Cramer on Enron Email details From: Jeff Dasovich To: Laird Dyer Sent: 25/10/2001 at 22:15 Email metadata Themes: Limited Partnership , Enron Online The message You see this? What the hell is with Cramer? Date October 25, 2001 Time 07:00 AM - 08:00 AM Station CNBC Location Network Program The Squawk Box Mark Haines, co-anchor: Joe Kernen, what's going on? Joe Kernen, co-anchor: We've got to shift gears into this Enron situation which has just been--you've been talking about it quite a bit, David--how could you not talk about it? Seventy-six million shares yesterday, down fifty percent in the last two weeks. This is a company with--what?--a hundred million in revenues. James Cramer, guest market commentator: Maybe. Kernen: Yeah, right. Anyone who does any trading in energy apparently, you know, uses Enron Online, so anything that destabilizes Enron to a great extent could destabilize the whole energy trading arena and... Cramer: Go ahead, say it! Say what you're thinking! No one has said it yet. We know the truth. We believe that Enron caused a national short squeeze. They knew every single number in this gas situation. They wrecked the California utility system and profited from it. That's my bet. My bet that this--they had--look, they were the market maker. Imagine if Instinet knew what you were going to be buying and took it ahead of you. I think they cornered the market for electricity for about four months, made a huge fortune and now the company is unraveling and when someone--when the Justice Department gets in there we're going to discover this. Kernen: Let's see what happened... Haines: Now, wait a second... David Faber, co-anchor: Whoa, whoa, whoa! The Justice Department, Jim? Now, is that new? Is that something-- Cramer: No, that would be, if I were a prosecutor, something... Faber: OK, so they are not being investigated? Cramer: Well, no, I'm actually being a little forward thinking. Kernen: The SEC wants documents about the limited partnership transactions of Mr.-- Faber: Which is very different from what Jim is talking about. Cramer: No, I'm saying that this is what, if I were an enterprising prosecutor, I would say, Did we have a nationwide short squeeze in electricity caused by one company that had access to all the screens and knew exactly what was happening with the electricity market which then wrecked the California utility system, cost the consumer billions of dollars, and is now being hushed up? Kernen: Well, let's talk about the actual news. Here's yesterday's trading-- Haines: Wait a minute. Kernen: Well, I just want to say that the guy is gone now. That's the new news here. Did you read--did you know that Fastow, after four-- Faber: Late yesterday. Kernen: Yeah, after four o'clock, Fastow is gone. What's interesting-- Faber: He's the CFO-- Kernen: But he's a new CFO. Faber: --who benefitted personally from some of these off balance sheet partnerships. Cramer: Mark, you know, I'm not on thin ice here, I'm not on thin ice. Haines: I just want to make sure we understand that this is your theory. Cramer: This is my theory. Haines: OK. Cramer: It is just a theory. It is my opinion. But I think we've got to find out more about that short squeeze that occurred. Haines: OK. Cramer: We need to find out whether it was orchestrated. Kernen: The new CFO might help regain some credibility for the company because he was the old treasurer who left that position a year or so ago because of some disagreements with how Mr. Fastow was doing business apparently. So now he's back as CFO and we'll whether that calms the market down. Faber: Well, what they need to do-- Joe, they need to come clean. I mean, that is what all the investors in Enron and those who've left the company as investors over this last week have wanted. Let's see everything; be as transparent as you possibly can be; tell us exactly what we need to know. And as much as they need to come clean with their investors, they need to come clean with their trading counterparties because that is really what people are concerned about. Kernen: Why is the credit worthiness issue such a big deal? Anyone who does trading with them, if their credit worthiness were to go--if their credit rating were to go down, how would that affect energy trading? Faber: Well, you want to know that they're going to be there on the other side and make good on the trades. Kernen: I guess you would, wouldn't you? Faber: Right. Not that they aren't, but why would you--if you can trade with seven other guys--seven other companies, maybe you cut back a little bit on your exposure there. Kernen: Now, why would-- Faber: And that would hurt their core business. Kernen: Why are people expecting some type of action from the credit agencies, not because of the stock price, right? Because of something that could unravel-- Faber: Because of something related to these liabilities they may have-- Kernen: That they don't know about at this point. Faber: --that they may have with regard to funding some of these off balance sheet partnerships that they backstopped in terms of borrowing that went on at the project level at the off balance sheet partnership. Will it be a liability? They don't know. But that's one of the reasons-- Kernen: We're talking hundreds of millions or billions? Faber: They don't know. Kernen: But there were billions of dollars in limited partners? Faber: Yes. About three billion in financing, I think is what some analysts estimated. Kernen: This is a pretty big number. Faber: Yeah, they can get to most of that with the assets that they have in the partnerships themselves. Kernen: I use a six month chart to show what's happened over the last two weeks. You got to look at here. But if we went back a year, you'd see eighty as far as the high for Enron. Now we're at sixteen. Faber: Everybody else took a hit yesterday. Dynegy got hurt. Kernen: Well, I got Dynegy next. Don't-- Here we go. Faber: I'm sorry. I'm getting a little excited. Kernen: You are. Faber: Enthusiastic about your charts. Kernen: There's a weekly chart of Dynegy, and you know what's coming next, don't you? Now I'm worried about the utility average. I've worried about the transportation average a lot in my career. Mark, now the utilities have replaced my worries. I'm angst-ridden. Did you see this chart? We're breaking below the-- Cramer: That's a positive, not a negative, Joe. Kernen: What's wrong with Cramer today? What happened? Cramer: I'm all fired up! Faber: He really is. My, God, he's got the DOJ getting all crazy, the FBI, the CIA. You going down to En--you going down to Houston yourself? Cramer: I may just have to. I may have to clean up that whole city. Kernen: Jim, why would the--that's the--now getting down to the lows, I mean, the other averages have come back quite a bit from the post-attack lows, the utilities are retesting those. That's not something to worry about? Cramer: No, because I think there's a lot of money going into more cyclical issues. I think the economy is showing signs of getting better. The consumer is certainly much stronger than we thought. The base book didn't say the corporate was strong, but the consumer is strong. Much stronger than before. Kernen: All right. In the past people have worried about the utility averages being a leading indicator, though. I don't--we're talking about four hundred to two-ninety at this point. That's a long way. Cramer: This average has got a lot of problems to it, but I still think that-- Kernen: It's no longer the-- Cramer: --you sell this as safety. We don't want safety as much as we want a little bit more reciprocality. # # #