Message-ID: <33082670.1075862341088.JavaMail.evans@thyme> Date: Mon, 19 Nov 2001 05:51:44 -0800 (PST) From: m..schmidt@enron.com Subject: Enron Mentions - 11/17/01 - 11/18/01 Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: Schmidt, Ann M. X-To: X-cc: X-bcc: X-Folder: \SKEAN (Non-Privileged)\Kean, Steven J.\Deleted Items X-Origin: Kean-S X-FileName: SKEAN (Non-Privileged).pst They left behind big piles of money Houston Chronicle, 11/18/01 Economic News Helps Stocks, Not Bonds The New York Times, 11/18/01 Bullish, and Patient, on Energy Stocks The New York Times, 11/18/01 Aquila Energy Makes Provision for Dynegy Withdrawal, FT Says Bloomberg, 11/18/01 A tale of greed and hubris Sarasota Herald-Tribune, 11/18/01 Counting Blessings Along With the Losses Los Angeles Times, 11/18/01 Don't Be A Pudd'n'head, Diversify The Washington Post, 11/18/01 Wessex Water `to be sold' The Independent - London, 11/18/01 UK PRESS: WestLB Makes Grab For GBP1B Wessex Water Dow Jones International News, 11/18/01 Quanta steels itself against takeover bid Houston Chronicle, 11/17/01 Business briefs / Houston & Texas Houston Chronicle, 11/17/01 AT ENRON, THE BIG DOGS ATE FIRST Portland Oregonian, 11/17/01 FINANCE WEEK - From dealing to reeling. Financial Times, 11/17/01 WORLD STOCK MARKETS - Bears take upper hand on Wall St. Financial Times, 11/17/01 IN BRIEF / ENERGY Pension Funds Consider Action Against Enron Los Angeles Times, 11/17/01 Enron Investors Hope Filing Will Shed More Light on Finances Bloomberg, 11/17/01 UK: Trade, bank buyers circle Enron's Wessex Water-reports. Reuters English News Service, 11/17/01 A user's guide to living in Calgary: People moving from Houston find the ci= ties much alike National Post, 11/17/01 WestLB Offers to Buy Enron's U.K. Water Unit, Newspaper Says Bloomberg, 11/17/01 Enron Closes on $550 Million Loan From J.P. Morgan, Salomon Bloomberg, 11/16/01 BUSINESS Jim Barlow They left behind big piles of money JIM BARLOW Staff 11/18/2001 Houston Chronicle 2 STAR 1 (Copyright 2001) WILL wonders never cease? Last week a couple of heavy hitters left money on= the table.=20 Mark McGwire, the home-run-hitting baseball player for St. Louis, retired. = And he let it be known that he never signed a two-year, $30 million contrac= t his agent negotiated last spring. Why? Because he wanted to find out if h= is injured right knee would allow him to play as well as he had before. It = didn't, and he decided he wasn't worth that kind of money. Then Ken Lay, chairman of Enron Corp., said he won't take the $60.6 million= he had coming to him in a severance agreement that comes into play when En= ron is sold to Dynegy Corp.=20 Of course, neither McGwire nor Lay will ever have to consider my fallback r= etirement plan - sacking groceries at the supermarket, carrying them to the= car and hoping for a big tip. Still, it was a class act on both their part= s. McGwire only hit .187 last season, well below his lifetime average. And = Lay? Well, let's say that rarely in the history of American capitalism has = a company sunk as fast as Enron.=20 Remember that earlier this year its stock hit a top of $82 a share. Now it'= s hovering in the single-digit level, and Enron is being forced to sell its= elf to a smaller rival.=20 The stock price incentive=20 How did Enron get into this position? Put the blame on the company's relent= less drive to push up its stock price. And a big reason for that push comes= from the way American companies compensate top executives.=20 In the last couple of decades, executive compensation has soared. The avera= ge chief executive officer today makes 531 times as much in salary, bonuses= and stock options as the average factory worker.=20 Apologists for executive pay say these kinds of figures really aren't relev= ant. Most of the money top executives receive doesn't come from base pay or= bonuses but from stock options.=20 Such options usually work this way. Executives are given hundreds or thousa= nds of shares of stock that they can only buy from the company at a future = date. The sales price can be anything from 10 cents to the price of the sto= ck on the date the options were granted. If the stock increases past the ex= ercise price in the option, the executive can buy the stock and then sell i= t, making big bucks. It the stock has dropped below the option price - it's= underwater, in the jargon - then those options are worthless.=20 Granting options aligns the interests of the top executives with the shareh= olders, those who favor this sort of incentive say. And that's true, if you= talking about in-and-out traders. But it's not true if we're looking out f= or the interests of the majority who hold stocks for the long term.=20 Keeping the debt hidden=20 Keeping its stock price soaring was what brought down Enron.=20 To hype the stock, Enron's execs were hiding the debt it took on to fuel it= s amazing growth and some of its dicier investments, in partnerships. Enron= was supposedly only a minority partner in these deals. That way it could m= ove a large portion of its debt off its books in that partnership. That, in= turn, made the company's earnings look better.=20 When Enron's executives finally fessed up, they had to write down their pro= fits over the past few years by 20 percent. But the real irony here is that= 80 percent is still a heck of a lot of money. But by that time, the majori= ty of shareholders simply had no faith in Enron's bookkeeping.=20 Now look at Lay's compensation. In 1999 he exercised stock options and made= $44 million on them. In 2000, sales of options brought him $123 million, a= nd this year about $26 million, according to a study published by Bloomberg= News.=20 Was Lay deliberating deceiving investors to keep his stock options profitab= le? I don't think so. He was simply following the latest fad in corporate g= overnance. He was aligning himself with the interests of the shareholders.= =20 The shareholders were happy with that high stock price. Nobody - besides so= me stock analysts - complained about Enron's often- impenetrable bookkeepin= g until that stock price started to fall.=20 Would Enron's bookkeeping have been different if top executives received fe= wer stock options? Maybe.=20 Fewer stock options would mean lower pay for the top guys. And no one would= want that job if he were only going to make $10 million a year instead of = $100 million.=20 Just kidding. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Money and Business/Financial Desk; Section 3 DataBank Economic News Helps Stocks, Not Bonds By JONATHAN FUERBRINGER 11/18/2001 The New York Times Page 17, Column 3 c. 2001 New York Times Company Stocks rallied and bonds plunged last week as investors digested some posit= ive reports about the economy. Inflation at the consumer level declined las= t month, retail sales surged after falling in September, and weekly initial= unemployment claims slowed.=20 All this news led some investors to conclude that the economy might not be = as troubled as it appeared to be in the aftermath of the terrorist attacks.= That was good for the stock market, but very bad for the many bond investo= rs who had been assuming the worst. For the week, the Nasdaq composite index rose 70.10 points, or 3.8 percent,= to 1,898.58, while the Dow Jones industrial average climbed 258.99 points,= or 2.7 percent, to 9,866.99. The Standard & Poor's 500-stock index gained = 18.33 points, or 1.6 percent, to 1,138.65.=20 But bond prices tumbled while yields, which move in the opposite direction,= soared. The yield on the Treasury's 10-year note rose to 4.85 percent, fro= m 4.31 percent a week ago, the biggest weekly move in percentage terms sinc= e the note was first regularly issued 25 years ago. The jump in rates also = showed that many investors no longer expect Federal Reserve policy makers t= o cut short-term interest rates when they meet next month. JONATHAN FUERBRI= NGER Chart: ''STOCKS IN THE NEWS'' AMR NYSE: AMR The stock of the parent company= of American Airlines, along with other airline companies, rebounded on fac= tors including lower oil prices and passage of the aviation security bill. = Friday's Close: $20.06 Week's Change: +10.65% EST. '01 P/E: -- Dynegy NYSE:= DYN As part of its planned $9 billion acquisition of Enron, Dynegy will re= ceive the right to acquire Northern Natural Gas, a potentially lucrative pi= peline system, even if the larger deal is not completed. Friday's Close: $4= 2.47 Week's Change: +9.57% EST. '01 P/E: 20.29 Home Depot NYSE: HD The nati= on's largest home-improvement chain said its third-quarter profit rose 20 p= ercent over the year-earlier period. Friday's Close: $45.80 Week's Change: = +8.76% EST. '01 P/E: 36.03 Dell Computer NNM: DELL Rebounding from a loss i= n the second quarter, Dell reported a third-quarter profit of $429 mil lion= . The company also predict d that PC sales would increase later this year. = Friday's Close: $26.60 Week's Change: +3.30% EST. '01 P/E: 41.05 SunGard Da= ta Systems NYSE: SDS An appeals court rejected the government's effort to s= top SunGard from buying a unit of Comdisco, which filed for bankruptcy prot= ection in July, while an antitrust investigation proceeds. Friday's Close: = $28.64 Week's Change: +9.56% EST. '01 P/E: 32.11 Yahoo NNM: YHOO Wall Stree= t analysts expressed confidence in the turnaround prospects of the company = after it outlined plans to increase fee-based revenue and to reduce its wor= k force. Friday's Close: $15.47 Week's Change: +12.76% EST. '01 P/E: 309.40= Philip Morris NYSE: MO Philip Morris says it plans to change its name to t= he Altria Group, pending approval by shareholders. Friday's Close: $48.13 W= eek's Change: +2.78% EST. '01 P/E: 11.90 CV Therapeutics NNM: CVTX The biot= echnology company said clinical trials of ranolazine showed that the drug, = which it developed, was effective in treating the chest pain of angina. Fri= day's Close: $51.67 Week's Change: +48.97% EST. '01 P/E: -- (Source: Bloomb= erg Financial Markets)=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Money and Business/Financial Desk; Section 3 Investing Bullish, and Patient, on Energy Stocks By JAN M. ROSEN 11/18/2001 The New York Times Page 8, Column 2 c. 2001 New York Times Company DESPITE last week's plunge in the price of crude oil and in shares of big o= il companies, some Wall Street analysts remain upbeat about the long-term p= rospects for energy stocks.