This week on "What Will Crash The Stock Market (and End Capitalism, this time I Promise)" with Charles Mudude:

Charlie talks about aeroplanes.

Charles, you just really don't know what you're talking about.

What happens after the corporations have bought back the majority of their own stock, and effectively taken themselves private?

Yes, because every time a plane crashes the market crashes.

Look up the DC-10 if you want to know a plane with a history of crashing. It was a grim joke for quite a few years.

So, has Charles shorted Boeing stock and is now trying to avoid getting ruined, or does he just have some extra cash and wants to buy Boeing stock at reduced prices?

Either way, his whole “stock market crashing” shtick will likely go the way of his previous predictions concerning Seattle’s real estate market.

I've noticed over the years Boeing and Airbus seem to run in alternative cycles - one does well for say, 5 years, then the other company does well.
Since Boeing stock was roughly at $100 per share about 5 years ago, it would have to descend quite a bit from its recent peak over $400, to truly claim disaster.
However, I'll grant you this - the floodgate of lawsuits could emerge pretty soon. If there's one thing the U S A is good at - it's lawsuits!

And as far as crashing the stock market, I'd be far more worried about Trump appointing sheer idiots to the Federal Reserve.

Charles, go back to Star Wars and that college student you were obsessing about several years ago. Leave thinking for people who know how to do it

@6

Oh you poor thing, no, that's not how it works. No wonder you get so agitated at the very concepts of business and ownership; the things we least understand are frequently the most frightening.

Buybacks don't give voting shares to the company itself, they instead effectively erase the shares, thus giving more voting weight (and higher value, purely in accounting terms) to each of the remaining shares outstanding.

Have a look:

https://www.investopedia.com/terms/t/treasurystock.asp

Charles - your thoughts are converging with Nassim Nicholas Taleb's, a super-contrarian thinker who has decidedly profited from Wall Street while espousing a Kropotkin-like political philosophy. I can't wait for you to cite him/meet him. I'm loving these posts!

@10, 11: You don't have to worry about Trump appointing sheer idiots to the Fed. I can guarantee you that he'll do that.

And you're right about lawsuits. Even if Indonesian and Ethiopian courts are not very plaintiff-friendly (I have no idea one way or the other), the claimants here have the golden ticket to an American jury. Ka-ching ka-ching ka-ching! Are there punitive damages in Illinois? If so Boeing may regret moving there.

@8

The 737 MAX has only been in service for 2 years and has caused ~350 fatalities. This is unheard of so early in the service life of a commercial jet; at this rate the plane would easily be responsible for more deaths than the DC-10, which was in service for 44 years and caused around 1439 fatailities, or the Airbus A300, introduced 4 years after the DC-10 and still flying 45 years later, which has caused 1436 fatalities. (Note that fatality figures for these planes each include a bombing).

I don't say any of this lightly-- an old friend of mine lost his mother when flight 191 crashed in '79 after takeoff at O'Hare.

The comparisons aren't apples-to-apples (nearly as many 737-MAX have already been produced as DC-10s over its entire production run) but it sure as hell isn't just a tempest in a teapot, either-- the plane has deadly serious design problems.

@16- At this point there seems to be a single issue related to the balance of the plane and a software fix that was supposed to compensate for it. I don't think that any of us who are not at Boeing really knows how serious or hard to correct it will prove to be. If I remember correctly (please correct me if I am wrong) the DC-10 problems were mostly due to a single issue too but it took them longer to figure it out. You can't extrapolate out the 737 Max accident rate to the longer service life of the DC-10s, because the planes are now grounded and presumably will be until this issue is corrected.

I think it’s just adorable when Chuckles pretends to know about things like “The Market.”

It’s like watching a monkey smoke a cigar.... adorable, but ultimately a fire hazard and a waste of a cigar.

cough. cough

Boeing executives are experienced professionals who know what they are doing and would not take undue risks. It is ridiculous to suggest they would make any serious mistakes due to ideology or shortsightedness. Charles lacks any basis or expertise to challenge the correctness of their decision making.

