Wednesday, July 16, 2008

Seeing Oil Bubble, a Contrarian Bets on an Indian Airline

The New York Times isn't referring to the Climateer Investing post from last Friday, "Dear CFTC: About those Oil Markets. And: A Stock Tip" in which we said:
"And the stock tip? Buy some airlines for a one week trade. The strongest stocks seem to be NWA and DAL, although LCC and CAL might give you a bigger pop.
Remember though it's a
trade. There's a real risk they could go out of business. "
but rather to one of our heroes*, Wilbur Ross:
Wilbur L. Ross Jr.’s latest deal, an $80 million investment in the flailing Indian airline SpiceJet, announced on Tuesday, is hardly earth shaking, but the idea behind it is typically contrarian.

Mr. Ross has decided that high oil prices have hit bubble territory, a bubble that should pop in the next 12 months. “We’re looking at everything that has been hurt by fuel” for deals, he said in a phone interview.

To that end, his firm, W.L. Ross & Company, which has an estimated $7.9 billion in assets under management, has bought stakes in railroad freight companies in Europe. It is looking at refineries, gas station chains and even the struggling United States airline industry.

“The fundamentals don’t justify an oil price over $100” a barrel, Mr. Ross said. “It is the nature of bubbles that they expand farther and last longer than anyone logically imagined” he said, but “they always reverse.” Exactly when the oil price bubble will burst is still unclear, but it could be within the next year, he said....MORE

Our last post on Mr. Ross, "Wilbur Ross: Run-Up in Oil Prices Is a Bubble" had this video from CNBC, which is definitely worth a look:

Here's our comment on Mr. Ross from last January:
If you are running a mismanaged monoline insurer you DO NOT want this man pulling into the parking lot. His presence means the jig's up and you're buffing that résumé. He is a VERY serious dude....