Enron was sacrificed. The people who ran it used it for their own private gain and then sacrificed it.
That may not even be totally true, but to the best of my knowledge, it has been openly admitted that Enron was engaged in manipulating the prices of high-leverage investments simply to redistribute wealth toward particular recipients. They bought certain investments, then took actions to increase the value of those investments.
In that regard, the behavior of the leaders of Enron is not at all unusual. They were just trying to make their own investments be profitable, like the owners of most any business. It was just their methods that were distinctive.
Enron was involved in the electrical power business in California. Enron had the authority to turn off it’s own electrical plant operations in a sudden sequence that would create huge shifts in the supply of electricity to the region. By suddenly reducing the supply of electricity during a time of steadily high demand, Enron could start price spikes in electricity that could then escalate in to huge speculative frenzies.
Because they could trade those predictable price rises for great profit (through investments like leveraged futures and “call options”), they may have intentionally created those price spikes by cutting off supplies of electricity from their own power generating stations. The price spikes were predictable to them because they knew that they were about to reduce production at a bunch of their plants all at once (even if they blamed it on technical problems or whatever). Even if Enron was eventually bankrupted, if the leaders behind Enron made huge private profits by manipulating prices using their instrument (Enron), their instrument served it’s purpose and perhaps then was discarded rather like a piece of used toilet paper (with Enron’s filing for bankruptcy).
Now, it does not matter really to me if anything I just said is specifically true. It could be that Enron was not influencing the supply of electricity, but was more involved in influencing the supply of oil or toothpaste or silver (like the Hunt Brothers in the late 1970s). Controlling supply is the best way to control price.
“I could care less what puppet sits on the throne of this empire. The one who controls the money supply controls the empire and I control the money supply!”
– Mayer Von Rothschild, paraphrased from what he apparently said back in the late 1700s
There are two primary ways of influencing price: influencing supply of something and influencing demand for something. Demand involves PR and marketing and legal subsidies and things like that. Supply can simply be cut off (or suddenly increased, like when Walmart “floods a market” to drive a competitor out of business by selling something for less than what a competitor can sell it, even at a loss to Walmart, but then taking over the competitor when they are weak).
Economics is war. War is economics.
Many people do not understand the issues and risks involved in things like the real estate mortgage industry or the insurance industry. They will be “milked. They have been drawn in through advertisements and PR and hype shows and commission-earning salespeople (AKA realtors etc) who actually know very little about the core purposes of the industries in which they may be employees, just like the average person working for Enron had no idea how much money the leadership of Enron was privately collecting through the mechanism of Enron. Even when leaders simply embezzle money from a corporation, they are obviously doing that as a sacrifice of the corporation’s financial stability.
So, the masses are duped in to pouring their investments in to real estate and stocks (for instance) and then the masses are “milked” through the mechanisms of markets and legal systems and so on. The first stage is the PR or propaganda stage, with propaganda about a particular legal system being central to the entire scam, and then the concentrating of control of supply, then cutting off supply (like supply of oil or supply of credit/mortgage financing).
If the conspirators can convince people that the conspirators are trying to “rescue” the masses from some other conspirators, that is perfect. Blame “the foreigners.”
Or, perhaps there are no conspiracies and the leaders of Enron are just as innocent and ignorant as the masses. I doubt it, but again that does not really matter to me at all.
The point is that people may vastly underestimate the potential for a supply chain to collapse. It could be because of a technical oversight. It could be because a CEO at Enron called a few plant operators and gave a “mysterious” order to halt production, perhaps for an “unexpected safety test” that happened to be initiated at 50% of their electrical plants within 60 seconds of each other. It could be because a Central Banker like Rothschild manipulated public perception and public behavior for personal gain- kind of like an owner of a business might “manipulate” or organize the activities of their employees.
So, everyone knows that prices can come down faster than they can go up. The day that Enron announced that they were filing bankruptcy, how many years of rising prices vanished overnight?
I mention all of this, again, with no particular interest in Enron. I just know that some people are hysterical about stock price manipulation and other forms of corruption. I ask “why be hysterical?” Be realistic.
Stock markets are systems for the organized redistribution of affluence from certain parties (the masses) to certain other parties (the attentive). Be attentive. Why not?
Stock markets in the US (and beyond) may be about to plunge. Why do I say that? Well, I have been publishing that warning for many years (long before the 2007 peak in US stocks).
But why do I repeat it now? Because the US stock market has formed a series of what I call “shelves.” These shelves are also visible on several scales of time.