=20 ''These very dramatic downturns are great buying opportunities,'' said Tina= Vital, an oil and gas analyst at Standard & Poor's, who recommends a broad= group of integrated oil companies, including Exxon Mobil, ChevronTexaco, R= oyal Dutch/Shell, BP and TotalFinaElf. ''They have excellent management, a = top dividend yield and are a safe haven for investors,'' she said, provided= that investors are patient and can bear short-term swings. Last week's price declines were set off by Russian oil companies' refusal t= o accept demands by the Organization of the Petroleum Exporting Countries f= or big production cuts. They were a reminder that the sector is extremely v= olatile. ''Oil could go to $10 a barrel short term,'' she said, but there i= s no certainty of that. The oil producers could reach an agreement by Janua= ry, sending prices upward. Over the long term, she expects to see productio= n cuts.=20 Demand for energy has grown only 0.5 percent this year, and prices have bee= n declining for some time for both crude oil and gasoline -- as drivers hav= e seen at the gas pump. West Texas intermediate crude closed Friday at $18.= 03 on the New York Mercantile Exchange, up 58 cents from its Thursday close= , the lowest since June 1999. But an economic recovery, expected by late 20= 02, could cause demand to pick up, analysts say.=20 As oil prices have dropped, so have the prices of most oil stocks, but not = as much as the overall market since the beginning of 2000. Over that period= , the S.& P. energy index has lost 8 percent, while the S.& P. 500-stock in= dex is down 23 percent.=20 A report issued last week by the Energy Department said that while the Sept= . 11 terrorist attacks had intensified the country's economic slowdown, ''t= hey are not expected to result in any long-term volatility in energy market= s.'' The report estimated that commercial energy demand would rise 1.7 perc= ent a year through 2020, instead of the 1.2 percent predicted only a year a= go. Its predictions assume increased use of computers and office equipment,= and slower increases in fuel efficiency for cars and trucks.=20 WHILE they warn of the possibility of wild price shifts in the months ahead= , other analysts are similarly bullish for the long term. L. Bruce Lanni, s= enior oil analyst at A. G. Edwards & Sons in New York, said that any potent= ial price war was likely to be fairly short-lived, because neither OPEC nor= non-OPEC countries could ''withstand low oil prices for a prolonged period= of time,'' and prices should rebound sharply as a result, ''back up in the= lower to mid-$20 range.''=20 Low prices could be painful for most of the oil companies in the short term= , but Mr. Lanni, too, sees value in the stocks.=20 His top pick is Conoco, now trading at $24.30; his 12-month target is $34. = ''We remain confident,'' he said, ''that the company's annual oil and gas p= roduction should grow by about 4 percent, on average, over the next several= years.''=20 Conoco's debt, at 55 percent of capital, is relatively high, but he expects= the company's strong cash flow -- it equaled $5.33 a share last year -- to= reduce the debt level to 46 percent next year and to 38 percent in 2003. T= he company's after-tax interest cost is only 3.5 percent, he said.=20 Mr. Lanni also favors Kerr-McGee, a natural gas exploration and production = company, and BP, calling both undervalued. He regards Exxon Mobil, Royal Du= tch/Shell and ChevronTexaco as fully priced, so he is not recommending buyi= ng them now. ''If you own them, hold them,'' he said.=20 William Featherston, executive director and an oil and gas exploration anal= yst at UBS Warburg, said he felt ''near-term caution but medium-term optimi= sm for sustainably higher'' natural gas prices. He said he would encourage = investors to consider buying shares of exploration and production companies= over the next two months. His top picks are Apache, Kerr-McGee and EOG Res= ources.=20 Such stocks are highly volatile, he said. They are ''trading-oriented vehic= les, and short-term volatility in commodity prices generally provides the m= ost attractive entry and exit points,'' he said. ''While natural gas prices= declined throughout most of this year, prices rose at a startling pace, fr= om $1.75 per million cubic feet at the end of September to over $3 per mill= ion cubic feet within weeks.''=20 He cited three reasons for the price rally: a decline in gas surpluses, pre= dictions of a colder-than-normal winter and what he has called ''pathetic t= hird-quarter natural gas production,'' despite record drilling activity.=20 The tangled finances of the Enron Corporation were also a factor in the rec= ent price increase for natural gas futures, he said. Enron, which marketed = 25 billion cubic feet a day of natural gas, or more than 40 percent of the = nation's demand, is under investigation by the Securities and Exchange Comm= ission and announced a $1.2 billion reduction in shareholder equity from de= als with partnerships involving its former chief financial officer. It also= reported a third-quarter loss and restated earlier earnings. Enron has agr= eed to be taken over by Dynegy, a smaller rival, for about $9 billion in st= ock. Dynegy is also assuming about $13 billion in debt.=20 Anxiety over whether the Enron investigation would disrupt deliveries or ha= ve other market repercussions led to an increase in prices. While it is ''d= ifficult to quantify the Enron factor,'' Mr. Featherston said, the short-te= rm effects on natural gas prices seem to be over.=20 OTHER factors, of course, could also mean a bumpy ride for energy investors= over the next several months. The status of the war against terrorism, Pre= sident Bush's decision to fill the Strategic Petroleum Reserve, thus helpin= g OPEC in reducing excess global capacity, and a United Nations review of t= he food-for-oil deal with Iraq expected in December could each have a signi= ficant impact on battered oil prices.=20 Nevertheless, Ms. Vital said, for the long term, energy will probably be in= short supply, and new sources must be developed. So she also likes the pro= spects of two drilling companies, Noble Drilling and Nabors Industries. Bot= h took a beating last week, along with the oil companies, so again she sees= buying opportunities.=20 Bern Fleming, portfolio manager of the AXP Utilities Income fund in Minneap= olis, who has stakes in Dynegy, Duke Energy and Dominion Resources, said al= l three had good prospects for growth, thanks to a mix of assets, ''managem= ent I respect and solid business plans.'' Photo: Workers at an oil well near Lafayette, La. Although oil prices have = plunged, analysts say there is still good long-term potential for the stock= s of energy companies. (Marty Katz for The New York Times) Chart: ''Power P= lay'' Energy stocks have generally outperformed the overall market since th= e beginning of 2000. Graph shows CONOCO SHARES, S. & P. ENERGY COMPOSITE, a= nd the S.& P. 500 INDEX since January 2000. (Source: Bloomberg Financial Ma= rkets)=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Aquila Energy Makes Provision for Dynegy Withdrawal, FT Says 2001-11-18 19:52 (New York) Houston, Nov. 19 (Bloomberg) -- Aquila Energy Corp. is one of several energy traders limiting its trading with Enron Corp. in case Dynegy Inc. pulls out of its bid for the company, the Financial Times said, citing Aquila. Aquila said it began making contingency plans in case Dynegy withdrew from its $24 billion takeover of Enron, the paper reported. Enron, the largest energy trader, decided to sell after its shares plunged this year and a federal investigation of accounting irregularities limited its ability to finance operations. Enron's collapse would have caused upheaval in energy markets, where the company does one-quarter of all gas and power trades. Dynegy's agreement to buy Enron allows it to withdraw from the transaction under certain circumstances, the FT said. PERSPECTIVES A tale of greed and hubris Waldo Proffitt 11/18/2001 Sarasota Herald-Tribune All F2 (Copyright 2001) For anyone not already disenchanted with the idea of total deregulation of = public utilities, the most recent installment of the miserable Enron story = as it unfolded last week should serve as a convincing example of the folly = of relying on unregulated profit- driven enterprises to supply our energy.= =20 A year ago Enron was the darling of Wall Street, the poster boy for the uti= lity industry, its stock selling for about $85 a share. Last week its stock= was worth about 10 percent of that and the company had agreed to be bought= by a competitor. There was fear the company's bond rating might fall to th= e "junk" level. What happened? It will take months, if not years, to untangle the details, = but it is clear that the main culprit was greed, closely followed by hubris= .