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The Latest Economic Fad: Cloud Stuffing

Tyler Durden's picture


At first we were quite impressed by the following major revenue and EPS beat by Boeing announced earlier today: 

  • *BOEING 1Q REV. $19.38B, EST. $18.31B :BA US

 ...until courtesy of Sean Corrigan we found out that Boeing is merely the latest company to discover what GM recently discovered as have so many now defunct other companies. That when in doubt - stuff.


The lower pane shows the 100% rise in Inventory relative to Sales from the previous decade's average level!!


Chart: Bloomberg and Diapason Commodities


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Wed, 04/25/2012 - 11:30 | 2373532 maxmad
maxmad's picture

Hopium hates details!

Wed, 04/25/2012 - 11:41 | 2373578 Eclipse89
Eclipse89's picture

Well, they will need to build some kind of a HUGE hangar to store them all... Ultra mega bullish as construction spending soars!

Wed, 04/25/2012 - 11:54 | 2373626 Global Hunter
Global Hunter's picture

has "shovel ready jobs" written all over it

Wed, 04/25/2012 - 12:18 | 2373730 JPM Hater001
JPM Hater001's picture

All that poor mal-investment.


Wed, 04/25/2012 - 12:27 | 2373767 valley chick
valley chick's picture

stuffing these "birds" with taxpayer money?

Wed, 04/25/2012 - 12:31 | 2373777 hedgeless_horseman
hedgeless_horseman's picture



Maybe they need more inventory, now, because the number of impulse buyers for a $400,000,000 jet airliner has increased?

Wed, 04/25/2012 - 13:45 | 2374141 Smiddywesson
Smiddywesson's picture

Yeah, I hear John Corzine just picked out four of them.

($400m X 4 = $1.6b vanished funds)

Wed, 04/25/2012 - 12:27 | 2373765 donsluck
Wed, 04/25/2012 - 12:45 | 2373843 Jena
Jena's picture

Any copper wiring? The tweakers in the desert will catch on eventually.

Wed, 04/25/2012 - 17:50 | 2375019 neidermeyer
neidermeyer's picture

No such luck ,, they'll just park then in Arizona or at the leasing companies fields...

Wed, 04/25/2012 - 12:16 | 2373721 battle axe
battle axe's picture

Memo from Boeing: Do not read the fine print.

Wed, 04/25/2012 - 12:31 | 2373780 LongSoupLine
LongSoupLine's picture



Algo's know only headlines, and all that remains in this "market" are algos.  Changing the game to fit the desired outcome.

Wed, 04/25/2012 - 11:31 | 2373535 CClarity
CClarity's picture

CNBC lemmings don't care.  All they respond to is Pavlovian USA USA, we're okay, buy buy buy.

Wed, 04/25/2012 - 11:31 | 2373537 truont
truont's picture

If you build them, they will come, eh, BA?

Wed, 04/25/2012 - 11:35 | 2373555 LouisDega
LouisDega's picture

Shoeless Joe Bitchezzzz

Wed, 04/25/2012 - 11:40 | 2373573 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

That means I will be able to buy my own 747 for a few $100,000 during liquidation?

Wed, 04/25/2012 - 11:49 | 2373599 buzzsaw99
buzzsaw99's picture

Silly Vamp. You will get nothing and like it. [/judge smails] The banks will buy them for $1 for a mile-high cocaine and hookers party then sell them to the fed for half a trill. Try to keep up.

Wed, 04/25/2012 - 18:12 | 2375072 mkkby
mkkby's picture

After the hyperinflation you'll get the plane for 1 gold eagle.  You keep up.

Wed, 04/25/2012 - 12:17 | 2373723 MaggieL
MaggieL's picture

Maybe, but you won't be able to afford enough Jet-A to taxi to the hold line. 

Wed, 04/25/2012 - 13:03 | 2373943 Element
Element's picture

No silly, they're being converted to 'dumb'-bombers to drop sticks of HE on to anyone who doesn't like the petro-buck.

Wed, 04/25/2012 - 11:31 | 2373538 buzzsaw99
buzzsaw99's picture

This low mileage beauty was previously owned by a little old lady who only drove it to church on Sundays. lulz

Wed, 04/25/2012 - 11:38 | 2373569 Dr. Richard Head
Dr. Richard Head's picture

My neighbor works for a company that works  on interiors of private jets, generally the Embraer models.  I love the stories of the planes that come in for upgrades to the interior only to be left in their hanger as the bill can't be paid.  The repo stories are fun to hear too.

Wed, 04/25/2012 - 13:31 | 2374068 Nobody For President
Nobody For President's picture

I get the phrasing, but it's about hours, not mileage. TT = Total time (hours) on airframe. SMOH = Hours since last major overhaul. Like that.

