Every Thursday on our WebFN TV show "Doctor J & the Traders" we talk a little about the ongoing Enron disaster, and usually preface the conversation by saying "At the risk of beating a dead horse". What happens if the horse you thought was dead keeps trying to kick you? This week-end I read several enlightening articles containing many new and interesting facts regarding the company and their long involvement with various elected officials of both parties. I was especially impressed by an article in the Chicago Tribune by Stephen Hedges, Jeff Zeleny, and Frank James. They set out in fairly clear detail the involvement of Enron CEO Kenneth Lay with the current and former administrations, as well as the interesting role played by former CFTC Chairman Wendy Gramm. The question we must be discussing is what ramifications do these revelations have on our ongoing investment strategy?

What business does someone writing a business column have crossing over into the political arena? The simple answer is that as long as businesses are able to feed handsomely at the government trough or influence either lawmakers or law enforcers to their relative benefit, politics and investing are very interrelated. In this particular case it appears that Enron made a concerted effort to become very close to both lawmakers and law enforcers through large contributions, service on various policy committees, social interaction, etc. What does it mean when a lawmaker, elected by the populace, accepts a large check from an individual or entity? Is it a flat out bribe? I would not go that far and use that bad word "bribe".  Is it an investment in general good government? I think we were not born yesterday. The truth is that the check is somewhere between a bribe and harmless encouragement to do a good job. The term that I have encountered, used by the lobbyists and justifiers of such activity, is "guaranteeing access".   I guess that means that even though you are unable at the present time to articulate a particular favor or advantage, you reserve the right to press the issue at a later date.

As both a citizen and investor you need to have confidence that there is some sound judgment on the part of elected and appointed officials, and that there is some general commitment to a level competitive playing field. Is the seemingly ever-increasing flow of money and influence peddling causing a growing lack of political and investor confidence in the system?  I think there is a danger of that.  The executives of the major tobacco companies testified under oath to Congress a few years back that they had no evidence of the dangers of tobacco use, with no negative consequences. Some major brokerage firms have made great strides in gaining control over the formerly competitive options exchanges under the tenure of SEC Chairman Arthur Levitt, a serious fund raiser for the Clinton administration. The new Bush justice department essentially tanked the Microsoft conviction after the company's increased Washington presence and active role in the last election. Former CFTC Chairman Wendy Gramm was appointed as a public director, yes, public director, to the Enron Board soon after favoring a CFTC rule change exempting many Enron OTC energy trades from federal oversight.

Two serious questions arise. Are the rest of the lawmakers so dirty with the same slop that no one was able to speak out on a seemingly obvious conflict on the part of Ms. Gramm?  What did the other protectors of the investors and public trust on the Enron board say on the reason for Ms. Gramm's appointment to the audit committee of that board?  More to the point, what did these prominent board members say when Kenneth Lay sent an e-mail to Enron employees last August touting the rosy future of the company and stock price?

Certainly there are political writers with more knowledge and insight into various dishonest statements and dirty deeds than this one. My issue as a business writer and money manager is how does it affect my fiduciary responsibility towards my clients and the funds managed by PTI Securities?  Right now I have zero confidence in the ability of lawmakers to do the job they have been sent to do. The muck is too deep, the list of favors owed is too long to count on them to maintain a level field. I also have no belief in the honesty of virtually all CEO's that are in the public eye. The term "two bit carnival huckster" comes to mind. On the other hand, I have tremendous confidence in the long-term ability of the U.S. people and economy.