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- The Week Ahead: CPI
Hi Everyone 👋,
Welcome to our Sunday newsletter! Here’s what we’re discussing this week:
GRIT’s BIG News of the Week:
Hottest News This Week 👉 CPI
Matt Allen’s Corner 👉 THE RISE AND FALL OF ENRON
Comin’ Up 👉 EARNINGS AND ECONOMIC DATA
1. Hottest News This Week
CPI
📣 Jerome Powell
Federal Reserve Chair Jerome Powell is set to appear on Capitol Hill this Tuesday and Wednesday. Both Republicans and Democrats are expected to grill him about the potential for interest rate cuts amid ongoing economic uncertainties. Powell's testimony will likely cover the Fed's outlook on inflation, employment, and economic growth, providing crucial insights for investors.
📣 CPI
This Thursday at 8:30 AM EST, the Consumer Price Index (CPI) report will be released. Fed Chair Jerome Powell has said more data is needed to confirm if low inflation is a true trend. The CPI report will be key in deciding if there will be a rate cut.
📣 BANK EARNINGS
Banking giants are set to release their earnings reports on Friday, including JPMorgan Chase & Co., Wells Fargo, Citigroup, The Bank Of New York Mellon Corporation, and Unity Bancorp. Last quarter, banks' earnings exceeded expectations, giving a significant boost to the stock market. Investors are eager to see if this trend continues, as strong earnings could signal economic resilience and further market optimism.
2. Matt Allen’s Corner
The Rise and Fall of Enron
In the late 1990s and early 2000s, Enron Corporation was a darling of Wall Street, hailed as a pioneer in energy trading and innovative business practices. However, beneath its glittering surface lay a web of deceit and fraud that would lead to one of the most infamous corporate collapses in history.
The Rise of Enron
Founded in 1985 as a merger between Houston Natural Gas and InterNorth, Enron quickly grew to become one of the largest energy companies in the world. Under the leadership of CEO Kenneth Lay and later, Jeffrey Skilling, Enron transformed from a traditional energy supplier into a market leader in energy trading. The company was lauded for its creative business model, which involved trading energy contracts and creating new markets for commodities like electricity and natural gas.
Enron's stock soared throughout the 1990s, reaching a peak of $90.75 in August 2000. The company reported revenues of over $100 billion in 2000, and it was listed among the Fortune 500's top companies. Enron's success story seemed unstoppable, with its executives becoming celebrated figures in the business world.
The Beginning of the End
However, the company's impressive growth was built on a shaky foundation. Enron used complex accounting practices and special purpose entities (SPEs) to hide its mounting debt and inflate its profits. These off-balance-sheet entities allowed Enron to appear more profitable than it actually was, misleading investors and analysts.
The trouble began to surface in mid-2001. In August, Jeffrey Skilling unexpectedly resigned as CEO, citing personal reasons. Shortly after, Sherron Watkins, an Enron vice president, sent an anonymous memo to Kenneth Lay, warning him of the company's dubious accounting practices and the potential for a catastrophic collapse.
Source: CNBC
The Collapse
By October 2001, Enron was forced to admit that it had overstated its earnings by nearly $600 million since 1997. The revelation sparked a chain reaction, leading to a loss of investor confidence and a plunge in Enron's stock price. As the company's financial troubles became public, it became clear that Enron was teetering on the brink of bankruptcy.
On December 2, 2001, Enron filed for Chapter 11 bankruptcy protection, marking the largest bankruptcy in U.S. history at the time. The fallout was immense: thousands of employees lost their jobs and retirement savings, shareholders were wiped out, and the company’s auditors, Arthur Andersen, were convicted of obstructing justice for shredding documents related to Enron's accounting practices.
The Aftermath
The collapse of Enron led to significant changes in corporate governance and accounting standards. The Sarbanes-Oxley Act of 2002 was enacted to increase transparency in financial reporting and to hold corporate executives accountable for the accuracy of their companies' financial statements.
Enron's top executives faced legal repercussions. Kenneth Lay was found guilty of conspiracy and fraud but died before sentencing. Jeffrey Skilling was convicted of multiple federal felony charges and sentenced to over 24 years in prison, though his sentence was later reduced.
Enron's story is a cautionary tale of how innovation and success can be derailed by unethical behavior and financial misconduct. It remains a pivotal example in the history of corporate governance, illustrating the catastrophic consequences of neglecting ethical standards in pursuit of profit.
Cheers,
Matt Allen
3. Comin’ Up
EARNINGS AND ECONOMIC DATA
💰 Earnings:
Monday: N/A
Tuesday: N/A
Wednesday: PriceSmart
Thursday: Pepsico, Delta
Friday: JP Morgan, Wells Fargo, Citigroup, Bank Of New York
📈 Major Economic Events:
Monday: Consumer Credit
Tuesday: Chair Powell Senate testimony
Wednesday: Chair Powell House testimony
Thursday: CPI
Friday: PPI
Will Banks Beat Earnings? |
Invest for the long haul. Don’t get too greedy and don’t get too scared.
Shelby Davis
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