Airlines have been especially hard hit by the spike in crude oil prices. This week they got to together and made some noise, targeting the oil speculators and the opaque commodity futures markets in general as a major contributor to the recent nearly vertical rise in crude and its distillates (such as gasoline, heating oil and jet fuel).

A consortium of 12 U.S. airlines sent a letter to Congress, correctly stating that oil speculators currently purchase 66% of all oil futures contracts, vs. 21% 20 years ago. The letter suggests this extra influence gives the speculators far more control over the end price of crude oil - and that airlines are picking up the bill.

Quoting the letter: "Speculators buy up large amounts of oil and then sell it to each other again and again," the airlines say in their letter. "A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab."

It's not hard to see why airlines and their shareholders are fuming! Here's how some of the majors have fared, in large part due to reducing profits from higher jet fuel prices (share price this February/now):

AMR Corp (AMR): $16/$5
Delta Airlines (DAL): 18/5
Northwest Airlines (NWA): 20/6
JetBlue Airways (JBLU): 7/3.50
US Airways Group (LCC): 15/2.50

These sell-offs seem overdone, but there are too many question marks about oil and where the price will go from here in the short-term to bet on the U.S. airlines right now.

However, I am recommending a second tier player in the airline industry this week in G3 Global Options, with far less exposure to oil prices, that has also been beat down and which I believe will recover strongly.

Jeff Manera
G3 Global Options,
Emerging Markets Insider
Email: Jmanera@EmergingMarketsInsider.net

Early this week, we are seeing a continuation of the mixed signals from the corporate world, with a bias towards the downside shifting more positive as investors shrug off some nasty earnings reports and buy up good stocks along with the bad.

We've seen a sharp rebound in financials over the past week or so (helped along by regulators cracking down on naked short-selling), plus the second quarter numbers weren't as bad as they could have been. Late last week and earlier this week Wells Fargo (WFC) and Bank of America (BAC) added to the party by beating estimates to the upside and rallying nicely.

It looked like that mood was going to sour today, however, with Wachovia's (WB) shares tanking in early trading after reporting an $8.9 billion loss and culling its dividend to almost zero. Regional thrifts Fifth Third Bancorp (FIFT) and KeyCorp (KEY) also posted losing numbers with loan-loss provisions and high loan defaults and slashed dividends. Surprisingly, both of those also saw their shares rally strongly on the day. I supposed because the horrible numbers weren't really REALLY horrible.

Airlines also posted some heavy losses from increasing fuel prices and write-downs but still rallied strongly in late trading, including US Air (LCC), JetBlue (JBLU) and UAL (UAUA).

It's promising to see investor sentiment improving, but I'm not sure a return to the old frantic buying on any news is a positive development either. Some of these stocks, such as Wachovia, deserved to be sold off, not to rally wildly into the close. One explanation is the speculators with "hot hands" who are now slithering away from the oil and commodity markets are looking for the next thing to jump into. I don't believe it's all legitimate and sustainable fundamental buying which can be relied on as a technical indicator of improved support or sentiment.

Meanwhile, I do see some very strong trade potentials in the global markets and away from the current "hot" and unsteady hands, where I expect to see long term investing that will be sustainable and keep a logical floor under the positions. I'm especially interested in an electric car play with huge global potential and one of two global infrastructure plays I'm working to narrow down. I'll be discussing the details in this week's G3 Global Options.

Best wishes,

Jeff Manera
G3 Global Options,
Emerging Markets Insider
Email: Jmanera@EmergingMarketsInsider.net

While you're waiting to pump gas at more than $4 a gallon and waiting for the long promised electric car models, consider how you might prefer pumping another gas inside your garage: Natural gas or propane. For a lot less, too!

The cable news pundits, principally CNN Money, are back on the subject of electric and other non-gasoline powered vehicles even when spot-market oil is dipping.

One recently highlighted vehicle is one I've been watching for some time: The Honda Motors (symbol: HMC) Civic GX, which runs on the compressed natural gas (and can also be converted to run on propane or methane)

The Honda's GX has been around since 2006 but if you don't live in California or parts of New York - and aren't one of the lucky ones "in the know," you probably haven't heard of this cool car.

I believe the GX and other natural gas cars could be a big part of the solution - someday - when there are more than a token few natural-gas filling stations along our roadways. In the meantime it's still a very interesting option for those who clock only modest around-town mileage and don't have to refill along the way (and are in areas where these cars are available). If you just clock 50 or 80 miles on a typical day and if you have natural gas at home, you can turn your garage into a natural-gas filling station and worry about your gas utility bills later - it will be a lot less than your current monthly gasoline expenses.

On the electric and hybrid/plug-in hybrid front, most of the major players are planning on coming out with a number of models in the next two to three years, including Ford (F), GM (GM) and Toyota (TM), but I'm skeptical on most of those claims for a number of reasons, especially with GM's much discussed "Volt." You can expect lengthy production delays and lame excuses. Mark my words. The big three and most of the others really don't want you to own electric cars - it kills their whole business model.

But in the meantime, for the rest of us, I believe the electric vehicle recommendation I recently gave my subscribers in G3 Global Options is a far better, and more timely, bet. And I expect this company to actually deliver the electric cars it's promising.

Best wishes,

Jeff Manera
G3 Global Options,
Emerging Markets Insider
Email: Jmanera@EmergingMarketsInsider.net