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Wall Street Brunch- December 2

Dec. 02, 2020 7:20 AM ET90 Comments
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  • Happy Wednesday to all. Make it a great day!

Let's start with a little history, shall we?

On December 2, 2001, the Enron Corporation files for Chapter 11 bankruptcy protection in a New York court, sparking one of the largest corporate scandals in U.S. history. An energy-trading company based in Houston, Texas, Enron was formed in 1985 as the merger of two gas companies, Houston Natural Gas and Internorth. Under chairman and CEO Kenneth Lay, Enron rose as high as number seven on Fortune magazine’s list of the top 500 U.S. companies. In 2000, the company employed 21,000 people and posted revenue of $111 billion. Over the next year, however, Enron’s stock price began a dramatic slide, dropping from $90.75 in August 2000 to $0.26 by closing on November 30, 2001. As prices fell, Lay sold large amounts of his Enron stock, while simultaneously encouraging Enron employees to buy more shares and assuring them that the company was on the rebound. Employees saw their retirement savings accounts wiped out as Enron’s stock price continued to plummet. After another energy company, Dynegy, canceled a planned $8.4 billion buy-out in late November, Enron filed for bankruptcy. By the end of the year, Enron’s collapse had cost investors billions of dollars, wiped out some 5,600 jobs and liquidated almost $2.1 billion in pension plans. Over the next several years, the name “Enron” became synonymous with large-scale corporate fraud and corruption, as an investigation by the Securities and Exchange Commission and the U.S. Justice Department revealed that Enron had inflated its earnings by hiding debts and losses in subsidiary partnerships. The government subsequently accused Lay and Jeffrey K. Skilling, who served as Enron’s CEO from February to August 2001, of conspiring to cover up their company’s financial weaknesses from investors. The investigation also brought down accounting giant Arthur Andersen, whose auditors were found guilty of deliberately destroying documents incriminating to Enron. In July 2004, a Houston court indicted Skilling on 35 counts including fraud, conspiracy and insider trading. Lay was charged with 11 similar crimes. The trial began on January 30, 2006, in Houston. A number of former Enron employees appeared on the stand, including Andrew Fastow, Enron’s ex-CFO, who early on pleaded guilty to two counts of conspiracy and agreed to testify against his former bosses. Over the course of the trial, the defiant Skilling–who unloaded almost $60 million worth of Enron stock shortly after his resignation but refused to admit he knew of the company’s impending collapse–emerged as the figure many identified most personally with the scandal. In May 2006, Skilling was convicted of 19 of 35 counts, while Lay was found guilty on 10 counts of fraud and conspiracy. When Lay died from heart disease just two months later, a Houston judge vacated the counts against him. That October, the 52-year-old Skilling was sentenced to more than 24 years in prison. (The parallels between Enron and Seeking Alpha's favorite company are striking)

On this day in 1942, Enrico Fermi, the Italian-born Nobel Prize-winning physicist, directs and controls the first nuclear chain reaction in his laboratory beneath the bleachers of Stagg Field at the University of Chicago, ushering in the nuclear age. Upon successful completion of the experiment, a coded message was transmitted to President Roosevelt: “The Italian navigator has landed in the new world.” Following on England’s Sir James Chadwick’s discovery of the neutron and the Curies’ production of artificial radioactivity, Fermi, a full-time professor of physics at the University of Florence, focused his work on producing radioactivity by manipulating the speed of neutrons derived from radioactive beryllium. Further similar experimentation with other elements, including uranium 92, produced new radioactive substances; Fermi’s colleagues believed he had created a new “transuranic” element with an atomic number of 93, the result of uranium 92 capturing a neuron while under bombardment, thus increasing its atomic weight. Fermi remained skeptical about his discovery, despite the enthusiasm of his fellow physicists. He became a believer in 1938, when he was awarded the Nobel Prize in physics for “his identification of new radioactive elements.” Although travel was restricted for men whose work was deemed vital to national security, Fermi was given permission to leave Italy and go to Sweden to receive his prize. He and his wife, Laura, who was Jewish, never returned; both feared and despised Mussolini’s fascist regime. Fermi immigrated to New York City—Columbia University, specifically, where he recreated many of his experiments with Niels Bohr, the Danish-born physicist, who suggested the possibility of a nuclear chain reaction. Fermi and others saw the possible military applications of such an explosive power, and quickly composed a letter warning President Roosevelt of the perils of a German atomic bomb. The letter was signed and delivered to the president by Albert Einstein on October 11, 1939. The Manhattan Project, the American program to create its own atomic bomb, was the result. It fell to Fermi to produce the first nuclear chain reaction, without which such a bomb was impossible. He created a jury-rigged laboratory with the necessary equipment, which he called an “atomic pile,” in a squash court in the basement of Stagg Field at the University of Chicago. With colleagues and other physicists looking on, Fermi produced the first self-sustaining nuclear chain reaction and the “new world” of nuclear power was born. (I love history!)