=20 Not too many years ago Enron was a small, struggling, gas pipeline company = in Houston. As deregulation spread to more and more states, Enron began acq= uiring pipelines, gas producers and utilities.=20 It also acquired friends in high places, especially the Bush family and the= ir key political advisers. And, it discovered it could make money faster by= selling and trading energy than by producing it. Enron sold many of its ge= nerating plants and became the biggest "power broker" in the nation.=20 Though it was by no means the largest winner in the con game that bilked Ca= lifornia consumers of tens of billions of dollars, Enron was one of the fir= st power barons to take advantage of California's flawed deregulation law -= - virtually written by in-state and out-of- state utility companies.=20 The California fiasco soured (probably) most Americans on utility deregulat= ion, but Enron was not singled out for calumny, and management saw no reaso= n to examine its business ethics.=20 Contrarywise. management had visions of even greater profits, which it felt= no obligation to share with ordinary stockholders. The chief financial off= icer and other high-ranking executives set up affiliated or subsidiary part= nerships which made deals with Enron. I do not understand the details of th= ese arrangements, but neither do independent accountants, the Securities an= d Exchange Commission or congressional investigators. It does seem clear th= at the Enron insiders made millions for themselves.=20 Enron acknowledges, without explaining, that stockholder equity dropped $1.= 2 billion in the last quarter and that it had for the last five years overs= tated profits by some $600 million. Whether this was by design or by mistak= e is in dispute, but it is the sort of thing which tends to undermine the c= onfidence of investors.=20 So much for greed. Back to hubris. It seems not unlikely that Enron's leade= rs felt they might not be punished for a modest amount of corner-cutting be= cause they had friends in high places.=20 The chief executive, Kenneth L. Lay, was and is a personal friend of George= W. Bush and has easy access to the White House. For many months after the = new administration took office, Karl Rove, Bush's top political strategist,= owned Enron stock valued at $100,000 to $250,000, and sold it only after h= e had been able to secure a ruling that he did not have to pay capital gain= s tax immediately because he sold to avoid a conflict of interest. Lawrence= Lindsey, the president's chief economic coordinator, and I. Lewis Libby, V= ice President Cheney's chief of staff, owned stock in Enron, and Lindsey wa= s paid $50,000 last year as a consultant for Enron.=20 Enron and its employees gave more than anyone else to Bush's four political= campaigns -- one (unsuccessful) for Congress, two for governor and one for= president. In 2000, Enron and its employees gave $113,000 to Bush's campai= gn, $250,000 to the Republican National Committee, and $300,000 to the Pres= idential Inauguration Committee.=20 Cabinet appointments affecting energy policy, key sub-Cabinet appointments,= administration action or inaction in the California energy mess, and the o= verall energy policy of the administration could hardly have been more favo= rable to the interests of Enron.=20 And now a couple of questions: Is it possible the unusual financial maneuve= rs by Enron went unnoticed or even unsuspected by all the savvy Texas oilme= n in the Bush administration? Were those of them with heavy investments in = Enron unconcerned about the conduct of the company? Was Enron right in thin= king its friends in government would not be in a hurry to investigate or to= reprimand?=20 Or, in light of our preoccupation with terrorism, will the Enron case get m= uch attention from the federal government? Or from voters?=20 Waldo Proffitt is the former editor of the Herald-Tribune. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business; Financial Desk MARKET BEAT Counting Blessings Along With the Losses TOM PETRUNO TIMES STAFF WRITER 11/18/2001 Los Angeles Times Home Edition C-1 Copyright 2001 / The Times Mirror Company Try finishing this sentence: "The best thing about my experience as an inve= stor in 2001 was ... "=20 Many Americans, contemplating the losses they've suffered this year in the = stock market, might say there was nothing "best" about what happened to the= m--in fact, nothing good at all, perhaps other than that it might have been= worse. With share prices on the rise again, the damage to portfolios has been less= ened. Even so, stocks will have to post strong gains in the next six weeks = to keep this from being the market's worst calendar year since 1977.=20 The blue-chip Standard & Poor's 500 index rose 1.6% last week, but it's sti= ll down 13.8% year to date.=20 Yet those losses, while certainly not trivial (especially when they're your= s), can obscure what arguably are some very positive aspects of this year's= experiences.=20 With investing, adversity can be a more important teacher than success. If = you're having trouble this Thanksgiving week finding reasons to be thankful= about anything investment-related, try these on for size:=20 * "Asset allocation" is no longer just a quaint theory. The paramount inves= ting rule has always been to spread your money around to reduce risk. But i= t took the worst stock bear market in 25 years to bring this lesson home fo= r many people who thought equities only rose in value.=20 Now, millions of investors have a far better appreciation for just how much= they can lose in stocks--and how bonds and short-term cash savings can off= set market losses and preserve capital.=20 It has been a hard lesson, to be sure. But investors who take asset allocat= ion to heart will be laying a much more solid foundation for their money in= the long run. And don't underestimate what that can mean for your peace of= mind long term.=20 * The wisdom of saving money on a regular basis has been relearned. In the = late 1990s, many economists lamented how the U.S. savings rate continued to= shrink. Some people felt there was little need to put significant new sums= into savings when the stocks or stock mutual funds they owned seemed to be= rising nonstop.=20 In other words, many Americans were letting the stock market do their savin= g for them when share prices were rising 20% or more each year.=20 Now, with shares down and with the likelihood of much more moderate returns= on stocks in this decade, it's clear that many people will have to find a = way to save regularly if they're going to meet their long-term financial go= als, especially retirement.=20 This may not be a pleasant reality, but it's better for most people to have= faced this fact sooner rather than later, while there may be time to make = up lost ground.=20 * A healthy skepticism has replaced mindless euphoria about stocks and thos= e who tout them. The market's slide has discredited a legion of Wall Street= analysts, money managers and others whose knowledge, understanding and jud= gment were clearly lacking, in retrospect.=20 Investors have come to see that having blind faith in those who present the= mselves as "experts" is a highly dangerous strategy, if it can be called a = strategy at all.=20 Sure, it may have been more fun when technology stocks were shooting the mo= on and nobody had much use for reviewing a company's fundamentals. But that= wasn't investing--it was speculating, and on a massive, and ultimately rui= nous, scale.=20 People have learned to be less trusting about what others say about the mar= ket, and that is more likely to be beneficial than detrimental to their por= tfolios in the long run.=20 Just ask anyone who shifted their entire 401(k) retirement savings sum into= aggressive-growth mutual funds in the first quarter of 2000--right before = the market peaked--because of the bullish comments of some 25-year-old tech= stock analyst. Those investors aren't likely to make a move like that agai= n.=20 * Free-market forces are weeding out the weak players and the phonies. Capi= talism may be harsh, but it's efficient when the good times end and it's ti= me to find out which companies truly have talent and staying power--and des= erve more capital.=20 Hundreds of dot-coms have failed, but who really misses them? Is it any har= der to find what you want on the Internet? It probably would have been much= worse for all concerned if those companies had sucked up investors' funds = for another year instead of failing when they did.=20 But the market isn't just eliminating small companies that never had much o= f a future. The financial near-collapse of energy giant Enron Corp. exposed= a business that twisted accounting rules to its own benefit--to the point = that the company now concedes that financial statements all the way back to= 1997 "should not be relied upon."=20 Also to be weeded out, though over a longer time period, will be mutual fun= d managers whose performance running other peoples' money has been a nightm= are for those investors--meaning, the returns produced have been far worse = than what the investors would have achieved in the average fund in that par= ticular sector.=20 These managers know who they are--and, hopefully, their shareholders know b= y now as well, and will vote with their feet.=20 The free market also is reminding cartels just how tough it is to control p= rices.=20 Once again, the Organization of Petroleum Exporting Countries has lost its = ability to prop up crude oil prices, which have sunk to two-year lows amid = the weak global economy. That's lousy for OPEC, but it's great for every en= ergy consumer.=20 * The market's woes have altered many investors' priorities for the better.= The wild bull market of the late 1990s demanded peoples' attention, and go= t it.=20 For some, stocks became an obsession. Their portfolios dominated their live= s, especially if they were actively trading shares. They believed they were= going to be rich, or richer, and that it was all because of how smart they= were.=20 Now, most people have been humbled by the market. In the process, some have= realized that they don't want their mood determined by their portfolio's d= ay-to-date price changes.=20 The Sept. 11 terrorist attacks, of course, also changed many peoples' view = of what truly matters to them.=20 Money is important, but you aren't your stocks, and they aren't you. Life i= s more than a daily stock quote.=20 *=20 Tom Petruno can be reached at tom.petruno@latimes.com. For recent columns o= n the Web, go to www.latimes.com/petruno. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Financial INVESTING James K. Glassman Don't Be A Pudd'n'head, Diversify James K. Glassman 11/18/2001 The Washington Post FINAL H01 Copyright 2001, The Washington Post Co. All Rights Reserved Warren Buffett, who was probably the greatest investor of the 20th century,= is fond of quoting the salacious actress Mae West as saying, "Too much of = a good thing can be wonderful." In the market, such a motto would lead you = to avoid diversification and instead concentrate your portfolio in stocks y= ou really, really like.=20 Peter Lynch, who was probably the best mutual fund manager of the 20th cent= ury, calls spreading yourself too thin "diworseification." Smart, witty and brilliant at picking stocks, Buffett and Lynch may not nee= d diversification, but the rest of us do. When you own one stock, you're ou= t on a limb. For example, very few analysts -- with or without a conflict o= f interest -- predicted that shares of Enron, the energy and trading compan= y, would tumble by 90 percent in a year. Put all your eggs in a basket like= that and you end up with a gooey mess. The more stocks you own -- as long = as they are in different industries -- the more the overall riskiness of yo= ur portfolio is modulated.=20 The reason you don't want a super-risky portfolio is simple: While Warren B= uffett may be calm and prescient enough to ride out severe dips in the valu= e of his holdings, most investors are not. A portfolio that increases in pr= ice by 10 percent each and every year is worth exactly the same at the end = of three years as a portfolio that falls by half the first year, rises by t= hree-quarters the second and rises by 52 percent the third. But reasonable = investors prefer the consistent ride. It prevents them from doing something= stupid, such as selling all their stocks after losing half their money dur= ing that first disastrous year.=20 Consider the sad case of James D. McCall, who earlier this month resigned a= s manager of the Merrill Lynch Focus Twenty mutual fund. Two years ago, Mer= rill wanted McCall's services so desperately that the firm went to court to= pry McCall away from his previous employer, Pilgrim Baxter, where he rang = up impressive gains in the late 1990s. (His big success was called PBHG Lar= ge Cap 20.) And when they got McCall, Merrill's brokers raised more than $1= .5 billion from their clients for him to invest. While the average growth-s= tock mutual fund owns about 100 stocks, with the top 10 holdings representi= ng about one-fourth of the portfolio's total value, McCall specialized in w= hat are called "concentrated portfolios." In the case of Merrill Lynch Focu= s Twenty, he owned, as the name implies, just 20 stocks. At last report, hi= s top 10 holdings accounted for a whopping two-thirds of the fund's assets.= =20 If McCall had spread his 20 stocks among, say, a dozen different industries= , he might have smoothed his ride. Instead, 69 percent of his assets went t= o technology firms. The Focus fund and a smaller one that McCall ran called= Premier Growth were launched in March 2000. Within just 17 months, all but= $650 million of the clients' original $1.5 billion had vanished.=20 It is hard to imagine losing as much as Focus Twenty did even if you tried.= As of Nov. 9, the week McCall resigned, the fund was down 72 percent for t= he year, compared with a loss of 14 percent for the Standard & Poor's 500-s= tock index, the benchmark for fund managers. According to the latest report= from Morningstar Mutual Funds, 19 of McCall's 20 stocks had declined durin= g 2001, the only exception being Harley-Davidson. More amazing, 16 of the 1= 9 losers had fallen by at least half. (By the way, Enron was McCall's seven= th-largest holding.)=20 "This fund has had a wretched existence," wrote Morningstar analyst Kunal K= apoor, who did admit a grudging admiration for McCall's perseverance. McCal= l's "faith may turn out to be well placed over time," Kapoor said. Unfortun= ately, time ran out.=20 My point here is not to pick on McCall but to reveal the perils of concentr= ation. Buying Focus Twenty as a technology fund, and consigning it to no mo= re than one-fifth of your holdings (with the rest of your assets in diversi= fied, conventional stocks or funds) might have made sense, but Focus Twenty= was touted as a "long-term capital appreciation" fund, not a sector fund. = Here, it failed, but maybe it didn't have to.=20 The manager who made the concentrated fund popular, Tom Marsico, who ran Ja= nus Twenty, took care to spread his holdings around. His successor, Scott S= choelzel, has suffered losses lately (he is down 28 percent year-to-date, b= ut that's after a total gain of 546 percent in the preceding five years), b= ut they have not been nearly so catastrophic -- and for good reason. Schoel= zel's last report lists among his top 10 holdings three tech stocks, two fi= nancials, one drug company, one energy firm (whoops, Enron again), one indu= strial, one consumer-durables company and one services firm.=20 For investors in individual stocks, the important question is this: How muc= h diversification is enough? Some risk is inherent in even the broadest por= tfolio. This is called market, or "systematic," risk. Over the past 75 year= s, market risk, as measured in standard deviation, has been about 20 percen= t. In other words, in two-thirds of the years the annual return of the S&P = has fallen into a band ranging from 20 points lower to 20 points higher tha= n its average return of 11 percent; that is, between a loss of 9 percent an= d a gain of 31 percent. That's still volatile, but if you invest in stocks = you have to live with it.=20 What you don't have to live with is anything more volatile. So your objecti= ve in building a portfolio is to try to approximate systematic risk and avo= id what is called "idiosyncratic," or extra, risk. A portfolio with just a = few stocks, or one like McCall's, that is overloaded in a single sector, ha= s lots of idiosyncratic risk. In 1977, an influential study found that inve= stors could nearly eliminate that extra risk by owning just 20 stocks in a = wide variety of sectors; in fact, owning eight or 10 stocks depressed risk = sharply.=20 Recently, however, the market has appeared to be far more volatile, and a n= ew study by a group of economists headed by John Campbell of Harvard found = that many more stocks were needed -- around 50 -- to bring a portfolio down= to the same level of riskiness as the broad market. What Campbell's group = found was that neither the market itself nor individual sectors had become = more volatile in the 1990s, but that stocks within those sectors had, so yo= u need to own more of them.=20 But owning 50 stocks is a pain in the neck -- and it brings up the Buffett-= Lynch admonitions about too much diversification. It is hard just to take t= he time to make the selections, but even buy-and-hold investors need to kee= p track of the companies they own to spot adverse changes in management, pr= oduct failures or new competition (not to mention Enron-style accounting sh= enanigans) -- signs that it's time to sell.=20 One good answer is to achieve balance by owning a combination of mutual fun= ds and stocks. For example, you might want to put 50 percent of the money y= ou have allotted for stocks into a fund that mimics the S&P itself, like Va= nguard Index 500, which charges rock-bottom expenses and guarantees that ri= sk won't exceed systematic levels. You could also consider a broad fund tha= t's managed by human beings, such as Meridian Value or Baron Growth, which = are recommended by Sheldon Jacobs, editor of the No-Load Fund Investor news= letter. Then another 25 percent of your holdings can go into a few sector f= unds that specialize in technology, real estate, energy and small-caps, and= the final 25 percent into a portfolio of 10 to 20 individual stocks. (I ow= n 16, at last count.)=20 There are many valid variations. Just don't emulate Mark Twain.=20 In a letter to clients recently, Anthony M. Maramarco of David L. Babson & = Co., the Cambridge, Mass., investment firm, recalled the aphorism of Twain'= s Pudd'n'head Wilson: "Put all your eggs in the one basket -- and watch tha= t basket!" Unfortunately, such a philosophy emphatically does not work in s= tock investing -- as Twain himself learned when he sank nearly all his fort= une into the Paige Linotype, a machine that flopped.