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I normally write about Asia, but I’m going to take you across the Atlantic Ocean today. Specifically, I’d like to tell you about Air France-KLM.
Air France-KLM, the largest airline in Europe, was formed in 2004 when the two airlines merged. Being big isn’t helping it though, because the airline reported a loss on Monday.
Air France-KLM lost a whopping $261 million for the year ending March 31. The reason: “Unprecedented difficulties.” But the details are even more telling about the worsening of the global recession.
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| Air France-KLM’s whopping $261 million loss shows how fast and how deep the global recession is getting. |
That loss is a dramatic turnaround from the $130 million Air France-KLM made last year. In fact, Air France-KLM was predicting a profit just six weeks ago! So that tells me just how fast and how deep the global recession is getting.
More Grim News Ahead …
Air France-KLM doesn’t expect business to get better any time soon either. The airline warned that it would lose money in the upcoming year as it expects annual sales to fall another 6 percent.
The problem for Air France-KLM is that the high-profit, business class seats aren’t selling. Proof: Europe’s equivalent of our low-cost Southwest Airlines, Ryanair and EasyJet, reported a 1 percent increase in revenues. A sign that the low-profit, coach seats are still selling.
Yet Air France-KLM is hardly the lone canary in the coal mine …
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| Jet engine manufacturer Pratt & Whitney is hurting, too, and expects to make big cutbacks this year. |
- The International Airline Travel Association reported that passenger traffic fell 10 percent and international air cargo traffic fell 22 percent in the month of February.
- Jet engine manufacturer Pratt & Whitney said it expects to make “significant” additional layoffs this year because of slow business.
- Last week, Brazilian jet maker Embraer reported a 44 percent drop in fourth-quarter profits due to plunging sales.
The Air France-KLM news is just another data point in the long list of economic woes I’ve been pointing out for a long, long time.
And I am absolutely convinced the global economy is going to get worse — a whole lot worse — before it gets better. That of course has a lot of important investment implications … especially if you agree with me.
What You Should
Consider Doing …
Run For Cover! The most important strategy to follow for 2009 is to increase your allocation to good old safe cash. How much depends on your situation, but I think anything less than 50 percent cash is a mistake.
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| In the past, gold was primarily an inflation hedge. But its role has changed to haywire insurance. |
Use every rally, such as the Dow going above 7,500, as an opportunity to sell (even at a loss) and increase your cash.
Invest With a Safety Net. There are several single premium life and annuity products that offer a rare combination of stock market-like growth with protection against stock market losses.
Buy Some Haywire Insurance. I’m talking about gold. In the old days, gold was primarily an inflation hedge. But its role has changed to haywire insurance. I think gold should do extremely well if (a) the stock market gets clobbered, (b) the value of the U.S. dollar collapses, (c) the rampant government spending turns into rampant inflation, or (d) the global recession turns into a global depression.
Frankly, I am convinced that (a), (b), and (c) are almost sure things. And I am very worried that (d) is a real possibility.
Regards,
Tony
About Uncommon Wisdom
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{ 1 comment… read it below or add one }
I am very please for all of the coments that you made in this article and others too. I am interesting in stocks in the Asian Market like the China Railways construction for example, i would like to invest a small amount if you can guide me how to make it happend, I am new in all of this Market world , but I want to be more educated and your magazing is an excelent toll for this porpouse.
Tanks Angel