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How this one stock can ultimately be responsible for killing the bull market



Stocks claimed Wednesday thanks to Fed Mayor Jerome Powell's signaling a likely interest rate cut later this month. S&P 500

SPX, + 0.45%

and Nasdaq

COMP, + 0.75%

both broke into the record while Dow Jones Industrial Average

DJIA, + 0.29%

snatched a three day tape strip.

But a stock could individually throw cold water at the latest market power, warns strategist Bill Blain of London-based Shard Capital, who oversees more than $ 1 billion in assets.

"I'm worried that the market is underestimating how bad things can go for Boeing," he warns in tomorrow's note Wednesday. "When done, the entire stock market will break aggressively and trigger pain over all the stocks."

Boeing s

BA, -0.22%

stock, the largest component of Dow, completed the session a little and swung around where it began the year. The shares are down at around 7% since the second 737 Max crashed on March 10.

"It's quite stable for a company that can be in serious trouble from a variety of demand requirements (ie not selling many aircraft, regulation, legal (many people will sue), cash, loss of confidence , and growing beliefs do not allow the company to seek profit, Blain says.

He went into the specific Boeing problems to paint what he thinks to be a bleak picture, not just for the stock, but also for the rest of market.

"The likely trigger for a market shock will be a" no-see-em "."


Bill Blain

For one, he says, it is unlikely that 737 Max, with his inventory hanging up in parking spaces at the airport, will come back in the air this year. "Boeing bleeds to build an airplane that no one can fly – not a good strategy," Blain wrote.

So, the company is trying to rush deliveries of other aircraft to make up for it.

However, it has presented its own problems, including problems with 787 Dreamliners, such as the New York Times

NEWS, -0.58%

reported suffering from "scary production and weak supervision" at Boeing's Charleston factory.

Read: What Investors Should Really Obsessed With 737 Max

Another problem is the manufacturer's approach to upgrading his old aircraft rather than designing new ones.

"It gave Boeing commercial sense to continue upgrading and upscaling [737]," Blain said, "because it kept the factories and they could tell regulators that it was just an upgrade, not a new design that saves billions on testing and training. "

But that led to cost savings that compromised 737 Max.

"Boeing must rue the day they did not go with brand new design – which would have been hugely expensive and killed the warehouse performance of recent years – but would have left Boeing dominating the larger airport and reaping the returns it could have done on Dreamliner

So what does that mean for investors?

"The likely trigger for a market shock will be a" no-see-em, "Blain says. "Something so obviously hidden in plain sight, it catches us completely and painfully by the short and curly."

And it triggers, he can be Boeing.


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