Over the past couple weeks I have had the AMAZING pleasure to answer numerous emails/phone calls regarding the AWESOME “pay out” of some of my buddies who fly for the Airlines. They are either buddies who I flew w/ in the Navy or classmates or, in one instance my best friend. To a person, they have all essentially asked “should I hold em’ or fold em?”
A GREAT QUESTION and one that I DO NOT take lightly ….but, as an expert at PATTERN RECOGNITION I am trying to be as objective as possible. Ultimately, it will be there decision. Here we go:
Equities: from a macro perspective, I see the US Equity market as very precarious, to say the least. just go back and read the posts that I have been providing …I am one of the few remaining BEARS out there. I have also been wrong about the Equities for about 1.5+ years. The length of this UP move has been amazing and when it ends, it’s going to be ugly. That I know … however, the SHORT of GOOG at 925 got SMOKED. The SHORT of the DOW got SMOKED … I am humbled and licking my wounds but I am not deterred. The equity market is a house of cards … until it’s blow over, run w/ it but certainly be ready to bail once the signs appear. IF YOU CAN …
Airlines: With that diatribe complete, I see the Airline Index as being a proxy for the “recovering” economy. Business Travel, Leisure Travel, Fuel prices, etc … they all play into the profitability, however, the airlines are acting like well run businesses. They have cut costs (my buds have really taken it on the chin), trimmed the fat and are lean and mean. That can’t be taken for granted … but in the context of where we are and what we do I see another 5-10% higher in the index at best before a major correction set’s in …CONCLUSION: if granted stock in the merger/bankruptcy ruling, then take a majority off it out of the market and 1) invest in tangible, scarce resources, 2) invest in you or your family w/ education or specific skill sets or 3) start a business or help someone start a business.
Also, take note, since the low in 2009, the Airline Index and Financials (ETF: XLF) have been almost 100% synced. Therefore, keep a watch on the Financials and if you see them start to crack, the probability is the same will occur w/in the airline industry.
Gents, that’s what I see … take some profit man and if your a gambler, then roll for the next 7-10% if you can and then take some profit …but, as I’ve been saying for a quarter – CAVEAT EMPTOR.