HomeGamer

Will an Industry Recovery Help the Airline ETF Take Off?

The US airlines' high beta is well documented over many, many macrocycles. They go down first as players bail, bottom with the rest, then tend to lead up (from very low floors) as proxies for recovery.
The psychology is simple, intense, and always repeats:

Hope, Doubt, Despair, Doubt, Hope...(rinse and repeat 2-3 times annually)

If Google's WIFI Is So Popular, Why Just 19,000 Users?

Washington DC is currently installing Wifi inside its Metro transit stations, with the first tier of stations going online this fall, and all stations throughout its system scheduled to be online by 2012.

Rome and several other Italian cities are advertising free muni Wifi at multiple locations...but only, alas, for local citizens and others with official tax residency cards, requiring an elaborate gauntlet of ID cards, applications, personal account passwords, etc...not accessible by tourists or visitors, and not 'free Wifi' as Americans know it at Starbucks, etc.

Here's an Unconventional Idea: Sell Apple

The author is correct that the iPhone will replace/cannibalize iPod sales, and that's a natural and obviously planned product life-cycle phaseout by Apple. Very clever.

Of further interest, in an Apple article I'm writing right now:

1. The new $99 iPhone pricepoint is ingenious, a deep-pockets company lowering the lid on the price ceiling for all its competitors at one stroke. Every new competing smartphone launch price from now on must now face the consumer's automatic comparison to a $99 3G iPhone, and in a deepening recession to boot. Also brilliant.

2. What no one is discussing is all those existing used 2G and 3G iPhones in circulation whose owners have upgraded to the new 3GS, which will soon be in the millions. Even with the ATT service switched to the newer iPhone, those units still work perfectly on wifi anywhere--applications, email, music, video, camera, everything in fact except voice phone and texting. What happens to these millions of Apple units? Some will go to eBay, but most I predict will be kept to use, as above, as backup iPod/iTouch units. I'm keeping mine and expect to get years more use out of it. Others will be handed down to offspring, nieces, nephews, Grandma--all of them spreading the Apple brand and interface and expanding the Apple ownership. And again, brilliant. There is an eventual saturation point, but that's a long way off and by then there will be new Apple game-changing products to aspire to. Just brilliant product-cycle management.

3. iPhone's major problem in the USA is ATT. In an odd example of wag-the-dog, this antiquated, poorly run telecom vendor is arguably hampering the planet's most successful tech innovator. That can't continue indefinitely, and ATT needs Apple now far more than Apple needs ATT. Apple could easily afford to buy ATT, but why bother? The shifting balance of power here will soon be evident as ATT is forced to grasp that it's now no longer the dog, more the tail. That will get interesting, and soon.

4. The new iPhone Apps ability to sell and upsell directly within applications themselves, not just at initial download of the app itself through the iTunes store, is a major change. Watch for more and more apps trying to migrate from one-time-purchase-for-... to monthly/yearly recurring 'subscriptions'. Because that's such poor value for the consumer, watch for pushback there. But because Apple gets a percentage of everything, even minor incremental growth goes immediately to Apple's bottom line.

More in my Apple article to come. Follow me if you like at 'HomeGamer' for more thoughts on Apple, the markets and the future.

Jack Welch Somehow Sees Workers Empowered by Crisis

Nice commentary on a surreal piece of fluffery. Sounds like Suzy, or a novice ghostwriter. Or are we supposed to actually believe that the self-proclaimed 'iron fist' of GE has had a retirement epiphany channeling warmed-over Anthony Robbins cliches?

Are Airlines Going Bankrupt Again?

Lots of chatter about easily the simplest yet least understood industries in America.
Re-regulate and re-subsidize.
Network nationwide inexpensive air travel is an essential and indispensable public utility, like universal mail service and universal electric service.
However, expecting this public utility to be both inexpensive, universally available and PROFITABLE is absurd. We don't expect mail delivery to turn a profit--by definition we want all our essential public services (electricity, basic phone, drinkable tap water etc) to be provided as INEXPENSIVELY as possible. And that's inevitably opposed to PROFITABILITY.

Darwinian musical chairs does not work in the public-utility model, and can never work. That's been tried since 1979 and failed miserably. Government is strangely slow to grasp that, and airline CEOs, never best of breed, can articulate the problem but can't seem to take the obvious logical step of volunteering to be nationalized.
Until that happens, there will be much more erosion of air service and easy money to be made betting on the next turn of musical chairs.

List of Troubled Companies Keeps Growing

So let me get this straight--Moody's, the rating agency that missed, ignored or snoozed through the last three years of glaring signs of corporate collapse, now wants us to grant it a Do-Over by hyping its 'Wooooooo-Scary!' Bottom Rung list.

Pitiful. No attempt to distinguish between vital core sectors that can easily adapt and downsize until they reach a sweet spot of core demand (airlines) and irrelevant niche apparel retailers obviously destined to be absorbed and displaced by WMT (Eddie Bauer etc).

Moody's is more irrelevant now than ever. It should put itself on its Bottom Rung list.

Domestic Air Travel: Lowest Since Post-9/11

November is now (mid-Feb) three months behind us.
The November chart is a rear-view-mirror snapshot, but with two important differences to the present:

1. Airlines in November were still operating at higher capacity, ie more aircraft still flying. Many additional aircraft have been permanently grounded in the three months since, notably January. Bad numbers like November's confirm that those grounded aircraft (and those scheduled to be grounded during 2009) will not be leaving their long term storage in the desert in the foreseeable future.

2. November was an unprecedented month of financial uncertainty verging on Y2k-like mass panic, with Paulson and Bernanke on every tv screen telling Congress that global apocalypse was hours away. 1929, no cash in the ATMs tomorrow, back to the ice age. Now, we're in a major, maybe unprecedentedly deep recession, but 1929 is not an immediate prospect.

That said, the industry is still a commodity business model, badly led by indifferent CEOs who seem never to learn from the industry's mistakes, poorly run by the caliber of front line employees that can be expected for the $11/hour that the CEOs have decreed. That's unlikely to change.

In a rational world, air travel would be nationalized and regulated for the common good just like any other essential utility--Amtrak, mail delivery, potable tap water, electricity and basic phone service. That likely will come only once the industry is at the point of total collapse.

Until then, the airlines are enormously profitable trades as the majors swing 40 and 50% in their trading ranges. Buy the two-week deep dips, sell the one to three day surges of enthusiasm.

And yes, it's Death Valley Days for those who manufacture and finance airline big-iron.