=20 We all make mistakes. (It was Twain, after all, who pointed out that "human= beings are the only animals that blush -- or need to.") But smart diversif= ication helps investors avoid some of the worst of them.=20 James K. Glassman invites comments at jglassman@aei.org, but he cannot answ= er all queries. http://www.washingtonpost.com=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business Wessex Water `to be sold' Heather Tomlinson 11/18/2001 The Independent - London FOREIGN 1 (Copyright 2001 Independent Newspapers (UK) Limited) Wessex Water, the water and sewage company, is understood to be up for sale= following an offer to take over its owner, Enron, by Dynegy, the US energy= group.=20 Three years ago, Enron spent pounds 1.4bn on Wessex Water. But Dynegy is un= derstood to want to concentrate on US and European energy assets and is not= interested in non-core assets. Any hope to regain the same amount of money could be derailed as the indust= ry is put off by regulatory problems, and the company's results have worsen= ed due to imposed price cuts over the past year.=20 "It is not that there is going to be a fire sale but most of [the internati= onal assets] are not core to the businesses we will continue to pursue," sa= id an Enron spokesperson. "At the right price we will sell."=20 Scottish & Southern Energy and United Utilities have been touted as potenti= al buyers, yet industry insiders believe that the UK regulator, Ofwat, will= take a dim view of bids by UK water companies, as they are too large to bu= y it. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 UK PRESS: WestLB Makes Grab For GBP1B Wessex Water 11/18/2001 Dow Jones International News (Copyright (c) 2001, Dow Jones & Company, Inc.) LONDON -(Dow Jones)- German state-owned bank WestLB Panmure is in talks to = buy Wessex Water from its troubled U.S. parent Enron (ENE), reports the Sun= day Telegraph.=20 WestLB is said to have made a formal approach within the last few days. It = is thought to be one of a number of companies that have approached Enron to= buy the British water utility valued at GBP1 billion. Newspaper Web site: http://www.telegraph.co.uk=20 London Bureau, Dow Jones Newswires; 44-207-842-9289 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 BUSINESS Quanta steels itself against takeover bid NELSON ANTOSH Staff 11/17/2001 Houston Chronicle 3 STAR 1 (Copyright 2001) Quanta Services, which builds and maintains power and communications lines,= said Friday it is fighting a "creeping takeover" by UtiliCorp United, one = of the nation's largest utility holding companies.=20 On Thursday Quanta board members changed the Houston company's shareholder = rights agreement - called a "poison pill" defense against takeovers - to de= ter UtiliCorp from acquiring a controlling stake. The action was taken after negotiations with UtiliCorp fell apart and the K= ansas City, Mo.-based company announced its intention to resume purchases o= f Quanta stock.=20 A spokesman told Bloomberg News on Oct. 4 that UtiliCorp wanted to increase= its stake to the mid-40s percentage range, which would give it effective c= ontrol, with a vote on management.=20 UtiliCorp invested $320 million in Quanta from September of 1999 through Fe= bruary of 2000, said UtiliCorp spokesman Ethan Hirsh, bringing its ownershi= p up to 28 percent, and has been adding stock since then. It owned about 38= percent when a standstill agreement stopped further purchases in early Oct= ober.=20 Part of the shareholder rights amendment limits further purchases by Quanta= by reducing the trigger point for the poison pill to 39 percent of Quanta'= s outstanding shares, instead of the 49.9 percent that has been in effect j= ust for UtiliCorp.=20 In addition to saying that UtiliCorp is no longer "an exempt" person under = the 39 percent trigger, the amendments changed the kind of securities to be= issued in the event the pill is triggered and how they could be exercised.= =20 UtiliCorp had a higher trigger point that other potential acquirers because= it already was a significant shareholder when the plan was initially draft= ed.=20 Hirsch didn't think the amendments would prevent his company from buying mo= re.=20 UtiliCorp's interest in Houston acquisitions is not limited to Quanta. Its = also said this week it would like to buy Enron's share of a United Kingdom = power station that provides electricity sufficient to light 1.88 million ho= mes.=20 It will soon get a 27 percent share in the station near London, known as th= e Teeside power station,through the purchase of a utility there. It would l= ike the 42.5 percent that Enron owns, UtiliCorp President Robert Green said= in a conference call.=20 Green said he understood that stake was on Enron's for-sale list.=20 UtiliCorp revealed in a Securities and Exchange Commission filing that it b= ought 1.538 million shares of Quanta's common stock on the open market, at = a cost of more than $24 million, between Sept. 28 and Oct. 3.=20 Quanta's stock declined 27 cents to close Friday at $15.69, while UtiliCorp= rose 10 cents to close at $27.50. Quanta's stock is down 51 percent for th= e year to date, and hit a 52-week low of $9.94 on Sept. 21.=20 "After many weeks of negotiations with UtiliCorp, we could not reach agreem= ent upon a strategy that would allow UtiliCorp to consolidate our financial= results for accounting purposes on terms acceptable to Quanta," John Colso= n, Quanta's chief executive officer, said in a written statement.=20 "In the face of UtiliCorp's communications last evening breaking off negoti= ations and stating its intent to resume open market purchases of Quanta sto= ck, the board acted to protect the best interests of all Quanta stockholder= s against a change of control transaction which did not provide an appropri= ate benefit to all shareholders," he said.=20 Quanta has a mutually beneficial relationship with UtiliCorp and hopes nego= tiations can resume, Colson said. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 BUSINESS Business briefs Business briefs / Houston & Texas Staff, Bloomberg News, Reuters, Associated Press 11/17/2001 Houston Chronicle 3 STAR 2 (Copyright 2001) Offer still on table for Canadian Hunter=20 Burlington Resources on Friday extended a $1.96 billion offer for Canadian = Hunter Exploration Ltd. until Dec. 3 while Canadian regulators study the bi= d. The cash offer was to expire Tuesday. Investment Canada, which oversees for= eign ownership of Canadian companies, won't complete its review by then, Bu= rlington said.=20 Houston-based Burlington agreed to buy Calgary-based Canadian Hunter on Oct= . 9.=20 Azurix settles suit over Dynegy buyback=20 Azurix Corp., a wastewater-services management company, won a judge's appro= val Friday in Wilmington, Del., to settle shareholders' lawsuits over paren= t Enron Corp.'s $329 million stock buyback in March.=20 Houston-based Enron, soon to be bought by Dynegy, said in October 2000 it w= ould pay $7 for each of Azurix's outstanding shares, or $275 million, to ta= ke the company private. Seven Azurix stock owners sued in Delaware Chancery= Court seeking more money.=20 Enron eventually agreed to pay $8.375 per share, adding about $54 million t= o the offer, and stockholders agreed to settle the lawsuit, lawyers said.= =20 SBC adds 2 states to long-distance rolls=20 San Antonio-based SBC Communications received permission Friday from the Fe= deral Communications Commission to begin offering long- distance service to= customers in Missouri and Arkansas.=20 The decision allows SBC to offer the service in the five states served by i= ts SBC Southwestern Bell subsidiary. SBC has already received permission to= compete in the long-distance market in Texas, Kansas and Oklahoma.=20 While the FCC's decision was unanimous, there was discussion on whether SBC= has made its DSL high-speed Internet access service available for resale a= nd if the federal law requires such resale. The commission will address the= issue in another proceeding.=20 Airline canceling 200 layoffs of pilots=20 FORT WORTH - American Airlines Friday canceled the planned Dec. 2 layoffs o= f 200 pilots because military duty was extended for pilots called up on res= erve and other employees took leaves.=20 American laid off 386 American pilots Sept. 28 and 200 more Nov. 1, as well= as 120 at TWA Airlines. Those were among 20,000 jobs AMR eliminated as pas= senger demand fell. The company said it will bring employees back as demand= improves.=20 Southwest drops suit against Orbitz site=20 DALLAS - Southwest Airlines Co. has agreed to drop a lawsuit that claimed O= rbitz, an Internet travel site owned by five rival airlines, displayed inco= rrect information about Southwest's flights and fares.=20 "It gives Southwest Airlines the right to restart the litigation at its cur= rent point if Southwest fares are ever displayed on Orbitz again," said Lin= da Rutherford, a spokeswoman for the Dallas-based airline. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 EDITORIAL AT ENRON, THE BIG DOGS ATE FIRST 11/17/2001 Portland Oregonian SUNRISE D06 (Copyright (c) The Oregonian 2001) Summary: Workers' ire over 401(k) plans is understandable=20 Watching Enron's bigwigs lose their jobs after inflating profits may offer = some satisfaction to retirees and employees at the troubled energy marketer= . But don't bank on it. When corporate insiders can sell the company and stroll away with millions = while workers and other stockholders are left with peanuts, it would be har= d not to be bitter.