Tag Archive: Jeffrey Skilling


“After taking your PR classes for the past three years, I feel confident to go out into the world of PR communications professionals. I will miss your enthusiasm in the classroom every day, and writing your two-page executive memos! I can’t thank you enough.” – Graduating Central Washington University Public Relations Student

“I have learned more from your classes than all the other classes I’ve taken combined, and that’s not just including lessons having to do with school. You taught me to take pride in my work, and to put in the effort to do my best. I honestly do not know if I would be where I am today, or have the future that I see myself having if it weren’t for you.” – Another Graduating Central Washington University Public Relations Student

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Trust me when I say not all student reviews are so positive.

When they are, you treasure each and every one.

Most of all you don’t take them for granted because there is always another opinion.

What we call the “Rule of One.” There is always at least one student, who quite frankly hates your guts and even loathes the very ground you walk on. Sigh.

And then there is the student, who can quote back what you said.

In this world of texting, Snapchatting, mobile devices and old-fashioned laptops, breaking through and instilling even ein bisschen wisdom seems almost miraculous.

A professor can prepare. She or he can spend hours researching. And devote even more time to tinkering with PowerPoints and video. Finally, the time comes to deliver the lecture, coax questions and then ask two key rhetorical questions:

  1. Was anyone listening?
  2. Does anyone care what you have to say?

One of my students provided me with a thank you card with valuable “Kevin Quotes” including a smiley face.graduation2016

Here they are with an Almost DailyBrett commentary under each one. They are offered in the exact order chosen by the student writer:

  • “Buy on rumor; sell on news” Almost DailyBrett: This ubiquitous expression in the late 1990s directly led to the Securities Exchange Commission (SEC) promulgating Reg. FD (Fair Disclosure). Corporate chieftains could no longer “whisper” meaningful tidbits to favored financial analysts (e.g., Goldman Sachs, JP Morgan, Fidelity, Morgan Stanley) allowing their clients to buy on the whispered rumor and then sell on the actual news.
  • “Your Brand Is In Play 24/7/365” Almost DailyBrett: Donald Trump in particular should pay close attention to this axiom. With instantaneous global communication through a few key strokes, digital communication can advance a personal or corporate with lightning speed, and destroy it just as quick.
  • “Digital Is Eternal” Almost DailyBrett: The complement to your brand being in play 24/7/365 is that all digital communications are permanent, enduring and can be resurrected by hiring managers, plaintiff attorneys and others who can hurt your reputation and/or career.justinesacco
  • “The Long and Short Program” Almost DailyBrett: The Olympics figure skating competition metaphor pertains to 10-K annual report letters and 10-Q quarterly earnings reports respectively. The former has more flexibility, while the latter must give precedence to GAAP (Generally Accepted Accounting Principles) and include revenues, gross margin percentage, net income, EPS, cash-on-hand and dividends (if applicable).
  • “Don’t Be a Google Glasshole” Almost DailyBrett: Guess, I really did say that …
  • “Buy Low; Sell High” Almost DailyBrett. Every one of our corporate communications/investor relations classes began with this chant. One must understand profit margins.
  • “Do Not Buy Stock in Enron” Almost DailyBrett: Don’t buy a stock just because it is going up. You need to understand a company’s raison d’ etat before you commit funds. There is a real difference between investing and gambling. Those who gambled on Enron lost everything.
  • “How Does a Company Make Money?” Almost DailyBrett: Bethany McLean of Fortune asked this basic question to Jeffrey Skilling, now imprisoned former Enron president. The Harvard-trained chief executive needed an accountant to answer this most basic of questions. McLean smelled a rat.
  • “Stocks Are Forward-Looking Indicators” Almost DailyBrett: As Wall Street wild man Jim Cramer of CNBC Mad Money fame always states” “I don’t care about a stock’s past, only its future.”edwards1
  • “Tell the Truth, Tell It All, Tell It Fast. Move On” Almost DailyBrett: These 11 words are the crux of effective crisis communications. Disclosure is inevitable. You can manage or be managed. Former presidential candidate John Edwards is the poster child for failing to follow this advice.
  • “Corporate America Needs Better PR” Almost DailyBrett: Amen