Consider the image below and the most notable features of the visual pattern in that image:
I made that image very small so that very little detail would stand out- only the most obvious things. I consider it obvious that there is a big sudden drop about 1/5th or 1/4th of the way from the far left, then a “shelf” after that. By shelf, I mean that prices kept coming down to a certain range “like a magnet was attracting them” (or like a bouncing ball after being dropped by gravity and then coming to stillness). Let’s look now at the same image, but larger:
That is the last two days (Thursday 11/17/2011 and Friday 11/18/2011) of prices in the US SPX (S & P 500) broad stock market index. Late Thursday, prices formed a “shelf” at about 1210, with 1215 or so being the upper range of prices. Friday, prices moved very little, mostly forming a shelf a little higher over 1215, with a brief dip around mid-day in to test the level around 1210.
There was a “shelf” or (support level) at 1210 on Thursday and a bit higher then next day. Now let’s look at the SPX chart for a longer period of time (the last 6 months):
Again, we see a big drop, then a “shelf,” then a slightly higher shelf. Here it is bigger:
In the middle two months shown, prices mostly stayed between 1100 and 1200. In the last several weeks (since mid-October), prices formed a shelf around the 1200 level. Let’s look at an even larger time period now (4 years):
There is a steep drop on the left of the stock price chart, then in the middle of the chart a shelf above the 1000 level, and then the same shelf around 1100 on the right. That is the same shelf that is shown closer-up above.
So, what does all of this mean? Does it mean that prices for the US SPX must do any particular thing next? Does it mean that stock prices are inherently steady and that economic trends are inherently permanent?
Or, does it mean that it is a good time to own cash rather than stocks or- perhaps even better than cash- to own put options and positions in inverse ETFs? This is a good time to be attentive, like any other time. This is just an ESPECIALLY good time to be attentive to the potential for predictable and sudden drops in prices which produce huge transfers or redistributions of affluence to a certain few participants relative to the vast majority of participants.
Why not be one of the receivers of the transfer? Why not be one of the attentive?
Related articles
- Enron Email Research Now Reveals Who Was CEO of Enron (caraellison.wordpress.com)
- Maria Cantwell Makes Statement About Enron (caraellison.wordpress.com)
- The Fifth Beatle and Enron (caraellison.wordpress.com)
- An Enron Disclosure: Stock Price and Credit Rating Dependencies (caraellison.wordpress.com)
- Enron, “Asshole,” and Research Process (bizgovsoc2.wordpress.com)
- Enron – one of the greatest frauds in American history (bizgovsoc2.wordpress.com)
- Random Thoughts About Enron (caraellison.wordpress.com)
- The “Asshole” Story: Enron, Skilling and Research Process (bizgovsociii.wordpress.com)
- Ex-Enron workers look back with a mix of feelings (mercurynews.com)
- Extra Resources for AIG, Enron (bizgovsociii.wordpress.com)
- First & Last Drunk Enron Post (caraellison.wordpress.com)
- 2002 – Panel Probes for Roots of Energy Mess, Focus on Link Between Enron, Harvard Group (lesliebrodie.wordpress.com)
- The Enron Players (time.com)
- Thesis Chapter 1 – Re-evaluating the Shareholder and Management Jam: The Case of Enron A Case Study of the Enron Scandal Using Agency Theory (thinkingbookworm.typepad.com)
- The Not-Very-Well-Thought-Out Enron Conspiracy (caraellison.wordpress.com)
- Fifty Shades of Enron (caraellison.wordpress.com)
- Thesis Chapter 3 – Re-evaluating the Shareholder and Management Jam: The Case of Enron A Case Study of the Enron Scandal Using Agency Theory (thinkingbookworm.typepad.com)
- Thesis Chapter 4 – Re-evaluating the Shareholder and Management Jam: The Case of Enron A Case Study of the Enron Scandal Using Agency Theory (thinkingbookworm.typepad.com)
- Things Enron Executives Have Said To Me This Week (caraellison.wordpress.com)
- An Enron Executive’s Response To Andy Fastow’s Speech (caraellison.wordpress.com)
- The Difference Between Private and Public Morality (robertreich.org)
- You’ve got to do something about your reputation: Why CEOs need to pay attention to reputation management (johnrondina.wordpress.com)
- Enron Creditors Get 53 Percent Payout, Aided by Lawsuit Accords (businessweek.com)
- Committing The Enron Mistake (caraellison.wordpress.com)
- The Enron Players (time.com)