=20 As Oregonian business writer Jeff Manning reported Friday, local employees = of Portland General Electric, an Enron subsidiary, watched their retirement= savings sink after Enron announced on Oct. 16 that it would lose $618 mill= ion in the fourth quarter. This came after Enron officers made more than $1= 36 million selling stocks earlier in the year.=20 Then on Nov. 8, Enron dropped the other shoe: It admitted it had overstated= earnings for four years by $586 million, or 20 percent. Over those few wee= ks, Enron shares plunged from $33.84 to its $9 close on Friday.=20 The four-year overstatement developed through some novel accounting methods= . Enron and its auditor, Arthur Anderson, insist that its financial reports= were all within proper standards, but the mechanics in this case included = obscuring debt by placing it on the ledgers of other entities so that the p= arent company's profit picture appeared rosier than it actually was.=20 The weeks from mid-October to early November were wrenching for employees. = Because the company was changing its fund manager, they were powerless to m= ake any changes in their 401(k) plans. PGE chief executive Peggy Fowler poi= nts out that the change in 401(k) plan managers was announced last summer. = And although employees could have gotten out of Enron stocks over the histo= ry of the plan, Enron seemed to be an attractive investment.=20 Company executives, though, were selling. Jeffrey Skilling, who was promote= d to Enron chief executive early in the year but resigned in August, sold m= ore than $5 million in company shares according to transaction records cove= ring the first half of the year.=20 Former chief financial officer, Andrew Fastow, who was fired last month in = an action related to the financial mess, made $14 million in stock sales be= tweeen March and November of last year. Kenneth Lay, Enron's chief executiv= e, who returned after his protege Skilling left, made at least $20 million = in stock sales from late last year. He has announced that he would decline = his severance package.=20 Dynegy, another Texas energy marketing company, has made a bid to buy Enron= . That probably means the best Enron and PGE employees can hope for now is = that Dynegy will be a better corporate owner, or they can try their luck wi= th one of the many shareholder lawsuits being filed.=20 The Securities and Exchange Commission is investigating Enron's activities.= If its behavior was illegal, there will be consequences for company office= rs.=20 That's still not much to offer to workers who have seen their retirement sa= vings dissolve. But for now it's all there is. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 FINANCE WEEK - From dealing to reeling. By BARRY RILEY. 11/17/2001 Financial Times (c) 2001 Financial Times Limited . All Rights Reserved FINANCE WEEK - From dealing to reeling - The legacy of the late 1990s stock= market bubble remains with us, as does irrationality THE LONG VIEW - BARRY= RILEY.=20 Optimism is back. Stock markets around the globe have typically rallied by = 20 per cent since rock bottom was reached on September 21. Only 9 per cent = of global fund managers believe equities will be lower in 12 months, accord= ing to a Merrill Lynch survey published this week. But the legacy of the late 1990s stock market bubble remains with us. The c= hallenge is how to minimise the level of irrationality. Two of the UK's big= gest losers from crazy prices reported on Tuesday. Vodafone suffered #11.45= bn of write-downs - but curiously, made no provisions against the sky-high = #13.1bn it paid for third-generation mobile phone licences in 2000.=20 Such payments, argued Sir Christopher Gent, Voda-fone's chief executive, we= re merely what the market demanded at the time. It is interesting to note, = too, that Paul Klemperer, the Oxford professor who is an expert in "auction= theory" and advised the British government, has defended the disastrous ou= tcome by arguing that the prices reflected the capital market's view of 3G'= s prospects. The common theme here is that it is nobody's fault if crazy pr= ices are paid, because they are legitimised by the stock market.=20 Marconi, which is financially in a much worse state than the mobile phone g= iant, has written off most of the #4.1bn paid for US internet hardware comp= anies in 1999. There has also been a great deal of controversy in the US du= ring the past few weeks over the near-collapse of Enron, the power group be= ing rescued by a takeover bid from its smaller rival Dynegy. There was an o= bvious failure by investors - and by stock market analysts - to assess the = true risks at Enron.=20 Smart businessmen will sellat mad prices, but why on earth should they buy?= The trouble is, too many academics have developed theories of value based = on rational expectations. The real world is unfortunately very different.= =20 Some of the distortions had obvious technical origins. The Vodafone bubble = of 1999 reflected the cross-border takeover of Mannesmann and the artificia= l weighting shortages that developed from that transaction as Vodafone ball= ooned in market capitalisation to reach, at one stage, 16 per cent of the F= TSE 100 Index. The market price was driven not by normal corporate fundamen= tals, but by the desire of most fund managers to reach a market weighting, = at which point they were "safe" in terms of risk against the index benchmar= k.=20 That was the period when investment banks exploited the idea of low free-fl= oat new issues: internet companies, especially, were floated off with only = 15 per cent of the stock made available, although anything up to 100 per ce= nt went into the indices, creating serious shortages and bubble valuations.= Changes now being made to the main stock market indices have reduced the p= roblem, but there remains a basic irrationality in the concept that investm= ent risk resides in an index rather than in the underlying stocks.=20 Takeovers have always been plagued by irrationality, and indeed this is an = area where academics recognise the problem; over many years they have point= ed out that all the benefits of deals, and often more than all, accrue to t= he shareholders of the companies taken over, while investors in the bidding= companies suffer dilution. Investors know this, and in normal market condi= tions news of a takeover will depress the bidder's share price. But in a bu= bble market these prudent attitudes can be overwhelmed by euphoria, as well= as technical factors relating to demand by fund managers so that they can = maintain their weightings when a bidder is spraying around large quantities= of new equity.=20 Also, it is irrational that many more deals are done when the stock market = is high than when it is low. Two years ago, companies such as Marconi were = engaged in buying sprees at daft prices. Now, when prices are much lower, h= ardly any acquisitions are being made (and investment banks are dismissing = thousands of employees). An exception to the deal famine is gold mining, wh= ich just happens to have been one of the stock market's strongest sectors t= his year.=20 Another important source of irrationality has been the domination of stock = market analysis by the stockbroking offshoots of the investment banks. Over= recent years their earnings-per-share forecasts for the next calendar year= have been on average 8 per cent too high. This has not just been a mistake= ; they have been paid to be over-optimistic. Admittedly, attempts are being= made to restructure the incentives here, as the embarrassed investment ban= ks come under pressure from the regulators and the courts for their errors = of judgment during the bull market, but it remains to be seen whether much = will really change.=20 The mystery is why anybody would take notice of these forecasts, and indeed= many professional investors do not. That Merrill survey, incidentally, sho= ws that fund managers on average expect no more than 4 per cent earnings pe= r share growth over the next year, while the stockbrokers' analysts are sti= ll clinging to the hope that it will be 15 per cent.=20 A final source of distortion is the tendency of companies to offer their ex= ecutives the wrong sort of incentives. The ruin of Marconi may appear irrat= ional, when multi-billion-pound acquisitions are being declared worthless a= fter only two years. But executives with lucrative stock option plans, whic= h pay off if their gambles go right, combined with golden goodbye and pensi= on packages that are triggered if things go wrong, may well consider it per= fectly rational, from their viewpoint, to take much bigger risks than other= shareholders, or employees, would consider acceptable.=20 Moreover, Sir Christopher Gent, shareholders of Vodafone will remember, rec= eived a controversial #10m personal bonus last year for clinching the Manne= smann takeover, a deal that requires #10bn of write-offs.=20 In normal market conditions the valuation of equities may be tolerably rati= onal, but in a bubble market the rules are thrown out of the window. Many i= nvestors certainly like the idea of getting rich quickly. That is why many = people subscribe so keenly to national lotteries in which the chance of win= ning is so small as to be not worth rational consideration.=20 barry.riley@ft.com.=20 (c) Copyright Financial Times Ltd. All rights reserved.=20 http://www.ft.com. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 WORLD STOCK MARKETS - Bears take upper hand on Wall St. By MARY CHUNG. 11/17/2001 Financial Times (c) 2001 Financial Times Limited . All Rights Reserved After an early game of tug-of-war, the bears took the upper hand as the Dow= Jones Industrial Average closed 5.40 lower at 9,866.99. The S&P 500 index = gave up 3.59 at 1,138.65 and the Nasdaq Composite slipped 1.98 at 1,898.59.