Now for stock and investing news-

Tesla (TSLA +2.0%) Chief Executive Officer Elon Musk says the company isn't going to make a hostile takeover in the auto sector, but would have a conversation with a company that thought it may be a good idea to merge. Big 24 hours for Seeking Tesla as the news keeps pouring in from Elon Musk. CEO Elon Musk wants employees to focus on cutting costs in a bid to maintain profitability, according to an internal e-mail posted by Electrek. A bid to maintain profitability? Seriously? The "leaked" email reads: "At a time like this, when our stock is reaching new highs, it may seem as though spending carefully is not as important. This is definitely not true. When looking at our actual profitability, it is very low at around 1% for the past year. Investors are giving us a lot of credit for future profits, but if, at any point, they conclude that’s not going to happen, our stock will immediately get crushed like a soufflé under a sledgehammer! Much more important, in order to make our cars affordable, we have to get smarter about how we spend money. This a tough Game of Pennies – requiring thousands of good ideas to improve part cost, a factory process or simply the design, while increasing quality and capabilities. A great idea would be on that saves $5, but the vast majority are 50 cents here or 20 cents there. In order to make the electric revolution happen we much make electric cars, stationary batteries and solar affordable to all. Thanks and great working with you as always, Elon." Might be time for Elon Musk to look into the reason that so many internal emails are "leaked." Neat way to make the news!

Salesforce (NYSE:CRM) signs a definitive agreement to acquire Slack (NYSE:WORK) in a deal with an enterprise value of about $27.7B.

London copper (HG1:COM) continues its torrid climb, +1.5% to $7,695/ton to yet another seven-year high, and Goldman Sachs says copper's current price strength is just the first leg of a structural bull market. This current price strength is not an irrational aberration," and the copper market should head into 2021 facing the tightest market conditions in a decade owing to a substantial deficit, followed by continued tight markets into 2022 and 2023, Goldman says, adding it is "highly probable" that copper will test the 2011 record high $10,170/mt by H1 2022. Why is it that I don't trust anything Goldman Sachs says?

Workhorse (NASDAQ:WKHS) -21.5% post-market after Trucks.com reports of further delays in the U.S. Postal Service process to award contracts for new mail trucks. According to the report, the Postal Service says it expects to reach a contract with one or more of the teams bidding for the business in the federal government's FQ2 2021, which works out to Q1 2021. Could this mean that Newman will have a new Postal truck to return cans and bottles to Michigan?

Walmart+ (NYSE:WMT) members will no longer have to spend $35 for next-day or two-day shipping as the service looks to better compete with Amazon Prime (NASDAQ:AMZN) during the coronavirus pandemic. The number of online-only shoppers across the U.S. jumped 44% over the Thanksgiving holiday weekend, according to the National Retail Federation. 

Boeing (BA +2.5%) trades higher as the Federal Aviation Administration issues its first airworthiness certificate for a newly built 737 MAX since the plane was grounded in March 2019. The FAA also confirms it approved an American Airlines (AAL +2.8%) training plan for pilots to resume 737 MAX flights, clearing the way for American to resume MAX flights starting Dec. 29.

Where is Jon Corzine and will MF Global workers be asked for their ideas on how to save pennies?

Where is Marissa Mayer and will she ever return to Yahoo and bring back reader comments?

Where is Elizabeth Holmes and what will her next move be to get out of her massive fraud trial?

Have a great day everyone. Stay safe out there.

This is the day The Lord has made. Let us rejoice and be glad in it.

I can do all things through Christ who strengthens me.


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