Dead Cat Bounce?
It has been at least 6 months since any good news came out of Wall Street. I found that I really quit watching any updates on the market indices because the news was always so depressing. The same think seems to happen to me during baseball season. I will stick it out until the all-star break, but if my Astros don’t start to put together some kind of run soon thereafter, I quit watching because it just isn’t fun to watch your team loose every night.
As of this writing, the Down Jones Industrial Average has now seen gains in six of the last seven trading days. It climbed from a 6,547 low at market’s open on March 10th to 7,486 at the closing bell on March 18th. Is this a sign of things turning around? I honestly don’t know the answer to that, but I have started looking at the markets on a regular basis simply because it’s fun again. I think a lot of investors have been waiting for some good news, any good news, in order to jump back in at today’s low prices.
I think the same holds true for some aircraft buyers. Most buyers continue to sit on the fence for fear that prices will continue to drop for the foreseeable future. However, the aircraft market is a bit different than the stock market. In each particular market, aircraft are offered for sale at various prices. Every once and a while, a seller becomes extremely motivated and drops their price well below current pricing. That aircraft will typically sell very quickly although usually with a few false starts (this has recently happened in the G-V, 604 & G-450 markets).
Buyers are then left to try to locate another airplane that meets that deal. However, more often than not, they are unable and are left frustrated. In order to capitalize on that type of deal, a buyer really needs to have his ducks in a row and be ready to move forward within hours. That means, you already has a canned offer to purchase ready to submit and have a sizeable deposit ready to wire to escrow immediately. That is how professional aircraft dealers capitalize on the best buys and that is how you have to work if you want the kind of deals they usually get.
But, just like Wall Street, you shouldn’t expect to be able to time your aircraft purchase perfectly. In any given cycle, there is only one bottom. If you make your purchase just before bottom, you will still come out well ahead of the curve a couple of years from now. If you catch the market on the way up, it is much harder to get the airplane you want at the price you want, because deals start happening extremely fast and you end up missing deal after deal as other buyers are moving fast to capitalize.
Have we hit bottom? I am not 100% sure. Prices have fallen almost 50% since last fall and based on numbers from the last correction I would say they aren’t going to fall much more if any. But sellers are primed and ready right now, and as soon as aircraft start to move, it won’t take long for those same sellers to get the upper hand again. If you have plans of acquiring an aircraft in the next 6 months, I would strongly recommend moving now while buyers still have a lot of leverage and a lot of the competition is still pondering their next move.
Toby J. Smith
JBA Aviation, Inc.