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Rich,
I did not catch the WSJ article. My comments are based upon past
observation.
I believe it is SOP that Insurers use for highly leveraged companies.
The Enron and WorldCom situations just gave them more fodder to raise
rates.
If the other companies you mention default, then we are in even
bigger trouble.
John
------------------ Reply Separator --------------------
Originally From: "FXTrader" <fxtrader@xxxxxxxxxxx>
Subject: [RT] Early Warning Signals - This Indicator Foretold All?
Date: 07/17/2002 04:45pm
Not sure if anyone caught the article in this mornings WSJ. It was
titled,
“The Early-Warning Signal For Stock Trouble”. It was quite
interesting to
say the least. The article pointed out how the credit-swap market
usually
tells you several months ahead of time, when a company is having
trouble.
The credit-swap market is basically insurance that lenders, big
bondholders,
amongst others, purchase to protect against a borrowers defaulting on
bonds,
loans etc.
What was pointed out here was the premium paid for this insurance
goes up
dramatically months before the corporate debacle occurs. This
happened with
both Enron and WorldCom. The suggestion was made this could be an
early
indicator for companies about to have major trouble.
The article went on to point out the same premium increases are
happening
for Sprint, AT&T, AT&T Wireless, Qwest and yes, you guessed it, AOL
Time
Warner.
Is this a real indicator or just a fluke? It will be interesting to
see how
things play out over the next six months.
Rich C.
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