Winglets

Remember George Bush’s magic wand? A few years ago he said that if he could wave a magic wand and lower oil prices, he would. I cringed at the time, thinking about the magic of prices, and what they communicate to everyone in an economy. If we mess with that language by distorting the price signals, we miss out on all sorts of important effects.

One example is winglets. You know, those little upturned jobs at the wing-ends of newer airliners. It turns out that this design saves the plane about 2% of its fuel cost each trip. And they have the added plus of smoothing out the ride.

But they cost about a million bucks to put on each plane. With jet fuel prices higher, the payback period for re-fitting the older airframes is a lot shorter now. And winglets are sprouting up everywhere.

This is just one example of the magic of prices. In a free market prices communicate incentives. If someone waves a wand and distorts this, we’ll all have a lot bumpier ride.


Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2014-09-03T20:23:11+00:00 July 29th, 2008|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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