Unfriendly Skies

Maybe this isn't so surprising. Like most Americans, I was dismayed by the news and the likely inconvenience of future trips to the airport.

But after a brief vow to curtail flying, I began to reconsider the positive aspect of the news. Apart from the most obvious — the plot was foiled — I was struck at the lack of progress in the terrorists' cunning and imagination. The idea of smuggling liquids on board multiple aircraft that could be combined into a bomb isn't new. That's a re-run of a decade-old Philippines-based plot to blow up airlines over the Pacific, which was also thwarted. Though some commentators were speculating that more people could have died than in the World Trade Center had the plot succeeded, there was nothing about this latest plot to rival the sheer shock and horror that greeted Sept. 11, which happened when most of us had never in our wildest dreams imagined someone flying commercial planes into a New York City landmark. Hollywood has come up with scarier scenarios than this latest one. Perhaps this is simply a reflection of how jaded and wary we've all become, but this plot failed at the most elemental level: It didn't scare.

I heard plenty of grumbling about the long lines and added inconvenience at airports, but even that was pretty muted. For some reason my name now comes up routinely on a computerized list of suspicious travelers. I can't use the automated check-in kiosks, everything I carry is searched, and I virtually undress before passing through security — and still get patted down due to some symbol on my boarding pass. I was mildly annoyed at first, but now I'm used to it, and hardly give it a thought. I'm not eager to check my luggage. I haven't checked a bag in the eight years since my luggage disappeared on a flight from South Africa. But the idea of a carry-on-free flight has a certain appeal, with no more jammed overhead bins, crushed suit jackets, and fellow passengers who take forever to get their luggage in the bin and make you wait while they struggle to get it out. And have you seen some of the junk people carry on?

In any event, some of the more dire restrictions, like banning water, seem sure to be lifted once the dust settles. Technology also promises to supply more effective screeners. Still, there's no reason to get complacent. It took years for Al Qaeda to return to the World Trade Center after its first attack. But last week was evidence that terrorists aren't gaining in their war on the global economy.

None of this makes me any more enthusiastic about airline stocks, which I believe individual investors should avoid. Even though the industry has finally returned to profitability, the history of airlines is filled with investor disappointment. Airlines serve many constituencies — customers, regulators, employees, unions — and their own investors always seem to come last. No sooner do profits start flowing than someone finds a way to siphon them off, which is why news articles about airlines turning a profit strike me as a signal to sell. The closest I want to come to owning an airline stock is a transport exchange-traded fund, which should benefit if (when) oil prices drop.

Speaking of the global economy, foreign markets seem to have reacted more positively to the Federal Reserve's decision to keep the federal-funds rate at 5.25%. I've been surprised by some of the harsh criticism and the gloomy comparisons to "stagflation" that greeted the decision here in the U.S. For those of you who actually lived through the inflation-ravaged 1970s and early '80s, you can easily dismiss those comparisons as hyperbole.

Back then, policy makers would have fallen to their knees in gratitude to have the 2.9% core inflation we're experiencing. And history buffs may be interested to know that the federal-funds rate approached 20% in the early 1980s.

For all the talk of rising interest rates, we're still in an era of benign to low rates, especially with long-term rates hovering near 5%. If the Fed has erred on the side of moderation, and if new data indicate a need for further rate increases, the Fed can raise rates again in September. It will only have lost a month, which is hardly catastrophic.