Enronitis Germ Lives on in Utilities
By James J. Cramer
10/10/2002 09:28 AM EDT
Enron lives!
That's right, we have discovered the spawn of Enron in just about every major utility stock. And it is the spawn that, like an Alien nightmare, pops out of the victim's stomach, all teeth and beady eyes, ready to take all the shareholders' money away.
El Paso (EP), Dominion (D), Duke (DUK), TXU (TXU), Northeast Utilities (NU) all tried to be something they weren't, which, after all, is the definition of an Enron. And, like Enron, they didn't tell us there was any cost to doing all of these fancy new businesses.
But there were tons of costs and hidden triggers and potential ratings downgrades, and all of the other stuff that we thought certification of financials was going to put an end to. We thought somehow that Sarbanes-Oxley meant more disclosure and fuller understanding of what was really happening at the companies. Now we know otherwise; it was just some sort of salve meant to make it so the politicians got off the hook for Enron. Certification, while meaningful for some, meant nothing for others.
Most of these utilities have totally impenetrable financials as a result of Enron. They did things we couldn't figure out to make their businesses grow faster. They did things overseas that we thought didn't matter but have turned out to matter hugely.
And now we are stuck with a group that is in full-fledged crash mode. Who knows where it will lead? Banks are on the hook to all of these utilities in some fashion. We know that from Enron, too.
The upside was never great from these stocks. The downside has become unquantifiable.
In other words, stay away. |