Appreciate the nice words. Even more: Thanks for listening and learning.

https://www.snapchat.com/

https://www.sec.gov/answers/regfd.htm

https://almostdailybrett.wordpress.com/2015/04/08/the-internet-where-fools-go-to-feel-important/

https://almostdailybrett.wordpress.com/2015/05/25/the-mother-of-all-weak-arguments/

 

 

“Bulls make money, bears make money, pigs get slaughtered.” – CNBC Mad Money host Jim Cramercramerpigs

Which decision requires more mental gymnastics?

When to buy?

When to sell?

The author of Almost DailyBrett humbly opines that when to sell is the tougher call.

Why?

There are two kinds of remorse: ‘Darn it the stock kept going up after I sold’; and the worse one, ‘I could have sold when the stock was up, but I was a pig … and oh fiddlesticks, now I am selling when the stock is down.’

Yep, there are a lot of potential could-of, would-of, should-of when it comes to selling.

So what should you do in the view of this humble retail investor (read: Charles Schwab account)?

Don’t Fall in Love

“…Sometimes the most obvious question really is the question. In Enron’s case: How do you make money? – Bethany McLean, Fortune Magazine

Preparing to teach Corporate Public Relations/Investor Relations to Central Washington University seniors and a few juniors starting this coming Wednesday, yours truly will pose the same simple question that Fortune’s McLean posed to Enron’s Jeffrey Skilling: “How do you (Enron) make money?”

Communicators need to have elevator pitches at their ready when asked this very same straightforward question about their own employer. The same is true for investors: How does a company make money? If the answer is clear; you like the company; you understand the business strategy; you have done your homework including consulting with your financial advisor, then it may be time to purchase shares of the company stock.bullandbear

This particular company’s stock is now part of your diversified portfolio, which in turn represents a portion of your retirement savings, a child’s college education, that dream vacation etc.

All is good, but when does it make sense to sell?

Buy and hold is a sure loser. Why? At some point, stocks will stop growing. Your invested company certainly will change, and not necessarily for the better. Circumstances may shift and a wave of caca may hit a company or an industry.

Remember the Internet bubble two decades ago? It burst.

Remember the housing bubble a decade ago. It burst.

Don’t fall in love with your securities. Follow your instinct and your plan. When it is time to pull the trigger and unload the stock, then sell the shares.

Have a Plan

“I love the company. I hate the stock.” – Jim Cramer on Tesla (NASDAQ: TSLA)

Okay, it’s time to confess: I fell in love with the Elon Musk Ion-Lithium Battery/Electric Car story at Tesla. Yes, I bought the stock and road it up and down (pardon the pun) and eventually got tired of the downward roller coaster.muskcar

Before I weighed selling, I considered at what average price point did I buy the stock and how low would it have to go before I would sell the stock? It hit that point, and it was time to sell.

Maybe at some future time, it will be low enough to once again purchase the stock, but only when one is convinced the company has a realistic plan for long-term profitability.

The same is true when selling a stock that is going up. Social media stock LinkedIn (NYSE: LNKD) recorded a blow-out quarter and the stock exceeded my prearranged sell price point. As Joseph Kennedy reportedly said: “Never apologize when taking a profit.”

And we should never worry about paying taxes on our profits; profits are taxable.

The point here is to follow your game plan and sell when it’s time. That’s a good thing, really.

What are some other signs that it is time to sell a stock?