How about a nice Falcon 100? 


Wed, 04/25/2012 - 11:33 | 2373548 the not so migh...
the not so mighty maximiza's picture

Cash for clunkers needed,  FAA style.

Wed, 04/25/2012 - 11:35 | 2373554 Cursive
Cursive's picture

So it's about as reliable as cloud computing, then?

Wed, 04/25/2012 - 11:36 | 2373560 Dr. Richard Head
Dr. Richard Head's picture

So GM and Boeing now acting like middle school girls giddly stuffing their bras.  Sounds like an investment opportunity to me.....GM and Boeing stock I mean.

Wed, 04/25/2012 - 11:38 | 2373564 monopoly
monopoly's picture

And we are decoupled from the rest of the planet. Yup, soon to run right off the track into the abyss.

Wed, 04/25/2012 - 11:38 | 2373565 rosiescenario
rosiescenario's picture

Perhaps something similar is going on with HOG?


Given the current economy and the fact that many of their dealers are out of business, this channel stuffing may explain their dramatic sales gain as reported today?????

Wed, 04/25/2012 - 11:45 | 2373581 SheepDog-One
SheepDog-One's picture

FUCK Harley Davidson, theyre moving their production to India! Same with GM now that theyve taken all the taxpayer rescue bailouts, theyre moving to China!

Cue up on iTunes 'Aint that America'

Wed, 04/25/2012 - 12:29 | 2373772 donsluck
donsluck's picture

God I hate those things. Roaring around saying fuck you to everyone. Try roaring back at them (vocally) and see the reaction. Yeah I'm crazy.

Wed, 04/25/2012 - 12:48 | 2373854 HarryM
HarryM's picture

The whole image of Harley - Big , excessive, loud , wasteful - in other words , every thing  the USA stands for.

Moving production out of the USA would be like Bud being made in Vietnam.


Wed, 04/25/2012 - 13:53 | 2374195 mick_richfield
mick_richfield's picture

That would make for a really cool "Beer Hunter" commercial, though....


Wed, 04/25/2012 - 16:51 | 2374883 Marginal Call
Marginal Call's picture

The might as well brew bud in Nam, they make it out of rice.

Wed, 04/25/2012 - 11:41 | 2373582 monopoly
monopoly's picture

Agree with you rosie....And they are back to the same old shit. Low down payment and borrow to ride. I guess Harley does not care how many bikes they take back. The two Harley dealers here are selling on credit, not on growth.

Wed, 04/25/2012 - 12:10 | 2373692 rosiescenario
rosiescenario's picture

Its puzzling.....folks are still buying $15,000 to $20,000 toys?


And insiders are only selling......but the analysts are all recommending....

Wed, 04/25/2012 - 14:27 | 2374400 Metalredneck
Metalredneck's picture

Exactly why I build my own rat-bikes.  $50grand & 50 miles don't make a biker.

Wed, 04/25/2012 - 11:44 | 2373568 carbonmutant
carbonmutant's picture

Hey, it's working for China... so far.

Wed, 04/25/2012 - 11:40 | 2373575 Dr. Engali
Dr. Engali's picture

Soon we will see lines of Dreamliners occupying fields like we did with GM right before bankruptcy. They were channel stuffing so many cars that they had to store them in off site facilities.

Wed, 04/25/2012 - 11:44 | 2373589 SheepDog-One
SheepDog-One's picture

Yes, lets count inventory as sales profits! Hey, isnt that ILLEGAL? Nah....get with the times man, nothings illegal anymore....EXCEPT telling the truth about anything re Egan Jones.

Wed, 04/25/2012 - 11:45 | 2373591 bob_dabolina
Wed, 04/25/2012 - 11:46 | 2373594 SheepDog-One
SheepDog-One's picture

You just swipe yo EBT card!

Wed, 04/25/2012 - 11:49 | 2373602 junkyardjack
junkyardjack's picture


Wed, 04/25/2012 - 11:45 | 2373593 francis_sawyer
francis_sawyer's picture

Well the next thing you know, we'll prolly be hearing about some TEAR OUR WRISTS (Iranians, most likely), that stole a fleet of these and flew them into the USS Enteprise...


Of course that 'Planet Nibiru' dude will be telling us that they're secretly being refitted to become space shuttles & Harry Stamper is in the process of getting his pilot's license...

Wed, 04/25/2012 - 11:52 | 2373598 Bold Eagle
Bold Eagle's picture

I think it's actually a good business strategy when one is expecting a crash of the fiat system. It's better to have real goods than sit on fiat. Yeah, it may be somewhat difficult to find a barter partner who wants an airplane, but an airplane is still better than a pile of paper.

