Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
UK Coronavirus Infections and Deaths Trend Trajectory - Deviation Against Forecast - 1st Apr 20
Huge Unemployment Is Coming. Will It Push Gold Prices Up? - 1st Apr 20
Gold Powerful 2008 Lessons That Apply Today - 1st Apr 20
US Coronavirus Infections and Deaths Projections Trend Forecast - Video - 1st Apr 20
From Global Virus Acceleration to Global Debt Explosion - 1st Apr 20
UK Supermarkets Coronavirus Panic Buying Before Lock Down - Tesco Empty Shelves - 1st Apr 20
Gold From a Failed Breakout to a Failed Breakdown - 1st Apr 20
P FOR PANDEMIC - 1st Apr 20
The Past Stock Market Week Was More Important Than You May Understand - 31st Mar 20
Coronavirus - No, You Do Not Hear the Fat Lady Warming Up - 31st Mar 20
Life, Religions, Business, Globalization & Information Technology In The Post-Corona Pandemics Age - 31st Mar 20
Three Charts Every Stock Market Trader and Investor Must See - 31st Mar 20
Coronavirus Stocks Bear Market Trend Forecast - Video - 31st Mar 20
Coronavirus Dow Stocks Bear Market Into End April 2020 Trend Forecast - 31st Mar 20
Is it better to have a loan or credit card debt when applying for a mortgage? - 31st Mar 20
US and UK Coronavirus Trend Trajectories vs Bear Market and AI Stocks Sector - 30th Mar 20
Are Gold and Silver Mirroring 1999 to 2011 Again? - 30th Mar 20
Stock Market Next Cycle Low 7th April - 30th Mar 20
United States Coronavirus Infections and Deaths Trend Forecasts Into End April 2020 - 29th Mar 20
Some Positives in a Virus Wracked World - 29th Mar 20
Expert Tips to Save on Your Business’s Office Supply Purchases - 29th Mar 20
An Investment in Life - 29th Mar 20
Sheffield Coronavirus Pandemic Infections and Deaths Forecast - 29th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast - Video - 28th Mar 20
The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do - 28th Mar 20
One of the Biggest Stock Market Short Covering Rallies in History May Be Imminent - 28th Mar 20
The Fed, the Coronavirus and Investing - 28th Mar 20
Women’s Fashion Trends in the UK this 2020 - 28th Mar 20
The Last Minsky Financial Snowflake Has Fallen – What Now? - 28th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20
UK Supermarkets Coronavirus Panic Buying, Empty Tesco Shelves, Stock Piling, Hoarding Preppers - 22nd Mar 20
US Coronavirus Infections and Deaths Going Ballistic as Government Start to Ramp Up Testing - 21st Mar 20
Your Investment Portfolio for the Next Decade—Fix It with the “Anti-Stock” - 21st Mar 20
CORONA HOAX: This Is Almost Completely Contrived and Here’s Proof - 21st Mar 20
Gold-Silver Ratio Tops 100; Silver Headed For Sub-$10 - 21st Mar 20
Coronavirus - Don’t Ask, Don’t Test - 21st Mar 20
Napag and Napag Trading Best Petroleum & Crude Oil Company - 21st Mar 20
UK Coronavirus Infections Trend Trajectory Worse than Italy - Government PANICs! Sterling Crashes! - 20th Mar 20
UK Critical Care Nurse Cries at Empty SuperMarket Shelves, Coronavirus Panic Buying Stockpiling - 20th Mar 20
Coronavirus Is Not an Emergency. It’s a War - 20th Mar 20
Why You Should Invest in the $5 Gold Coin - 20th Mar 20
Four Key Stock Market Questions To This Coronavirus Crisis Everyone is Asking - 20th Mar 20
Gold to Silver Ratio’s Breakout – Like a Hot Knife Through Butter - 20th Mar 20
The Coronavirus Contraction - Only Cooperation Can Defeat Impending Global Crisis - 20th Mar 20
Is This What Peak Market Fear Looks Like? - 20th Mar 20
Alessandro De Dorides - Business Consultant - 20th Mar 20
Why a Second Depression is Possible but Not Likely - 20th Mar 20

Market Oracle FREE Newsletter

Coronavirus-bear-market-2020-analysis

Thomas Cook's Fall from Grace - A Cautionary Tale for the Entire Global Economy

Companies / Company Chart Analysis Oct 03, 2019 - 04:35 PM GMT

By: EWI

Companies

Since its very first 11-mile train tour on July 5, 1841, the Thomas Cook travel company has been taking adventure-seekers around the world, from river cruises down the Nile (a.k.a. "Cook's Canal"), railcars up to the mouth of Mount Vesuvius, and spaceships to the surface of the moon! (Between 1950 to 1996, Cook's "Moon Registry" had a 100,000-flight manifest).

