Nice to see today's move, but this action is very difficult to play. Very much above my pay grade. I wonder how many people really understand what's going on here.
Interesting. Just yesterday I responded to a thread by saying "In the next day or two, it will probably reverse when the analysts reiterate how much they love Parker and the new company."
I guess I should have put my money where my mouth was. :) I probably would have, had we seen another buck or so discount.
I don't think oil has much to do with this move. It's not deviated from the recent range. And NOBODY is really worried about oil right now. I mean, it would be crazy to do so. Everyone who invests in airlines knows that market is manipulated and unpredictable. But the odds of it going sky-high with Iran back online and the US Oil Revolution going gangbusters is extremely remote.
As far as the reason for the LCC drop, the answer is that nobody knows. My guess is that it's regular rotation between sectors, magnified by some arbitrage plays with AMR. In the next day or two, it will probably reverse when the analysts reiterate how much they love Parker and the new company.
I am afraid that there's too much "financialization" in this stock right now to make any meaningful price prediction. Unless you're really an arbitrage expert and can figure out who's moving what money around. I'd advise waiting for the dust to settle before making any move into or out of the stock.
Well, here's the problem. As I've noted for years, oil prices are USUALLY phony, at least if you expect them to react to supply and demand fundamentals. They don't with any consistency, and haven't for a decade now, due to the "financialization" of the oil market by Wall Street.
I read recently that there was a dinner party of oil traders recently and they were asked to secretly write down their prediction of oil prices for next year. Unsurprisingly, almost all of them thought oil would be much cheaper next year. But will it be? I'd think so, too, what with the American Oil Revolution and the return of Iranian oil. But that's a low confidence bet. Everyone who uses common sense to predict oil prices has generally been wrong.
So, bottomline, I think you're right. But I wouldn't advise betting money on that prediction. The oil market is just too screwed up to bet on fundamentals.
It's worth watching the Bethune interview on CNBC this morning about the merger (you can see some of it by clicking on the link on the main yahoo stock page for LCC).
Long time board readers may remember that my yahoo ID is a tribute to the two centers of creative airline management (IAH-Continental and PHX-then America West). It's a bit sad that neither city will now be home to an airline headquarters, but it's pretty obvious that these two management teams -- and their shareholders --were the big winners in the sector the past decade or so.
Ironically, Bethune and Parker were sometimes bitter rivals a decade ago. Bethune even famously predicted that Parker's airline (AWA) would go broke. It's been nice to see that, since his retirement, Bethune has come to recognize that Parker is his true successor for the title of Best Airline CEO in America.
As you might expect, Bethune was blunt, honest and accurate in his assessment of the merger deal. As I noted in August, this seemed to be the case of a new cop on the antitrust beat (Bill Baer) trying to make a name for himself and over-reaching at the same time. Bethune hit that point hard today. I'm glad to see he's still "being Gordon," and airline investors should always listen to what he has to say about the industry.
Right, it's not a bad deal for LCC. The only thing they're really giving up are some flights at DCA and a very few flights at LGA. Honestly, I don't think this deal is too good for the flying public (as many pax will lose as win), but at least the Justice Dep't can say they got SOMETHING. If you liked the deal beforehand, you'll still like the deal now.
Whatever the oil market is, it's certainly not a free and fair market based on the supply and demand of the product. Today, it's getting whacked because the Euro is down. It's an asset class that tends to fall on a stronger dollar.
I did see that report about the Brent manipulation. I've noted for years that the Brent contract seems to be the epicenter of the oil price manipulation. Ten years seems about right. This all started early last decade, when supply and demand stopped being the driving predictor of oil pricing.
Right, if the gov't expects "significant divestures" in the way an airline analyst would characterize that term, this case is going to trial. I guess the market started to understand this as the day wore on. What we don't know is what they're really talking about. When people are acting irrational, you have to believe they will continue to act irrational. I can't believe this case gets settled much before trial, because the gov't is going to have to recognize that their case is a loser and that they need to treat LCC and AMR about the same as they treated all the other recent merger participants.
Oh, I fully believe that the DOJ's lawsuit is both misguided and stupid. But that was obvious when they filed it. What has happened today that suggests they want to be logical and reasonable? Calling for "significant divestitures" is neither logical nor reasonable. Now it very well may be that they're prepared to take little and "declare victory" -- which, as I've said in the past -- would be a very smart strategy for them to undertake. But what have they done today to suggest that they will take that path? I'm not seeing it in the public information. There seems to me to be an equal chance that they will continue to be unreasonable, and that this case will have to (stupidly) go to trial.
When I hear "significant divestitures," I think the gov't is still being unrealistic and treating LCC worse than it treated DAL, CAL and LUV on their acquisitions. It makes me think they'll have to beat the gov't in court.
Obviously, somebody thinks they know something more than what was publicly said here.
It's ironic because a week ago I was saying here that I thought UAL was worth considering around $30 but there wasn't any rush. Whoops! In this go-go market, anything that offers even plausible value gets scooped up.
Not sure if it's correct, but CBS affiliate is reporting that the shooter is an off-duty TSA agent. Wouldn't that be special -- the TSA agents make the airports less safe!
Despite the nonsense being broadcast, I understand from a cursory review of twitter that Fed officials say the incident is over. So the odds of the "lone loon" have increased to about 90%. If you're short, you've probably got 5 minutes to cover.
And notice nobody is!
We don't know what's going on here, but if I had to bet -- based on the shooting du jour we seem to get in the USA every week or two -- it's a lone loon. We'll see. Lone loon nobody cares about; it seems like the price of living in the USA.
Pretty ridiculous, but it seems obvious to me that airline stocks are up today because it looks like the oil market is breaking down. Why is the oil market breaking down? Oh, I could give you some nonsense supply and demand reason, but it seems pretty clear to me that the real reason is that there is less FINANCIAL demand for oil futures now. Note how the price is down with the Euro reversal of the past few days.
Why we allow this BS to go on, I have no idea. Of course, these days, one has to expect it.
Right, LCC will be fine without the merger as long as we have our current, excellent management. They will figure out a way to make money.
That said, I'd rather them have the much better AMR assets to manage. There's just more potential. You don't want to have to compete against airlines that are much bigger than you. That's just not right, and that's why the government's antitrust case is so obviously wrong.
Yeah, there could be something here. Or not. We're really not sure of anything right now. We're also not sure who "leaked" the story. It almost certainly wasn't the LCC folks, who tend to be tight-lipped about these things. It could be AMR, or even the gov't.
As I said, this is a hopeful development, but I wouldn't pay a lot more for the hope. The 20 cent gain today sounds about right. Of course, it could help the momentum of the stock, and result in further gains. Everyone likes "progress".
OK, story just hit the wire. LCC/AMR are preparing a settlement PROPOSAL -- there is no deal yet. As I suspected, CNBC did not report this correctly. No word on what the DOJ might think of this proposal, so it's a hopeful story, but not one that really means very much.