Wed, 04/25/2012 - 12:00 | 2373652 Global Hunter
Global Hunter's picture

Thank you for thinking ahead and trying to plan strategically however Bold Eagle in the interests of national security I must appropriate your lot of commercial airliners, thank you in advance for your patriotic sacrifices...shared sacrifice!

Wed, 04/25/2012 - 11:52 | 2373614 ptoemmes
ptoemmes's picture

So, when is an aircraft a sale, that is, revenue?

If it's Boeing inventory - implied - then the rules must truly be different or are they inventorying "sold" aircraft for the carriers?

I suppose the same question appleis to GM, but I suspect that may more truly be a sale if the vehicles leave the GM plant and are stuffed to the middelmen or dealers (not that cramming inventory downstream is particlualry fair or even legal)?

Rules - we don't need no stinkin' rules.



Wed, 04/25/2012 - 12:37 | 2373804 hidingfromhelis
hidingfromhelis's picture

Sale equals revenue equals taxable event equals send in your damn quarterly tax estimate like the rest of us peons.  How is this nonsense even remotely acceptable under GAAP?  Oops, I guess the first half of that is "Generally Accepted."  Interesting how the definition of that seems to vary based on the TBTF'ness of an institution.  I fucking well don't accept that!!  Yeah, I know; putting on the reality goggles this am colored my thinking.

Wed, 04/25/2012 - 11:53 | 2373617 yogibear
yogibear's picture

All Boeing has to do is cry like GM. Obama will shower them with bailout cash.

Cash for old planes. Millions in rebates for a new plane brought to you by the taxpayer.

Time to start crying Boeing. A crying economic baby under Obama and Bernanke gets showered in cash.


Wed, 04/25/2012 - 12:02 | 2373635 Cognitive Dissonance
Cognitive Dissonance's picture

The thing few understand about the aircraft business as presented by Boeing, Airbus and to a lesser extent the smaller manufacturers, is that their cost and sales accounting is truly bizarre. Their numbers are really whatever they want them to be because the development cost is written off over the expected sales life of the plane. So what they report as "making" on each plane is not real.

So even though the 787 is years behind schedule, they have simply shifted all these extra "costs" out over many more 787's to be sold in the future. When it was first presented to the board of directors, it was expected that the program would break even at plane number 400. It has now been pushed back out to plan 1100. I expect it to be 1400 soon enough.

Since the majority of the purchase cost of each plane is paid upon delivery, and many 787s (and 747-8s) are way (way) behind on deliveries, the jet powered can just gets kicked down the road. If one were to look at Boeing's cash flow the company looks one way. If you were to shake the books and get a peak at all the amortized costs, you would see Boeing in a different, less favorable light.

BTW the reason for the large number of planes not delivered, thus in "Inventory", is because of all the 787s and 747-8s that have been produced while the planes were still in testing. That testing showed that a great deal of rework needed to be done on their large stockpile of already made planes. They are slowly working through that already-built inventory, all of which already have buyers who will pay once delivery is made. Lockheed has the same problem with their F35. Sorry, the tax payer has the same problem.

Finally, Boeing never discloses the steep discounts they offer to those airlines who take the first planes of a new development. But they are substantial. This applies to both the 787 and 747-8. Those two lines of planes won't be making money (except on paper) for many many years.

Wed, 04/25/2012 - 12:03 | 2373666 Global Hunter
Global Hunter's picture

Informative post CD!  F35s might be the fighter jet that is causing the Canadian government a lot of very bad press I will have to look into that.

Wed, 04/25/2012 - 12:15 | 2373701 Cognitive Dissonance
Cognitive Dissonance's picture

The F35 has big big problems, all of which I could not mention in this small post. While aircraft manufacturers have always begun building planes before the final testing was complete, in order to show a low projected cost per plan over several thousand planes sold (most to the US, the rest to foreign nations) both the Pentagon and Lockheed convinced themselves they could begin producing planes before testing even began. After all, they claimed that their design software was so good that they would catch most of the problems in development, not testing.


Testing on warplanes can last 4 or more years. In fact, most of the operating software wasn't even written (and still isn't written) when the very first F35 took off for the first time. And F35 testing has just been extended out even further, the second time this has happened. Concurrent production might make sense when you are building a product that is well understood and you aren't breaking new materials and technology ground. It works poorly when the opposite happens.

This concept was well understood by the old timers. They for the most part were retired off a decade ago when this "project" was awarded so that the young bucks could promise the moon to the Pentagon, who wanted to buy it. hard place.

Wed, 04/25/2012 - 12:51 | 2373881 Ace Ventura
Ace Ventura's picture

The F35 also has the illustrious 'benefit' of being the first major fighter program awarded to an international consortium of OEMs. How DoD ever believed getting several multinationals to agree on anything, much less deliver anywhere near on time or on budget, while protecting any technological a replicating mystery wrapped in a joke.

