• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Jim Cramer

Jim Cramer: Fast Traders Are Gunning the Airlines and Cruise Ships Pre-Market

Something's very wrong here. I don't know how this can be. But it is happening and it seemingly can't be stopped.
By JIM CRAMER
Jun 08, 2020 | 09:09 AM EDT
Stocks quotes in this article: AAL, LUV, UAL, DAL, JBLU, RCL, CCL, NCLH, SAVE, BA, APA

Something's happening here. What it is ain't' exactly clear. There's a man with a buy order there, telling me I don't have to beware.

That's how I feel these days by the decision of some fast traders gunning the airlines and the cruise ships every morning well before the market opens.

The concentration is in American Airlines (AAL) , Southwest (LUV) , United (UAL) , and Delta (DAL) , JetBlue (JBLU) on the airline side of things and Royal Caribbean (RCL) , Carnival (CCL) and Norwegian (NCLH) on the cruise side.

It is relentless and it defies all reasoning about how stocks used to trade. In fact it is almost like the old schemes of the 80s when I would watch stocks be bagged, gunned and liquidated; they called it BGL for the bagged, gunned and the process and I never lived it, railed against it and tried to stop it with writings here, but it was futile.

The big difference this time? There is no liquidation.

It's hard to find the time that all of this started happening. I know that it did coincide with when Buffett blew out his airline stakes on May 3rd. We don't know the full story, what price he got on each. But consider these prices: American $11, Southwest $26, Delta, $23, and United $25.

These marked about the exact bottom.

At the time the analysts put out some pretty grave price targets. For example, Evercore slashed its price target on American to $1 from $10 when Buffett exited on May 1. At the time the stock was at $12. In retrospect with the stock at $21.

It's odd because the CARES Act, which was created back in March and executed at April 14, gave $12 billion to the airlines. American got a $5.8 billion from the government, a $4.1 billion grant and $1.7 billion in loans. The Treasury also acquired warrants to purchase 13.7 million shares at $12.51.

Now the stock's at $20, up 40% Thursday and 36% Friday. In retrospect the $1 price target at Evercore was premature or at least ill-advised. Speaking of advice, should the Treasury take the near double that it created? Always good to sell much higher the price that Buffett dumped, no?

American is not wasting time. It is planning some big severance packages even as they weren't supposed to lay anybody off. But it voluntary. Why not? American plans to fly only 55% of its domestic schedule in July versus last year, and 20% of its lucrative international schedule. Its stock was at $20.11 in pre-market.

All of the airlines present opportunities for U.S. Treasury to bail. Secretary Mnuchin gave United roughly a $3.5 billion grant and $1.5 billion in loans. It also got warrants to purchase 4.5 million of common stock at $31.50. United was at $46 in pre-market.

Southwest took a $2.3 billion in a payroll grant and nearly $1 billion in loans. It also got warrants to purchase 2.6 million shares struck at $36.47. The stock was at $39.85 in pre-market.

Delta took $3.8 billion in total payroll assistance with a grant of $1.6 billion and 1% of the company at $24.39 in warrants. The stock was at $36.65.

JetBlue, for good measure got $685 million in grants and $250.7 million made as a loan. 2.6 million shares of common stock at $9.50. It was at $15 in pre-market.

Spirit's (SAVE) pretty's much the same thing, too, they just didn't disclose anything I can find.

Because of the bagging, these stock prices all seem pretty inflated. TheStreet called the American rally "insane" last Friday. For the record I had nothing to do with the piece. I was on vacation.

As far as the cruise lines you have some major moves off the bottom. Carnival sold $500 million of shares -- 71,875,000 altogether -- at $8 on April 1 and $1.75 in in convertible bonds at 5.5%. It also sold 71,875,000 shares at $8 at the end of April. It was now at $21. It also sold $4 billion of $11.5 at $20.23. Its pre-market price was $25.14

Royal Caribbean raised $2 billion last week, with three year bonds at 9.12%, which was on top of $1 billion in three year convertible notes with a 4.25 coupon. That's on top of $3.3 billion at 11.7% 3 year notes and 12.3% of five year notes. That's a huge amount of debt but it could get them through until mid-2021, according to Bloomberg because it is burning $250 million to $275 million per month. Its pre-market price was $76.00

Is this all too optimistic? This morning Carnival CEO Arnold Donald told the Telegraph "that the fall out from Covid-19 has been devastating for travel and tourism broadly and obviously for the cruise industry, we have no revenue but large ongoing expenses because of the assets that need to be nurtured."

Norwegian took in $675 million at 12.25% on May 15th , according to people inside the deal. Its pre-market price was $25.80.

The stock was at $10. They also raised some money through stock but we don't know the price, according to Bloomberg. It is most likely around the $10 area.

Now there are plenty of stocks being run in the morning: Boeing (BA) , several oils, including Apache (APA) , but the most glaring are the airlines and cruise ships because their projections are so low even as their stocks are now so high.

Wall Street analysts fought almost all of these rallies. In fact, many called them fanciful.

Obviously the voracious pre-market buyers don't think so. Nor do the sellers because these stocks gap up every time.

Something's very wrong here. I don't know how this can be. But it is happening and it seemingly can't be stopped.

What it is ain't exactly clear, except for a gunning I have never seen before.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned.

TAGS: Investing | Markets | Stocks | Trading | Airlines | Jim Cramer | Warren Buffett

More from Jim Cramer

Jim Cramer: This GameStop Nonsense Has Gotten Out of Hand

Jim Cramer
Feb 26, 2021 7:11 AM EST

It has become the market equivalent of the storming of the Capitol, and the viciousness must stop.

Jim Cramer: The Bond Market Vigilantes Strike

Jim Cramer
Feb 25, 2021 1:41 PM EST

What does that mean for stocks? Consider Nvidia.

Jim Cramer: How Do You Pull Off What GameStop Buyers Did?

Jim Cramer
Feb 25, 2021 6:12 AM EST

Here's my theory on how this was done.

Jim Cramer: Don't Miss This Train

Jim Cramer
Feb 22, 2021 2:40 PM EST

We're headed to Boom Town, so let me show you how to line up your ticket -- and the best picks for the great reopening.

Jim Cramer: Toast, the Next Big Thing? I Question its Valuation

Jim Cramer
Feb 22, 2021 6:19 AM EST

Maybe it will be viewed as the ultimate 'opening' story because restaurants might soon come back.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:32 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Navigating a Market Correction
  • 11:29 AM EST GARY BERMAN

    Where Does the Nasdaq Go From Here?

    Where does the Nasdaq Composite (CCMP) index go fr...
  • 12:31 PM EST GARY BERMAN

    Has the Short-Term Top Come for the XLF/Banks?

    The has triggered a long-term overbought signal ...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login