Tuesday, 5 June 2012

The sky is not falling ..... it's only an airline's stock

Markets were up for most of the morning in Europe as the Portuguese magically found €6.6bn to recapitalise its banks. Of course reading beyond the first paragraph of any news source tells you that this was old money, mostly previously earmarked from the €78bn EU-International Monetary Fund rescue programme, which was agreed last year, allowing €12bn for aiding banks. Oh well it was a good headline.

The weather is great and I've done a stack of chores and it's still only lunchtime. I probably have the OK to hit the road on the Pinarello, but I want to do some reading on this G7 emergency conference call scheduled for tomorrow. Clearly this has the markets covering back shorts. Fair enough too, because if they turn on the taps the Euro will pop to 1.30. Having said that I believe any statement will be short on detail and long on intentions. Be prepared for lots of paragraphs beginning with: "... the leaders believe that it will be in the best interests of member states to work towards . . . " - you get the picture. Fade any rally.

Airlines are a terrible investment. Richard Branson has said this, but we all fall for the glamor of travel. I'm about to book flights to go home and I can tell you I'll be squeezing as hard as I can. Flying up the back for 24hrs is not on when I'm traveling with so much luggage, so I'm using the internet agents and frequent flyer staff to work it all out.

I won't be flying Qantas, not because I'm unpatriotic, but because I always get crap service on them ... and I'm talking business class, not the Sydney to Melbourne shuttle where who cares as you don't have to be trapped for very long. Anyhow Qantas warned profits could be down 90% this year. They obviously blamed jet fuel prices, though we know that the problems run deeper as evidenced by its intention to split its costly international arm from its profitable domestic business. Even Singapore Airlines is launching a low cost carrier for long haul . . . and it's first route? Singapore - Sydney, obviously. Not good . . . stay out of Qantas and airlines for the moment. Oil as I said yesterday would go down, but be careful trading the airline bounce.

Professor of Marketing at NYU Scott Gallow called the Facebook IPO a "text book version of an IPO" when he appeared on Bloomberg's Inside Track on the day of the float. He was back today, poor guy and was hit with his quote within the first 30 seconds. He's now calling it a flop. Well I guess at -20%+ he's got that right. Anyhow he says the thing that will drive the company stock price is whether they have any ancillary business up their sleeves that gives them the "promise" PE multiple (say 30+ times), if not the implication is we go back to 14x times earnings and call it a mature business? 10 bucks a share? Remember I said that Silicon Valley Pod-Father Adam Curry said it was worth about 14. Good for Mr. Curry. I wish I could say I thought the same thing at the time.

The big bike race at the moment is the Critérium du Dauphiné. It's always been an important race, but after the way Evans used it specifically to ride the time trial course that would also be the final stage of the 2011 TdF it seems to have enhanced its reputation. As usual the younger Schleck was nowhere in the time trial prologue and looks out of form. Cadel Evans won the first serious stage and really looked good. That stage was supposed to be a gift for the classics riders such as Phillipe Gilbert, but Evans stole it. Wiggins, who for my money looks like the missing third Schleck brother has the yellow by 1 second. Very interesting.

Schlecks and . . .

missing Scleck or Brad Wiggins?
I just got back from a ride. It was short and annoying. I broke a spoke nipple on my back wheel and had to nurse the Pinarello back to Brun's bike shop. Only 33k's and 18 of those were at low speed. Oh, well . . . it's still a nice day.


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