Memories of the Enron Crisis

August 13th, 2008

Many investors think that the current financial crisis is much more significant than previous ones. However, as you can understand from the documentary movie below, this crisis has many features that former crises such as the Enron crisis have witnessed. There might not be any accounting frauds, but there was probably inappropriate financial behavior, which received legitimization from the inspecting authorities.

Financial banks that give unlimited credit to every home buyer without considering his ability to return his loans, and rating companies that give higher rates to these banks could be the main causes for the current crisis.

The current level of government regulation is still on debate and will probably not increase in the near future. Therefore, the best way to reduce the risk involved in investing in these kinds of companies is by learning how to value stocks and knowing the right time to buy and sell. Watching and learning from other investors in a virtual stock trading community such as Yalicoo can teach you these things, and dramatically increase your chances of avoiding investing in dubious companies such as Enron.

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Entry Filed under: Stock Investing Ideas

7 Comments Add your own

1. Some Guy | August 13th, 2008 at 12:04 pm

The main cause of the mortgage bubble is the fact that there was no limit on how much money banks could borrow to lend to real estate buyers.

The federal reserve was inflating the money like crazy, and the banks weren’t constrained at all to lending out their depositors’ money.
2. confused | August 13th, 2008 at 12:17 pm

It seems like this crisis is far from over, though many analysts say it is. So who should I believe ??
3. Yinon | August 13th, 2008 at 7:02 pm

Be sure that most analysts are as confused as you. Obviously, no one knows if the crisis and the consequence bearish market are over yet. There are at least several financial companies that are attractive at current prices (for example I like and hold Discover financial - DFS), but performing a valuation of most companies from this sector is like trying to look through a thick layer of fog. Thus, the best way to go is by learning how to value companies on your own by using sites such as Yalicoo and other educational sites.
4. confused | August 14th, 2008 at 11:27 am

so i am not alone!
do you think it’s a good time to buy the banking stocks? it seems that they in a low point - but is it their lowest point?

thanks yalicoo!
5. FreeCom | August 14th, 2008 at 11:51 am

I think its always good to buy the banking stocks, specially when they are in their lowest point. from there they will only go up i believe, but that’s just me.
6. Sophie | August 14th, 2008 at 12:47 pm

What happened in the end with the Enron executives?
7. FreeCom | August 14th, 2008 at 1:02 pm

Sophie, You know there are lots of companies now searching for a new method of producing energy, i think its a good idea to invest on them.
The one who will find a new cheap (and clean for that matter) energy will have its stock rising exponentially

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