Article---Investing is a continued Learning Experience
Maybe I post too many articles here, but thought this may save someone some $ in the future.
What Individual Investors Should Learn From Enron
By James J. Cramer
11/30/2001 07:43
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Stop blaming the feds for Enron ENE . That's ridiculous. When people don't tell the truth, when bad actors strike, you can't do anything about it. You can't game alleged fraud. You can't talk about it ahead of time. Look, I still had to use the word "alleged."
Rooting out bad actors is darned tough. You need someone to come forward from the inner circle, who was really in the room, someone in the executive suite, to rat out everybody else based on conscience or tapes.
If you don't have anyone with a conscience and you don't have any tapes, you don't have any case until after the damage is done.
That's the importance of seeing the warning signs in the market and taking action immediately, even if it means making a lot of people angry.
Take Enron. In August, CEO Jeffrey Skilling resigned for no reason. There was tons of speculation about whether it was something personal or corporate.
Wrong question!
When people quit for unexplained reasons, and those people are important, you don't try to find a reason to stay long. You quit, too. You walk. One of my proudest moments writing for RealMoney was my column the day Skilling resigned, when Enron was at $40, in which I wrote, don't walk, run from Enron. I said the stock was a "goner."
I said that because I have traded off probabilities for years, and the probability that things are good after top execs resign for no reason is nil. Nil.
I didn't do this when the CFO of Cendant's CD CU International Division resigned for no reason in the last week of March 1998 and it cost me $18 million in 30 seconds a few days later.
Telling.
Don't confuse the issues and the lessons of Enron. It has nothing to do with the vigilance of regulators; they are doing all they can. They are beaten up and trashed everyday very unfairly. Regulators will never get you out of a stock in time, which is all we should care about in these cyberpages.
Learn from this stuff. Learn from Cendant, learn from Enron, learn from Sunbeam, learn from Waste Management WMI : When you see inklings of this stuff happening, you sell.
Period. |
