I predicted a low of 7,000 last summer. I think that it's probably still a good guess, but I'm getting a little more pessimistic lately. I'm beginning to think that 6,000 is a more likely bottom. Why? It's not GM and Citigroup; anybody who could add 1 + 1 could take a cursory glance at their balance sheets a year ago and know that they were headed for a fall. The next domino to fall will be a great American success story: Boeing. It hasn't fallen nearly as far as I would have expected. Don't get me wrong; Boeing isn't a dog. In the long run, it will survive and prosper. It has almost $3 billion dollars in REAL shareholder equity. (The other $5.7 billion in equity is "goodwill and intangibles", which don't exist in the real world.). That's much better than many other companies in the Dow Industrials, whose balance sheets are so "Holy" that when you remove the "goodwill and intangibles" from their books, they have negative equity.
The problem with Boeing isn't poor management, like GM, or a gambling problem like Citigroup and most of the financial industry. Boeing's problem is fundamentals. The economy is in the toilet, so there will be less demand for commercial aerospace products for the next few years. The military build-up over the last 6 years has been so costly that it has almost bankrupted the country already. There is just no way to justify destroying the country in order to keep increasing the already bloated military budget. Instead of fighting with Airbus and Northrup about who gets the new $35 billion refueling plane contract, it might be fighting to keep some of its current contracts from being cancelled. Even if all of the Pentagon procurement specialists in the world keep saying that they are going to have to increase military spending by over $350 billion per year, you can't convince me that it's anything other than BS. Our government can't even sustain the current military budget in the face of declining revenues and a total of $4.28 TRILLION and counting in banking industry bailouts, TO DATE, which will probably keep rising. Citigroup isn't exactly stable right now, and it really is too big to fail. I can see another multi-hundred-billion dollar bailout in the near future.
CNBC's running tab of the total bailout cost SO FAR THIS YEAR:
http://www.cnbc.com/id/27719011
Therefore, in the face of declining sales and earnings outlooks, I would think that Boeing's stock will probably fall below $30 per share soon.
And that's just based on the economy in general.
Revenue and Labor problems: http://www.boeing.com/news/releases/2008/q4/081022a_nr.html
Layoffs may intensify: http://www.boeing.com/news/releases/2008/q4/081119c_nr.html
Despite the state of the economy, Boeing is a survivor, and it will be worth much more than it is now, in a few years. However, it can't escape reality: In a global economic collapse, there will be far fewer people flying, so there will be a much lower demand for commercial aircraft for several years.
Also, while Bush was able to add an average of $650 billion dollars per year to the National Debt every year, for 6 years running, that massive military build-up destroyed the economy; just paying the interest on a $12 trillion national debt is going to mean that the entire Federal government will be in financial trouble soon. it will be decades before a President will be able to accumulate that much debt to spend on our military again.
Without massive military spending or commercial airlines lining up to buy their planes, Boeing is going to struggle in the face of rapid declines in revenue. In other words, Boeing is in for a rough ride. And it's going to take the DOW with it.