Traders in the market (what little is left of them) always seek out the investment thesis with the highest upside/downside ratio to a delta in any fundamental forecast. In other words, what derivative play to a secular trend generates the higher IRR? A good example is the ABX which allowed contrarians in 2006 and early 2007 to bet on a collapse in subprime and put on a "short" at next to now cost of carry, with practically no downside if the thesis ended up being wrong, and unlimited upside (just ask Paolo Pellegrini and Kyle Bass). Well, as we just learned, one of UBS "surprises" for 2012 is that oil could drop below $70/barrell. Is this possible? Absolutely - should the Eurozone collapse, and/or China experience the long-overdue hard landing, a deflationary shock (which will naturally only precipitate the central banks into an even more rapid devaluation of legacy paper currencies) can and likely will send crude tumbling (Iran geopolitical concerns aside) as happened back in early 2009 when crude collapsed to around $30/barrel however briefly. So is there a better option to play crude downside than merely shorting CL? Perhaps one idea with better "upside" in case of a deflationary collapse in crude is to get bearish on Boeing instead. As the following chart from Goldman shows, 3 of the 4 biggest widebody (and thus most profitable) aircraft orders are from Gulf airline companies - Emirates, Qatar and Etihad. Together, they amount to about 450 profitable future orders... which could well be cancelled if Gulf states revert to their panicked state last seen so vividly in the spring of 2009 when they were cancelling orders left and right.
The thesis is quite simple - should crude collapse, and deflation reign, for however many brief months (remember: central banks only need to press a switch to add any number of zeroes to the global "monetary" reserve), it will be precisely these companies that will cancel any and all standing orders for delivery. Of course, in addition to Boeing, one may also extend this thesis to Airbus, but with the amount of subsidization by the broke European continent, it is quite possible that in a downside case Airbus actually does better than Boeing. Of course, if and when Europe blows up all bets are off.
As for the other three of the top 6 carriers with widebodies on order, they are all China-related - Cathay, Singapore and Air China. So yes, a global deflationary collapse (once again, pre-central bank response) will force not only the Gulf companies, but those operating out of China to hunker down as well, to the detriment of shareholders of companies who believe that an order is an order, only to realize that orders all too often can be cancelled at any given moment.
source: Goldman Sachs