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Date: Thu, 25 Oct 2001 09:01:33 -0700 (PDT)
From: m..schmidt@enron.com
To: pr <.palmer@enron.com>, karen.denne@enron.com, j..kean@enron.com,
vance.meyer@enron.com, pat.radford@enron.com,
meredith.philipp@enron.com
Subject: CNBC: The Squawk Box Transcript
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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.
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