Here's how Enron works. It's really quite simple.

Anonym 07.02.02 12:48

Wie Enron Geld verdient. Aus einer E-Mail von einem J.P. Morgan Chase Mitarbeiter:

Here's how Enron works. It's really quite simple.

Ismail is a successful mule trader in Peshawar. Every year Ismail
30 mules to the Kabul Mule Market and gets $40 per mule. This year,
the Khyber Pass is full of warlord militias, so Ismail is not sure he
drive his mules to market without losing a mule here and there. Also,
demand for mules in Kabul seems to be dropping. Maybe he'll only be able
sell 20 mules, or, God forbid, 15, and then be forced to feed and water
rest of them on a money-losing trek back home. In other words, it's a
market and Ismail is worried about feeding his family. What Ismail needs
to limit his RISK with an Enron derivatives package.

First he pays $2 per mule for a Khyber Pass Derivative, so that any mule
killed or stolen by warlords will be reimbursed at the rate of $20 per
mule-half the going market rate, but STILL better than taking a Total
Next he buys Enron Mule Futures. For $28 per contract, he guarantees
delivery of a mule in three months time. He takes 15 of these, figuring
a guaranteed $28 mule sale is better than showing up in Kabul and
discovering that stray bombs have killed the mule buyers.

Meanwhile, at the Enron Mule Trading Desk in Houston, eagle-eyed yuppies
studying the worldwide mule markets and starting to have their doubts
those $28 delivery contracts. Mule use is dropping all over Afghanistan,
even as the mule count is dwindling. Better resell eight of those 15
contracts to a European commodities broker for $24 each, then make up
$32 loss somewhere else while cutting the company's exposure in half.
how to hedge the RISK on the other seven?

Aha! A blip on the computer screen. A temporary mule shortage in
Iran! With a current mule price of $42 in Tehran, Enron could offer a
Linked Mule Swap Double Derivative tied to the gap between the price of
mules delivered in Kabul on a given date and the price in Tehran on the
date. Sure, you would rather have the quick-and-clean Iran sale, INSTEAD
the sale in Kabul that requires trucking the mules to a foreign market.
even if you add in $4 per mule for transport through militia-held
and averaged the markets together, you can STILL clear eight bucks just
the gap alone.

Enron's average price-per-future-mule is now $32.57 when you include the
$4-per-mule loss on the mule futures dumped in Europe. But based on the
amazing $12 Kabul/Tehran trading gap, they can easily put together a
"delivery in either market"
contract that will allow them to ask $36 per mule on their Mule Online
Internet trading system. The first mule future sells
instantly for $36, and the price bobs up to $36.50. Two mules go for
and then there's a big jump for the last three mules to $37.90. Enron
now off-loaded all its price-based mule futures liability for a profit
$31.70. But this doesn't mean they're out of the mule market in Central
Asia. It's STILL two months until Ismail delivers his 30 mules, and
Enron is on the hook for his Khyber
Pass derivative insurance policy.

Things are not looking good in that part of the world, either. The
of a mule being picked off as a road-passage tax are pretty high, and
loss of the whole herd would be a $600 liability. Quickly, the financial
boys go to work, and part of that liability is resold to a consortium of
Singapore banks, Australian mutual funds, and Saudi Arabian arms
merchant Adnan Kashoggi, thereby
reducing Enron's percentage to 25 percent, or $150 in potential
against a $15 premium (remember the $2 per mule paid by Ismail), and
Enron also takes a brokerage fee of $20 from the three other partners,
thereby reducing its real liability to just

But that's STILL too much of a spread, so Enron continues to hedge.
Fortunately, the company has such a diversified trading floor that Enron
mule-market experts can walk over to the traders in the warlord-militia
derivatives department. Sure enough, at least four tribes near the
Khyber Pass are increasingly concerned about profit margins. There
simply aren't enough people to rob. Things have gotten
so bad, in FACT, that the warlords are hedging against the oncoming
by taking futures positions in stolen chickens, stolen humanitarian aid
trucks, and Western
hostages. There's not a mule market yet, because the warlords have
successfully converted many of the recalcitrant villagers into pack
But Enron knows how to MAKE markets. Quickly the numbers-crunchers go to
work, and they soon determine that the average number of stolen mules
per 100-man militia is 1.4 per year.
That represents anywhere from $28 to $56 in lost mule-thievery income if
Khyber Pass is closed or inhospitable to traders from Pakistan.
Amortizing that amount over 12
months, the warlords have an exposure of anywhere from $2.33 to $4.67
month in lost pillage. Hence Enron announces the new Highway Robbery
Derivative, in which each tribe is guaranteed the value of two stolen
mules in each
12-month period in return for paying a premium of $4 per month.

Enron's hedge is now complete, and it's a beautiful thing to behold. The
chances of Ismail losing a mule to a raiding party are approximately one
30, or 3.33 percent. Since he's paying $60 for his derivative contract,
expected loss of 3.33 percent of his herd would result in a payment of
only $20 ? a more than
comfortable spread. Meanwhile, if the mule is stolen by a warlord
holding a Highway Robbery Derivative, then the payment to the other side
would only be $28 against premiums of $48. If Ismail simply passes
through the Khyber Pass without incident and sells all his
mules at the standard price, Enron pockets $60 from Ismail and $48 each
from four warlords, in addition to the previous profit of $31.70 from
that heady Internet mule-futures
trading day and the $20 in packaging commissions. If each warlord steals
standard 1.4 mules per year, then Enron STILL owes six-tenths of one
mule to the warlord, or about $22.20 based on a $37 sale price.

Total expected profit, based on 5.6 stolen mules, one of which is stolen
from Ismail: $143.20. Total profit from all Ismail-related mule
transactions: $194.90.

See, it's simple when you know how it works. Ask Arthur Andersen.

  1. Anonym 07.02.02 13:50

    Business can be so simple...

    Antworten Melden
    (4.4/5)   7 Votes
  2. runaway 08.02.02 09:28

    What about the SICK mules?? ..and take in regard that the Iranian mule market is overrun by north Irakian, aserian and armenian mules.....however "arthur andersen" is a nice-sounding name...

    Antworten Melden
    (4/5)   4 Votes

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