With gasoline prices rising in concert with the increase in oil prices, airlines profit margins, or their ridership, will suffer. Additionally with interest rates climbing, corporate travelers will not be buying as many airfares. The economy always moves to shaky ground with increases in bond yields. Employers keep their eye on this. Anyone notice what the 30 year is selling for or what a 30 year mortgage goes for? A 30 year mortgage now goes for 4.875% at Wells Fargo. This is a major jump from 2 months ago.
Time to go short home builders and airline stocks if you haven't already. It was 6% interest on a 30 year mortgage that brought the economy to its knees in 2008. We are more than half way there now.
Oil and gas prices are headed down IMO. Syria has become a non-issue. Iran more agreeable. Mexico open to foreign investment in fracking. Most forecasts I've seen have oil in the mid $80s next year and 2015.
It is a different industry. Fewer competitors (ask DOJ) higher margins. DAL forward PE of less than 8 suggests a $30 share price one year. The code share collaboration with Virgin will reap excellent returns.
And who knows maybe Trainer will show a profit.
That doesn't mean it won't go lower with the overall market. I'm a buyer of any pull back.
1. Have you seen the price of oil lately? It is $110 a barrel, and this is before Obama starts his war with Syria, and perhaps Iran and Russia. Now Obama is not doing this because someone may have used chemical weapons in Syria. There is going to be money made in this deal. Sure getting BP back into business in Iran has been a goal of the British empire for decades, but in the short run there is money to be made running the price of oil up and down. London and NYC love to trade on insider-generated political events.
2. I work at a Fortune 100 company. They have already curtailed business travel.
3. With a $1 trillion in new money being created by the government and and the big banks each year, prices are going to rise until QE ends, which ain't going to happen until inflation get unbearable to the m#$%$es. But when it does, look out below because m#$%$ive deflation is then going to happen. Taper my #$%$. Taper = deflationary depression.
4. The war might scare some into buying bonds, but that is like jumping from the frying pan into the proverbial fire. The dollar is doomed with all the government debt, the huge defict, and rising interest rates. The war could grant an interest rate reprieve, but that is only temporary. Sooner or later, the world is going to realize that the US has no intention of paying down its debt other than through inflation.
And if you don't think inflation kills the airline industry, go look at what happened to it in 1979-82. This time it is going to be far worse. Mark my words. BYW, I am up 84% this year, following a 60% gain last year. I've been making money shorting housing stocks; now it will be the airlines turn. Thank you Barry Sotoro, son of Frank Marshall Davis.