Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Minyan Mailbag: WorldCom Delayed Reaction

By

Pleasure delayed is not pleasure denied!

PrintPRINT

Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next column with that very intent.

David,

Yesterday on the Buzz, you mentioned May 9, 2002 as an important date for WorldCom WCOM (the day it went to junk status or filed for bankruptcy?).

I have looked at several charts (S&P 500, Nasdaq 100, and a couple of junk bond funds), but I have not been able to see any delayed reaction. Was May 9, 2002 the day that they went to junk? What market showed the delayed reaction (stocks or high-yield debt)?

Thanks,
Minyan Ryan

Ryan,

Thanks for the inquiry.

NBI
May 9 = 591.96
May 15 = 631.41
July 10 = 403.98

The biotech sector rose in the first week after the debt was downgraded. Then it turned over and bottomed nearly 200 points later (-31%) in July.

COMPQ
May 9 = 1650.49
May 17 = 1741.39
October 9 = 1114.11

The NASDAQ Composite also rose in the first week after the debt was downgraded on May 9. A slight rally started in July, but it failed and the low for the year was put into place in October over 500 points (-32%) later.

As I noted to my own subscribers in our last communication, it is illogical to lay blame for the entire failure of the market in the time periods noted above at the feet of the WorldCom downgrade. However, I've become increasingly convinced over the last year that the downgrade was a major contributing factor. Given the magnitude of the effect (30% drops must be avoided), the much larger size of the GM debt in comparison, and the historical precedent from 2002 -- caution seems warranted.

Regards,
David

No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE