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Non-Tech : The ENRON Scandal -- Ignore unavailable to you. Want to Upgrade?

To: JBTFD who wrote (1733)	1/30/2002 12:50:13 PM
From: Baldur Fjvlnisson	Read Replies (1) \| Respond to of 5185

*All stock market collapses occur with a heavily indebted private sector, history also shows. Indebtedness is a sign of confidence. The lender trusts that the debtor will be able to pay the principal and interest on time. The debtor--if not a crook--believes the same. He does not have the money now, but he will have it later. Accelerated overindebtedness is, correspondingly, a sign of overconfidence, and in the latter stages, of euphoria. It is too easy, after the fact, to label as irrational many actions undertaken in a stage of overconfidence. These actions appeared perfectly sound to the decisionmakers at the time of the decision. For example, according to The Wall Street Journal last November, an American regional bank lent 100% of the price of a house to a person without stable income, recently divorced, and whose previous house had been foreclosed. In this stage, you and I may call it overconfidence. The Wall Street Journal used it as an example of the emerging "brave New World of mortgage financing." Historians will call it something else. "Irrational exuberance" perhaps? Experience also shows euphoria is rampant before the crash. "This time is different" is euphoria's motto, even though signs of disequilibrium appear, warning of danger ahead. In 1989, for example, price-earnings ratios of Japanese stocks climbed to ridiculous levels as the Nikkei index soared to 39,000. Despite numerous warning signals, many pundits and analysts continued to favor Japanese investments, arguing that Japanese accounting systems were "different" and that central banks now know how to keep an economy depression-proof. "This time is different," was the rallying cry. But, as we now know, the Japanese stock market subsequently collapsed by 60%, and a virulent and protracted recession ensued. Psychologists refer to this phenomenon as "cognitive dissonance," which pertains to the denial of the warning signs, the rationalization of risky decisions, and inaction. We do not want to see, we do not want to know; we rationalize and justify the unjustifiable. Euphoria leads to carelessness. In America, at present, the ratio of dividends to price is lower than the interest rate on bank deposits. Today it is less than 2%, indicating that stocks are more than 45% more overvalued than in 1929 (when the ratio was 2.89%). This means a bank deposit is providing a higher return at a sizably lower risk than stocks. Why buy stocks then? Buyers of stocks confidently expect to sell to someone else at an even higher price. If they cannot, they lose. In financial circles, this is called the "Greater Fool Theory." And again history teaches us that this theory makes its grand entrance, time and time again, before a crash.* usastores.com The Collapse Of Wall Street And The Lessons Of History

To: JBTFD who wrote (1733)	1/30/2002 12:55:51 PM
From: The Duke of URL©	Read Replies (2) \| Respond to of 5185

This is a little pissant story. Sure Enron had some effect on the price. They were the broker, for goodness sake. What are you, asleep? The problem is that California put Enron in Business. California GAVE AWAY!!!!!!!!!!!!!! its power plants. Now it is bitching because it has to buy power? More Government boondogle. What the hell is Grey Davis stepping in to buy 10 years of power at extortion rates for??? Did any body ask him too???? After the State gave away the power plants???? Now he and Dianne want to breach the contracts??? Understand what is happening first before you start ranting.

To: JBTFD who wrote (1733)	1/30/2002 2:18:43 PM
From: Mephisto	Respond to of 5185

<<Robert McCullough, a consultant whose clients include several Northwest utilities, testified that in the week after Enron announced its bankruptcy, the "forward price" of electricity in the West fell sharply. Enron had been a key trader in this market, which is used as a hedge against future power price changes and is unregulated. "That certainly raises the question about whether Enron was manipulating the West Coast market" by keeping prices artificially high, Sen. Ron Wyden, D-Ore., said in response to the consultant's testimony.>> Message #1733 from Mark Anderson at Jan 30, 2002 12:45 PM story.news.yahoo.com.