Enron - I still don't feel sorry for these folks...

Eric_L · 01-26-2006, 04:39 PM

. .Enron woes reverberate through lives

http://news.yahoo.com/s/usatoday/200...tethroughlives

Quote:

How did it happen? Like many employees, Boyce believed in Enron's stock. He bought and held Enron shares until it was too late to get out...

Enron workers' retirement savings were demolished because their 401(k) assets were mostly invested in company stock, which was considered a sound investment until late 2001...

In 2001, Tom Padgett, 63, was within six months of retiring and was feeling pretty good about his retirement. The former senior lab technician had 11,000 Enron shares - worth about $700,000 before Enron's bankruptcy - in his 401(k)...

[rant font on]

Yes losing any amount of money is any investment sucks, but it is a part of life for any equity investor. These folks are 100% responsible for investing foolishly. Excuse me for not having an ounce of sympathy for them.The golden rule of investing is simple: DIVERSIFY. <--- hyperlink
I have no sympathy for someone who invested 100% of their retirement in ANY stock and got their ass handed to them, be it ENE, LU, KM or whatever.

Most of these folks were not simple minded, they were skilled and educated. They should have known better. Even those who weren't - what nimrod gets a substantial nest egg then does not consult an experienced professional? Especially as they near retirement? Even a semi-competent professional advisor would have told them to diversify. Did they consult one? Of course not. Probably 'too expensive'. (sigh) They found the cheapest way to lose money!

I frankly say tough shit. You put the money on red and lost - quit blaming the table - it was your choice to lay the money there.

These folks had plenty other investment choices in their 401k. The thought that three weeks illiquidity (due to ENEs compliance with a SEC requirement involved when there is a change of plan admin - completely unrelated to the scandal) caused them all to go down the tubes is a farce. The stock had lost 50% before then, and still had value after. The participants had PLENTY of time the fifteen years prior to then to choose to diversify.

Here is the funniest line I read in the story:

Quote:

...their 401(k) assets were mostly invested in company stock, which was considered a sound investment...

WHAT??? According to whom? Really.. By what standards? A 'sound investment' is a fairly large blanket term which could imply treasury quality to the trashiest of assets. I wouldn't call a $700,000 portfolio invested 100% in ANY one stock a sound investment - unless the sound was of flatulence. The author obviously knows nothing of 'sound investing'.

These sob stories about people feeling bad because they made STUPID investment decisions really irk me. Step up folks and admit YOU mad a stupid decision. Yes, Ken and his gang all deserve everything that the SEC can throw at them, but if these investors had invested with any sense of responsibility they would all still have been able to reach their goals with the other assets - which would have grown quite nicely since then. It is not Enron’s fault, it is their own. Quit crying about it and move on folks.

[rant font off]

Micheal · 01-26-2006, 05:24 PM

The old guy lost his retirement nest egg. I feel sorry for him regardless of what you've written.

Did he make a mistake? Sure, we all make mistakes.
I still feel sorry when someone goes through a life changing mistake like this one.

I guess if you take a chance and walk down a dark alley one night and just happen to get murdered then we shouldn't feel sorry for you?? You were just stupid for trying to take a short-cut... right?

I feel sorry for you that you needed to take the time out to rant on someone who has lost everything. Do you always react in such a manner or are you just having a bad day?

He made a big mistake and he'll pay for it for the rest of his life. Isn't that enough?

Eric_L · 01-26-2006, 05:35 PM

Yea, you got a point there. I certainly have had a bad day. (My office was flooded this AM by a burst pipe). I do feel for the unfortunate people, but I don't feel that their woe is something we should lay entirely on the folks at Enron, Arthur Anderson or anyone other than themselves. I get weary of hearing people blame everyone else for their own poor judgement. I have considerably more sympathy for the folks who were set back 10% than those who were set back 100%. The 10% people were misled - the 100% were foolish.

I would feel for the person who took a shortcut through a dark alley and got mugged, but the comparison is not valid in this case - unless that person was walking there with their entire life savings - which begs the question - what were they thinking??

Mort Corey · 01-26-2006, 05:46 PM

When the housing market readjusts itself it'll make Enron look like a bunch of pikers. Heck, the USG defrauds people out of a lot more money than 10 Enrons through annual inflation. There just ain't no free lunch or sure thing.

Mort

Rob Willey · 01-26-2006, 05:57 PM

I can't cite any specific sources, but I seem to recall that the investment choices in Enron's retirement plans were severly limited compared to most employer's plans. Enron stock and not much else. The thinking was it give the employees greater incentive to cut whatever corners management asked for to make sure the stock price remained high.

Rob

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Micheal · 01-26-2006, 06:18 PM

Quote:

Yea, you got a point there. I certainly have had a bad day. (My office was flooded this AM by a burst pipe). I do feel for the unfortunate people, but I don't feel that their woe is something we should lay entirely on the folks at Enron, Arthur Anderson or anyone other than themselves. I get weary of hearing people blame everyone else for their own poor judgement.

Understood.

Thanks for clarifying.
Sorry if I came off too harsh,

Mike

Lew Crippen · 01-26-2006, 06:40 PM

Well Eric, I understand that you are having a bad day. But still, you are comparing your sophisticated understanding of investment to that of someone who likely took Ken Lay and his cohorts at their word: “that investment in the company is a sound investment.”

It is very easy now to look back and realize that the top officials of the company were not telling the truth and only out to line their own pockets.

For me, I have nothing but sympathy for those who believed the company line and lost and nothing but loathing for those who sold their employees (and the company) down the river for their own benefit.

Eric_L · 01-26-2006, 08:35 PM

Well Lew, I just don't really consider the golden rule of investing (diversify) that sophisticated, especially for technicians, chemists, and other well educated people. We'll just have to agree to disagree on that one. I'm going to stand by my ascertation that these people who lost everything investing foolishly have only themselves to blame.

Enron should stand as a blaring example to all people of the need for diversification - particularly with 401k and familiar companies. Sadly, I can tell you from personal experience, there are many who still just don't get it. (You know - 'that can't happen to me' mentality) Ignorance often provides it's own punishment. THAT is the real sad part.

Carlo Medina · 01-27-2006, 12:47 AM

Enron was considered a great investment. The University of California system has always been considered one of the better judges of what to invest in--their investment and retirement plans are traditionally rated very highly. They had, you guessed it, invested in a large amount of Enron shares. Now granted UC is huge and their investments were varied and diversified so when Enron went down, the effect was not as drastic as it would be on one individual.

But my point is that Enron, pre-expose, was considered a very good stock to invest in. Those people probably had many, many people who supposedly were "in the know" about investing telling them that Enron was solid. The facade was held up by those people who are now standing trial. That's why Enron officials deserve to go to jail.

So personally, I do lay blame the on Enron and not the individual (and no, I didn't lose a thing because of what they did).