Trading the Indices on Fundamentals

Overnight said:
It's just a software update
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Well, as a frequent flyer myself I would not fly on an aircraft that would drop from the sky without a computer to keep it in the air. Might be OK for military stuff but unacceptable for airliners. Pushing the engines forward and up, changed the centre of gravity both in the horizontal and vertical planes, a proper fix would mean repositioning the wings, in effect, it would not be a 737 anymore. Anything short of that is a patch that gambles with lives. If the FAA approves just a software fix then both the FAA and Boeing lose credibility.

An airliner needs to be able to glide 200ml or so without power, no power also means no electronics after some time. If the airliner can't glide without computer assistance then it must fail the safety test.

In simple terms, the MAX has different characteristics to the other 737s, Boeing released the plane on the claim that it can be flown by existing 737 pilots without re-training and installed software to compensate for the different characteristics. The result was catastrophic, when the software failed (or did things that were unexpected by the pilots), the pilots were not trained to handle the situation nor to fly the MAX without computer assistance. It was a failure of the FAA to let Boeing self-certify the plane. People paid with their lives. It's not a small thing and a software fix still does not mean that a 737 pilot can fly the MAX. Boeing claim was false and it was a criminal act to allow pilots unable to fly the MAX to fly it
 
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FXtrader8911 said:
Well, as a frequent flyer myself I would not fly on an aircraft that would drop from the sky without a computer to keep it in the air. Might be OK for military stuff but unacceptable for airliners. Pushing the engines forward and up, changed the centre of gravity both in the horizontal and vertical planes, a proper fix would mean repositioning the wings, in effect, it would not be a 737 anymore. Anything short of that is a patch that gambles with lives. If the FAA approves just a software fix then both the FAA and Boeing lose credibility.

An airliner needs to be able to glide 200ml or so withouth power, no power also means no electronics after some time. If the airliner can't glide without computer assistance then it must fail the safety test.
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The problem was not the physical characteristics of the plane. It was the software that forced the plane into a nose-down position without an easy way for the pilots to over-ride said system.

"...If the airliner can't glide without computer assistance then it must fail the safety test..."

That is practically every aircraft in the commercial fleet. They are all fly-by-wire.
 
Overnight said:
The problem was not the physical characteristics of the plane. It was the software
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I've based my comments on the investigator's report on the Lion Air disaster, it implicates Boeing for the MAX's design flaws and the FAA for certifying the MAX skipping the tests normally required (the FAA took the word of Boeing that the MAX & the 737 are the same planes.. it isn't), the report does not even mention software. On what are you basing your view that it's software related and all can be fixed via a software patch? In fact, the software patch was ready within two weeks of the grounding, but neither the FAA nor other countries regulators accepted a software update as enough.

I doubt any airline will buy the MAX with known design flaws even if Boeing claims the software can overcome the flaws and, again, it would be criminal for the FAA to now re-certify the plane while it still has the design flaws stated in the investigator's report.

As for being able to glide, every Boeing and Airbus model is certified to glide and safely land at an aiport within 200ml without power from 33,000 feet.

If I was running Boeing I'd now go into damage controll, scrap the MAX, redesign it, release it as something other than a 737. Persisting to call it a 737 will affect the reputation and continued sales of the original 737 which was the best selling airliner in history.
 
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marameo said:
Total market cap over GDP currently at 143.5%

(Sep 30 2007 = 110%, Mar 30 2000 = 148%)
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Good job on defining these stats... they do show that things are not normal and approaching bubble territory.

Markets are now wishing for rate cuts and will probably go higher if they get their wish. I say be careful on what you wish for. Powell is an idiot, first he was on auto-pilot for increases then he flips 180 degrees and is almost on auto-pilot for cuts. The guy had no idea why he was raising then and has no idea on why he's cutting now.. he's just following the leading monkey which currently is Draghi. The US needs to look at history... Japan was the first, the inventor of zero rates, and that wrecked their banks and paralyzed their economy for almost 20 years now, 2nd was Draghi and likewise wrecked the banking sector in Europe and they too have paralyzed their economies for 3 years now, did the EU learn something? no, they took it a step further than Japan, they went negative. Will the US be number 3? Zero rates wreck the financial system, give an incentive for banks to keep bad debts on their books and reduce lending to a trickle. Without a healthy banking system, the economy stagnates. Get rid of Powell I say, he's a bigger threat to the US than China ever will be.
 
Recession fears in the US are growing and everyone is pointing the finger at Trump's lack of a road-map on policy and the tariffs, these have negated the tax reforms and all other stimuli. Trump has the right idea but the wrong methods, targeting products the US suspects have been produced using stolen IP in the process or product is fine and even 100% tariffs on these is warranted, instructing Government procurement not buy any "made in China" goods at all is also fine, but putting blanket tariffs on all goods is lazy policy and stupid. 10% will be absorbed by the manufactures, more than 10% will be a tax on to the consumer and there's the problem. Trump's impulsiveness has already stifled industrial expansion, add a purchase tax on the consumer and that becomes a recipe for recession.

My view is that reducing rates will do nothing for the economy but will create an asset bubble which makes Trump look good and so he thinks all's well, the ad-hock policy works and so do the tariffs, all is "perfect". Not so in my view! The market cap over GDP at 143.5% is bubble territory.

Sentiment might be high and markets are going up on that but fundamentals do matter. The nature of trading has changed dramatically over the past two decades. Traders that used to be on the floor of the exchanges had a feel for the economy and stock prices were at a fair price based on the fundamentals of a company adjusted for the fundamentals of the economy. Now we have machines dominating the price through HFT and kids, yet old enough to shave, are writing the algoes that drive the machines on tweets, news headlines and trends created by other machines, the machines also trade sectors against other sectors and even a whole Index against another Index. Retail traders and investors that used to be 50% of participants are now insignificant against the volumes generated by the bots, traditional traders are predominantly competing against machines and professionals that get guided by machines, machines are setting prices detached from reality. Worst still, TA can no longer give reliable signals.... you might as well flip a coin and you'll get the same win/loss ratio. This perspective is important to realize because it underscores how markets have changed and how machines algoes are predisposed to preying on the unsophisticated trader. It also underscores the biggest change of all i.e. the Index now manipulates the stock price rather than the stock prices setting the Index... the tail wagging the dog often puts the dog in the wrong place.

All said and done I remain short in the US & long in the EU because markets will eventually gravitate towards the fundamentals. Corrections are inevitable and mostly happen at a high.. the point when humans see reality and override the machines but do not switch-off the machine so then markets oversell bringing the humans back to eventually settle at a fair price that matches the fundamentals.... and the process re-starts!
 
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Actual corporate profits in divergence with the stock markets
 

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marameo said:
Actual corporate profits in divergence with the stock markets
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Nice graphs, looks like peak profits were in 2015 when the DOW was 18,000 (S&P 2,100), now it is 27,000 on lower-earning that in 2015... something is out of sync I'd say. Based on earnings, if markets go to the Dec lows they'd be about at fair value adjusted for inflation.
 
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