Yes... and the hits just keep coming.

Nothing like 9 lives and high profile.

News of the last few weeks has been concerning with the realization that COVID 19 was going to impact the world and U.S. economy. Then news of the Opec/Russia breakup over the weekend and yesterday's market turmoil is leading to a reevaluation of economic prospects.

I had a long conversation yesterday with a private banker from a large national firm who had just gotten off a call with their chief economist. This following receipt and reading of an updated Corona analysis from McKinney. The banker expressed concern for small and midcap companies and said the credit markets were not that healthy. Certainly in our area there has been concern for some time for energy companies and their prospects look much worse today than they did Friday.

When you consider that supply chain disruption hasn't yet been widely felt but is coming it adds to the concern. And there is obviously a lot more.

I think the picture is very uncertain both in terms of degree and time horizon but it sure looks like economic storm clouds are gathering. Depending on the length and severity of the COVID19 contagion McKinney is forecasting up to .5% to 1.5% negative growth worldwide. That was before yesterday's oil news and market selloffs (worldwide).

Now how do we view the jet market in 2020?

News of the last few weeks has been concerning with the realization that COVID 19 was going to impact the world and U.S. economy. Then news of the Opec/Russia breakup over the weekend and yesterday's market turmoil is leading to a reevaluation of economic prospects.

I had a long conversation yesterday with a private banker from a large national firm who had just gotten off a call with their chief economist. This following receipt and reading of an updated Corona analysis from McKinney. The banker expressed concern for small and midcap companies and said the credit markets were not that healthy. Certainly in our area there has been concern for some time for energy companies and their prospects look much worse today than they did Friday.

When you consider that supply chain disruption hasn't yet been widely felt but is coming it adds to the concern. And there is obviously a lot more.

I think the picture is very uncertain both in terms of degree and time horizon but it sure looks like economic storm clouds are gathering. Depending on the length and severity of the COVID19 contagion McKinney is forecasting up to .5% to 1.5% negative growth worldwide. That was before yesterday's oil news and market selloffs (worldwide).

Now how do we view the jet market in 2020?

If you were considering general aviation as an alternative to commercial travel I would think the last couple months would have pushed you over the edge.

It did for me. I wouldn't be caught anywhere near a commercial airport.....or the mall. Heck I live in a small tourist town where foreigners outnumber residents 1000:1.

I let the mail come to me and I've cut off ordering anything from Amazon or Ebay.

That leaves hanging out in the Hanger and working on our house project. I could get used to this.

=======

As for how an election year affects anything. Its always been my opinion that the economy operates like an 12 year old. No reason, just reaction and all of it narcissistic.

Depending on the success of either political party.. Generally the incumbent will argue to "Stay the course, it can only get worse with change!" While the "Reform" party will say that change is absolutely needed to regain what was lost!

A lot depends on what the success of the incumbent during their term. If they pander to the "interests" and hand out favors, tax cuts and can show consistent stable growth of the market, then its likely to continue. If growth is unstable, inconsistent or unintelligible and an undependable, then the market will reflect this instability and volatility.

In general, people (and markets) hate change. Especially if its unpredictable. What we want is a solid interest rate that we can make a good business model on. If you cant do that, I will not vote for you. I want to know that the money Ive created and invested will do what I expect it to do.

Chip,

News from today includes Goldman Sachs negative estimates on the economy through the third quarter, and the Fed cutting the discount rate again and announcing quantitative easing.

I know you have deals in the pipeline but what do you think about the aircraft market over the rest of the year now?

Tony,

I'm not sure, I think unless this Corona Virus issue ends up turning out much better than what we are preparing for, we will definitely see a recession. It's been a long run and I think we all know it has to come to an end at some point, but the counter-point to that is the economy took a long time to recover and we didn't see much in the way of real prosperity until the last few years, this was based on lower taxes and regulation... I know some will argue that isn't true... but from the viewpoint of not only a small business person but also a fairly new start-up, we've been in business for less than five years, I can guarantee you that lower taxes and a more welcoming business environment made the difference. When I started Jet Acquisitions I had zero plans of hiring anyone, in fact the thing I liked about the business the most is that I could do it on my own with no employees. Obviously, that changed. I'm still very optimistic about the business environment no matter what the economy does. A slow recovery a slow slide, maybe we've successfully taken some of the mountains and valleys out, though the road is bumpy as hell right now!

Back to your question, I think the fundamentals of our economy are still very good. I think we'll know more about the virus and it's impact on our country and the economy in the next 7 - 10 days.

On a small scale we are already seeing the weakening of values, sellers seem more motivated, the unknown drives people to make decisions quicker... sometimes those decisions are rash. As a buyer I welcome it and it's hard not to use the "sky is falling" negotiating technique... as a friend to many, many aircraft owners I want to see the value of their investment protected.

Thankfully our business will do well no matter what, one's loss is unfortunately another's opportunity. I do have a lot of friends that inventory airplanes and when the market drops it hurts them, hate to see that. These guys serve an important role in all of this, taking airplanes that need love and getting them back up to speed and flipping them, often for a whole lot less profit than you might think!

The next week or two is going to be very interesting. I'm excited scared.

I tinker in the legacy Citation environment (mainly 501s) as one of those guys that owns/inventories what he sells. In 2020, I've sold 7 JT15Ds and 2 complete 501s. I've whittled my inventory down to 1 spare engine and 1 complete airplane. I don't want to own more than I'm prepared to own and operate myself. Citations are expensive to store.

BUT, I think the legacy market is going to stay strong. Airplanes in this segment are bought with cash. People with Corona fears and cash are going to want to travel privately and the 500s are the most affordable jets you can buy.

I do wonder if that is what is driving continued activity, I had an initial call with a new prospective client on Friday, in a time when I would expect people to be waiting the opposite seems to be true.

I do wonder if that is what is driving continued activity, I had an initial call with a new prospective client on Friday, in a time when I would expect people to be waiting the opposite seems to be true.

Demand is down, I have people with Jets that are talking about selling to avoid the expense and get some cash back.

Have heard the opposite (slowing activity) from a number of people. Cannot imagine accelerating purchases, of substantial, largely discretionary capital goods. Certainly there are some cash-rich folks on the sideline that want to avoid commercial air travel. I would guess, and be willing to bet, that there are far more folks who will be pulling in their horns to see how things shake out.

Thanks Bill, was actually going to call you and get your take on things!

No, seriously, was going to call you today! Call
you tomorrow!

The oil guys (their bankers) will be selling some nice planes for a great deal in the not too distant future. They won’t be the only ones!

You can’t shutdown the country thru August and think this will be business as usual.

“Hunker in place” now being spoken. Ski Resorts closed. Florida beaches are now getting closed. Casinos closed. Sporting events cancelled.

What do you need an airplane for? To go where? 2020 is screwed....unless you are in healthcare. YMMV.

JR