I'm sure any problems with the 737 Max will be shown to have been caused by unscrupulous Washington state union workers sabotaging the development and production process. Boeing executives would never risk there being any of the alleged leathal design flaws by cutting corners. In the same way, it is outrageous to suggest that there is any unconsidered risk involved in the scale of Boeing's stock buybacks. These executives are simply too qualified to make mistakes on that scale.

cough

Imagine how frustrating it must be to be Charles Mudede, needing and wishing for capitalism to fail so badly, yet living a privileged and cushy life every single day thanks to the neverending abundance that capitalism provides him.

I imagine that dissonance in his head is what drives him to drink and write such hilarious blog posts.

robotslave dear, the point I was making is that the aerospace industry has survived other product calamities. They will survive this one. I do have a special kind of contempt for Boeing management, however, for they were complicit in this.

Charles' lack of knowledge aside, the real concern to those in the know is corporate bonds. Approximately 30% of corporate bonds currently rated as investment grade, held in many, many, many bond funds, will become junk bonds in a recession if the fed lowers the rates back down towards 0%. Once they are downgraded to junk status, all those funds which have charters that say they can only hold investment grade bonds will then have to sell the junk bonds at tremendous loss. Add to this the level of US debt, 22T? And interest payments on national debt are about 3.6% of GDP? The economy will tank, credit will freeze. We are in for a world of hurt because lots and lots of americans are carrying too much debt themselves. It has nothing to do with the 737 Max or Boeing.

@17

The FAA withdrew certification after flight 191 went down, grounding all DC-10s in the US and other countries until MD addressed the issue (it took a month or two). That crash was ultimately found to be caused by (rather wildly) incorrect engine maintenance; earlier incidents were due to a design flaw in the cargo doors, which was ultimately fixed at mandatory order from the FAA after a congressional investigation of the agency's handling of the problem and its original certification of the plane.

The balance of the 737MAX appears to be fundamentally flawed, making the plane prone to stalls, which Boeing tried to paper over with software compensation in the control systems. It's not "just a little glitch," it's a major issue.

You can't make direct "apples to apples" comparisons between ANY two commercial aircraft model-families. But there sure as hell are a lot of ways you can compare aspects of the DC-10 and the 737-MAX, be it in safety record, in soundness of original design, or in incident response on the part of government or manufacturer.

Yay! "Market-analyst-Mudede" is my favorite satyrical slog character. But in reality corporate cash holding (both in absolute terms and as a percent of current assets) have been climbing since the 60's. This trend has done nothing but accelerate lately, to the point where it's its own problem for the economy. And companies, even extremely large ones, have gone out of business before with the result for the market being extremely proportionate.

And simply saying "during an economic downturn investors will hold more cash" is [a] not an insight and [b] not a way to explain the 2008 crash.

@6 uh....they would go private? Publicly traded companies go private all the time. If you'd like to take one private yourself, raising a bunch of money and buying up all the shares is exactly how you do it. Once you own all the shares, you can delist it. This is a thing that happens pretty regularly.

Don't be surprised if ... Mudede is back a few weeks from now with yet another announcement of yet another imminent crisis of capitalism.

Boeing won't crater. The market cap is about US$20 bil. It will get pummeled in the short/mid haul sector of the business. It will leave a mark that's for sure. More likely someone will swoop in and pick it up a fair bit cheaper than now. With the exception of the recent quality/design issues (becasue that's what they are) Boeing is pretty solid. None of the other models are impacted because the 737 used olde tyme mechanical controls with newer software kludged on top and didn't tell the pilots specifically about MCAS. The other models use fly by wire systems. Someone should go to prison, likely they won't. They chose speed to market over safety and at the least I see the whole C suite getting sacked.

Their market cap is more like $2 hundred billion. But I also don't think they are going to collapse. They're still even up YTD more than 13%. That's not bad compared to the whole index's 14ish%.

Boeing in NOT an ethical corporation. They WILL fuck us all just like they fucked Witchita, Kansas. This article is SPOT ON. Unfortunately. Eat your words now people.

Also Charles drew heavily from other articles and studies, so the insults in this comment thread are just unnecessary. If you don't like an author don't read them. I can't stand David Brooks for example so I rarely read his column.