ANOTHER BUY BUY BUY SIGNAL

Folks, I just returned from the library where I was surprised to find the bull market indicator of indicators. The front cover of the September 10 Business Week is a black and white image of flying planes reminiscent of an MC Escher wood cut of flying swans. Are the swans black or white? Are they flying east or west?

The front cover headlines were:

OVER BOOKED PLANES CANCELED FLIGHTS RECORD LUGGAGE CLAIMS

FEAR & LOATHING AT THE AIRPORT

HOW A FAILURE OF LEADERSHIP LED TO THE SUMMER FROM HELL!

In case you have never heard of the front cover indicator, I used it to my advantage in 1982 and bought John Deere heavily in 1982 when right at the bottom of the market the Business Week front cover was all about the death of the American farm, another one of the famous front covers was called the Death of Equities, also published right at the market bottom. Of course, the farmer on the cover was driving a John Deere and he was headed for bankruptcy. I will leave it to you to search the Internet for more details but this indicator has worked well. This is my third email today because I want to make myself clear: the signs of a dramatic turn in the market are here.

Today, Marion Blakey resigned as the head of the FAA to take a new job as the president and CEO of the Aerospace Industry Association. As the Administrator of the FAA she earned in the neighborhood of $168,000 per year. At the AIA she will earn more than $500,000 per year. In her parting interview she talked at length about how the new satellite based air traffic control system will dramatically improve on time performance of the airlines. It will cut costs and improve safety. She goes on to say that a President Bush has committed to veto the bill if it includes the provision in the house bill that reopens the bargaining table for the unionized FAA employees. The house is willing to negate an agreement to "earn" more campaign contributions from the unions. Of course, the other continuous part of the bill is how to fund the new system. Currently, big planes pay as much as $7,000 per landing while small planes pay as little as $600. Of course, it takes just as much time and effort for the controllers to land a small plane as it does to land a large plane. When several hundred passengers are delayed while a few employees of a company are given a prime landing spot the repercussions can be huge. Many other connecting flights are sometimes delayed as well. In other words, thousands of passengers are routinely given a bad deal while a few wealthy companies or individuals land where they need not land. Many times these smaller planes would land at smaller less congested airports if they were not allowed the "free lunch".

In the Business Week article, it was made clear that the congress will not pass the bill to fund the FAA on time. They will invite President Bush to close down the airlines temporarily. They hope to create as much havoc as possible. The first contract for the new system has already been let. ITT won its $1.8 billion bid to get the ball rolling. Ironically, many of the smaller planes will not wish to spend the money for the sophisticated electronics needed per airplane. The total cost of the new system will be more than $40 billion.

Do you see how the second half economy is going to be a very different economy that the consumer lead first half? Fewer homes will be built but total investment will be much larger. Sophisticated electronics, designed by American engineers will be the products of the next 3 or 4 years.

The Bush veto pen is a powerful weapon. You may recall that when the Republican Congress tried to make Clinton shut down the government, the public took out its rage against the congress. It is the congress that will be under pressure to pass a total package of legislation that Bush will be willing to sign.

Again, the next several weeks could be choppy at best. A 50 basis point cut in the Fed Funds Rate may be met with initial but fading joy. The big discounted housing sale this weekend will put all the more pressure on congress to avoid raising taxes. The Democrats have their hearts set on starting lots of new programs. They want to give relatively wealthy children free health insurance at public expense because they believe they can "win the argument" that all children should be covered by health insurance. One irony is that the Canadian System that was the model for Hillary's plan is falling apart. A judge has ruled that having the right to stand in line for health care is not free access to health care. Law suits are being won by those who are being denied treatment in Canada.

As we all know, the news media shows us graphic pictures of injured soldiers daily. More than 100 US citizens die each day in auto accidents. Something should be done to save the many children who are lost because of reckless behavior, poorly designed roads and scandalous engineering. If we got a steady diet of death on the highway each night, our politicians would be forced to stop diverting highway construction money to other "social needs". North Carolina is one of the worst of the worst. At least 175 million dollars have been diverted from the highway trust fund annually. Now the Governor is pushing to build toll roads. The gasoline taxes are not enough. Government needs more money to give to corporations rather than safer roads.

If the technology were not available, perhaps I could understand the apathy toward the safety of our families but ask congress to fund a system that will save lives and a hold is put in place until the unions can negotiate some more.

An inventor is working on an airplane that will fly itself. This is not new as there are many unmanned drones flying around the world. What is new is that his plane will be an inexpensive but very safe five passenger plane. The unions are not happy that legacy pilots pay has been cut from $250,000 to $170,000. This for work that can be done better by machine. I am not advocating that planes be unmanned. I am simply saying that our priorities are based on political considerations rather than on what is right.

Millions and millions have already been spent lobbying Congress. Ms. Blakey has completed her job and, yes, it looks like she is being rewarded for steering the system toward one that will improve the experience of the great majority of passengers. The congress will balk like a stubborn mule for a while but in the end, they will do what the vast majority of Americans want them to do. That is to modernize the air traffic control system. The investment required by the industry will be huge but the payoff will be rapid. At the current cost of fuel, a 15 minute savings per flight adds up quickly. The time savings for 100's of thousands of passengers daily will add up to millions of hours saved per year. The safety record of the airline industry is incredibly good but it cannot be maintained with over crowded flight paths and antiquated control systems. The new system will ultimately save hundreds of lives.

A RARE EVENT JUST OCCURRED

The Business Week indicator comes along once in a blue moon. When it happens, you should take advantage. It was such a pleasant surprise to see the cover tonight. I had noticed a significant change in the attitudes about airlines. Firm after firm has been raising their estimates. I knew something was up but could not put my finger on it. Yes, many indicators are screaming BUY, BUY, BUY. The front cover indicator confirms the others! BUY, BUY, BUY!