Hi kb,
Here's an item that caught my eye on the Enron unravelling. Wonder if you or any of our other illustrious contributors might care to comment on the nature of energy trading that is described in the following post:
Message 16554760
<Snip>
To:fallen_cowboy who wrote (275)
From: rupers Thursday, Oct 25, 2001 12:34 AM
View Replies (1) | Respond to of 280
Fallen_Cowboy
Check out the Greenberg's Oct 24th article at RealMoney.com regarding ENE, entitled "Enron's Bonds Tell the Tale: Stay Away."
Also, fwiw, read the following post from Yahoo's ENE board (I normally discount the morons posting there, but this one appears to have some credibility):
Re: Chapter 11 Bankruptcy
by: alpha137alpha (M/Black Hole, Center of a Gala)
Long-Term Sentiment: Strong Sell
10/25/01 12:23 am
Msg: 25071 of 25077
Good points, I come at the issue from the trading side (energy). What ENE is going to face (perhaps tomorrow) is a massive margin call in energy trades. Most of their counterparties were refused adequate credit - Ernon was the big dog and they refused to give anyone LCs - just corporate guarantees. Given what the bond world things of the ENE corporate guarantee 99% of all counterparties will be asking for LCs tomorrow or the next day or Monday. ENE won't be able to come up with 5% of what it will need. The counterparties will then require liquidation of the trades, trades made in markets where there might be only 4 counterparties actively trading. The collusive effect of 3 parties bending over lay et al will be large. This will drive massive trading losses further eroding whatever liquidity is left. Enron has trades on its book going out 20 years. Unfortunately, it cannot call in the "good" (read in the money) trades - they only realize that cash when the energy is delivered. Therefore, the only trades that will be called will be the out of the money trades - those that require ENE to caugh up cash.
Even if ENE's book is positive, which it may be, the effect of a massive call on the out of the money trades will put them into CH 11 in a day.
My advice to anyone owning this - don't
messages.yahoo.com.
<End Snip>
My sense of things is that this Yahoo poster has about 90% of his ducks lined up pretty well. I do believe the Chapter 11 prediction a tad far fetched however. Wasn't it California's AG Bill Lockyer who spoke last April about imprisoning Ken Lay with a cellmate who's opening line was "Hi Honey, I'm Spike"? Seems Lay may be getting straddled from a new direction here.....
Comments welcomed!
Cheerio, Ray |
