Larry,
Everybody seems to agree that the airline business is terrible and nobody should be invested in it. Seems everyone is on the short side. Delta is starting a fare war that may very well end up putting several carriers out of business. If this happens wouldn't that reduce supply? I doubt that people are going to quit flying anytime soon. If the whole sector gets dragged down by a few bankruptcies perhaps that would be a good time to buy LUV & JBLU. Are there other reasons that I'm overlooking about the airline business that would condradict my reasoning?

Jim

Nope, Jim. I don't think you're overlooking anything. I think your reasoning is sound. Jim Cramer thinks we're going to get down to two airlines -- the two that you mentioned.

The only thing is that if this market decides to head south in any kind of seious way, it will probably take LUV and JBLU down with it. So the best way to play it may be to short one of sick airlines and go long LUV or JBLU. That way you're playing the relative move no matter which way the market goes.

Larry

I wasn't ready to go long either airline yet. I kind of wanted to wait a bit and see what the fare war does to the airline stocks in general first. I was just wondering if I was overlooking something. By the way I'm short SINA again. The FXI is not looking good and I figured that if the Chinese stocks are faltering Sina ought to go down with them. Maybe I can get lucky again

Jim

Jim,
Jim Rogers agrees with you that airlines are the only thing he would buy at this time in the market. Although he suggests buying the airline bonds.

Gary

Although he wasn't specific, I think Rogers wants to buy real junk - AMR, DAL, UAL, and the like. He seems to think that the administration's energy policy (which he likes) is going to create an environment where they can survive.

You can buy non-callable 10-yr DAL bonds right now and get about a 20% yield. I think I'll pass.

Larry