Hi Jeff, As I was mentioning with the Enron congressional hearings reaching a fever pitch today.
It may be a time to be looking at the merchant energy companies, as potential opportunities on the long side.
It's possible that a basket of a group of these stocks may perform well over the coming 6 to 12 month timeframe.
I think there is maybe a 10-15%% chance that we are going to see another 3 or 4 of these companies go into ch. 11, but that should be a lower probablity outcome. And I may be very wrong about this. I'm not convinced that they are buys yet, but am exploring it as an idea, for more DD.
I've been kicking some of the tires on them and am going through some of the latest SSB and GS opinions on these companies later today. This has been a fast changing situation, in relative terms. I'm also checking up on the more recent Moody's and S & P downgrades and looking at the language used in them.
One might thing that if a number of additional merchant energy companies go ch. 11, it could cause widespread power and electricity disruptions, and hence would be a national security issue.
some of the firms in this area are: Dynegy, El Paso, Williams, Mirant, AEP, Cinergy, Calpine, RWE, and even Edison and PG&E.
this quote from John Allario is a great one on Enron:
What many do not understand is this risk management and trading business at Enron began with noble intentions and was based on sound policies. It was the lust to expand into new businesses and foreign markets, which caused our downfall and spawned our alleged corruption and rule bending practices. These new businesses and markets required a lot of new capital fast. Access to quick capital was acquired through hundreds of Enron's abusive and complex funding sources and concomitant financial structures, which ultimately led to our collapse. |
