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Rock 'n Roll inflation from the 80's will be coming back to visit us
soon....
UPS and FedEx charges for internet-related books and such will be $10+ soon.
Sell AMZN, Buy Gold, Sell 10y Bonds
> -----Original Message-----
> From: cwest@xxxxxxxxxxxx [mailto:cwest@xxxxxxxxxxxx]
> Sent: Friday, November 30, 2001 8:56 AM
> To: Omegalist
> Subject: the post ENRON market place
>
>
> I though some discussion about ENRON's (ENE)so far unofficial
> demise might
> be interesting. Below is an extract from an analysis/news service
> to which I
> subscribe. The conclusion is that gas prices will rise. The objective of
> this post is to hear of varying ways one can profit from this perception.
>
> After Enron: Higher Energy Prices
> 2200 GMT, 011129
> Summary
> Reverberations from the collapse of Enron Corp., the United
> States' largest
> energy trader, will be felt for some time. The biggest winner is Dynegy
> Inc., the only company that can easily incorporate Enron's assets into its
> own operations. But U.S. consumers will lose: Enron developed an efficient
> method of getting energy to customers. As the power market
> reworks itself to
> compensate, natural gas and electricity prices are sure to rise sharply.
> Analysis
> Enron Corp., America's largest energy trader, collapsed spectacularly this
> week.
> With analysts only now picking through the debris of the company,
> which was
> the United States' seventh-largest company and biggest energy
> trader, it is
> apparent that no company other than Dynegy can pick up more than tidbits
> from Enron. The company is simply too large to be replaced. That's great
> news for Dynegy, the new industry leader, but signals increased costs for
> power producers, distributors and consumers alike.
> One immediate effect of the company's collapse will be higher
> heating bills
> this winter. The low price of oil had raised expectations that winter fuel
> costs would be much cheaper than the record highs of last year, but as the
> market reshapes itself around Enron's corpse, that hope is shrinking into
> oblivion. Neither the rising costs nor the collapse of one of its largest
> companies will help the United States as it attempts to shake off a
> recession.
> Enron will enter the history books as a well-executed revolutionary idea
> that was sabotaged by cronyism and which left mixed results.
> On the positive side, the company successfully demonstrated that power
> trading was a uniquely efficient way to manage the United States'
> patchwork
> of power generators, utilities and distributors. Prior to the
> power-trading
> era, much of the country's trading was point-to-point: Individual
> producers
> sold their natural gas and electricity to individual distributors and
> utilities. Enron inserted itself between these groups, buying power from
> providers across the country and reselling it to a variety of buyers. In
> effect Enron engineered vast economies of scale by managing the energy
> sector's risk nationwide. For energy consumers, producers and retailers,
> this meant more reliable and cheaper contracts.
> On the negative side, power trading depends upon the marketer having deep
> reserves of good credit. Good credit is not maintained by writing
> down $1.2
> billion in shareholder equity and overstating earnings by $586 million, as
> Enron has admitted doing. Once it leaked that Enron's books were
> cooked and
> senior officers were accused of fleecing the company, all three major
> credit-rating agencies -- Fitch, Moody's and Standard and Poor's
> -- tripped
> over each other in the rush to cut Enron's credit rating.
> Any energy trades now must be backed with hard cash. When Dynegy abandoned
> its planned buyout on Nov. 28, Enron's rating was cut to junk status,
> bringing forward $3.9 billion in debt for immediate repayment.
> That reduced Enron's cash reserves to zero; it cannot even pretend to
> service its contracts. Loans are impossible as Enron put up most
> of its few
> assets as collateral in the past two months simply to stay
> afloat. Its last
> scrap of cash likely disappeared Nov. 28 when it suspended
> EnronOnline, the
> Internet trading operation that accounted for 90 percent of its business.
> With no credit, no unclaimed assets and no cash, Enron is now unofficially
> dead. At last check, its stock was valued at 33 cents per share.
> Now, the United States faces a unique problem. Enron brokered about 25
> percent of the U.S. power market, and revenues in the year to
> Oct. 1 totaled
> $140 billion. It is by far the largest U.S. company to crash, and
> no single
> company can even pretend to absorb all of its business.
> Dynegy, now the single-largest player in the U.S. energy market,
> can absorb
> a portion, however. Dynegy shrewdly negotiated its early takeover plan and
> should be able to snag the 16,500-mile Northern Natural Gas
> Pipeline network
> from Enron. That would give it a dominant position in a swath of territory
> stretching across the Midwest from the Canadian border to northern Texas.
> But Dynegy holds only about 5 percent of market share. It lacks the
> bandwidth to absorb all of Enron's contracts, which would quintuple its
> size. Also, Dynegy leaders are far more conservative than Enron's when it
> comes to expansion -- as evidenced by their ultimate refusal to
> take a risk
> on the Enron merger, even with the backing of partner ChevronTexaco. With
> Enron's spectacular collapse, the tendency toward caution has
> certainly been
> reinforced.
> Many of the contracts Enron serviced will revert to point-to-point
> operation, but because many of its customers dealt only with Enron, they
> have long since dropped their marketing arms. Enron's collapse
> catches them
> all off-guard. Instead of selling their power to Enron, they must
> locate and
> negotiate with individual consumers. This will add time, risk and cost to
> each step of the process.
> This large-scale switchover from pooling to point-to-point will be
> laborious, chaotic and hugely expensive.
>
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