You're right about the loss of wisdom in the workforce of major firms and gubment. No one values real experience and know-how.......its all about who has the slicker Powerpoints.

Wed, 04/25/2012 - 12:54 | 2373893 hedgeless_horseman
hedgeless_horseman's picture



How is the X45C armed drone market looking for Boeing?

Wed, 04/25/2012 - 13:20 | 2374017 Cognitive Dissonance
Cognitive Dissonance's picture

Looking hot hot hot.

The Pentagon and all the large and small "defense" manufacturers have identified drones as the (next) growth area, particularly over the next 10-20 years. Pilots sitting inside the actual plane is so yesterday.

It may sound crazy now, but the future of civil aviation is you sitting inside a plastic tube going 550 MPH at 40,000 feet piloted by HAL 5000.....if they can work the bugs out.

Do you drone (on)? :)

Meet your pilot

Wed, 04/25/2012 - 13:28 | 2374055 tarsubil
tarsubil's picture

The way pilots talk, it seems we are already there. The only thing they do is land and take off.

Wed, 04/25/2012 - 13:43 | 2374130 Element
Element's picture

Which is why they use LRIP (Low-Rate-Initial-Production) to generate the first 10 or so early build aircraft, that are then used not so much just for testing but also for development (and not just of the aircraft and systems, but of the production line and its facilities, processes, procedures and staff training and skills acquisition, etc.), so that the initial block's design can be ironed out before full rate serial production cranks up.

BTW, the first F-35A to fly was not a production version, it was actually a pre-weight-reduction design review build, that was about 3 tonnes heavier than the current LIRP aircraft.   Basically it was a proof-of concept aircraft, that was needed in order to develop the current LRIP-build aircraft that have followed, in order to move testing and development forward.

F-35 is designed to be, and is expected to be still the most capable tactical aircraft in Western inventories in 2040, to still be able to match and better almost any other tactical aircraft, after its mid life updates and later block builds, and especially to be able to knock out any defended ground or Naval surface or airborne target.

This program and aircraft is being maximised for capabilities, which is slowing development and increasing price and complexity, because Govts in the West are necessarily foreseeing that a major conflict could develop as that aircraft begins to come to full operational service.

F-35 is not only low observable, but more importantly is has very low drag, a powerful but efficent engine, so a very high cruise speed, and 2.7 times the internal fuel load of the initial F-16A, and it has an automated refuelling capability as well ... so that's a whole lot more naval 'reach' provided to the USN and USMC, to stand well off from a naval surface or continental-based combatant, and just pound the snot out of them, like always.

Plus deny them control of the intervening airspace.

F-35 is the right jet ... if you want to maintain global hegemony.

But it's also the right jet, if you don't, and instead pull-back from super-expensive foreign entanglements and bases, but want to maintain the ability to re-deploy air-power in an 'emergency', etc.

It is going to get built, in big numbers, with lots of export opportunities, and those exports and the reliance on parts etc., will greatly assist to maintain US geo-political influence for a few more decades.


The economics of it, will play second-fiddle, when all is said an done.

Wed, 04/25/2012 - 14:01 | 2374238 mick_richfield
mick_richfield's picture

"Low observable" -- man, you got that part right!

I predict it will be low-observable to no-observable for the foreseeable future.

Except on PowerPoint.


Wed, 04/25/2012 - 15:02 | 2374533 Cognitive Dissonance
Cognitive Dissonance's picture

The total committed buy from the US has dropped by a third and several nations have pulled out completely with others wavering. And they are still writing the software that makes all those whistles and bells work.

30 million lines of software and counting was the last estimate I read.

No doubt it will eventually be quite a capable aircraft. I have been following the industry for decades so I have watched this program from the beginning. But this plane will cost 3 times as much as initially estimated even when you adjust for inflation.

The only reason it hasn't been axed is because Lockheed sourced suppliers in all 50 states. Spread the wealth bitches. Modern day version of a jobs program.

Thu, 04/26/2012 - 08:18 | 2375908 Element
Element's picture

But when are they not still writing software code, Cog?  It's a process that never sleeps.

If you are following developments you know the major systems are functioning, integrated, tested at an initial development Block level, and it is working.

Block expansions will continue because they were always planned to.  It'll probably eventually have 100 million lines of code.  Does that matter if it's modular block development?  When has complexity been a reason to discontinue development in military systems?

All major aircraft these days have dedicated software development programs for upgrades to capabilities.

How else do you get a capability that's superior (more deadly and more survivable) or keep it current, or ahead of the pack until 2040?