  • The Music Stopped: Once upon a time, Intel (e.g., microprocessors), Microsoft (e.g., software operating systems) and Cisco (e.g., Internet routers and switches) were literally rocking and rolling. We couldn’t get enough of these stocks until … the music stopped. The PC is yesterday’s news. The 1990s came and went. It became time to sell and move on.
  • Commoditization: Just like Intel’s microprocessors became a commodity to serve as the brains of social, mobile and cloud, the same is true for all other semiconductors and those that build semiconductor manufacturing equipment and electronic design automation (EDA) software. Intel’s rumored takeover of Altera, similar to Avago’s absorption of LSI Corporation, are more signs of industry consolidation. If you have not sold already, it’s past time.
  • High Volatility: Sometimes an investor can benefit from a highly volatile stock. A perfect example is Salesforce.com (NYSE: CRM). Lost track of how many times, yours truly has bought, sold, bought, sold, bought … this stock. As long as the trend line is consistently up, it’s okay to let go of the shares now and then, only to become reacquainted at a later date.
  • New Management: Tim Cook is proving that there is life at Apple following the ultimate demise of Steve Jobs, but that is the exception not the rule. Companies change. Business plans shift. Circumstances change. Markets explode or implode. Almost DailyBrett has always followed the mantra that if the old boss or new boss is a bosshole, it’s time to pass on the stock or sell the stock. Translated: Stay away from Larry Ellison and Oracle (NASDAQ: ORCL)
  • No Balance Between Fiduciary and Corporate Social Responsibility: The best run publicly traded companies do NOT see “doing well” and “doing good” as being mutually exclusive. Publicly traded companies with their brands under a digital 21st. Century microscope must appreciate their respective brands are trading in the cloud 24/7/365. Worshipping exclusively at the altar of fiduciary responsibility will no longer cut it. If so, it’s time to sell.
  • Caca Happens: Planes land at the wrong airports (e.g., Southwest). Companies name shoes (e.g., Umbro) after the cyanide gas used in Nazi concentration camps. The CEO falls dead in the backseat of a car (e.g., Texas Instruments). Oil wells explode and gush on global video for three months (e.g., BP). Guano hits the fan. This is precisely the reason not to fall in love with any stock.

Sometimes, it is time to say goodbye.

Breaking up is hard to do.

http://www.thestreet.com/story/10292084/1/bulls-bears-make-money-pigs-get-slaughtered.html

http://en.wikipedia.org/wiki/Joseph_P._Kennedy,_Sr.

https://almostdailybrett.wordpress.com/2011/07/21/what-happens-when-the-music-stops/

https://almostdailybrett.wordpress.com/2013/10/06/how-does-a-company-make-money-2/

https://almostdailybrett.wordpress.com/2014/07/18/donate-to-united-way-or-invest-in-tesla/

http://finance.yahoo.com/video/cramers-stop-trading-tesla-motors-135400997.html

https://almostdailybrett.wordpress.com/2014/01/02/farewell-lsi-logic/

https://almostdailybrett.wordpress.com/2011/12/13/fiduciary-responsibility-vs-corporate-social-responsibility/

 

 

 

 

 

 

“Fear of criminal prosecution trumps any fear of public humiliation.” – Mark Palmer, former Enron managing director of Corporate Communications

“The longer you indulge in the practice of maintaining a cosmetic shell, the harder it is to recover when the shell eventually cracks.” — Len Brooks, University of Toronto

“Thanks to the Enron implosion and the subsequent rash of accounting and corporate-governance scandals, the credibility of any corporation is no longer assumed. It must be earned.” – Matthew Boyle, Fortune Magazine

palmer

Growing up, I repeatedly followed the mantra that winners never quit, and quitters never win.

But mumsy always said: “If you are in a bad situation get out of it.”

These two adages seem to be in direct conflict with each other, which brings me to the question that I posed to my students this week: If you were Mark Palmer, the former Enron managing director of Corporate Communications, what would you have done?

Would you quit?

Would you try to stop the sinning?

Would you become a whistle-blower?

Would you continue to drink your own bath water?

The answers to these questions and many more are not easy, considering that the staggering tales of criminal intent of the Smartest Guys in the Room story did not become clear until it was too late…way too late

Securing Palmer’s six-figure job as the head of PR for Fortune’s Magazine’s Most Innovative Company — the darling of Wall Street’s financiers, analysts and investors — would have been universally seen as a coup.

Chairman Kenneth Lay, President Jeffrey Skilling and CFO Andrew Fastow were regarded as business rock stars. The company could do no wrong as the stock price continued to rise even after the Internet bubble burst.

Business Week, Fortune, Forbes, Wall Street Journal and other influential business pubs couldn’t say enough good things about the Holy Trinity, and Enron. Life was presumably good for Palmer and his team…until the nightmare unfolded.

As we all know a decade later, it was all a lie. For the longest time, the Enron PR team didn’t know it was telling a lie.

In the documentary, The Smartest Guys in the Room (a.k.a. Lay, Skilling, Fastow), Enron Energy Services public relations director Mark Eberts recalled repeatedly hearing internal rumbles that the company was not doing well. And then…magically every quarter just like clockwork the company always exceeded its quarterly projections…and the stock continued to rise.

When something is too good to be true, isn’t that usually the case?

The first shot across the bow came in the form of a call from Fortune reporter Bethany McLean in 2001, who merely asked how the company made its money. Sounds like a softball question, but it wasn’t for Enron. Skilling told McLean that he wasn’t an accountant. Why does one need an advanced accounting degree to answer the most simple of business strategy questions?

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The subsequent story wondering whether Enron (NYSE: ENE) was overvalued started the downward pressure on the stock. That would not be enough to cause an experienced PR team to panic.

Enron

However, when Skilling suddenly resigned on August 14, 2001 for “personal reasons” the alarm bells started going off. Did he want to spend more time with his neglected family?

These warning signals intensified when the following evening the PR team was waiting unusually long, until 2 am for management to produce the income statement, the balance sheet and the cash-flow statement that normally accompanies a SEC-required quarterly earnings release.

Enron’s Karen Denne remembered the scene all-too-well: “I remember at the time there were sections in the press release that didn’t make sense, that I had questions about,” she said.

When she asked the executives to provide more information, she was told that everything was fine and there was nothing to worry about. Ultimately, though, the sections that concerned her were “the very quotes and phrases” that drew the attention of the reporters at the Wall Street Journal, she said.

It all came to an end on Dec. 2, 2001, when the nation’s seventh largest corporation filed for Chapter 11 bankruptcy protection with $63.4 billion of assets on its balance sheet.

Lay was sentenced to 45 years in the slam (he died of a heart attack); Skilling, 24 years (currently serving his term in Colorado) and Fastow, 10 years (He served five years).

lay

For the public relations team, their shares in Enron were worthless. Thousands of Enron employees loaded up on the stock for their retirement, and for far too many ENE was their nest egg. The team members also carry the Enron imprimatur on their resumes.

For Palmer, he appears to be doing well according to LinkedIn as he is a Brunswick Group Partner in Dallas.  For Enron PR expert Karen Denne, she is the chief communications officer for the Broad Foundation in Los Angeles.

For each and every member of the Enron public relations team, Almost DailyBrett wishes them the best in their respective careers. One must wonder if they still wake up in the middle of the night thinking about the Smartest Guys in the Room.

http://www.savvypr.com/iabcethicscolumn3.html

http://www.bizjournals.com/houston/stories/2003/06/30/newscolumn5.html?page=all

http://annenberg.usc.edu/News%20and%20Events/News/111110Enron.aspx

Ten years ago, a friend of mine was getting his knickers in a twist about a hugely successful, $101 billion energy-trading company from Houston, Texas that had just completed a takeover of his firm, a Pacific Northwest public utility.

He told me that these Texans were so friggin’ smart, in fact they were “The Smartest Guys in the Room” – I believe their names were Ken, Andrew, and Jeffrey – and that I needed to buy stock in their company pronto.

So I did some homework. And even more homework. And still some more homework…And I just couldn’t for the life of me figure out how this company made money. And the more I read, the more dazed and confused I became. Why would anyone pay gobs of money to this company to broker energy deals…sounds like a very expensive middle man?

Out of frustration because of my lack of business acumen, I didn’t invest a dime in this company. I think it was called…Enron (NYSE: ENE).

Which brings me to Somali Pirates and the question of whether there should be an IPO (Initial Public Offering) for their business?

somali

A cursory check on the CNBC website indicates that no NYSE-member company has the ticker symbol, PRT, or Pirate, and no NASDAQ-member has the ticker symbol, PIRS, for Pirates.

More importantly Somali Pirates has a “devastatingly effective business model,” according to the most recent edition of The Economist. The UN estimates that the annual cost of piracy lies somewhere between $5 billion and $7 billion (top line?). The Economist reported that Somali Pirate “earnings” (bottom line?) reached $238 million. To top it off, the pirates are now accepting ransom payments via electronic funds transfer.

“Great Investor” Peter Lynch has repeatedly stated that the difference between investing and gambling is that investors need to clearly understand a company’s business model and why they are buying shares. CNBC’s Jim “Mad Money” Cramer has repeatedly reminds his viewers that share prices are a leading indicator of the anticipated direction of a stock and that he is not interested in a stock’s past, only its future.

If you take both Lynch and Cramer at face value, and many other Wall Street talking heads, then you have to be excited about investing in Somali Pirates. We can all figure out how they make money (e.g. seize shipping, demand ransom, receive revenues either in cold, hard cash or via EFT). Got it. Wish that Enron was that clear…or maybe not.

Better yet, they are a minority-run-and-operated business. Do you think they would receive preferential treatment from the federal government?

What are the COGS (Cost of Goods Sold) on the financial statement for Somali Pirates? Mostly speed boats, AK-47s, rocket-propelled grenade launchers and scaling ladders. They have reduced these costs somewhat by using “mother ships,” often captured deep-sea fishing vessels that they use as floating bases for their fast skiffs. Even though there are no hard-and-fast COGS numbers, there is every indication that the gross margin for Somali Pirates is expanding, not contracting (WallStreetease…).

What about personnel costs? Somali Pirates hail from the ultimate low-cost state (or more accurately, no state), Somalia. They don’t need to outsource to India. Let’s see that means that we can enter almost zero next to the line on the financial statement for SG&A (selling, general and administrative), unless you consider demanding ransoms to be “selling.”

How about R&D? The response by naval forces in the region about the size of Western Europe poses a risk to the business model of Somali Pirates, forcing them to operate further and further away from Somalia. Obviously some more work needs to go into supply over such long distances. And apparently they have not been successful catching up to ships making 18 knots or more…Sounds like they need to invest in competitive research focused on speed-boat technology.

Okay, so now we should have an operating income figure. Which brings us to taxes? What taxes? How about GAAP reporting? What’s Generally Accepted Accounting Principles to a bunch of pirates?

And finally, what about the threats to the business model of Somali Pirates? And will they prefer, similar to Facebook, to remain private…at least for the time being? There is a very real possibility that there will never be an IPO for Somali Pirates.

Maybe Goldman Sachs will just set up a hedge fund and invite wealthy investors to take their own stakes in privately held Somali Pirates. Besides who needs the headaches associated with quarterly earnings reports, pre-announcements, chairman’s letters, annual meetings of shareholders, SEC enforcement and the prospect of corporate raiders?

Think of it this way, if Wall Street-types could embrace Enron with irrational exuberance, then what’s to stop them from investing in a bunch of pirates?

http://en.wikipedia.org/wiki/Enron:_The_Smartest_Guys_in_the_Room

http://www.investopedia.com/university/greatest/peterlynch.asp

http://www.cramers-mad-money.com/

http://www.economist.com/node/21015664

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