When everyone knows that they are going to make a bottom, it is not a good time to make a bottom.
This article is from WeChat public account “LongBridge LongBridge” (ID: LB-Global), Author LongBridge.
Boeing is subject to the impact of the 737MAX no-fly and epidemic on the aviation industry. The stock price has continued to fall from a high of 437 US dollars per share in March last year, and it has fallen more than 60% in the past month. The market value has shrunk by more than 120 billion US dollars. .
Affected by this, Boeing, with more than 100 years of accumulated fame, “bottomed Boeing” has become the most discussed topic after dinner. In everyone’s perception, Boeing is the leading stock in the aviation industry and the main force of US trade exports. It is also the eldest son of the United States industry and provides a large number of jobs. The United States will not let it fall.
Few people can really make a bottom.
Because Buffett increased Delta ’s quilt in the past, US stocks triggered 4 blowouts in 10 days, and market sentiment dropped to freezing point. No one dared to act lightly.
But in the past two days, U.S. stocks rebounded and Boeing’s stock price rose sharply. The gains in the past three trading days were 11.17%, 20.89%, and 24.32%, breaking the 10-day moving average in one fell swoop.
Some people think that the cold winter is over and it is the time when the spring is blooming. They ca n’t wait to make a bottom search. They do n’t know that they may become a member of the new leek.
Air travel needs
As an aircraft manufacturer, the development of the company is closely related to the prosperity of the aviation industry.
According to the data in the “Air Transport Industry Statistics Report 2018” released by the International Aviation Association in August 2019. In terms of passenger transportation, global airlines regularly carry 4.4 billion passengers on scheduled flights, an increase of 6.9% over 2017, and a seat load rate of 81.9%. At present, there are 22,000 cities offering direct flights, an increase of 1,300 compared to 2017 and double the number in 1998.
In terms of freight, global air cargo demand increased by 3.4% and capacity increased by 5.2% in 2018.
The entire aviation industry seems to be thriving, entering the scene of rapid development. But all this was broken by an epidemic.
Since the outbreak of the new crown pneumonia epidemic, the global civil aviation industry has suffered the most direct impact, and major airline companies around the world have begun operations for suspension and assistance. Lufthansa, Europe’s largest airline, even bluntly said: “” The number of aircraft flying in the sky by the company today is similar to that of 1955. “
IATA latest analysis predicts global aviationPassenger transport revenues may drop by $ 252 billion, a 44% drop from 2019. As strict travel restrictions may last up to 3 months, global air transport passenger demand is expected to decrease by 38% in 2020 compared to 2019.
The new crown epidemic’s blow to the aviation industry is comparable to the “9/11” incident of the year.
Perhaps you think that after the epidemic is over, the aviation industry will soon pick up as demand for global passenger transport resumes.
But you have to remember that the aviation industry is inherently “high risk, high debt”. China Southern Airlines stated in its 2018 annual report: “On the one hand, it is reflected in the political and economic situation, war, turmoil, terrorist events, and even epidemic diseases will cause unexpected shocks. Exchange rates, interest rates, and jet fuel prices fluctuate. Will also have a huge impact on operating profit. “
The “interest rate” and “oil price” are positive for the aviation industry. Earlier, the Federal Reserve announced that it would lower the federal funds rate target range to an ultra-low level of 0 to 0.25%, which will help the aviation industry reduce financial costs. And the sharp drop in crude oil prices this year is also conducive to the airline’s remaining expenses, because usually fuel costs account for more than 30% of the airline’s total costs.
However, these two items are not as good as the bad ones hit by the epidemic. First, only a very small number of flights are running, and the overall recovery of the business is very low. Even if the interest rate drops again, the company has no income, and it is still unaffordable. And it is precisely because there is less demand now that oil prices will be so low. If demand really comes up in the future, the price will gradually increase.
At present, airlines around the world are fighting for survival. If the government does not provide timely assistance, many airlines will not even be able to enter the recovery phase.
Even if some airlines are lucky enough to escape, but I am afraid to welcome them, is a longer and more painful crisis-the global economic recession.
The Federal Reserve ’s unlimited QE and $ 2 trillion stimulus plan have boosted market confidence. Some people think that U.S. stocks have bottomed out, but if you only need to run a money printing machine to make money through the crisis, what else do you need to do with economic law? This is only a short-term relief of the crisis, so that the old leek can unravel and replace it with a new one.
Hongye, chief strategist of Bank of Communications International, once said that the current epidemic ’s impact on the economy is completely different from the 2008 financial crisis. In 2008, monetary and fiscal tools can be used to deal with the recovery; Impact is not something that monetary and fiscal instruments can solve. This is a new challenge we have to deal with.
Aircraft order
Boeing 737The living standards of American residents have the most direct impact, and even indirectly lead to greater livelihood problems. And Lehman Brothers’ customers are mostly concentrated in institutional investors in the securities industry. Therefore, the United States would prefer Lehman Brothers to bankruptcy rather than AIG to fall.
(Behind Boeing, there are 17,000 suppliers and 2.5 million jobs in the aviation manufacturing industry chain. According to the latest news, the number of first-time unemployment claims in the United States soared to a record as of March 21 The record of 3.28 million people is more than four times the previous record high set in 1982. The U.S. government will definitely take into account the unemployment pressure faced by the entire society at this stage and will not easily let Boeing fall)
Second, it has a huge impact on the US economy
AIG is the link between the domestic financial system and the real economy. If the AIG falls, it will be even worse for the already fragile financial market, which will greatly increase the difficulty of recovering vitality and getting out of the crisis, and will cause substantial harm to economic growth.
(Boeing is the largest exporter in the United States. If Boeing falls, it will be worse for already weak trade exports, which will greatly increase the trade deficit and harm the suppression of the growth of the fiscal deficit.)
It was precisely because of the help of the US government that AIG was rescued. On December 11, 2012, AIG was officially announced that the US government had cleared all the shares of AIG it held, and AIG successfully “redeemed.”
Data source: Changqiao App
But despite being rescued, AIG’s stock price has been slumped. Investors who hoped to “bottom” when the U.S. government transfused blood to AIG were almost halfway down, and even now, they can’t get rid of it.
The story of the first half of AIG is very similar to that of Boeing. I wonder if the second half of Boeing will mirror the development.
Conclusion
Buffett once mentioned the famous quote in a letter to shareholders: “When Richard Branson, the owner of Virgin Atlanta Airlines, was asked how he could become a millionaire, his answer was simple: In fact, there is nothing! First you have to be a billionaire, and then you buy an airline! “
Of course, if I didn’t succeed in persuading you, you still resolutely chose to take a Boeing.I will also send you my most sincere blessings.
I wish you a millionaire!