MARKET EMAIL

An old friend who is a CPA, portfolio manager and former broker sent the following email. Editors notes have been added.

Still two floundering airlines. I would think it would be determined how much stress is placed on the employees. I like NWAC. According to report they have somehow cut $5 billion from operating expenses in 2006. They could outperform CAL. (CAL has lowered costs by about $7 per share. A classical turn-around situation, where cost are down and revenues are soaring.)

The real loser in this looks to be DAL. I have a bunch of mileage with them and only wish I could cash them in. The airline analysts still believe there is overcapacity. Probably true. But the market forces(as well as bankruptcy judges) will force the marginal and inefficient players to reduce flights to profitable levels. (DAL has taken a sharp knife to its route structure; it has cut out numerous flights as have other carriers. DAL management stated this week that they expect to cut total costs by $5 Billion annually. Management is trying to make the cuts without using the bankruptcy court. UAL just turned its pension plan over to the PBGC--saving $3 Billion per year. DAL employees know that their pay must be rationalized with the other carriers or their jobs will be lost. The decision would be easy if unions were not involved; never-the-less, I believe a deal will be made.)

Oil prices are trending back to the CRB index. Its funny whenever I explain to people my belief the oil prices were manipulated to the earlier levels people think I'm crazy. Basically oil is a commodity used in industrial and commercial purposes. Over history it trends with the CRB but has a much higher std deviation. I think the current level is OK but is still high. Greenspan's comments are that oil inventories are at 3 year high. Wow!

As we know from standard deviations the swing could and should at some point in time reverse and actually become oversold. That may take some time. But I do believe it will happen. Double Wow! The price over-shot on the way up and may over-shoot on the way down?

I'm still keeping an eye out for the ET and AMTD's of the world. They could surprise many people in 2006 when more people are getting interested in the market. ET at double this price in a year sounds about right. In a bull market, trading volume will triple or quadruple at AMTD and ET. A double in stock price is certainly doable. My family owns more AMTD because we believe it has the higher take-over probability--ET has the most solid, diversified business model.

Cramer had a couple of good thoughts yesterday on St. Joe and Weyerhaeuser. Whatever there book values state, I would imagine they are probable understated by conservatively 50% due to historical acreage purchase prices. I have an uneasy feeling about this one. I bought Weyerhaeuser many years ago based on its land value and for years after-ward the land turned into a cash pig. The company spent money on taxes and maintenance during years when the property produced little income.

LJ