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Paul Price Headshot

Expert Analysis and Commentary

Paul Price: Maximum Media = Turning Points

Dr. Paul Price Feb 09, 2015

As has happened many times previously, that article appeared at almost the exact bottom of the cycle.

One year after that issue was released, WTI had rebounded by more than 25%. Three years post-publication, crude was up more than 50%. It turned out that, in early 1994, “big oil” didn’t really need to do anything but wait. Two years further down the road saw oil tack on another 20%.

Maximum Media

The flip side of that coin is also in play.

Airlines were the industry group benefiting the most from 2014’s plunge in crude prices. The relative strength (RS) of the air transport stocks recently hit its highest level in years.

Media outlets are falling all over themselves letting readers know that low jet fuel prices will boost airline company profits.The relative strength of the air transport group hasn’t been this high in more than eight years. The last two times the industry’s relative strength approached this altitude each preceded very bad times for airline company shareholders.

air transport chart

Note the huge run-ups in Fidelity’s Select Air Transportation Fund (FSAIX), The SPDR Transportation ETF (XTN) and the iShares Transportation ETF (IYT), all correlated to last year’s drop in oil pricing.

Fidelity Select Air fund
SPDR Transportation etf
ishares transportation average etf

The Bottom Line

Disclosure: Paul Price owns no airline stocks, funds or ETFs. He is long shares of BWP, CR, DNR, DO, DOV, EMR, ESV, FLR, FLS, HFC, HP, JEC, KMT, SDRL, SLB.

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