Learn How to Ignore Your Stupidities and Soldier On

Once I cherished Boeing. Today it's history.  I got excited about jet aircraft when Boeing introduced its 707 jetliner some 70 years ago. Douglas Aircraft introduced its DC 9 then too, but they’d underpriced it. Their backlog destroyed Douglas and they declared bankruptcy. I learned a good lesson, too much business can destroy you unless it's priced carefully for delivery. 

With Boeing,  you worried about its machinists assembling aircraft on the floor of their aircraft assembly plant. Management had given me a bicycle to tour the factory floor which was a stretch. 

In those days, with very skimpy capital resources, I usually kept my fingers crossed and bought 6-month call options. The machinists were explaining to me that they were using titanium fasteners made by a Connecticut firm, Helicoil. I bought calls on this fastener operator and made more than on my Boeing position after visiting their factory. 

In those days, early sixties, most stocks with stories sold at 15 to 20 times earnings. Only Polaroid and Xerox sold over 30 times earnings. Analysts then were allowed to do brokerage, too. I’d promise my clients that PRD and XRX would rise 2% monthly. It worked for years until both fell apart and never recovered. The lesson I absorbed was to monitor the R & D plans of growth companies to judge their viability. 

If Boeing’s 707 aircraft was riddled with defects the stock would sell at a shabby machinists’ valuation because they couldn’t offer a troubled free aircraft. Consider today, GDP stocks like IBM and General Motors, even General Electric can shed bunches of points when the market cares to factor in cyclical risks. 

Even my admiral American Express shed handfuls of points when it turned into a cyclical growth stock, not a pure growthie. If Boeing again were to suffer a serious mechanical fault in aircraft models the stock would get crushed and sell at 10 times earnings, not a 15 or 20 times valuation. 

I know somebody’s going to pop up and scold me for falling in love with a stock, an industry or a management. I was there Charlie, the day they red-dogged Motorola. Management delivered a down earnings number for its quarter. Nobody expected it and the bailout began while management was still explaining their “down” numbers. 

I gotta come clean.  Past week, I banged out all my Boeing which had been in a swoon. As I finished selling, the stock rose contrapuntally a bunch of points. Alas! Without my participation. The market logs many ways of torturing you. 

Right now, I’m down to a couple of longs, Amazon and Goldman Sachs. Both are super volatile,  right below Eli Lilly which can be a contrapuntal mover.  At the least, any market move, up or down, carries these guys with it. 

I prefer not to run stark naked or net short. Extremism is too heavy a cross to bear. By the time the market has discounted everything that can go wrong, it’s time to close out your shorts and find longs.