Wednesday, March 30, 2005


This morning CNBC reported that Merrill Lynch has moved American Airlines from neutral to buy. It seems less than a month ago when Merrill upgraded to neutral. The legacy Airlines are producing so much revenue per share that it is only a matter of time before the negative dike will crumble. The same with the over-all market.

The average S&P company is growing earnings at 15%! Negative sentiment is holding share prices down but earnings continue to grow. Merger and acquisition activity is high because one company sees value in the shares of another.

AMR is up $1.1 per share this morning. My family purchased shares on 2/4/2005. We are up 25% in a little over a month. This is a blessing during a tough market. In the coming months and years, I expect the sentiment to do a 180 in regard to airlines. Baby Boomers are buying second homes at a rapid pace. In a similar situation in the late 80's, a close friend had reached the level of 6 weeks annual vacation. He decided to take Friday off for 30 plus weeks in a row. Counting holiday's I believe it was 35 weeks in a row. He was on a plane to somewhere every Thursday night; he saw much of the world on three day weekends. The extreme often illustrates the point. Our economy is growing at an extraordinarily fast pace--25% above historical norms! Americans are as wealthy as they have ever been. The average homeowner in America increased his net worth by approximately $16,000 last year! Think about how long it takes for the average person to save $16,000.

Short selling has become a popular tool. Hedge funds and speculators are betting stocks will go down. Short sellers will buy heavily when the market breaks to the up-side. If you are not in the market, you will not have time to "catch-up". Buy the big American companies now and hold on to Ken Fishers famous "bucking bronco bull market". Ken says the bronco will try to buck you off but if you hold-on you will reap extraordinary gains. Ken, Ed Yardeni, and other folks who look at the market with a longer term point of view are currently very bullish. Short-term traders are currently very bearish. In particular, chart readers are very negative. The risk of breaking below support levels appears to be high. Even those who call for a big rally suggest that one should sell into the rally. If this happens and the market breaks, the sellers into the rally will be chasing the market for weeks to come.