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Strategies & Market Trends : Mu Gamma Lambda -- Ignore unavailable to you. Want to Upgrade?

To: Jorj X Mckie who wrote (7609)	9/20/2001 12:17:17 PM
From: Rich1	Read Replies (1) \| Respond to of 10077

I think we are probbaly closing the barn door after the cows got out.. Doubt if the next attack will be via airplanes probably something else BWDIK..

To: Jorj X Mckie who wrote (7609)	9/20/2001 12:21:43 PM
From: Original Mad Dog	Read Replies (1) \| Respond to of 10077

I agree with what you are saying, JXM. The question for me is not whether to invest in the airlines, but which airlines to invest in. LUV has a market cap which exceeds the combined market cap of United, American, US Airways, Northwest, and Delta. That may also have been true before the attacks, I'm not sure. The question is really, if you are betting on an industry comeback play as the shock and security obsession give way to the desire for freedom of movement, where on the table do you want to place your chips? I think an instructive example from investing history is the government's bailout of Chrysler. Chrysler's bailout was in large part comprised of loan guarantees. Without those guarantees, the company would have likely been forced to reorganize in bankruptcy to flush out its balance sheet. But with the guarantees, that was not necessary. Chrysler ended up being the best investment that Peter Lynch ever made on a large scale, and was a key part in driving the ascent of Fidelity Investments to the top of the investment world. The same strategy could easily be applied to the airlines at this point. The government package will reportedly include generous loan guarantees as well as outright grants. This is the government's policy decision that the bankruptcy of these major institutions (the largest airlines) ought not to be permitted. I also think the government feels a political imperative not to allow these well known American institutions to be bankrupted by terrorists, and that will cause the bailout to be large and sustained. George W. does not want Americans to turn on CNBC six months from now and hear that Osama bin Laden bankrupted these icons of American corporate culture. The current price of UAL, and probably AMR and Delta, reflect a fear that these companies may go bankrupt if something is not done. If you believe that, like in the Chrysler case, the government will prevent those bankruptcies from occurring, then those are the ones to invest in. LUV does not have the same bankruptcy risk because it is financially much stronger. And therefore the upside on LUV is not as great IMO.