= Volume was fairly heavy with 1.34bn trades in the NYSE.=20 The indices were earlier bolstered by news that some of the leaders of the = Taliban and the al-Qaeda terrorist network had been killed in bombing raids= on Kabul and Kandahar this week. However, the momentum faded as investors found little reason to keep sendin= g stocks higher following a sharp decline in the US consumer price index. T= he index saw its steepest monthly drop since April 1986. Separately, the Fe= deral Reserve reported another drop in industrial output last month.=20 Investors appeared more hesitant to step into the market and buy stocks aft= er several weeks of sharp gains. However, the corporate picture looked to b= e improving for some companies such as Dell. The computer maker reported th= ird-quarter results that beat analysts' estimates by a penny and predicted = a small rise in sales for the current quarter. Shares, however, fell 4 per = cent at $26.60.=20 Rivals Hewlett-Packard shed 2.7 per cent at $21.50 and Compaq gave up 3.7 p= er cent at $10.30. Yahoo!, the world's largest internet portal, jumped 4.3 = per cent at $15.47 after it announced a restructuring and job cuts, but rea= ffirmed its guidance for the fourth quarter.=20 Shares in Starbucks fell 9 per cent at $17.50 in spite of the coffee compan= y reporting a 22 per cent rise in earnings for the fourth quarter.=20 Energy prices rose in spite of the continuing dispute over oil production b= etween Opec and Russia. Amerada Hess put on 2.5 per cent at $54.59 and Exxo= n Mobil added 1 per cent at $37.54. Enron, the embattled energy trading com= pany, however, slid 5 per cent at $9. Most Dow components were lower as Alc= oa slipped 1 per cent at $37.12, American Express shed 3.7 per cent to $33.= 13 and Wal-Mart fell 1.6 per cent at $55.10.=20 Toronto was little changed in morning trade in spite of a rally in technolo= gy and cyclical shares, the first sectors expected to respond to an improvi= ng economy.=20 However, at the close the S&P TSE-300 composite index was up 0.72 per cent = at 7,315.30 as tech issues continued to strengthen.=20 Overall, 11 of the market's 14 sub-indexes were higher but safe-haven gold = stocks suffered as hopes grew for a swift conclusion to the war in Afghanis= tan. The tech-heavy industrials sector enjoyed a 1.61 per cent gain. Electr= onics manufacturer Celestica charged ahead, rising 3.3 per cent to C$64.80.= =20 Telecoms equipment heavyweight Nortel Networks jumped to C$12.69 as several= investment firms raised targets.=20 (c) Copyright Financial Times Ltd. All rights reserved.=20 http://www.ft.com. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business; Financial Desk IN BRIEF / ENERGY Pension Funds Consider Action Against Enron Reuters 11/17/2001 Los Angeles Times Home Edition C-2 Copyright 2001 / The Times Mirror Company Some big pension funds that invested in Enron Corp. said they are consideri= ng legal options in the wake of the energy giant's stock collapse and a reg= ulatory probe of its dealings.=20 Spokesmen for the New York state and city comptrollers and an official from= Amalgamated Bank, a trustee of workers' retirement funds, said they were l= ooking into lawsuits stemming from Enron's murky financial dealings and sto= ck plunge. Pension funds and mutual funds have been big holders of Enron, once a Wall = Street darling whose stock has plunged 89% this year.=20 Five New York City pension funds hold about 2.9 million Enron shares, said = David Neustadt, a spokesman for the New York City Comptroller's Office. The= funds serve teachers, police and other city workers.=20 Enron shares fell 48 cents to $9 on the New York Stock Exchange. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron Investors Hope Filing Will Shed More Light on Finances 2001-11-17 11:06 (New York) Enron Investors Hope Filing Will Shed More Light on Finances Houston, Nov. 17 (Bloomberg) -- Enron Corp. investors hope the energy trader's third-quarter report to the U.S. Securities and Exchange Commission will answer some of the questions that sent its shares tumbling and led to a proposed sale to rival Dynegy Inc. Enron, which has been criticized for failing to clearly explain how it makes money, may disclose in Monday's filing more on how much is owed by the company and affiliated partnerships, as well as any planned job cuts and other cost-saving moves related to Dynegy's $24 billion buyout. ``Investors will be looking for anything that affects the likelihood of the (Dynegy) deal going through and the timing of such a deal,'' said Edward Paik, who helps manage the Liberty Utilities Fund, which owns 1.6 million in Enron shares. Enron agreed to sell after its stock plunged 67 percent in three weeks amid an SEC investigation into partnerships run by Enron executives. Investors worry that new disclosures, such as previously unreported debt, might threaten Enron's credit rating and scuttle the merger, possibly pushing Enron into bankruptcy. ``There's been so much skepticism about what Enron's liabilities are with these partnerships, I'm looking to quantify this,'' said Glen Hilton, a fund manager at Montgomery Asset Management LP, which holds Dynegy shares. Enron Chairman Kenneth Lay admitted last week that failed investments and a loss of investor confidence forced the sale to Dynegy, and he and other executives pledged to be more open with investors. Lay, 59, said last week he won't accept a severance package of more than $60 million that he could have collected following the takeover. Enron shares fell 48 cents yesterday to $9. Dynegy fell $1.53, or 3.5 percent, to $42.47. Balance Sheet Enron's third-quarter report, which had been expected last week, was delayed by the Dynegy talks and a restatement of earnings, Chief Financial Officer Jeffrey McMahon said. Enron reduced net income for four years by a combined $586 million to include losses from affiliated partnerships. Monday's filing, called a 10-Q, will include a balance sheet summarizing assets and debts. Enron for years has omitted balance sheets, which the SEC requires as part of the 10-Q, from its press releases announcing earnings. Investors renewed their criticisms of the practice after Lay mentioned during a conference call last month that dealings with two partnerships had reduced Enron's shareholder equity, or its assets minus liabilities, by $1.2 billion. The disclosure led to the ouster of Chief Financial Officer Andrew Fastow. ``Everyone is trying to make their own assessment of what (Enron's) ultimate liability will need to be,'' said Commerzbank Securities analyst Andre Meade, who rates the shares ``hold'' and doesn't own them. Monday's report probably won't give a complete answer, said Louis Gagliardi, an analyst at John S. Herold Inc. While the balance sheet will list liabilities for the partnerships, which were set up to buy Enron assets and get debt off the company's books, it won't spell out Enron's share, he said. ``What is the net liability off the balance sheet?'' Gagliardi said. ``We really don't know what that number is.'' Credit Rating Dynegy has said it can back out of the acquisition if Enron's legal liabilities exceed $3.5 billion. The balance sheet ``will help us see how good a deal this is for Dynegy,'' said Kathleen Vuchetich, co-manager of the $1.4 billion Strong American Utilities Fund, which owns 284,000 Dynegy shares. Both companies are based in Houston. The filing also might offer details on the SEC probe. ``It may say what the SEC is looking for, and what the rating agencies have told them,'' said Christopher Ellinghaus, an analyst at Williams Capital Group. He added, though, ``I don't expect much.'' Enron's stock drop led Moody's Investors Service to cut the company's debt rating to the lowest investment grade. Dynegy held off on a purchase agreement out of concern that the rating would be cut to junk, jeopardizing Enron's ability to raise cash needed to settle its daily power and natural-gas trades. Enron may reveal where it expects to cut jobs and how much it will pay to departing employees, Paik said. Chief Operating Officer Greg Whalley said last week that fourth-quarter profit will be hurt by severance payments and reorganization costs. He didn't give details. Jobs likely will be eliminated in businesses the company plans to sell, including its money-losing telecommunications unit and operations in Europe, analysts said. Enron has about 21,000 employees, two-thirds in the U.S. and about a fifth in the U.K. Its 600 traders are divided between London and Houston, where Enron employs about 7,500. Many Enron workers are already preparing for layoffs, said Lyndon Taylor, a Houston-based recruiter for Heidrick & Struggles International Inc., an executive placement firm. ``I got 56 resumes last week from Enron,'' Taylor said. ``That's equal to the number I got in the past year.'' --Margot Habiby in Dallas and Jim Polson in Princeton UK: Trade, bank buyers circle Enron's Wessex Water-reports. 11/17/2001 Reuters English News Service (C) Reuters Limited 2001. LONDON, Nov 17 (Reuters) - Both financial and trade buyers are considering = bids for Wessex Water, the UK utility owned by crisis-hit U.S. energy group= Enron , weekend press reports said.=20 According to the UK trade magazine Utility Week, Enron's rescue buyer Dyneg= y wants to offload Wessex as soon as possible, and focus on integrating Enr= on's core energy businesses. A report in the Sunday Telegraph newspaper named German bank WestLB as a po= ssible buyer at a price of 1 billion pounds ($1.4 billion). WestLB is the f= inancial backer of the management buyout team that owns another southern En= gland regional utility, Mid Kent Water.