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Non-Tech : Tulipomania Blowoff Contest: Why and When will it end?
YHOO 52.580.0%Jun 26 5:00 PM EST
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To: Bull RidaH who wrote (913)1/30/1999 12:29:00 AM
From: Doug   of 3543
 
David: There has been the odd stumble but no TUMBLE.

The high fliers have a rescue plan based on mutual survival. As you have seen ,when one Company has beaten the street that Company announces a take over of another at inflated prices. By so doing they pool their assets and credit the excess price as Goodwill. The take over Company now writes off the Goodwill creating an artificial loss which safeguards future earnings being taxed. This is the reason why Takeovers are always done when the Market is sky high and not rock bottom.

You and I aim to make our Big Ticker purchases at the lowest price. You must wonder why takeovers do not follow the same principles.Company take overs are generally made at the highest price to create Goodwill and then amortized as a Loss. This safeguards their actual earnings from any Taxes to Uncle Sam. (The UNIPHASE/JDS FITEL deal valued at $6b hopes to amortize $2.5b as Goodwill.)

Once there is Goodwill to be amortized, that Company now becomes an attractive take over target to another Company that has similar interest but has excellent earnings and high taxes.

Timing is most critical and any Tumble must be between earnings reports so that a takeover announcement is near impossible.
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