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AAL Undervalued, Dollar Slides and Bonds Suggest Deflation

By December 12, 2014November 19th, 2015Weekly Market Observations (Archives)

By Jim Dondero | December 12, 2014

  • As oil continues its slide, the strength of the dollar did not show a countertrend correlation, falling three percent versus the yen.
  • With the exception of China A-shares and India, emerging markets remain an area of concern as lower commodities pricing continues to affirm the downgrade.
  • Bonds showed concerning trends as HY continues to decline while US Treasuries remain strong. Bonds remain nervous in the short term and continue to suggest a deflationary environment in the long term.
  • Equities will test support with a possible 1%-2% correction. If the markets holds at this level, we expect a Christmas rally.
  • Despite a recent rise, American Airlines stock is still 10% to 20% undervalued. Lower fuel costs, affordable airfares and diminished potential for re-regulation should command a $55-$60 price. Our thoughts in more detail here.

The views and opinions expressed are for informational purposes only and are subject to change at any time. This material is not a recommendation, offer or solicitation to buy or sell any securities or engage in any particular investment strategy and should not be considered specific legal, investment or tax advice. There is no guarantee that any of the forecasts will come to pass. Past performance is no guarantee of future results.