...(I received an) email complaint about my being a broken record in regard to the airlines. It noted that I recommended these stocks at much higher prices and recommended doubling-up half-way down. What can I say? I did recommend the stocks again and again and I still do. I have strongly recommended Continental (CAL) since it was trading around $6 per share in 2002. CAL just reported an amazing quarter (Call Transcript). With oil prices at ridiculously unsustainable levels, the company added about $500 million dollars to its net cash position! How much will it add when oil prices are down?
One of the reasons I write about the airlines so much is because the boom in international travel (still is in its infancy) is part and parcel to this new wonderful economic age that we have entered. A new age that is being totally mis-characterized by left leaning media.
The attitude of the left reflects the short term concerns of the average man, who does not "see the big picture". The huge run up in commodity prices, that is seen as a super negative each time we visit a gas pump, is actually the result of a world wide increase in prosperity. A temporary economic slow down and a temporary time of limited capacity are each masking the long term trend.
Jim O'Neil posted an article at FT.com a day or two ago that you should read. He reports that a Goldman Sachs study shows the world is currently adding 70 million people per year to the middle class. The study suggests that the number will increase to 90 million per year for the next 20 years! From the selfish point of view, these 1.4 billion people being lifted out of poverty will become customers for every thing from Intel (INTC) computer chips to CAL plane tickets.
...American companies such as Texas Instruments (TXN) and INTC produce incredible products. Products that you nor I would have a chance of developing, even if we had a million years to try. The development costs of these products are huge, however, the addition of 70 million new customers each year is resulting in tremendous economies of scale. These huge development costs are extremely small when allocated to billions of units. Suddenly, it has become true that poor people can afford the most sophisticated computers, cell phones and other communication devices.
The left leaning media and politicians look at one end of this process and declare that the CEO is making an outrageous salary. The left falsely cries out that the rich are getting richer and the poor are getting poorer, but, you and I know that the poor benefit the most from new technology. The CEO only gets more of what he already has whereas the poor experience the opening of doors to a whole new world.
...My specialty is a top down view of the world. I do not pretend to be a "stock picker", but I buy what fits my view of the world. I have a long term orientation. I am willing to sacrifice in the short run in order to win big in the long run. I understand that the real estate market is about 5 times the size of the equity markets and as such, the real estate market is the dog and the stock market is the wagging tail. The stock market can jump around but it must follow the dog.
Three years ago, I did not believe that there was time for US officials to take the US into a slow down and have time for a significant recovery before the election. I was wrong. Because high risk mortgages were mixed into batches of low risk mortgages, the FOMC and the Treasury were able to quickly "bust the bubble" of a booming housing market. Seven years worth of slow down has been compressed into three years, with time for improvement before the election.
As a result, there are wonderful buying opportunities. Now is the time to buy resort real estate. While prices and occupancy are low, largely due to high gasoline prices. A turn in the price of gasoline will increase the value of "destination properties". Now is the time to buy high beta stocks, including high tech, banks, consumer discretionary and airlines. The coming recovery in real estate, the happy dog, will be accompanied by stocks, the wagging tail. It is time to "Buy Something"!