=20 Utility Week raised the possibility that UK power utility Scottish & Southe= rn might be interested. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Financial Post: Canada A user's guide to living in Calgary: People moving from Houston find the ci= ties much alike Claudia Cattaneo Financial Post 11/17/2001 National Post National FP7 (c) National Post 2001. All Rights Reserved. U.S. oil companies are setting up shop all over downtown, usually picking h= igh-quality office space with lots of open space. Anadarko Petroleum Corp. = is located at Fifth Avenue Place, Burlington Resources Inc. is in Bow Valle= y Square and Devon Energy Corp. is in Canterra Tower. Some end up in the of= fices of the companies they acquire. Conoco Inc. has moved into Gulf Canada= Square.=20 The big takeover wave has led to a reshuffling of downtown space. Today, th= ere is a shortage of large spaces and an increase in small ones available f= or sublease. Some would like to get the towers they occupy named after them but landlord= s resist this because naming a building after one tenant can be a disincent= ive for others.=20 Oilmen's favourite hangout is the Calgary Petroleum Club, founded by U.S. a= nd Canadian oilmen in 1948 in the Palliser Hotel. Members have reciprocal m= embership at the Petroleum Club of Houston. But Calgary's Pete Club is a ba= rgain compared to its Texas counterpart. The initiation fee in Calgary is $= 2,000, monthly dues are $65 and the minimum amount members must spend in a = year is $600. The initiation fee for full membership at the Petroleum Club = of Houston is US$3,500, monthly dues are US$110 and the minimum house accou= nt is US$75 per quarter.=20 U.S. executives running Canadian oil and gas operations earn substantially = more than their Canadian counterparts because their compensation is competi= tive with the U.S. market.=20 When U.S. oil companies purchase Canadian operations, they like to keep as = much of the Canadian staff as possible, since they are even more aware than= their Canadian rivals of the "war for talent."=20 When recruiting locally, U.S. firms pay competitively but of course will pa= y what they must to get the best candidate. They also offer competitive ben= efits and stock-option plans. U.S. employers gulp at the generous holidays = enjoyed by Canadian oilpatch employees.=20 There's no American neighbourhood in Calgary, although many recent arrivals= are buying homes close to the city's core, particularly in such high-end n= eighbourhoods as Mount Royal, Elbow Park and Britannia, where homes sell fo= r $500,000 to $2-million.=20 Some U.S. companies purchase condominiums in such areas as Eau Claire on th= e Bow River to house U.S. executives in transit.=20 Ted Zaharko, a broker-owner with Royal LePage, says Americans are driven by= lifestyle choices and the fact that they can afford to buy expensive homes= . Living near other Americans isn't important.=20 The cost of living is lower in Calgary than in many comparable U.S. cities.= However, U.S. cities become more competitive for high-income earners becau= se personal income taxes in Canada are higher than in the U.S. at the highe= r income levels. Offsetting factors include access to health care, clean ai= r, a short commute to work and the nearby mountain playground, which tend t= o be important to affluent people.=20 U.S. oil types may have strange accents -- many come from the southern stat= es -- but oilpatch jargon is pretty much the same. Calgarians and Americans= understand one another when they talk of dry holes (no discovery), wildcat= wells (exploration wells) or roughnecks (rig workers). The language of mon= ey is also the same: barrels and U.S. dollars.=20 Oilpatch humour is also borderless. One of the latest jokes circulating by = e-mail, courtesy of oilpatch investment dealer Peters & Co., is called "Und= erstanding Enron." The U.S. energy giant is in trouble over its use of off-= balance-sheet transactions to keep debt off its books:=20 FEUDALISM You have two cows. Your lord takes some of the milk.=20 FASCISM You have two cows. The government takes both, hires you to take car= e of them and sells you the milk.=20 PURE COMMUNISM You have two cows. Your neighbours help take care of them an= d you all share the milk.=20 APPLIED COMMUNISM You have two cows. You must take care of them, but the go= vernment takes all the milk.=20 TOTALITARIANISM You have two cows. The government takes them both and denie= s they ever existed. Milk is banned.=20 MEXICAN DEMOCRACY You have two cows. The government takes both and drafts y= ou into the army.=20 EUROPEAN DEMOCRACY You have two cows. The EU commission decides which regul= ations for feeding and milking apply. If there aren't any, they invent some= . They pay you not to milk the cows. They take both cows, shoot one, milk t= he other and pour the milk down the drain. They then require you to fill ou= t forms accounting for the missing cows.=20 AMERICAN DEMOCRACY The government promises to give you two cows if you vote= for it. After the election, the President is impeached for speculating in = cow futures. The press dubs the affair "cowgate," but supports the Presiden= t. The cows sue you for breach of contract. Your legal bills exceed your an= nual income. You settle out of court and declare bankruptcy.=20 CAPITALISM You have two cows. You sell one and buy a bull. Your herd multip= lies and the economy grows. You sell them and retire on the income.=20 ENRON VENTURE CAPITALISM You have two cows. You sell three of them to your = publicly listed company, using letters of credit opened by your brother-in-= law at the bank, then execute a debt/equity swap with an associated general= offer so you get all four cows back, with a tax exemption for five cows. T= he milk rights of the six cows are transferred via an intermediary to a Cay= man Island company secretly owned by the majority shareholder who sells the= rights to all seven cows back to your listed company. The annual report sa= ys the company owns eight cows, with an option on one more. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 WestLB Offers to Buy Enron's U.K. Water Unit, Newspaper Says 2001-11-17 20:01 (New York) London, Nov. 18 (Bloomberg) -- Westdeutsche Landesbank Girozentrale, Germany's largest state-owned bank, is one of several suitors talking to Enron Corp. about its Wessex Water unit, which is valued at more than 1 billion pounds ($1.4 billion), the Sunday Telegraph said without citing sources. Dynegy Inc. of the U.S. is looking to buy Enron for $24 billion, and will sell some of its assets, including Wessex. WestLB made a formal offer to Enron in the past few days in hopes of striking a quick deal because Dynegy may want to avoid the regulatory risk in such a sale; any bid for a water company in the U.K. worth at least 30 million pounds must be referred to the Competition Commission, the newspaper said. Enron bought Wessex for 1.4 billion pounds in 1998. RWE AG of Germany, Europe's fourth-biggest power company, is also interested in Wessex, but Enron thinks U.K. regulators won't approve an RWE bid because the company already owns Thames Water, a large U.K. water company. WestLB has also been reported to be preparing a buyout for Railtrack Group Plc, the insolvent owner of the U.K.'s train tracks and stations, the paper said. Enron Closes on $550 Million Loan From J.P. Morgan, Salomon 2001-11-16 17:36 (New York) Enron Closes on $550 Million Loan From J.P. Morgan, Salomon Houston, Nov. 16 (Bloomberg) -- Enron Corp. closed Wednesday on a $550 million loan from J.P. Morgan Chase & Co. and Salomon Smith Barney Inc. that was secured with assets of its Transwestern Pipeline Co., spokesman Vance Meyer said. Enron, the largest energy trader, said Nov. 1 that it had received a commitment for $1 billion in loans from the investment banks that would be used for debt payments and to supplement cash reserves. Enron secured the loans with the assets of Transwestern and the Northern Natural Gas Co. The two pipeline systems combined are about 19,000 miles long and can deliver as much as 6 billion cubic feet of gas a day. The remaining $450 million loan, secured with the Northern Natural Gas assets, is in the documentation stage and is expected to close next week, Meyer said. Enron agreed a week ago to be acquired by Dynegy Inc. in a transaction now valued at $24.7 billion in stock and assumed debt. The move followed a loss in investor confidence -- the company's shares had fallen 90 percent this year -- and amid a federal investigation of accounting irregularities that limited its ability to finance operations. ChevronTexaco Corp., the second-biggest U.S. oil company and Dynegy's largest shareholder with 26 percent, provided Enron, through Dynegy, with a $1.5 billion cash infusion on Tuesday as part of the buyout agreement. In return, Dynegy acquired preferred stock and other rights in the Enron unit that owns Northern Natural Gas. If the merger isn't completed, Dynegy will have the right to acquire Northern Natural Gas, Enron said in regulatory filing Wednesday. ChevronTexaco will provide Dynegy with another $1 billion after the merger closes to maintain its equity stake. The shares of Enron fell 48 cents to $9, while shares of Dynegy fell $1.53 to $42.47. Both companies are based in Houston. Shares of San Francisco-based ChevronTexaco fell 35 cents to $83.45. --Margot Habiby in the Dallas newsroom (214) 954-9452