So, Duke, what would you suggest for everyone to look for when selecting companies in which to invest...
Look for companies who your own common sense tells you will have a chance of making a real profit to support an increase in their total market cap.
Enron was a broker, mostly, not a producer. Brokers typically don't make a whole heck of a lot of money, just like Netscapes "Toll Road" or ATT's "data repositories". Ask yourself, if I'm only getting 1% of the deal, and the ease of access makes my possition highly competitive and I have no particular competitive advantage as Buffett would require, just how much could I (or this company) make on this deal???
And if I have to do huge volume for little profit (as a percentage of the deal), there is always a danger that that volume will change.
IF after going through all of this you still like the company, then look to see if all this money is reflected in the income statement.
If it is not taxable income as Enron seems to have claimed then there should be a HUGE pile of cash (not cash equivalents) on the balance sheet.
If not why not.
I could go on. Note that I have NEVER looked at any financial statements from Enron and have NEVER done an analysis of the company.
But no matter how sharp you are, if someone wants to lie, and they are smart enough, you will believe them.
What is going to be interesting is to find out why some of these "Big Hitter" investors got popped. Maybe they don't know so much or maybe they were too lazy or maybe they just can't read a balance sheet as well as an attorney who has tax and accounting training.
I don't have a clue. |
