Henry, Kenneth Lay may not have totally understood some of
the intracicies of the financial dealings of ENE.
It seems that he had stepped away from some of the day to
day things the past year or two.
Also, the transactions and business plan made sense in
Dec of 1999 or March of 2000. ENE could have most likely
sold their broadband segment for 30, 50 or even 80 billion.
Then they would have looked like geniuses. Great asset
managers.
The valuations in a bubble sometimes don't look quite as
wacky until the post mortem is done.
The music stopped playing and ENE did not find a chair
quickly enough.
Just look at Bernie Ebbers of WCOM, he took a tiny, tiny
company from the Tennesee in 1989 and conducted acquisition
after acquisition and grew the company into WCOM.
By the year 2000, he'd have to be assessed as one of the
very smartest people on the planet when it comes to the
telcom area. But yet he got caught being massively long
WCOM and on Margin!! and needed a 200 Billion Loan
from WCOM so that he did not have to sell out at the bottom,
and really crush the stock as the market digested that
selling.
Look at the Sid BASS and how they had to liquidate,
185 million shares of DIS, at 15.50 this fall to meet a margin call of 2 billion dollars.
The award for the largest margin call met by a single
individual yesterday goes to Sid Bass, one of the
(somewhat less) wealthy Bass Brothers from Texas.
Somehow, Mr. Bass incurred a margin call approaching $2
billion that he satisfied by handing over to Goldman
Sachs 135 million shares of Walt Disney Co.
Right up their in the Nelson Bunker Hunt league -g-
the American Business Ethos of the 1990's was to push
the envelope, be very aggressive and innovate;develop the
first mover advantage. Had ENE not done this and done it
well for a number of years, ENE's demise would not be
front page news.
The question is at what point does a corporate vision
part ways with economic reality.
Michael Dell and Larry Ellison of Oracle, both had severe
cash flow crises back in the 1990-1991 timeframe, both
stocks had massive sell offs and both CEO's worried about
possible bankruptcy.
I'd say that if the economic recession and bear market of
1990-1991, had snowballed into a 1974-75 style bear market
and severe recession, they both would have been wiped out.
It's very possible that "The Second Bear Bond Market of
1946-1981" (the first being the one accompanying World War
I). Created the Macro Interest Rate cycle and the
structural business changes that propelled this secular
Bull Market in Equities.
The Second Bond Bear Market,as you know, culminated in the
Treasury's paying nearly 16% for long-term money; and a FED
Funds rate that was near 20%.
Shorter term rates spent time north of 20% back in 1979 and
then again going into 1981. I believe the Prime rate topped
out at 21% and change.
I find it quite ironic that the Treasury announced the
end of the 30 year bond auction, just as the US Government
was moving back to deficit spending, after several years of
surplus. I'd say that US Government tax receipts were
significantly enhanced over the past 3 or 4 years due to
the very powerful bull market. The huge corporate
profitability, coupled with significant capital gains in
the corporate and individual sector, created a Wave of
Inflated tax receipts that was never more sustainable than
the market bubble mentality and equity valuations
in the stock market itself.
Not sure if I feel better or not now that I've vented -g-
John |
