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There have been a string of failures preceding Enron ... Sunbeam, Cendant,
Waste Management, et al. Investors suffer widely from the "won't happen to
me syndrome" so there is likely to be relatively little fallout from the
Enron stock concentration issue unless Congress passes legislation which
limits concentration. Given the fact that corporate money dominates just
about all political careers today, I would bet that nothing drastic is going
to happen because it would force a lot of stock out of corporate friendly
hands and into the general float.
I think that the far greater impact is going to come on the accounting side
where boards, mutual funds, and plan administrators are all going to be
under far greater scrutiny. There will far more emphasis on real earnings
and scrutiny of the habitually recurring "special charges". Keep in mind
that change tends to be evolutionary rather than revolutionary. The
accounting issues are simply a continuation of the unwinding of the great
bubble which is far from fully deflated.
Lastly, the baby boomer generation has seen the risk to retirement funds
posed by lack of diversification and concentration in stocks. They are
becoming more conservative investors.
Earl
----- Original Message -----
From: "Daniel Goncharoff" <thegonch@xxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Friday, January 18, 2002 5:50 PM
Subject: [RT] 401k Reaction
> I notice the general media is starting to concentrate on the harm
> suffered by Enron employees that had large investments in company stock
> in their 401k and were burned when the manager was changed (freezing the
> accounts) at the same time the stock plummeted to almost nothing. Advice
> is being given for employees of other companies to look at their own
> 401k and diversify.
>
> My gut reaction is that this has to be bad for stocks and good for
> bonds, given the current condition of the stock market and the likely
> conservatism of the 401k holders. (Once you have made the decision to
> diversify, are you really likely to do so in a risky fashion?)
>
> Does anyone have any thoughts about how individual stocks may be
> affected? I would think recently successful companies will be more prone
> to being 'diversified down', companies that have done very well over the
> last 3-5 years. These companies will be more prone to having created
> large involuntary concentrations of risk for their employees accounts.
>
> The ultimate example may be MSFT, which has continued to make its
> employees very wealthy, has been successful in any reasonable time frame
> you choose, and is now subject to ongoing legal action of indeterminate
> size. Would you keep you millions in retirement dough in MSFT stock, or
> would you, in light of the Enron case, look to sell MSFT and put your
> money elsewhere?
>
> Your thoughts would be appreciated
>
> Regards
> DanG
>
>
>
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>
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>
>
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