As we enter the bailout phase of Boeing, there is one chart that should alarm all investors.
Since the low in the stock market on March 9, 2009, Boeing (BA), (as of March 20, 2020) has gained approximately +206%.
In the same period of time (March 9, 2009-March 20, 2020), the Dow Jones Industrial Average has increased +192%.
Let that sink in for a minute. We are about to bail out a company that as of March 20, 2020 has exceeded the gains of the Dow Jones Industrial Average since the March 2009 low.
Now, Let’s look at the chart that should be causing dread for all investors.
The comparison between Boeing and the Dow Jones Industrial Average, when drawn on a relative basis, shows the extent of the bubble in the price of Boeing stock.
Defenders of the Boeing bailout say that the total shutdown of the airline industry and the coronavirus are the reasons that Boeing is suffering more than usual. However, when viewed on a relative basis against the Dow Jones Industrial Average, which Boeing is a part of, we can only conclude that Boeing is only reverting to the mean.
As noted above (206% v. 192%), the mean has not been reached and as Charles H. Dow has said, the reaction will swing to the opposite direction before being resting at the mean.