Yesterday I saw this movie and felt that I am reading SS7 of FSA.
haha…jeez, I’m such a dork for laughing at this. But I’m NOT ashamed
I took L2 once in the '90’s and these items weren’t covered then, at least not to the same extent. All that stuff was added to the curriculum precisely because of Enron, Worldcom, Global Crossing, etc.
Bondclipper, how many times, have you taken level 2? It’s 2008 now.
thought this was a great documentary… the recorded conversations of the enron traders were classic!
CFAdummy, let’s just say i’m running out of fingers. Didn’t take a girl on some exotic vaca this spring in order to focus a bit more on quant and econ, so maybe this is my year!
that was an awesome movie…seeing first hand how someone of those guys were so caught up in the fraud was unreal.
true and now the movie made sense to me after reading all cr** in CFAI text.
Most documentaries take some kind of stance, and this one was no exception. I’ve watched the movie and read most of the books published about Enron, but I think this was anti-business, pro-state propaganda. Who was that class action lawyer quoted in the movie? It was convicted felon and notorious extortionist Bill Lerach; hardly a credible source of information. Certainly a few traders quotes taken out of context look bad, but the traders didn’t set up the CA energy trading system in the first place. The blame for what happened in CA lies squarely on the idiot politicians who came up with the system in the first place. They had so many loopholes that it was open season for people smart enough to figure out how the system worked. It was not a failure of deregulation since they system that was setup wasn’t deregulated by any stretch of the imagination. And what about Skilling and Lay? Can we really call two people criminals who did what the smartest accountants and lawyers money could buy told them to? If spending tens of millions of dollars a year to ensure compliance isn’t enough, how can any normal person protect themselves? The case against Skilling and Lay was at a minimum grossly unfair and should scare any one who believes in the free market. The State can crush anyone for its own ends. In this case the government needed its heroic prosecutors to crush some evil businessmen. Skilling and Lay were in the wrong place at the wrong time. How nasty was the prosecution? Besides holding the trial in Houston, they prevented hundreds of witnesses from testifying by naming an unprecedented number of them unindicted co-conspirators. http://blog.kir.com/archives/2006/05/anything_for_a.asp This was one of the many dirty tricks the state pulled to get their headlines. What was Enron really hiding? Not much. They disclosed what they were required to in their annual reports. Here is what Malcolm Gladwell had to say about Enron: http://www.gladwell.com/2007/2007_01_08_a_secrets.html It was an interesting movie, but the prosecution of Enron is not something that should be celebrated. “Be careful what you wish for because you just might get it. Good and hard.” HL Mencken T/G
i actually thought the exchange between the traders was funny. when dude says something to the effect of: “we will be ripping off old widows in california” and the other guys starts snickering and says, “no,no, no. we will be arbitraging, not ripping off, arbitraging” i saw this thing years ago… though i agree it’s biased, i’m not going to be defending skilling anytime soon. he’s a scumbag.
Hello, Sorry, I have to ask a stupid question. What is wrong with Enron using mark-to-market accounting principle? Please advise. Thanks!
because mark to market reflects the current market price which is generally more than the buying price which shows appreciation of the assets. The value of Fixed assets (Machines) should go down every year because of depreciation. If you take mark to market which will inflate the asset side of your balance sheet. This shows the numbers have been manipulated in the balance sheet of the company as actual value of that asset is lower than the what reported on the balance sheet. I hope this will help.
There are no stupid questions. Just stupid people.
Hi cfaboston28, Thanks for your explanation. It DOES help 
The movie mentioned Enron used mark-to-market accounting principle for commodities. I don’t think it wrong. Futures are marked-to-market. We can even let forwards mark-to-market. It is a good market practice. Although FSA said Enron based on inexistent/nonreliable market prices, I am still confused. Could you/anyone help again? Many thanks and good day! —jingtianren
Sorry, one more question. In the teleconference, an analyst/investor asked why Enron couldn’t publish balance sheet statement and cash flow statement. It is so weird for me. I thought it is compulsory for most companies to make financial statements public. How come Enron was an exception? Is it because it was listed in different board of the exchange? Many thanks in advance ^&^
to really get the answers to your questions, read the book, A Conspiracy of Fools, by Kurt Eichenwald. Or, listen to it on tape, even better. He goes into detail on exactly why Jeffrey Skilling wanted the mark to market accounting approved.
Hi DoubleDip， I will go and read the book. Thanks for your suggestion
“Didn’t take a girl on some exotic vaca this spring in order to focus a bit more on quant and econ, so maybe this is my year!” Not if your if you focus is quant and econ. Repeater here.
I wish I’d have studied that SS when I was doing my case study of Enron for a security analysis class back in university. Would’ve added a lot more juice to that paper.
More on mark to market …I am watching the documentary again, you can see it here: http://freedocumentaries.org/theatre.php?filmid=203&id=1116&wh=1000x720 They explain the reason Skilling wanted mark to market accounting at about the 19 minute mark.