Industrials: Boeing

Boeing presents an interesting diversification across military and civilian earnings streams as it is produced airplanes for airlines as well as military contract work. What is the biggest difference between the civilian and military worlds? I would presume it is in the civilian world, most events are driven by money while in the military world most events are driven by safety. In the end, the entire industrials sector is composed of companies whose businesses are too large for an individual to process, and much of the success seems to lie in the hands of fate or luck. This is only the appearance though, because the industrials sector is fundamentally more military than civilian in how it is organized. If your product keeps the United States safe it probably will sell in the industrials world. To make money from military type machinations is similar to trying to make money from art: you can’t. You can only do your art well, or in this case, do your engineering well, and hope things work out. If you invest in this sector, you invest not in the most commercial artist or military guru, but the Van Gogh because if you can find him, you turn brass into gold, as he will find some way to return you the favor that you have invested in his works. If his stock price doesn’t go up, maybe some of your other stock prices will go up as in an efficient market, there is very little privacy implied as private information becomes public information very fast. In short we are all working together on problems and if we solve them we get rewarded and whether or not we can manage our businesses well is a function of whether we can solve these problems well at the end of the day not whether we can spin money around. There were people who specialized in spinning money around so people like military Van Gogh engineer would work on his SpaceshipOne to launch into space, but these people largely failed in the catastrophic leadup to the financial crisis in 2008. Well maybe not all of them failed. These people were known as flow traders and generally do not bow to quants because we know quants can only trade in certain types of markets while flow traders can handle all markets. Quants are like human calculators, we aspire to be Olympic athletes, and we believe in the human body and that it was built for all the needs we have in life if we train it in all the ways that wasn’t given to us. These articles source ideas so there is little valuation or analysis of risk in these stocks recommended and are meant to find the most illuminating and interesting stocks of a sector, not necessarily the ones that will outperform the most. Sometimes in your portfolio you need glamor as if you just have stocks to outperform what happens when the market as a whole tanks? Glamor stocks may prove resilient in that scenario both as conversation fodder and in value. Glamor stocks in other words hold portfolios together by ensuring your other stocks will be kept long enough by you for them to go up. Portfolio construction is more an art than a science and that is why I like it.

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