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SockMarket (34.52)

January 2010



Socialist vs. Capitalist, a Statistical Comparision

January 21, 2010 – Comments (26)

I don't think more than a day passes when someone on this forum makes some statement regarding how capitalism is by far superior to anything in "socialist Europe". I find this a little annoying myself, maybe a little arrogant, but I do not hold an opinion one way or the other. For the record I am politically independant.

That said here is a comparison of capitalist countries and socialist ones. Sources for the data should be obvious (ie UN, CIA factbook, etc. unless otherwise noted).

Human Development Index

"The Human Development Index (HDI) is an index used to rank countries by level of "human development", which usually also implies whether a country is developed, developing, or underdeveloped." -wiki

1 Norway
2 Australia
3 Iceland
4 Canada
5 Ireland
6 Netherlands
7 Sweden
8 France
9 Switzerland
10 Japan
11 Luxembourg
12 Finland
13 United States
14 Austria
15 Spain
16 Denmark
17 Belgium
18 Italy (just plain corrupt but closer to socialism)
19 Liechtenstein (a monarchy but closer to capitalism)
20 New Zealand

Well there you are. Total count: 14 - socialist, 4 - capitalist, 2 - unspecified.



GDP per Capita

1 Liechtenstein $ 118,000 2007 est.
2 Qatar $ 111,000 2008 est.
3 Luxembourg  $ 81,200 2008 est.
4 Bermuda $ 69,900 2004 est.
5 Norway  $ 59,500 2008 est.
6 Kuwait  $ 57,500 2008 est.
7 Singapore $ 51,600 2008 est.
8 Brunei (I don’t really know) $ 51,300 2008 est.
9 United States $ 47,500 2008 est.
10 Ireland  $ 45,500 2008 est.
11 United Arab Emirates $ 44,600 2008 est.
12 Cayman Islands $ 43,800 2004 est.
13 Iceland $ 42,300 2008 est.
14 Switzerland  $ 42,000 2008 est.
15 San Marino  $ 41,900 2007
16 Netherlands $ 40,500 2008 est.
17 Austria $ 40,400 2008 est.
18 Canada $ 39,200 2008 est.
19 Australia $ 38,200 2008 est.
20 Sweden $ 38,200 2008 est.

(note: I removed a number of nations listed here that aren’t really countries, mainly UK tourist destinations like Jersey)

Well there you are. the count: Socialist – 9, Capitalist – 9, unspecified – 2



Nations With Sovereign Debt Issues

January 18, 2010 – Comments (11) | RELATED TICKERS: DEB.DL.DL2 , T

An excellent piece that I found over on Yahoo.  [more]



Do You Have a Receding (H)airline?

January 05, 2010 – Comments (2)

I just don't see any future for many of the companies here.  From what I can see it is a darned if it does darned if it doesn't with economic recovery, faced with assets no one will buy, and at a competitive disadvantage.  

Damed if it does damed if it doesn’t
Right now oil is in the sweet spot, about $40-80 where airlines can make money. If the economy improves any more it is very likely that, with the significant supply constraints under $100/barrel (even if you don’t agree with peak oil theory you should acknowledge this). So if the economy improves even a few GDP points oil will go up enough that airlines will be forced into one of two scenarios: 1) raise prices sharply to squeeze out some profit or 2) take a loss. As I will explain below they will almost certainly take #2.

You can’t judge an airline by its book value
The issue lies not in the cost of liabilities but the value of assets. The true value is whatever the market is willing to pay for the assets. Try selling a jet liner at full price and see who is willing to buy. No airline has expanded significantly by buying old planes from fully operating companies, and no one is going to start; especially not at full price. And if a company were to go bankrupt, selling a fleet of planes in a fire sale, if you can do it at all it will erode the prices by well over half. This is, as you may guess a large part of an airline’s assets. I won’t use them in any valuation I do and suggest you do the same.

A competitive disadvantage
It is no secret that planes are the most inefficient form of transportation. I am not going to go into specifics here but trains are many times more efficient. There is, of course, the downside to sitting in a tiny cubicle for a day or two instead of a cramped little seat for 3 or 4 hours but as costs for the airlines go up, if they try to raise rates trains will gain ground, so to speak. Especially in the northeast where it takes just about as long to go through the airports and on a plane as it does to take a train. So if costs continue to rise planes will lose market share if they attempt to raise rates in conjunction with costs. Even if costs don’t rise enough for there to be a mass customer migration to Amtrak more and more of those at the margins will choose to use trains if airline prices increase.

Why they will choose #2
So back to my first point. The reason airlines will choose the second option, to a large extent, is that there are enough carriers, most famously, Southwest, who have hedged their prices and thus can hold their prices down sustainably. So non-hedged airlines will lose business if they try to raise prices. The loss in business itself would likely be enough to drive the company’s into the red.

What I don’t like
Any airline who is losing money right now, as in most of them. More specifically, United (UAUA), US Airways (LCC), American (AMR) is an excellent short, as is Delta (DAL). Also any airline that runs short distance routes for its primary business.

If you are going to buy anything
Frankly I wouldn’t suggest it but if you are going to buy an airline find one that is trading under book (less PP&E) and is consistently profitable. Or just buy the easy one: Southwest. After all everyone needs a little LUV. :)

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