What is for sure is the general public don't know, and also won't be permitted to know the true state of things, because deception is everything with regard to real capabilities.

I would however expect this aircraft will be unmatched for a decade or two, in quality, or in numbers.  That is what people and countries should expect.

Implicit in maximising capabilities is increased cost, and also reduced numbers to achieve the detailed specified in-service capability REQUIREMENT, that lead to LIRP, and commitment to accept them into service.

That is happening, it has entered initial operational capability, and it is happening in the year that this was initialy planned to occur.

The 3x price rise (which is about right, but that includes the whole enchilada of in-service infrastructure for it, EVERYTHING several squadrons need to operate, deep maintenance, engines, spares, weapons, training, simulators etc., not merely the aircraft, sitting on a hardstand) is certainly the point that sorts the export wheat from the chaff, plus combined with development slippages, has got a few countries baulking and looking at other options or delaying their purchases an talking of interim fighters and buying a later and more mature block aircraft.

But Cog, I will take issue with you on this point; the F-35 DOES have numerous countries very interested in it, and the number of countries openly stating an interest in acquisition has greatly expanded as the program has reached multi-year LIRP, and now entry into Initial-Block service.  Right?  I mean, it's not like any countries actually think it's a dodgy design or that build quality is sub-par, or the capability potential dividend has eluded it.

It that not so?

Only the STOVL F-35 aircraft is/was/has/ been considered a candidate for axing, while the USMC have said F-35B is "absolutely vital", and they don't want to even consider axing it at this stage.  I'm fairly confident it won't be axed, given Russia has just said it plans to spend $500 billion on new arms, and China is doing that, ... and more.

Regarding Lockheed's supply chain, they sourced suppliers from all over the Western world, not just from all the US states (why wouldn't they all want to 'benefit' from it?).  Allied Sovereigns participating in the SDD development phase(s) insisted on that approach and on technology transfer, and data-sharing, plus specification and design cooperation and input before they would put up money or commit to buying the resulting aircraft.  Their money has been a national investment, they want to make sure the aircraft is right for their specific national needs, as well.  Some think the initial blocks are aimed too modestly especially in weapons capability terms, saying that current in-service aircraft are more weapons delivery capable than the initial capability.

The Lockheed/Pentagon response is that in-service initial capability will be very rapidly expanded and progressively bought to fully operational levels that exceed current aircraft capabilities.  A lot has been written on this block-upgrade process as I am sure you are aware.

The primary need for radical new aircraft designs (besides aging existing aircraft, that could be re-produced, if they had to be) is the need to survive to weapon release, and to return to do it again, and again.

Current designs are struggling against current new-gen air defence systems, and aircraft/missiles entering service.  It only gets worse for existing tactical aircraft designs, from here on.  

If you cant get to weapons release point routinely, attrition takes over, and you may lose.

So what's needed at this point is not just a superior new design dedicated attack aircraft, but such a design in sufficiently large enough numbers and capability mix, to be sure to make an overwhelming difference.

Otherwise, if that doesn't come about, then yeah, you may as well not have the F-35s - at all.

Slow and <25k altitude Reapers, with Hellfires, LGBs and SDBs are simply a joke, incidental compared a SuperHornets, A-10s and F-35s.  Such initial capability drones are way too slow, terribly under-powered, woefully under-armed, almost completely lacking in rapid manoeuvre and transit capabilities, can not defend themselves, and are too technically immature (and as the RQ-170 and other incidents have shown, so much too vulnerable to electronic means to interdict) to be a replacement, for several more decades.

If F-35 were axed now you're then left with the same weapon-on-target and mission-kill and survivability/attrition problems, but with no suitable or appropriate, nor viable combat-competitive solution in sight.

Hence the economics of it will play second-fiddle, and the US and several allied States will acquire F-35s, in large enough numbers to replace most of what they now have, during the next 20 years. 

Getting them soon enough, while still getting a high enough level of capability with the innate ability to rapidly expand that capability, is the key to F-35 being effective or ineffective with regard to the identified COMBAT REQUIREMENT it was designed to meet.


Would you basically agree with this Cog?



PS:  The economic cost : performance analysis of F-35 is much over-blown.  Example; Australian GDP = $1.35 trillion AUD and the funding for F-35s is $15.5 billion AUD.  This is 1/87th of annual GDP.  But spread-out over 30 years, of in-service operation, this initial investment amounts to only 1/2612th of GDP, if GDP were actually, ... 'constant'.  But I think most would agree that Australian GDP can be expected to remain at least the current size in 2040, if not become VERY much larger.  Such a small cumulative fraction of annual GDP is almost but not quite insignificant, from a military defence and geostrategic perspective. But the effect of F-35s being around for 30 years is significant.  It also means it would be no great stretch to double, or even tripple the numbers of them, if that were necessary.

