Well said, John.
Looking at things on a given day, month, or year can sometimes seem good, and sometimes seem bad. What matters is how things look over the business cycle. Didn't a financial sage once say, "We'll know in the fullness of time."
// durability of its earnings //
If you believe Parker when he says the company can make more than its cost of capital over the business cycle, then the earnings become "durable" ... let's assume it's believable.
Any time the inverse of the PE is greater than the cost of capital, buying back shares will always lead to a higher EPS (over the business cycle) than paying off debt and reducing interest expenses. The big assumption is making more than the cost of capital over the business cycle.
Also, all companies operate under capital rationing so there are a lot of moving parts and assumptions that go into these decisions ... that why they get paid the big bucks.
// Anaylst will never recommend AAL until PRASM is trending up //
That's their problem, though I can see the concern, which I think is really that they are concerned about where margins will settle out. The other side of the wildcard of PRASM is fuel. Both are changing very fast ... where will margins be. AAL will manage that.
Zika has been around for decades. And actually there is not a causal link to microcephaly. At this time it is a link through correlation. They may find a causal link, so I'm not saying there is not one, nor am I saying there is one. Pregnant women have been going to Africa where Zika has been a problem for decades.
// taking sub 4 percent debt //
And buying back stock as well as upgrading the airline at 4% cost of debt is good as well. The cost of capital vs the PE of the stock is an important part of determining whether or not buybacks are good. As long as the investment environment isn't recognizing the value management sees (over the long run), they'll do buybacks when able. When the PE or cost of capital changes to make buybacks unattractive, I'll take dividends. AAL's management laid it out there.
And also as they said, other airlines will eventually have to upgrade their airlines as well ... why not do it at 4%.
// 4Q15 GDP-Adv came in only at 0.7% //
Q1/2015, I believe, was negative. The economy is just slowly moving along, not unlike it has for the last 5 years. If the economy stumbles, it doesn't have far to fall. Falling from 1-1.5% growth to negative isn't as bad as falling from a 3-4% rate in the days of old. Meanwhile the airlines make good money at a 1-1.5% growth. It's ho-hum until it isn't.
If the fed is going to raise it normally does it away from the election in an election year. Not that I feel they have to raise, or are going to raise.
With large funds using correlated algos, there is no way that trading reflects anything but "algo values" ... is that what our markets should be?
With commodities the CFTC made it clear that correlated commodity derivative swaps weren't going to be considered bona fide hedges but would be considered speculative positions (with limits being imposed). That was in late spring of 2014. It screwed up commodities for a decade.
These correlated algos in the stock market need to be looked at next. Until then ... they are out there running wild ... good luck.
That's like saying someone's income when young should always exceed their wealth. Historically, there is wealth creation so over the years it will grow. Anyway, it's comparing an "annual income" to an asset amount.
// the market is still "worth" over $19.7 trillions ... a "fare value" should be our nominal GDP number //
Why is that, Unc?
The DJT is just getting killed. Just a bit of hope ... maybe it will bottom soon in this area. Just an amazing drop since early December.
A line of credit included in cash? Only if it is drawn, and it is not. And then it would be both an addition to debt and cash, not just one or the other.
Hey, the cash is down from buying stock, maybe some down from buying aircraft (but a/c purchases were mostly from additional debt), etc.
unc ... weren't the labor shares already part of the diluted share count but held for labor until issued? AAL just bought the shares from the diluted share count ... paid wage taxes and gave the remainder to employees in cash?
//Profit always matters, ... Many other things also matter as well. ... Not all things are equal. //
But all things are made good with adequate profits ... just not made good at the same time.
I'm surprised the market didn't break the 1950 area to put some fear out there. I agree, this is the first level to make some bets, but something is lurking in my gut that this market bounce off the lows isn't right ... my gut isn't right all the time.
Iahphx, I agree, no matter what the reason for the selling, everything is at least a little caught up in the contagion. Maybe the S&P will hold 1950, and if not the 1870 area from the late summer.
Just wondering about thoughts about future mergers in the industry. Does a JBLU/HA tie up make sense? Maybe add another to fill in some blanks ... make it a three way? After the discussion of SAVE yesterday with the change of CEO, if SAVE changes their model, would they also make a fit? Or VA?
Yes, there are a few different percentages 90%, 100% or 110%, depending on the variability of income year to year. I agree, if you have an unusual gain in 2016, you'd only need to make estimated taxes of 110% of 2015 income. I guess the talking shirts were talking to a special situation assuming they were talking to those that know. They probably should have said (and none did), if you have an unusually large gain relative to the previous year's gain you can do that.