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B4 The Bell Moonday September 13


Hiding Bear

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Media reporting that US Airways may be liquidated.

 

Old timers know that it used to be Allegheny Airways. In focus-group testing, consumers had a negative image of Allegheny, as a puddle-jumper carrier out of hillbilly country. Whereas, the then-nonexistent "US Airways" was much more favorably viewed.

 

The consultants said -- are you nuts? -- change the name to US Airways immediately -- impress the rubes.

 

Turns out that, just as early Windows was nothing but a pretty front end for DOS, "US Airways" was just a slick livery, with the ugly duckling of Allegheny still hiding behind it.

 

"We don't have no cash, Mr. Creditor. But they's a couple of chickens and hawgs behind the terminal here that you kin take ..." :lol:

 

your prediction of the impact of an airline going BK and then having competitive advantage is gonna be played out in other industries.

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In August 2002, U.S. Air filed for bankruptcy protection and emerged from bankruptcy in March 2003. Yesterday tey filed again for bankruptcy protetion and seek $800 million in concessions from their employees, and they number 28,000. The airline stated employees will be paid and their benefits will continue. For how long though? In my view, there are too many airlines, too many auto companies, and so on. It's only a matter of time until the less efficient disappear. It is the survival of the fittest. Hopefully, the employees impacted will have viable alternatives for earning a living. That concerns me greatly.

 

http://melduke.blogspot.com/

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"If you stand back and take a structural view of the world, deflation is still a bigger threat than inflation. It is still a highly competitive world and there is still the whole Asia supply story out there. Technology is still a disinflationary force in the sense that it encourages more competition and pushes prices down. The Internet is a true force for competition and low prices?Even though the Fed has had a very stimulative policy for some time now, they haven?t really been able to create a whole lot of inflation yet. Inflation popped up in asset prices and in the housing sector in some markets, but despite their best efforts inflation has been very slow to come back. That tells you there is a deflationary tone to the world."

 

http://melduke.blogspot.com/

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In August 2002, U.S. Air filed for bankruptcy protection and emerged from bankruptcy in March 2003. Yesterday tey filed again for bankruptcy protetion and seek $800 million in concessions from their employees, and they number 28,000. The airline stated employees will be paid and their benefits will continue. For how long though? In my view, there are too many airlines, too many auto companies, and so on. It's only a matter of time until the less efficient disappear. It is the survival of the fittest. Hopefully, the employees impacted will have viable alternatives for earning a living. That concerns me greatly.

 

http://melduke.blogspot.com/

US Air has already traded 10x the short interest and has risen 20% off the low. Who ini their right mind is buying? They have declared bankruptcy and declared that they do not have enough assets to cover cash liabilities. Unsecured paper is history. Equity is three stories down from unsecured paper.

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Sorry I have to fade all the bullishness. They are setting this thing up like a bowling pin. Hey, who knows? but if this thing fails it could easily be a quick 100 points down on the spoos.

Soup:

 

Last time you shorted at the height of the hysteria, you were rewarded with a 150 point drop in the spoos..............

 

We could be getting close..............

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There is alot of extra liquidity provided by the Fed in the system. Thursday will be an interesting day to watch. The treasury's CMB's totalling $41B are expiring and being replaced with only $24B in 5&10 yr notes, causing a net return to the public of $17B.

 

The Fed monitized virtually all of the CMB's and have $19.5B in 8 & 14 day Repos up for renewal. If they drain it, there will be a giant sucking sound. If they roll it over, there will be a liquidity tsunami.

 

The real question is 'what was the treasury doing with all that extra cash for the last week?????? Maybe that where the Cialis moment came from.... :D

Interesting comments. I suspect that the Debt Limit and heavy current borrowing needs have lead to a somewhat irregular Treasury borrowing schedule.

 

The Fed added $3B to the repo 'pool' today. If Ivan hits the Texas/Louisiana area later this week, I expect that the Fed will also take some unusually agressive actions then. This may provide even more support under the market temporarily, but about the time of the next Fed meeting they will want to calm activties down for a while - so they will not seem to contradict the "message" of the .25% rate increase.

 

The market is still setting itself up for a more significant decline in late September/early October, partly because the Fed's actions won't yet be agressive enough to stop a budding downturn in the economy.

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