Fri, 04/27/2012 - 03:53 | 2379421 Element
Element's picture

I'll have to take your lack of response as a yes, Cog, that you do basically agree with those points.

Wed, 04/25/2012 - 21:33 | 2375390 Tijuana Donkey Show
Tijuana Donkey Show's picture

The best deal is for the Chinese, who will backdoor the software, and steal the design right after everybody works out the bugs. Lets see how the F-35 does when it's in real combat, and the Chinese send a blue screen of death....

Thu, 04/26/2012 - 06:35 | 2375936 Element
Element's picture

When it's real combat, you can and you will do something about that.

Wed, 04/25/2012 - 12:30 | 2373773 SheepDog-One
SheepDog-One's picture

The only thing I know about the aircraft business is its real stupid to buy aircraft stocks.

Wed, 04/25/2012 - 12:47 | 2373809 Cognitive Dissonance
Cognitive Dissonance's picture

The huge order book both Airbus and Boeing boast about will quickly dwindle once the global slowdown begins in earnest. The blood will flow freely then.

On another note, Mrs. Cog and I bought a new refrigerator to replace a decades old model. So I expect a big "Thank you" for helping the durable goods number not disappoint even more so.

BTW the refrigerator fresh out of the box has problems. All kinds of spooky noises coming from inside. We suspect it is about to birth Dragons.

This way be (GE) Dragons. Really!

Wed, 04/25/2012 - 12:50 | 2373872 Jena
Jena's picture

Maybe not dragons.  If I remember correctly from the historical document "Ghostbusters", you'll soon have some sort of demon.  Or two.  (Who ya gonna call?)

Good luck!

Wed, 04/25/2012 - 13:22 | 2374025 Cognitive Dissonance
Cognitive Dissonance's picture

In that case I'll send Mrs. Cog in first. :)

Wed, 04/25/2012 - 14:20 | 2374348 Jena
Jena's picture

The better part of valor is discretion. :)

Wed, 04/25/2012 - 13:29 | 2374063 tarsubil
tarsubil's picture

Cog, you seem like a sharp guy. Why would you buy a GE appliance?

Wed, 04/25/2012 - 14:45 | 2374478 Cognitive Dissonance
Cognitive Dissonance's picture

We had unique space constraints and GE had the right fit.

Or so we thought.

"GE. They bring good things to blight."

Wed, 04/25/2012 - 12:12 | 2373705 El Viejo
El Viejo's picture

Correct me if I'm wrong, but the airlines couldn't exist without subsidies.

Wed, 04/25/2012 - 12:23 | 2373752 CPL
CPL's picture

For every dollar in an airline stock 95 cents of it is government subs now.


Boeing really isn't a company, it's a government bond program.  Other than parts, I haven't heard of any big orders in twenty years.  Used planes are a dime a dozen and discount carriers don't buy new.


The only business that has profits are the thin ones made by discount carriers.

Wed, 04/25/2012 - 13:28 | 2374054 Cognitive Dissonance
Cognitive Dissonance's picture


You might want to look at Boeing's order book. Discount airlines ARE buying planes. Lion Air just ordered 230 737s. In fact the B737 and A320 are favored by discount airlines. Southwest flies only 737s.

Paying for them might be a different matter though.

Wed, 04/25/2012 - 17:09 | 2374926 Marginal Call
Marginal Call's picture

Uh, there's a long wait to get the new plane because of fuel savings and no maintainence on the carbon fiber fuselage.


You're the same guy who said last week all the Navy's ships were built in the 60's  and the Chinese were the only ones that could build aircraft carriers anymore.

Wed, 04/25/2012 - 13:29 | 2374060 CPL
CPL's picture

Google search string...AA is bankrupt...yet having the BEST FUKING YEAR EVAR!!!!


Search for airlines on the ropes.


(aircraft|airlines|airport|airways|aviation|jet) (business|carrier|service) (flight|fare|cost|charge|price) (cancel|bankruptcy|concession|crisis|"chapter 11")


American Airlines cites bleak finances in bankruptcy court Read more here:


Search for healthy Airlines making a profit.

(aircraft|airlines|airport|airways|aviation|jet) (business|carrier|service) (profit|dividend|profitable|good|great|hiring)


US Airways Swings to Profit

Wed, 04/25/2012 - 12:01 | 2373639 FranSix
FranSix's picture

There's so many contingencies to civil aviation, its not funny.  

You have an aircraft construction mandate that overwhelms the market, probably tied to needs within the military industrial complex.  Then you have municipalities subsidizing landings for airlines.  You also have massive overhaul of the almost all the airports including terminals and runways.  Tied in with municipal bond markets you have housing markets, light rail, not-so-cheap raised civil engineering projects.  An advent to these expansions were the new business jets that saw major expansion.

