Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : High Tolerance Plasticity -- Ignore unavailable to you. Want to Upgrade?

To: Think4Yourself who wrote (12237)	2/5/2002 12:12:20 PM
From: Raymond Duray	Read Replies (1) \| Respond to of 23153

John, Re: Could they have been anticipating a potential over reaction from their banks involving the credit lines and be trying to take advantage of the credit lines while they were still there? First, you fail to understand the seriousness of the situation. You talk of "over reaction". It would be far more useful for you to talk about "reaction" or prudence or basic business sense. There is a pattern to these credit line drawdowns. Enron did, Global Crossing did it, K-Mart did it, Level 3 is in the process of doing it, TTBOMK. It is an obvious red flag. It is a last gasp grasp for a breath of air by a drowning business. As retail speculators we have no insider information, no investment bankers work-ups, no auditors working papers. All we have is the ability to deductively predict a future course of events with very few signposts to go by. Tyco has made it abundantly clear to the informed speculator that it is bent. Maybe not rising to the level of an Enron, but that report yesterday that they'd bought 700 companies and conveniently failed to mention it in three years of financial reporting is a three alarm bell red flag. The heavily footnoted byzantine arcana of the financial reports, another red flag. You may, along with a few other stubborn ill-informed outsiders, have faith in this company. But the tape today said this sucker is going down. Believe it. Just one man's opinion...... Good Luck, Ray :)

To: Think4Yourself who wrote (12237)	2/5/2002 2:59:53 PM
From: Raymond Duray	Respond to of 23153

JQP, Spotted this and thought of you: thestreet.com Good Reason to Be Afraid of Fear Itself By James J. Cramer 02/05/2002 01:16 PM EST Can fear itself bring down a company? When I look at what happened with Tyco (TYC:NYSE - news - commentary - research - analysis), I have to believe that if the company has a lot of debt, the answer is yes. You see, if a company needs to finance itself, it needs good ratings to be able to borrow at reasonable rates. Companies can't go to Capital One (COF:NYSE - news - commentary - research - analysis) or Providian (PVN:NYSE - news - commentary - research - analysis) and get capital as if they were applying for a credit card. They can't just tap the equity markets constantly. They need to be able to borrow money and borrow money fast without a problem. To do that, they need to be rated. The rating agencies, under huge fire for not downgrading Enron (ENRNQ:OTC BB - news - commentary - research - analysis) more aggressively, are now moving swiftly, and it is really freaking people out in the bond market. The bondies watch the stock market, too. They know that when stocks vanish overnight, their bonds could do the same. So fear itself is worth fearing because it causes the rating agencies to panic, which causes the bondholders to panic, which causes the stockholders to panic, which reverberates right back to the rating agencies, who then downgrade again! Talk about a horrid vicious circle. Of course, if the companies don't borrow money, the fear is meaningless. The companies, if they are doing well, just stand there and buy the stock back and take advantage of the fear. But that can't happen if you are heavily indebted. Heavily indebted companies, companies like WorldCom (WCOM:Nasdaq - news - commentary - research - analysis) or Nextel (NXTL:Nasdaq - news - commentary - research - analysis) or Qwest (Q:NYSE - news - commentary - research - analysis) or Broadwing (BRW:NYSE - news - commentary - research - analysis), to mention four that are in the crosshairs of this ratings-bond-stock machine gun, can't break the spiral because they can't buy back stock. They need the money to pay the debt. Without confidence, you get these drawdowns. What breaks them? Typically, acquisitions by others. That seems to be the real problem here; many of the telephone companies that are in this vortex aren't worth anything to anybody because you can build new phone lines much more cheaply than you can buy them, even in bankruptcy, and we have too much capacity to begin with. These drawdowns, unfortunately, are rarely broken by mutual funds deciding enough is enough. They are too scared, and too sheeplike. So they go on and on and on until, well, they venture into the valley of the shadow of bankrupt companies. Which is where they all seem to be headed, regardless of the protestations.