Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Dow Stock Market Trend Analysis - 25th Nov 20
Amazon Black Friday Dell 32 Inch S3220DGF VA Curved Screen Gaming Monitor Bargain Deal! - 25th Nov 20
Biden the Silver Bull - 25th Nov 20
Inflation Warning to the Fed: Be Careful What You Wish For - 25th Nov 20
Financial Stocks Sector ETF Shows Unique Island Setup – What Next? - 25th Nov 20
Herd Immunity or Herd Insolvency: Which Will Affect Gold More? - 25th Nov 20
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20
THE STOCK MARKET BIG PICTURE - Video - 19th Nov 20
Reasons why Bitcoin is Treading at it's Highest Level Since 2017 and a Warning - 19th Nov 20
Media Celebrates after Trump’s Pro-Gold Fed Nominee Gets Blocked - 19th Nov 20
DJIA Short-term Stock Market Technical Trend Analysis - 19th Nov 20
Demoncracy Ushers in the Flu World Order How to Survive and Profit From What Is Coming - 19th Nov 20
US Bond Market: "When Investors Should Worry" - 18th Nov 20
Gold Remains the Best Pandemic Insurance - 18th Nov 20
GPU Fan Not Spinning FIX - How to Easily Extend the Life of Your Gaming PC System - 18th Nov 20
Dow Jones E-Mini Futures Tag 30k Twice – Setting Up Stock Market Double Top - 18th Nov 20
Edge Computing Is Leading the Next Great Tech Revolution - 18th Nov 20
This Chart Signals When Gold Stocks Will Explode - 17th Nov 20
Gold Price Momentous ally From 2000 Compared To SPY Stock Market and Nasdaq - 17th Nov 20
Creating Marketing Campaigns Using the Freedom of Information Act - 17th Nov 20
ILLEGITIMATE PRESIDENT - 17th Nov 20
Stock Market Uptrend in Process - 17th Nov 20
How My Friend Made $128,000 Investing in Stocks Without Knowing It - 16th Nov 20
Free-spending Biden and/or continued Fed stimulus will hike Gold prices - 16th Nov 20
Top Cheap Budgie Toys - Every Budgie Owner Should Have These Safe Bird Toys! - 16th Nov 20
Line Up For Your Jab to get your Covaids Freedom Pass and a 5% Work From Home Tax - 16th Nov 20
You May Have Overlooked These “Sleeper” Precious Metals - 16th Nov 20
Demystifying interesting facts about online Casinos - 16th Nov 20
What's Ahead for the Gold Market? - 15th Nov 20
Gold’s Momentous Rally From 2000 Compared To Stock Market SPY & QQQ - 15th Nov 20
Overclockers UK Quality of Custom Gaming System Build - OEM Windows Sticker? - 15th Nov 20
UK GCSE Exams 2021 CANCELLED! Grades Based on Mock Exams and Teacher Assessments - 15th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Why Airlines Are The Next Big Trade

Companies / Sector Analysis Jun 07, 2017 - 04:41 AM GMT

By: John_Mauldin

Companies

BY JARED DILLIAN : I’m a longtime airline bull, going all the way back to 2012–2013—long before it was trendy.

I liked airlines because everyone hated them. Especially Warren Buffett, who once said that someone should have shot Orville and Wilbur out of the sky. He now owns the stocks.

A pilot wrote a great article in The New York Times saying that the conventional wisdom about airlines (which is that they suck) is all wrong.


People like to talk about the golden age of flying, with three-course meals, plenty of room to stretch out, people wearing ties, the piano bar in 747s… all that jazz.

But there was no golden age of flying. In fact, the golden age of flying is now.

Read for yourself.

Flying today is:

  • Massively cheaper—prices are down over 50% in real terms.
  • Way more convenient—there are flights pretty much wherever you want to go.
  • Safer—there hasn’t been a crash by a major airline in the US in 15 years.
  • Greener—planes were louder, less fuel-efficient, and more polluting.
  • Smoke-free—people used to smoke! Today, that would be intolerable.
  • Fun—there’s enough entertainment, with in-flight wifi, unlimited movies, etc.
  • Still pretty roomy—there’s a little less space than there used to be, but not as bad as people think.

This is yet another example of people being habitually sullen and taking things for granted. Flying is pretty awesome. As Louis C.K. said: “You’re in the sky… in a chair!”

False Perception

But didn’t United Airlines just throttle a guy and drag him off the plane?

Didn’t a flight attendant from another airline try to start a fight with a passenger?

Didn’t Spirit Airlines customers start a riot at the ticketing desk in Fort Lauderdale?

There is a phenomenon in social psychology—I don’t know if there is a name for it1—but when you see something in the news, like a passenger being mistreated, chances are you going to see that over and over again for months, until the news people get bored and move on to something else.

Based on the newsflow, you might be led to believe that airlines beat up their passengers all the time, and that flying commercial is some kind of dystopian hell.

Certainly some aspects of it are less pleasant than they used to be, and a lot of that has to do with airport security.

If Everyone Hates It, Buy It

One of my really great trades was back in 2011 when Occupy Wall Street happened.

Oh, I remember that clearly.

Sentiment towards banks and bankers is still pretty bad, but it reached a low point in 2011. I remember thinking… if everyone hates banks, then banks are probably going to… rally!

In fact, it was a massive rally. I called the trade “Occupy XLF” at the time. Occupy Wall Street pretty much marked the lows in financials.

It always works out that way.

Airlines aren’t on the lows, but I can tell you that when everyone hates airlines… airlines are probably going higher.

Want another example of how this works? Remember Deepwater Horizon? The BP oil leak in the Gulf of Mexico?

The explosion happened on April 20, 2010, and the leak was capped in July. Remember how angry people were at oil companies?

Yup. The Occupy BP trade.

Airlines Are Big Businesses

Airlines have been such horrible stocks for so many years that people have completely forgotten that they can be… not horrible.

There was actually a time where there was speculation that United Airlines would be taken private in a leveraged buyout (LBO) in the late eighties, sending the stock into space.

Of course, that was peak private equity stupidity because an airline is about the worst possible business to LBO. But it shows how drastically different sentiment can be from one decade to the next.

Let’s play the market cap game.

American Airlines is the largest airline in the world (by routes). What do you think the market cap is?

Dum dum da…

$23 billion.

eBay is $37 billion. eBay is where old people sell baseball cards.

I don’t know, guys.

Airlines are not special. They have the ability to be wildly profitable like any other business. Now that there are only four major American carriers, my guess is that they have some pricing power.

And fares have come up a bit—and they will come up more.

And you will pay them—because you are getting richer, and because they are still very low in real terms.

It would have been nice if Buffett was bullish in 2013, but he’s no dummy. It’s not hard to see the potential here.

Grab the Exclusive Special Report, The Return of Inflation: How to Play the Bond Bear Market, from a Former Lehman Brothers Trader

Don’t miss out on this opportunity to cash in on the coming inflation.

Jared Dillian, the former head of Lehman Brothers’ ETF trading desk, reveals why inflationary price increases could be much higher than 1% or 2% and how you can position yourself for big profits as the bond market falls.

Download the special report now. 

John Mauldin Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules