Enron Traders and Me

| 9 Comments

I am glad I was never an Enron energy trader. After listening to these clips from the company's trading desk phone records, my actions and words during that time may not be much different. My hesitation would probably come when the decision to break the law was made; yeah, I do have some ethics. What the conversations capture is an attitude which fairly accurately reflects my own.

"Burn, baby, burn" is something that I muttered a couple of times. For option traders like me, who always have disaster protection or are long volatility, those days, when the world seams to be coming to an end, are the ultimate thrill. Andreline takes over, but it doesn't manifest itself in physical activity, although sometimes it could.

One morning, I was waiting for my boss to get into the office when the phone rang. He was arrested that morning for driving on a suspended license( this was the result of not paying a parking ticket of all things). The reason he was pulled over in the first place was markets overnight were down hard and he ran a stop sign coming into work. The andreline flowing through his blood had fired him up.

Typically, the physical outburst during trading are by those who have the wrong positions. The voices by the Enron traders are those of people confident and in control. Comments like "burn, baby, burn" are just a release of nervous energy and, well, of course you're make jokes and laugh as you make in a day what most people make in a year(some people make multiples more than that, others less, it just depends on how big you are and for whom you trade). The guys sound like assholes and they probably are. The comments horrify many people; how could they be so mean? Maybe they are taking pleasure in other people's pain, I never did even while making plenty of jokes that would make it seam like it.

9 Comments

Please proof things before posting them. Typical trader.

Er, proof what?

JT, typical douchebag.

it is adrenaline, but who really cares?

So with the release of these tapes, the Government (California or FERC) continues to reinforce the simplistic notion that it was Enron that caused the defenseless citizens of California (defenseless since they never received anything close to the right price signal during the crisis) to lose $9+ billion to Evil Capitalism. Boy, does this play well in a politically correct state dominated by Socialists (Sorry Arnold).

Having worked with these issues while employed at the Cal ISO during the 2000 energy crisis (oh yes, there will be more crises), I will admit that Enron definitely played games. But Enron's total take was actually quite small (as per studies done by the ISO) and most of the $9 billion was made possible only by colossally stupid regulation and criminal negligence on the part of the California state government, including the Legislature, the CPUC, and ISO itself. When will there be a study that quantifies the billions of extra charges that were actually caused by the incompetence of the aforementioned state agencies? Probably never.

Enron was able to manipulate the market precisely because of California's ill-conceived deregulation. If you put a price cap on one side of the market but leave the other side free to float, it's only a matter of time before somebody figures it out and bankrupts the utility. People only talk about Enron because it had so many other cases of corporate greed and fraud. But what about Dynergy? El Paso Corp? Williams Brothers? They were all electricity traders too, and nobody is accusing them of market manipulation.

Anyone who listened to nursing home workers speak of residents "circling the drain" would be likely to see it as heartlessness and not the coping mechanism it really is. I have no trouble not thinking less of Enron traders after reading the transcript.

Let's be honest; a vacuous energy policy and cost-based regulatory paradigms cannot adequately protect consumers or utilities in an "instant" marketplace like the west coast. Regulating costs is much easier than regulating behavior. Policy makers failed to understand deregulation changes the equation from cost to trading behavior based regulation. The FERC and the CPUC both are institutionally arrogant in attempting to sell the public on how just a few traders...(none of which were affiliates of California utilities, yeah right) ruined the market by gaming the system. There would have been little or no gaming had the two entities been doing their jobs. But alas, the FERC sat on tariff sheets submitted by the ISO which would have closed many of the loopholes, and it allowed LADWP to profit on its NW power capacity with impunity-political power balances opportunistic behavior?

I dont know who the people posting to this board are. But you definetly know more than the lay person about this subject. My Compliments. You all seem to know how this stuff works. And know it correctly.
California was a fruit ripe for the pickin'. They compromised on deregulation. Which is something you have to do all of, or none of.You cant do it part way like they did. California is probably by far the dumbest state in America with exception to washington dc.The government people there think they are so enlightened and so much better than everyone else. But they are completley stupid which is why this happened. No Offense to anyone who lives there. You cant do deregulation halfassed, or this will happen EVERY TIME. No matter if its Enron, Dynegy, Duke, or whoever. Its like an armored car driver taking his lunch break in the compton neighborhood in los angeles and leaving the back of his truck open, and putting a sign on his truck saying Free Money. Similar problems happened in Ohio where they did Deregulation correctly. And the Thievery Did NOT happen. Because in Ohio, the government is not stupid. The Karate Kid version of this... You can do Deregulation - Yes, You can do deregulation, NO ....but if you do deregulation.. guess so.. Squashed like grape. California had this coming. It was a lesson in Capitalism. I think the morons that were on the other side of the table were just as guilty as us Enron Traders. Yes there were shady practices going on. We made more in a day then people make in a year. Pretty much by being bookies. We wouldnt have been able to have the fix in if California did deregulation correctly. But what do you expect? Its california. We should annex that state and make it part of America again. Haha. Or maybe we should kick it out of the union and send it the direction its going? The Chinese government would like a satellite close to the US right?

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This page contains a single entry by Bob published on June 3, 2004 6:06 AM.

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