as $196.18, up 4.88 percent from Friday’s close, and settled at $191.41, a 1.36 percent gain.

Parachutes and ejection handles are clearly operative tools of analogy at this point.

But there’s another aviation concept you read about in stories where things have gone horribly wrong that captures what’s been going for decades.

“Spatial disorientation,” according to Alan J. Benson, occurs when “the pilot fails to sense correctly the position, motion, or attitude of his aircraft or of himself within the fixed coordinate system provided by the surface of the Earth and the gravitational vertical.”

The evolution of Boeing’s logo since its founding in 1916, including its merger with McDonnell Douglas.

This company is all mixed up. Harvard Business Review took a look at Boeing 10 years ago this June in the context of its 787 crisis.

Here’s Gautam Mukunda:

Before its 1997 merger with McDonnell Douglas, Boeing had an engineering-driven culture and a history of betting the company on daring investments in new aircraft. McDonnell Douglas, on the other hand, was risk-averse and focused on cost cutting and financial performance, and its culture came to dominate the merged company. So, over the objections of career-long Boeing engineers, the 787 was developed with an unprecedented level of outsourcing, in part, the engineers believed, to maximize Boeing’s return on net assets (RONA). Outsourcing removed assets from Boeing’s balance sheet but also made the 787’s supply chain so complex that the company couldn’t maintain the high quality an airliner requires. Just as the engineers had predicted, the result was huge delays and runaway costs.

Will new leadership have the grip to get Boeing under control? The stock price reflected confidence on Monday.

But recapturing the trust of customers, suppliers, regulators, and passengers seems like a longer-term project.

deep dive |
March 26, 2024

Can $BA Straighten Up and Fly Right?

ENERGY

Why Oil

It’s dirty and it’s gross and it’s necessary.

Yesterday in this space we talked about Apple $AAPL and the fact that Warren Buffett and Berkshire Hathaway $BRK had sold some of its still-substantial stake in the iPhone maker, cashing in part of what’s reported to be a $135 billion profit.

Buffett and Berkshire have been accumulating shares in oil and gas companies, Occidental Petroleum $OXY in particular.

They’re not the only ones. Indeed, energy is emerging as a leader of this bull market this year.

The year-to-date percentage change in values for the United States Oil Fund, the Energy Select SPDR Fund, and the S&P 500.

The United States Oil Fund $USO is basically a vehicle to track the price of crude oil.

The Energy Select SPDR Fund $XLE includes big integrated outfits like Exxon Mobil $XOM, Chevron $CVX, and ConocoPhillips $COP as well as smaller exploration-and-production companies, midstream operators, and refiners.

The extraction and delivery to market of hydrocarbons is a notoriously volatile industry. But a lot has changed in the 21st century.

One major shift is the emergence of the US as an oil exporter.

Annual US crude oil exports from 1920 through 2023.

Here’s Robert Rapier:

The journey from a history of minimal exports to becoming a prominent player in the global market underscores the nation's evolving energy landscape. With robust legislation and changing market conditions, the U.S. has emerged as a significant contributor to international oil supply chains. As the country continues to navigate geopolitical and economic challenges, its role as a key exporter is poised to shape the future of global energy markets.

This is a good thing. Consider this personal anecdote.

Among the “subscribe and save” items in our Amazon Prime configuration are different types of food for each of our three dogs, roasted unsalted almonds for me, and Vaseline Lip Therapy for my significant other.

“You know that stuff’s made of petroleum,” I often note, pondering too what this means in the broader context of a societal shift away from hydrocarbons like crude oil, coal, and natural gas.

My SO almost literally can’t live without her Lip Therapy.

I imagine it’s that way for a lot of people for a lot of things derived from that dirty and gross and necessary stuff.

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