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Steve;

 

As I said, it was an intangible thing, something I was never able to put my finger directly on.

 

Here's an example.

 

A couple of weeks ago I heard a news story that Pfizer had announced coming layoffs. The reason cited was that the reduction in the work force would save the company lots of money, and allow it to become more competitive, realignment more in tune to the company's business units, etc, etc.

 

This was apparently a big deal because as I understand it, the industry in general won't do anything until another company does it first, sort of a you show me yours and I'll show you mine, but you gotta show me yours first.

 

Miracle of miracles, three days later, Pfizer is announcing that their new cholesterol drug which is in late stage trials does indeed seem to be lowering folk’s cholesterol, but it's doing it by lowering those folks into the ground, as in push'n up daisies.

 

The next thing I hear is that Pfizer is going to be having additional layoffs, and things are looking grim and all of the other crud that the news throws out at us.

 

But this is what I believe. I believe management has known for good while that the company's new drug was going to be unsuccessful and they also knew because of what they would have to eventually announce, that the stock was going to get slammed.

 

What happens to the price of a stock when a company announces layoffs? Since investors view an announcement like that has positive news, it generally rises, and such was the case with Pfizer's stock, closing up the day following the announcement and the day after that and the day after that, which brings us to $27.86, an increase of almost $1 since the announcement of layoffs.

 

It's now the weekend. Not a lot of business activity over a weekend period, so there aren't as many folks...watching.

 

Pfizer announces it's drug sux and that it's stopping trials of the drug and so forth.

 

At the end of the first business day after the announcement, the stock is down $2.96.

 

But wait. The announcement several days earlier had driven the stock up almost a $1, so the net loss to the shareholders was $1.96. Shareholders I might add, that include management.

 

Don't get me wrong, I'm not saying there is/was a conspiracy or anything even remotely close.

 

What I am saying is that IF the scenario I laid out were true, I wouldn't be surprised because it all fits with my perception of Pfizer management. I simply don't trust them.

 

And if you don't trust management to tell the truth, why would you want to give them your money for safekeeping?

 

Wax

 

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