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Even after doing multiple assignments on Enron and going through multiple lectures about it, I am still not hundred percent sure what Enron's business was. The

Even after doing multiple assignments on Enron and going through multiple lectures about it, I am still not hundred percent sure what Enron's business was. The most easy to grasp description of their main activity was they were into energy based commodities trading. Yet they had their sticky finger in every industry. It was such a massive complicatedly diversified company, I think it is reasonable to say if it wasn't whistleblowers we wouldn't have never realized what went wrong.

WoahNoun 5y ago
The natural gas pipeline industry had it's regulations changed around '85 that made it so pipeline operators had to let anyone use their pipes. This meant Enron didn't have to actually own pipes. They could just buy and sell natural gas from the wellhead to the refinery. They made a lot of money doing this. They then tried to copy that to anything else that can conceivably move over a fixed, expensive infrastructure like electrical power lines, broadband lines, water pipes etc. They wanted to be in heavy industry with an "asset lite" model. The Enron physical pipeline business still exists as Kinder Morgan as Enron sold it off because they didn't want to deal with the physical infrastructure anymore. Everything else was just financial engineering.
deltree7 5y ago
Enron, Lehman Brothers and similar companies would have easily thrived in the 2020s. Up until 2015, there was really a true cost of capital. Investors wanted to see real products, real cashflow, else you head straight to bankruptcy. 2015+ changed a lot of things. You can fraud / lie / deceive your way to success if you form a cult around it. Trump, Nikola, NFTs, Crypto, Hertz, Gamestop, AMC, Blackberry, Tilray, Sundial have all shown you can astroturf, gaslight, propagandize a subset of population to fund your fantasies in a world awash with capital and very few assets to invest.
- dan-robertson 5y ago
  Hertz feels weird to me as an example for two reasons: 1. The company wasn’t really leaning into the thing where they became a meme stock when they filed for bankruptcy for some reason. They did start an at-the-market offering but that was stopped pretty quickly by the courts. 2. It did actually go up for non-meme reasons so the crazy people buying stock of a bankrupt company, or rather, the people who believed what they read on Reddit and bought the stock and didn’t sell it, we’re vindicated as the company did somewhat recover.
  - anyfactor 5y ago
    I was there when Hertz became memefied. Memefication always starts with atleast some good research. There was three schools of thoughts with the Hertz saga- 1. Bankrupt companies are required to buyback their shares from the market. If they force the share price to go up the company is required to buyback the stock from the market regardless of the price. 2. People expected that Hertz would get a lifeline from a hedge fund. 3. Hertz car inventory still had value. If you look at used car prices you can see this sentiment was true. They thought Hertz had plenty of good assets that was just affected by the pandemic but after the pandemic prices would go up. So essentially, it was backed by some logic but when it comes to finance logic validity of that is subjective.
- moneywoes 5y ago
  When interest rates rise will this still be true?
  - andrepd 5y ago
    Will they ever? The crisis hit in 2008, and in 2022 we've still not recovered, by many metrics, to a pre-2008 level.
- anyfactor 5y ago
  # Rant It all started with Tesla. Everyone thought Tesla was a load of BS. But post 2018 the sentiment became Tesla will keep growing until the last short investor held their breath. Tesla showed that classical economic value means squat when ultimately market sentiment determines the price of an asset. I with hundred of people created bots to track the CEO twitter feed to determine a stock price. And it worked to some extent. Head down to dogecoin subreddit, and you will see everyone there is praying and hoping a car manufacturing company CEO shitpost about their coin which might trigger another spike. And this time they will sell for sure. If you are in your 30s you would remember Facebook games like Barn Buddy or Farmvile. The fucked up thing is that now you have similar games where you harvest NFT game characters which are supposedly worth thousands and millions of dollar equivalent money. I sat through the GME senate hearing and politician interviews. Even a US senate member acknowledged that what makes Tesla's valuation fair but Gamestop's valuation unfair? Based on the accounting numbers they are exactly the same thing. GME has its own meme leader a, a guy who sold his dog toys business to amazon for a billion dollar. I remember people talking up patent, innovation and charismatic leadership of Tesla. I see the same passion in GME people when they talk about GME and some they were NFT deals. Rant over.
hashimotonomora 5y ago
Dealmaking. It was hedge fund run by M&A fanatics.

