Mark-to-Market
"The accounting system for all the big investment banks on Wall Street"
"Lets us see future profit, hugely liberating"
Sets asset values to reflect their market sale prices
question is, do the markets always know best?
This accounting system has caused/helped in a number of financial crashes but also aided the economy in a number of situations it isn't a good or bad thing.
Electricity retail market
simply the market where electricity is bought and sold
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"Clem up at Enron"
"Fuck Clem, i'm gonna finish-"
Who is Clem?
Clem Abrams
Former Assistant General Council at Enron (9 years and 11 months)
"An attorney who has a relationship with a law firm or organisation but not at partner or associate level"
He now owns a Law Firm and Works as a professor of Law at Regents university.
LinkedIn - "Reputable for managing complex and politically sensitive legal projects, aligning resources, and developing tactical business models while providing the continued delivery of top quality services."
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CFO - Chief Financial Officer
A corporate officer primarily responsible for managing the financial risks of the corporation. They're also responsible for financial planning and record keeping as well as financial reporting to higher management. They analyse and review financial data, report financial performance, prepare budgets and monitor expenditures/costs.
CFO often has staffing to address accounting and treasury functions, they make between 1044 to 154k a year.
The CFO reports directly to the CEO
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Skilling's reading list
Don't read
Dale Carnegie -"How to Win Friends and Influence People" (1936)
One of the Best Selling self-help books ever published
"The Seven Secrets of Highly Effective People"
Jeff getting the second part of "How to Win Friends and Influence People" wrong
Do read
"Richard Dawkins - The Selfish Gene" - Looks at Genes and Natural Selection (competition), implying that Business works in the same way, it's a harsh reality.
You aren't one of the fittest therefore you aren't going to survive.
"Fastow: Self interest and competition"
Self-interest is the motivator of economic activity. Competition is the regulator of economic activity. Together they form what Adam Smith called the invisible hand, which guides resources to their most valued use.
"Skilling: Money and sex motivate people"
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Deregulated Electricity
Deregulated electricity gives you the power to switch your natural gas supplier and ultimately affects how much you will pay for your energy. Whereas before consumers could only get energy from their local utility, post-deregulation customers benefit from a free open marketplace offering choice, more competitive rates and of course an opportunity for Enron.
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Hedging
Protect yourself from loss by supporting/investing in more than one possible outcome
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Special Purpose Entity aka. Raptors - LJM
A group of entities designed to buffer Enrons earning from mark-to-market reports. Any Mark-to-Mark-to-Market losses were shifted from Enron to these special purpose entities. The problem was that the SPE's didn't provide a sufficient hedge against the losses.
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Arthur Anderson LLP
Formerly one of the Big Five accounting firms providing auditing, tax, and consulting to large corporations.
They surrendered licenses to practise as Certified Public Accountants after the Enron scandal.
AA didn't do it's job by not stating concern over the LJM transactions to Enrons board.
15th of June 2002, Anderson was convicted of obstruction of justice for shredding documents related to its audit of Enron, resulting in the Enron scandal. Although the conviction was reversed by the Supreme Court the impact of the scandal and public knowledge of their complicity destroyed the firm.
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Jenna Jameson
An American entrepreneur, webcam model and former pornographic film actress and i think the "research" can end there.
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