But on September 23, 2019, Thomas Cook filed for one of the most dismantling bankruptcies in recent history, shuddering the world's oldest travel firm and leaving hundreds of thousands of travelers high and dry. The stranding prompted the UK's largest-ever peace time repatriation effort, a 10-day long, 60 million-pound rescue effort coined Operation Matterhorn.


So how did Thomas Cook's fall from grace happen? Well, there's one easy target: "Why did Thomas Cook Go Bust? ... One factor towers above all others: the huge pile of debt." (Source: September 23, 2019 Guardian). Essentially, after decades of tamping down unpaid loans, the company's $2 billion debt burden erupted (as the volcano Vesuvius in 1944, which destroyed Cook's funicular railcar the "Vesuvio"), burning the business into a bankrupt crisp. But that isn't the whole story. Cook's massive debt didn't cause its collapse. Not finding someone to bail it out of said debt -- did.

To understand the distinction, late 2017/early 2018 becomes pivotal. At the time, Thomas Cook was flying high with renewed growth, the birth of a new tourism market in Turkey and Egypt, a revival of an old 1980's ad campaign "Don't Just Book It, Thomas Cook It!," its first-ever foray into commercial TV, and a soaring stock price which had increased five-fold since the dark days of the 2011 financial crisis. All of this, even though the firm was heavily indebted to its shareholders and strapped by credit-funded buyouts.

But the "D" word wasn't seen as a deterrent to future growth. You gotta spend money to make money: "Few in London's tourism industry have publicly suggested the capital will suffer" (Source: July 2017 Bloomberg). Specific to Thomas Cook, a February 8, 2018 news source cheered:

"We believe that Thomas Cook has reported a robust set of Q1 results which show that it has continued to grow booking volumes strongly, despite passing through material cost inflation to customers."

As late as April, analysts upwardly revised their ratings from "neutral" to "buy," prompting this April 30, 2018 The Times headline: "Sunny Outlook for Thomas Cook." The bullishness was predicated, however, on the idea that markets are driven into the future by present data, such as strong earnings, when in fact, they are driven by human behavior. An exclusive report from Elliott Wave International, "What You Need to Know Now About Protecting Yourself from Deflation",explains:

"When the social mood trend changes from optimism to pessimism, creditors, debtors, producers and consumers change their primary orientation from expansion to conservation. As creditors become more conservative, they slow their lending.

These behaviors reduce the "velocity" of money, i.e., the speed with which it circulates to make purchases, thus putting downside pressure on prices. These forces reverse the former trend."

From an Elliott wave perspective, the shift in mood unfolds in the form of technical patterns on a company's stock chart. In July 2017, an important tourism bellwether, the FTSE 350 Travel & Leisure Index, displayed five waves up since 2009, thereby signaling an impending change of direction. The index bobbled along for 10 months, but, in May 2018, prices finally broke, and a mere 20% decline was apparently all it took to take down Britain's overindebted travel giant Thomas Cook. In just the past 12 months, Cook's investors have suffered through three profit warnings and watched the value of their stock plummet to 10 pence, a 93% decline. Some analysts argue that the shares are worth less than that.

From the June 2019 European Financial Forecast

Ultimately, highly indebted companies are fine so long as social mood is rising, which supports a willingness to assume risk and lend. The speed and extent of Thomas Cook's fall from grace shows what can happen when that mood reverses. The question now isn't if, but who will be the next industry icon left stranded with no one willing to come to the rescue?

Club EWI's exclusive report, What You Need to Know Now About Protecting Yourself from Deflation, pivots off the idea that the signs of major sea change in the global economy are underway and writes: "If you miss that, you miss the warning. Meaning: you won't see the beast in time. " Fortunately, the entire report is available for FREE to all Club EWI members. Get instant access.

Who is Elliott Wave International?
EWI is the world's largest independent technical analysis firm. Founded by Robert Prechter in 1979, EWI helps investors and traders to catch market opportunities and avoid potential pitfalls before others even see them coming. Their unique perspective and high-quality analysis have been their calling card for nearly 40 years, featured in financial news outlets such as Fox Business, CNBC, Reuters, MarketWatch and Bloomberg.


© 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