WoahNoun 5y ago

The natural gas pipeline industry had it's regulations changed around '85 that made it so pipeline operators had to let anyone use their pipes. This meant Enron didn't have to actually own pipes. They could just buy and sell natural gas from the wellhead to the refinery. They made a lot of money doing this. They then tried to copy that to anything else that can conceivably move over a fixed, expensive infrastructure like electrical power lines, broadband lines, water pipes etc. They wanted to be in heavy industry with an "asset lite" model. The Enron physical pipeline business still exists as Kinder Morgan as Enron sold it off because they didn't want to deal with the physical infrastructure anymore. Everything else was just financial engineering.

deltree7 5y ago

Enron, Lehman Brothers and similar companies would have easily thrived in the 2020s. Up until 2015, there was really a true cost of capital. Investors wanted to see real products, real cashflow, else you head straight to bankruptcy. 2015+ changed a lot of things. You can fraud / lie / deceive your way to success if you form a cult around it. Trump, Nikola, NFTs, Crypto, Hertz, Gamestop, AMC, Blackberry, Tilray, Sundial have all shown you can astroturf, gaslight, propagandize a subset of population to fund your fantasies in a world awash with capital and very few assets to invest.

dan-robertson 5y ago
Hertz feels weird to me as an example for two reasons: 1. The company wasn’t really leaning into the thing where they became a meme stock when they filed for bankruptcy for some reason. They did start an at-the-market offering but that was stopped pretty quickly by the courts. 2. It did actually go up for non-meme reasons so the crazy people buying stock of a bankrupt company, or rather, the people who believed what they read on Reddit and bought the stock and didn’t sell it, we’re vindicated as the company did somewhat recover.
- anyfactor 5y ago
  I was there when Hertz became memefied. Memefication always starts with atleast some good research. There was three schools of thoughts with the Hertz saga- 1. Bankrupt companies are required to buyback their shares from the market. If they force the share price to go up the company is required to buyback the stock from the market regardless of the price. 2. People expected that Hertz would get a lifeline from a hedge fund. 3. Hertz car inventory still had value. If you look at used car prices you can see this sentiment was true. They thought Hertz had plenty of good assets that was just affected by the pandemic but after the pandemic prices would go up. So essentially, it was backed by some logic but when it comes to finance logic validity of that is subjective.
moneywoes 5y ago
When interest rates rise will this still be true?
- andrepd 5y ago
  Will they ever? The crisis hit in 2008, and in 2022 we've still not recovered, by many metrics, to a pre-2008 level.
anyfactor 5y ago
# Rant It all started with Tesla. Everyone thought Tesla was a load of BS. But post 2018 the sentiment became Tesla will keep growing until the last short investor held their breath. Tesla showed that classical economic value means squat when ultimately market sentiment determines the price of an asset. I with hundred of people created bots to track the CEO twitter feed to determine a stock price. And it worked to some extent. Head down to dogecoin subreddit, and you will see everyone there is praying and hoping a car manufacturing company CEO shitpost about their coin which might trigger another spike. And this time they will sell for sure. If you are in your 30s you would remember Facebook games like Barn Buddy or Farmvile. The fucked up thing is that now you have similar games where you harvest NFT game characters which are supposedly worth thousands and millions of dollar equivalent money. I sat through the GME senate hearing and politician interviews. Even a US senate member acknowledged that what makes Tesla's valuation fair but Gamestop's valuation unfair? Based on the accounting numbers they are exactly the same thing. GME has its own meme leader a, a guy who sold his dog toys business to amazon for a billion dollar. I remember people talking up patent, innovation and charismatic leadership of Tesla. I see the same passion in GME people when they talk about GME and some they were NFT deals. Rant over.

hashimotonomora 5y ago

Dealmaking. It was hedge fund run by M&A fanatics.