Who says that history doesn't repeat itself?
This year's window-dressing experience the last couple of weeks of March was very much like what was seen in the same time frame in 2001. Here are the comparisons:
2001: Pre-window-dressing high of $46.95 on March 15. Window-dressing low of $41.40 on March 29. Percentage decline - 11.8%.
2002: Pre-window-dressing high of $35.83 on March 11. Window-dressing low of $31.00 on March 26. Percentage decline - 13.5%.
In 2001, the low was seen the day prior to quarter-end. This year, the low was seen two days prior to quarter-end.
In 2001, the pre-window-dressing high and the window-dressing low were 14 calendar days apart. In 2002, the highs and lows were 15 calendar days apart.
How do the volumes compare? Was their similar volumes and market moves for the other months of the quarters? Come on charts, hang up the window dressing theory. No way you can compare quarters given this year's massive sell-off and tanking in january. I believe selling of past week was due to FDA story (check time of release and time of decline) CIT uncertainty, and a general market uneasiness about management's credibility right now. This leaves Tyco's stock price vulnerable to the daily whims of day traders. No big shorts, no big buyers, just traders. And it will stay that way until management steps up and reestablishes credibility and direction. Nothing more, nothing less. It will also overreact to news either positive or negative. That is why no-one is making a major commitment either way. So please hang-up the window dressing scenerio for this quarter. The sell-off came in january and the majority of trades the past week were all in the 100 to 2,000 range....not many big blocks at all.
What are you talking about with a 2% interest rate? Those were relatively-long-term bonds and I read where Tyco had to pay something like a point-and-a-half over the Treasury bond rate for similar maturities. I'm absolutely sure that the interest rate was between 7 and 8 percent.
As for the $1 billion offering being upped because of demand, that wasn't the way it was written up in the news articles I saw. Remember - I was on jury duty and away from the boards. Why would you think I was tuned in to the conference call? Even if I wasn't on jury duty, I'd still be at the office. I am never able to catch the conference calls.
It seems strange to me that if all Koz wanted to do is raise $1 billion, he'd accept $2.5 billion - especially at an unfavorable interest rate. What was the big rush - the credit ratings will soon be upgraded and then such a rate won't be necessary. I'm not usually one to question Koz but this move doesn't make a lot of sense to me under the circumstances.
The interest rate is nowhere near 7%. What are you talking about? It was written up in the media as being double what they should have paid, but that is around 2% I believe. And in terms of the over subscription, that was discussed on the conference call. Swartz himself said that they upped it from 1 million to 2.5 because of the demand.
Where are you getting the info that it was a $1 billion offering that had $2.5 billion in takers? The reports I've seen merely refer to a $2.5 billion offering involving interest of over 7% - a considerably higher interest rate than the company would have had to pay 90 days ago.
Window dressing my ass. That $31.00 low was a direct result of the F.D.A. scare that took a dollar of the stock price for about half an hour.The rest of the drop in the last ten days can be attributed to G.E.s drop. You were wrong all the way down, don't be wrong all the way back up. I do enjoy reading your posts. You are far more informative than most of the posting on this board. Keep the faith...
If you don't accept the $31 low for window-dressing, you would still have to accept the $32 that was seen the day before with no adverse news from the conference call. I completely reject the FDA letter as a reason for the decline - that's silly - those letters are rather routine occurrences. The CIT debt and the exposure to Argentina are different stories, however.
I also have to minimize the effect of GE's problems. The news was pretty specific to GE - they didn't have backup lines of credit sufficient to cover commercial paper if they were faced with temporarily being locked out of that market as Tyco was. GE was also pilloried for announcing a $50 billion shelf offering of debt right after they had sold a regular $11 billion debt offering. Those events had nothing at all to do with Tyco. Also, I didn't see GE dropping precipitously when Tyco had its free-fall.
And even if Tyco dropped TEMPORARILY in the wake of the GE news, why was there no meaningful recovery in the final days of the quarter? To say that window-dressing didn't play a big part here is to dig your head in the sand.
I'm not very thrilled about your comment that I was "wrong all the way down." Other than absolute clairvoyance, there was no way to get that right AND COME UP WITH A RATIONAL REASON!
If when the stock was at $37 anyone asked for a forecast, I would have said as Phua Young of Merrill Lynch said at the time that it looked like all of the shoes had dropped and that Tyco should start to slowly recover.
Am I really supposed to know that the Wall Street Journal will have a sensationalist article about the tiny acquisitions where Tyco didn't have public PR's? Does anyone really expect me - or anyone else - to anticipate a 15-point two-day drop on such a "nothing" story and that the stock decline will actually cause the bond rating agencies to lower the ratings by three levels?
Prior to that happening, did you expect me to envision that Mark Schwartz of K-Mart would resign and that somehow it would be turned around to where traders thought it was Mark Swartz of Tyco and that the stock would buckle five points on such rumors?
Did you expect me to envision rumors about a Honeywell acquisition - and that another five points would be lost?
I don't mind admitting when I'm wrong - but fair is fair - placing blame for not predicting those kinds of flukish stuff is way beyond the pale.
On the other hand, the window-dressing was rather easy to predict. After declining by 40%, at least SOME funds would understandably not want to include the stock in the porfolio to have to show to fund-holders at quarter-end.
We had a very recent history of just that kind of window-dressing that occurred in the March quarter of 2001 - why would anyone expect this year's experience to be radically different - given the fact that the decline preceding the window-dressing was even steeper this year?
Last year, the overall market environment at the March quarter end was terrible. As a result, Tyco didn't bottom out until the third day of the new quarter. The intraday low of $40.15 on April 4 was a point-and-a-quarter below the window-dressing low of $41.40 on March 29.
After the lows were seen, however, re-accumulation by the funds and the influx of IRA money sent Tyco soaring by almost 12 points in only 11 trading sessions. By the date of the April expiration on April 20, the stock had touched $52.00. Here is the history:
TYCO INTL LTD NEW (NYSE:TYC)
Date Open High Low Close Volume
04/02/01 43.350 44.950 43.050 43.170 11,496,600
04/03/01 43.170 43.290 41.030 41.740 11,430,400
04/04/01 41.500 42.560 40.150 42.000 13,410,500
04/05/01 43.000 44.340 42.910 44.240 10,701,800
04/06/01 44.240 44.240 42.500 43.150 7,337,300
04/09/01 44.150 45.000 43.350 44.370 8,130,900
04/10/01 45.750 46.750 45.550 46.750 15,204,700
04/11/01 48.000 48.000 45.510 45.800 10,878,200
04/12/01 45.800 47.450 45.000 47.150 10,483,900
04/16/01 47.150 47.200 45.910 46.300 6,361,300
04/17/01 45.750 46.270 44.950 46.150 13,287,800
04/18/01 47.970 50.960 47.820 49.700 27,410,400
04/19/01 49.950 51.500 49.750 51.500 13,843,700
04/20/01 51.400 52.000 50.570 51.850 10,181,300