over9k
So I didn't tell my wife, but I...
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- 12 June 2020
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Of course it's subjective. For example, nobody can know how much business travel is going to be reduced and for how long. Anyone who wants to claim they can estimate that I will laugh at. The only thing that can be said with any certainty is if things will be more or less than they were before and fact is that many, MANY companies are flatly on record as stating that they're NEVER going to return to their previous levels of in-office staff or business travel, and with business travel being as profitable as it is, there goes a massive chunk of airline profits just right there.
All these estimates are based on an assumption that things will (eventually) return to their previous levels and it's just a matter of pricing the time in. I'm saying that's incorrect - they're not going to return to their previous levels and whatever they do get to is certainly not going to come about as quickly as people think either.
I think the market is pricing in waaay too optimistic future earnings etc etc. Let's take a look at GE in isolation over the past 6 months:
There's not even a trend to follow. It's not like AU's travel/aviation stocks that have slowly crept up as coronavirus cases have reduced for example. Instead, it's just an absolute sh!tshow. If anything, there's just been a long slow melt since that peak after the pullback on what looks like the 16th of june:
$6 looks like the support level and it's either busted that or knocked on the door of it 4x in the last 6 months and actually cracked the $5.50 mark at one point. $7 looks like the top too and with dow futures in the red, we're likely looking at another significant drop tonight.
Then there's seasonality to consider. Europe's already looking at increased lockdowns being imposed within a few days and winter's going to make things so, so much worse up there - from both an aviation and a simple economic perspective. There's also the curveball of the 737 max being grounded until god knows when - which is a massive contract that's literally non-existent until they get recertified and the fixes installed in all the existing planes as well which is going to take months at absolute best. With jet engines, like buying a car, the profit is not in the sales margin but rather, the maintenance of the product, which is all negotiated and sold as a combined servicing and engine package with the jet engines (the airlines often get the engines at cost price if GE gets the servicing contracts), meaning that even if boeing keep making the jets and just park them outside everett and have stacks of them in stock, if they aren't flying then there's no maintenance to be done on the engines. No maintenance = no profits for GE.
I wouldn't even think about a buy order at anything more than $6 and if my suspicions about seasonality are correct, we're going to see the $5.50 mark cracked again. Maybe even $5.
All these estimates are based on an assumption that things will (eventually) return to their previous levels and it's just a matter of pricing the time in. I'm saying that's incorrect - they're not going to return to their previous levels and whatever they do get to is certainly not going to come about as quickly as people think either.
I think the market is pricing in waaay too optimistic future earnings etc etc. Let's take a look at GE in isolation over the past 6 months:
There's not even a trend to follow. It's not like AU's travel/aviation stocks that have slowly crept up as coronavirus cases have reduced for example. Instead, it's just an absolute sh!tshow. If anything, there's just been a long slow melt since that peak after the pullback on what looks like the 16th of june:
$6 looks like the support level and it's either busted that or knocked on the door of it 4x in the last 6 months and actually cracked the $5.50 mark at one point. $7 looks like the top too and with dow futures in the red, we're likely looking at another significant drop tonight.
Then there's seasonality to consider. Europe's already looking at increased lockdowns being imposed within a few days and winter's going to make things so, so much worse up there - from both an aviation and a simple economic perspective. There's also the curveball of the 737 max being grounded until god knows when - which is a massive contract that's literally non-existent until they get recertified and the fixes installed in all the existing planes as well which is going to take months at absolute best. With jet engines, like buying a car, the profit is not in the sales margin but rather, the maintenance of the product, which is all negotiated and sold as a combined servicing and engine package with the jet engines (the airlines often get the engines at cost price if GE gets the servicing contracts), meaning that even if boeing keep making the jets and just park them outside everett and have stacks of them in stock, if they aren't flying then there's no maintenance to be done on the engines. No maintenance = no profits for GE.
I wouldn't even think about a buy order at anything more than $6 and if my suspicions about seasonality are correct, we're going to see the $5.50 mark cracked again. Maybe even $5.
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