- Research Proposal – Re-evaluating the Shareholder and Management Jam: The Case of Enron A Case Study of the Enron Scandal Using Agency Theory (thinkingbookworm.typepad.com)
- 10 years later, two members of the Rigas family that founded Adelphia maintain their innocence (pennlive.com)
- This is what desperation looks like (salon.com)
- I Will Not Throw Good Money After Bad in 2012 (dailyfinance.com)
- The Difference Between Public and Private Morality (the2012scenario.com)
- The Difference Between Private and Public Morality (wallstreetpit.com)
- What Happened at the ‘Enron of Kansas’? (opinionator.blogs.nytimes.com)
- Guest Post: World Bank Wants Control Of The High Seas (zerohedge.com)
- REAL NEWS March 29 (danimartextras.wordpress.com)
- EOG channels Enron roots while outperforming Chesapeake (business.financialpost.com)
- I Will Not Throw Good Money After Bad in 2012 (fool.com)
- Binghamton University scholar advocates for additional corporate oversight (eurekalert.org)
- A Repost: CFTC Obstruction of Justice Exposed Euro Fraud is JP Morgan Fraud (jhaines6.wordpress.com)
- JP Morgan Chase Employee Blows the Whistle | The 2012 Scenario (aquariuschannelings.com)
- American Kabuki – JP Morgan Chase Whistleblower Tells CFTC Of Many Frauds – 15 March 2012 (lucas2012infos.wordpress.com)
- Apple Is Peaking (fool.com)
- NatWest Three: ‘I should have walked away’ (telegraph.co.uk)
- CFTC Obstruction of Justice Exposed Euro Fraud is JP Morgan Fraud (jhaines6.wordpress.com)
- The ‘High Oil Prices = Recession’ Fallacy (zerohedge.com)
- Everything Up As Gold/Silver Outperform (zerohedge.com)
- Market Manipulation: Jp Morgan Whistleblower (silberguru.ch)
- From: The First Whistleblower of Many – thanks to M (jhaines6.wordpress.com)
- JP Morgan Chase Employee Blows the Whistle (the2012scenario.com)
- Collateral Damage: U.S. Covert Operations and the Terrorist Attacks on September 11, 2001… (projectworldawareness.com)
- What the Bagel Man Saw – An Accidental Glimpse at Human Nature (stephenjdubner.com)
- Republicans: we don’t need no regulation (guardian.co.uk)
- David Callaway: Plunge protection team hedging on Greece (marketwatch.com)
- Nortel trial hears fraud allegations (cbc.ca)
- Goldman Sachs executive leaves sinking ship in disgust..JPM whistleblower letter (seeker401.wordpress.com)
- Gold Price Manipulation: Bullion, Gold Stocks Undervalued – Report – International Business Times (goldkingint.wordpress.com)
- Clock ticking for Obama to avert gas price spike (business.financialpost.com)
- Today’s Silver Slam Down: Profit Taking or Intervention? (politicalmetals.com)
- Cannot Trust The Corporate System: 30 Facts Rothschild Planned The Gulf Oil Crisis ~ Throw It On The Ground. (politicalvelcraft.org)
- Muppet-Gate Meets Blank-Berg (zerohedge.com)
- Paul Mylchreest Presents Various Visual Case Studies Of Gold Price Manipulation (zerohedge.com)
- Forbes: Ben Bernanke’s Paper Dollar Embodies Systemic Risk (cointrader.wordpress.com)
- Warning Issued to Avoid Easy Markets With Penny Stocks Warns Peter Leeds, Author of Invest in Penny Stocks, and Publisher of the World Famous Penny Stocks Newsletter (your-story.org)
- Chris Martenson Explains How Gold Is Manipulated… And Why That’s Okay (zerohedge.com)
- D.C. Judge Sides With Prosecutors In Document Dispute In Fraud Case (legaltimes.typepad.com)
- ‘Probe PM’s son for share price manipulation’ (hornbillunleashed.wordpress.com)
- Investing Red Flags: 3 Companies with High Corporate Governance Risk (wire.kapitall.com)
- Average February Gas Price At All Time High; Follows Record January Gasoline Costs (zerohedge.com)
- Gary Shilling’s 2012 Investment Themes (ritholtz.com)
- Don’t confuse what you wish were true, with what IS, part I (amydeee.wordpress.com)
- Since Morgan Stanley CEO Thinks Greg Smith’s Op-Ed Was “Unfair”, Have Are Some Questions (zerohedge.com)
- How to Successfully Buy and Sell Stocks (answers.com)
- 4 Charts Summarizing Obama’s 2013 Budget (zerohedge.com)
- Interview with “The Behavior Gap” Author, Carl Richards (mint.com)
- How JPMorgan Is Like Enron – Bloomberg (bloomberg.com)
- Did Chesapeake miss Enron lessons? (blogs.reuters.com)
- Mark Gongloff: JPMorgan’s Latest Headache (huffingtonpost.com)
- Romney called for tax transparency in past campaigns (politicalticker.blogs.cnn.com)
- Enron Ex-CEO Seeks Retrial on ‘New Evidence,’ Lawyer Says – Bloomberg (bloomberg.com)
- The LIBOR scandal: Why manipulating prices is easier in the financial industry (macleans.ca)
- JPMorgan Accused of Manipulating Power Market (investmentwatchblog.com)