Monthly Market Debrief

Market Snapshot

Stocks this month continued to perform well with the S&P 500 closing the month at another record high of 2,254.35. Investors and the Fed continue to be optimistic for three interest rate cuts this year, but the start date continues to get pushed to the right as inflation remains sticky. At this point, the Fed is just dangling this carrot of rate cuts in front of us. I don’t think we will see any rate cuts in 2024 unless there is a major economic recession. Historically, inflation takes longer to come back to 2% than everyone wants. If there is a rate cut, I think inflation will shoot back up.

The hottest new stock this month? Former President Donald Trump’s Truth Social. The social media company finally merged with a publicly listed shell corporation in a move called a SPAC, Special Purpose Acquisition Company. The newly formed company which contains all of Truth Social is trading under the ticker DJT. The initials of the former President is no accident. The timing is also no accident as the former President struggles to pay fines in New York. This $3 billion dollar boost to his net worth may provide a safety net. The only problem is he is restricted from selling any stock for 6 months after the SPAC completes. A sale can still be approved if the board of DJT approves it. The board is primarily filled with supporters of the former President, including his son, so I think we can predict how that will go. This stock will experience more ups and downs than a ride at Six Flags or the price of a bitcoin. Although I won’t be on the ride, I will be watching from the sidelines.

Company Highlight - Boeing

In March, the Boeing CEO David Calhoun announced he was stepping down in response to the door plug that blew off mid-air in January. David became CEO in 2020 after the previous CEO was fired over the two crashes of the 737 MAX planes that killed 346 people. The head of commercial planes, Stan Deal, has already been replaced by the chief operating officer, and the board chairman, Lawrence Kellner, won’t run for reelection in May.

This is sadly becoming routine for Boeing. Their emphasis on profits over everything else leads to jaw dropping failures in their planes. Thankfully their slacked standards did not lead to hundreds of deaths this time. Initial reports from the NTSB (National Transportation Safety Board) claim the door plug bolts were MISSING. Not loose, not the wrong size, not weak, but missing entirely. The NTSB can surely determine who failed to replace the bolts and find the responsible party, right? In a twist that sounds fake, the security footage of the Boeing facility was overwritten and Boeing can’t find any documents related to the maintenance of that door plug… You can’t make this up. But wait! There is more. 

John Barnett was a former Boeing employee with 30 years of experience working and managing Boeing factories. Since his retirement in 2017, he has been in ongoing legal action against Boeing for defaming him and damaging his career over the many reports he filed while an employee. John claims that Boeing not only cut corners, but also deliberately installed faulty parts onto planes. If a piece arrives at a factory that is “non-conforming,” meaning it isn’t the right size, damaged, or has defects, Boeing has to catalog, store, and track the parts to ensure they remain off the plane. John witnessed managers retrieving those same defective parts and forcing workers to install them on planes. Surely that can’t be true, right? Sadly, a review from the FAA (Federal Aviation Administration) confirmed at least part of his claims and determined the location of 53 non-conforming parts were unknown and “lost.”

Earlier this month, John was in Charleston, SC testifying against Boeing. On Friday, March 8th, he testified all day with Boeing lawyers and cross-examination. On Saturday, he did not arrive for a second day of testimony. He was found in his car with a “self-inflicted” gunshot wound. There are reports that he specifically told his family and friends that he is not suicidal… 

This chain of events has been a long time in the making. There used to be a saying in aviation, “If it ain’t Boeing, I ain’t going.” Nowadays, you can sort your flights by aircraft to specifically exclude Boeing planes. In 2001, Boeing moved its headquarters from Seattle to Chicago. This is seen as the start of the downfall. This symbolic move separated the “bean counters” from the engineers. Money started to dominate decisions at Boeing. The 737 MAX is the pinnacle of those decisions when Boeing created automatic systems to compensate for a poorly designed plane, withheld important training information from airlines to prevent pilots from requiring additional training, and went on a media takeover to blame the airlines for the crashes. 346 people lost their lives because the culture of Boeing changed from lifting planes to lifting profits. The recent door plug falling off, wheel falling off, panel falling off, and engine fires prove that nothing has changed at Boeing since 2020. As investigations complete, I believe the reports will continue to highlight truth defying facts that sound made up. However, Boeing is too big to fail. The government has allowed and facilitated this monopoly in commercial airliners to exist for decades. In 2022, Boeing moved its headquarters again to Washington DC. The lobbying and plane failures will only increase.

Current Event - Crypto’s Golden Boy Sentenced

Sam Bankman-Fried, the head of the FTX Crypto empire, received a 25 year prison sentence and $11 billion in forfeiture. As a reminder, FTX was a crypto exchange where people could open accounts and easily buy Bitcoin and thousands of other coins. The account holders didn’t realize that Sam Bankman-Fried and others high up at FTX were taking customer funds and using them to invest in other coins, donate to political campaigns, and for personal use through Alameda Research. When cryptocurrency nose dived in 2021-2022, Alameda Research lost billions and FTX couldn’t give people their money back.

Now that crypto is reaching an all time high again, the bankruptcy court holding FTX assets should be able to get everyone's money back. However, it will be the value of their account when FTX crashed, not what it would be now. Some people held hundreds of thousands of dollars in crypto through FTX. They are losing out on thousands of dollars of gains.

Sam Bankman-Fried’s lawyers again tried to argue he was just “an awkward math nerd” and “beautiful puzzle” who deserved a light 5 year sentence. The prosecution, on the other hand, argued for a longer 50+ year sentence. The judge found a middle ground that aimed to prevent SBF from ever being able to commit such crimes again.

Although there will be appeals, this is the end of SBF’s journey trying to convince people that his billion dollar scam was effective altruism. This was SBF claiming he needed billions of dollars to help as many people as possible. It surely wasn’t to buy penthouses, fund friendly political campaigns, and hang out with celebrities that the “nerd” never would have met otherwise… weirdly enough when you trace the money, that is exactly what it was for.

I didn’t lose any money with FTX, but I am happy Sam Bankman-Fried will spend decades in prison. He didn’t act alone though, and I hope he is joined by the rest of the C suite from FTX.

What we are listening to:

Freakonomics Ep. 580: The True Story of America’s Supremely Messed-Up Immigration System. At this point, all Congress can agree on is that our immigration system isn’t working. Freakonomics did a multi-part series going in depth on the immigration system and how we got here. It does a great job of showing both sides without getting too politically spicy.

Debrief on Deck

Next Week, Mike will talk about Target Date Funds and why picking a 2030 Target Date Fund is the opposite of what you should do if you want to retire in six years.

Until then, stay the course.