Tuesday, September 04, 2007


CAL is HOT! Congratulations to those of you who added money to your account while the stock was below 30. There may still be a few bumps along the way but I expect a double in value within a year or so.

This morning, LUV raised fares up to $10 each way. LUV is the key for higher prices. The legacy carriers have been quick to follow the increase. JP Morgan has once again upgraded its estimates. The firm expects yields to rise. Duh, if all the seats are full and you raise prices, the yield is likely to go up.

We are in a time like 1996. After the 90's mid cycle turn, total passenger miles flown grew by better than 10% for three years and better than 6% for 5 years. Business people fly during the prosperity phase of the business cycle. When a deal hangs in the balance, only a foolish executive is willing to rely on electronic communications. The old rule in sales is to get the signature on the dotted line and take it with you.

In response to the questions about my price target, I should point out the obvious. I am not an analyst and I do not sit around calculating to the penny what a company is likely to make. My view is clearly a top down view. I can tell you that airlines have done very well during prior prosperity cycles but each cycle will be somewhat different. The big difference about this one is that international growth has never been so strong and the advanced stage of our communications abilities increases the odds that international deals will be made. If millions and millions of dollars can be saved by making a product in developing nations, then the companies saving those millions are more than willing to buy a few airline tickets.


Apple is set to announce its latest version of the iPod. Indications are that it will have a digital radio receiver built in, allowing one to download songs directly (for a small fee of course). My concern about APPL is that the company has once again tried to lock up a market with proprietary software. I know that Sony and many others will make a strong push with competitive products. I continue to believe that a wifi enabled Google "phone" could open the doors to many other services. It seems to me that a lot of iPod customers would find an open source Google phone attractive relative to the 99 cents per song model.

The stock has done well and most of my accounts hold it individually or as a part of a QQQ fund. The stock is about 7% of the value of the QQQ fund holdings. CREE and Magellan are also almost too hot to handle. I will continue to hold current positions but am not likely to add shares at current prices.


The market may be in for a huge disappointment if BIG BEN does not cut rates by the September 18 meeting. Be prepared and don't let additional volatility buck you off this bull market bronco!