But in the companies themselves you have chronic bankruptcy and failures, mergers, wages being crushed, travel fares that don't return the cost of capital for the airline companies themselves.

All of this has gone on since 9/11.  Its as if they made sure to crash them planes just so's you could expand this whole sector.  Since that time, there have been massive fleet renewals.

Wed, 04/25/2012 - 12:20 | 2373737 El Viejo
El Viejo's picture

All because of the lack of locks on cockpit doors. Someone said the Airline Pilots Union were opposed to them. Do you know if this is true??

Wed, 04/25/2012 - 13:00 | 2373928 FranSix
FranSix's picture

No, I think putting locks on doors have nothing to do with the controlled demolition of buildings.

Wed, 04/25/2012 - 12:05 | 2373672 PaperBear
PaperBear's picture

Look at the shysters whacking silver today - down 80c to $30.20/oz.

Wed, 04/25/2012 - 12:05 | 2373675 cnhedge
cnhedge's picture


An update on TARGET2

Wed, 04/25/2012 - 12:09 | 2373688 El Viejo
El Viejo's picture

Aren't the FED and the banks doing the same thing???

Wed, 04/25/2012 - 12:13 | 2373707 Quantum Nucleonics
Quantum Nucleonics's picture

There is lot's of positive spin on negative news out there, and pointing out the spin and bs is one of the useful features of ZH, but it this case it's just wrong - trying to take a negative spin on a resonable change.  This site seems to be losing its business sense to the gold bugs and doomers.

There are two very logical reasons you'd expect to see the observed uptick in inventory that have nothing to do with channel stuffing.  First, they ramped up the production line for 787's and 747's before they got the FAA certifications.  They parked the planes, and are now going back to rework them.  It's a logical business decision because of the big backlog, inflexible production rate, and cost/benefit of rework vs. delivery penalities.  Second, they've been increasing production rates to meet their 737 backlog.  The nature of increasing production rates demands running a higher inventory level.

Wed, 04/25/2012 - 12:44 | 2373833 Ace Ventura
Ace Ventura's picture

You got a point QN, but if this inventory spike is strictly the child of increased demands in an era of major backlogs...why is a single airframe sitting on a tarmac at Boeing? Such a backlog of orders would seem to indicate a perpetual 'zero-stock-on-hand' condition until the backlog was filled, no?

I believe the FAA certs were granted in August 2011. I wouldn't be surprised if there are significant order cancellations happening, and Boeing an extent....playing the musical inventory shuffle game. Certainly not on the scale of GM, but lets face it.....that system is working for GM so far in terms of allowing them to report rosy performance numbers.

Wed, 04/25/2012 - 12:45 | 2373846 walküre
walküre's picture

Let's wait for their next numbers then. What you describe makes sense but it is pretty much already baked into the pie. I'm calling peak aircraft delivery across the globe for a few years. The Sheiks are done buying and growing, the Europeans are done growing, the Asians may need to replace but overall the trend is slowing down and air travel is peaking - again. This time with oil at $120 and a tapped out mass consumer base across the world.

Wed, 04/25/2012 - 12:13 | 2373709 debtor of last ...
debtor of last resort's picture

Just like China's 64 million empty appartments.

Wed, 04/25/2012 - 12:18 | 2373729 BLACK_DOG
BLACK_DOG's picture

they all live at Fuxxcon!

Wed, 04/25/2012 - 12:24 | 2373750 El Viejo
El Viejo's picture

None of this stuffing seems to make it to the consumer does it?? Sorry, but debt-slavery can only go so far. Some people are disciplined or desperate enough to just say no.

Wed, 04/25/2012 - 12:27 | 2373762 SheepDog-One
SheepDog-One's picture

Exactly, 'suspension-of-disbelief' as an economic model can only go on for so long.

Wed, 04/25/2012 - 21:03 | 2375350 jarrollin
jarrollin's picture

they have so many people, that's only like 10 empty apartments there

Wed, 04/25/2012 - 12:13 | 2373714 walküre
walküre's picture

Bruce Kasting had a piece on BA Finance a few months ago. Saying that BA customers had a hard time obtaining financing to purchase new planes and that BA was entering into financing models.

Channel stuffing makes sense if they "sell" a plane to every deadbeat carrier who couldn't afford the puke bags on the plane let alone the entire aircraft.

Last time I checked up on the aviation biz, it was all downhill from here. Less scheduled services, less airlines, higher prices due to higher fuel costs but lower margins.


Wed, 04/25/2012 - 14:33 | 2374428 Metalredneck
Metalredneck's picture

Sub-prime aviation?  I wanna take the bus.

