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Politics : Formerly About Applied Materials

AMAT 226.02

-1.2%

1:50 PM EST

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To: Jacob Snyder who wrote (54337)	10/20/2001 5:12:36 PM
From: Sam Citron	Read Replies (2) of 70976

Jacob, A few grains of caution on CCL. I think you are making a very gutsy bet on a pickup in the luxury end of the leisure travel business. You are certainly correct that they are extending their dominance of the industry, as competitors with less healthy balance sheets are declaring bankruptcy on a monthly basis. I know very little about this industry or this company, but with investment performance so dependent on sector selection, how aggressive do you want to be on this industry/company when we are just now sliding into recession. Why catch the falling knife right here? Some obvious issues are: (1) Do you have the transparency in terms of monthly passenger load factors and breakeven loads as you have in the airline industry? The hisory or confidence in management that you have with a LUV? (2) What will happen to CCL when/if an uprising occurs in Saudi or the Gulf and crude oil spirals to $80/bbl? What if this happens while demand is already reeling from the recession? If the s*** hits the fan and CCL needs to retrench and sell a few ships, who would be in a position to buy? Or are the ships leased? On what terms? (3) Why do you want to buy this on margin right here and now? I agree with you that the industry will not simply go away in spite of the terrorist threats. But the share price does not reflect such panic. In fact, with a history of being publicly traded only dating back to 1987, I cannot really get an idea on how the company does in a serious recession, let alone the "negative wealth effect" bubble aftermath we are witnessing. It is precisely this kind of wealth effect money that typically gets spent on such discretionary purchases. It can always be deferred for a few years until one feels sufficiently flush with cash. In short, I would recommend that instead of buying here on margin, that you consider a much more gradual scale down buy program. With fixed costs so enormous in this industry, can you be sure that a debt/equity ratio of 0.41 is sufficiently low to cover a long drought in demand? Sam

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