Searching for symptoms of Enronitis has become all the rage. “The one constant in the market is the herd mentality,” says Mike Kinneally, chief investment officer at Bank of America Asset Management. “Misery loves company.”
Tyco appeared to be a classic case. Within four weeks its share price halved, bond prices would drop by $6 and recover again within one day, and prices on the default swap went from as tight as Libor plus 115 basis points to L+1150, with the widest trade struck at L+875.
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