Wed, 04/25/2012 - 12:19 | 2373734 adr
adr's picture

As long as you can book forward sales as profits now, THANKS APPLE!!!!!!, every company is involved in massive channel stuffing. You really think LULU sells all their inventory? Or Under Armour? Not a chance in hell.

Inventory is an asset, not a liability. Produce $250 million worth of goods, book it as sold, what doesn't sell is written off as a loss to save on taxes. All perfectly legal under GAAP.

How can every company seem to increse comps year after year even though real sales are stagnating? Because you don't actually need to sell a product to book it as sold. Apple could have made 100 million iPhones on paper, not actually producing them at all, and not one actually making it to the hands of a consumer and still be able to book the profit on 100 million sold.

The economy is nothing but a scam to pump stock to make insider board members rich. Burn it to the ground.

Wed, 04/25/2012 - 12:40 | 2373807 walküre
walküre's picture

Commodities and producers are telling the real story, though. You don't need nearly as much ore and copper to produce 100 million i-phones than you would need to produce a decent CAT iron.

CAT (-5% today) cannot afford to keep producing machines and storing them with the intention of selling 2 years later. Construction spending is down across the globe.

Who cares how many toys AAPL is producing and selling? That's neither here nor there in regards to the global economy.

Watch the producers of base materials. Their revenues and profits are coming in 50% less yoy. That is the real story. UK is officially back in recession already. Greece, Portugal, Spain in DEPRESSION. Italy, Ireland, UK in RECESSION. France and Benelux will enter RECESSION in Q2 and Germany will enter RECESSION by Q4 at the latest. Japan and US never got out of DEPRESSION. China teetering between marginal growth and recession.

Where is the next growth story coming from? United States of Afreaka with the ZULU Dollar as common currency?

Give me a break. We're done.

Wed, 04/25/2012 - 12:59 | 2373922 jarrollin
jarrollin's picture

Yeah, seriously.  This whole effing era of human history is done.  The mirages have run dry...time to stop looking at them.  What the fuck is next?

Wed, 04/25/2012 - 14:35 | 2374441 Metalredneck
Metalredneck's picture

That is exactly how the record industry works.

Wed, 04/25/2012 - 12:21 | 2373743 lolmao500
lolmao500's picture

France's foreign minister says UN Security Council should consider allowing military action in Syria if peace plan fails (BBC)

Wed, 04/25/2012 - 12:28 | 2373768 SheepDog-One
SheepDog-One's picture

What does France care about Syria for? Main problem in this world is too many buttinsky's.

Wed, 04/25/2012 - 12:44 | 2373838 El Viejo
El Viejo's picture

I sure hope France asks for our help on this (like maybe refueling aircraft or something) I'd love to tell them to take a hike.

Wed, 04/25/2012 - 13:37 | 2374096 Vince Clortho
Vince Clortho's picture

We also helped them out in Vietnam.

That went well.

Wed, 04/25/2012 - 12:31 | 2373775 Fix It Again Timmy
Fix It Again Timmy's picture

Ram it, jam it, slam it - 'til you look MARVELOUS!  Then, everything is ok...


Wed, 04/25/2012 - 13:18 | 2373806 jarrollin
jarrollin's picture

Instead of seeing it as a cautionary tale, corporations have found Enron to have had an enlightening way of doing things.  Holy shit is this fucking thing going to blow.

Wed, 04/25/2012 - 12:41 | 2373820 unionbroker
unionbroker's picture

i wonder if we looked behind the curtain how many more sino forest we would find.... 

Wed, 04/25/2012 - 13:55 | 2374065 earleflorida
earleflorida's picture

The U.S. Exim Bank that makes exporting american jobs easier, while keeping unemployment high - making for a more accommodating/ competitive workforce on a minimun wage scale? What say you mr. corporate welfare,... shall it be a blueberry-pie alamode, or the usual apple?  Surprise me,... as long as its less than the,"Almighty-Dollar-Bill"? ___   ____  *[Archive / View-Section] May 15,2002/ Bernie Sanders

Wed, 04/25/2012 - 13:34 | 2374086 Nobody For President
Nobody For President's picture

Cloud stuffing is really dangerous, especially when stuffed with aluminum, when one likes to fly VFR around them and sometimes through little parts just for fun.

(Not that I would ever do such a thing - it is illeagal and against FAA regulations.)

Wed, 04/25/2012 - 15:26 | 2374632 Eric L. Prentis
Eric L. Prentis's picture

The “small brains in charge,” in order to delay the enviable—so they can loot as much as possible in the interim—are adding a cyclical inventory bear market atop the credit crisis secular bear market.


Our leaders are greedy, selfish, psychopathic criminals.

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