“We are the good guys. We are on the side of angels.”
– Jeff Skilling, slightly less than three years prior to his arrest
2020 just keeps on getting better…
Jeff Skilling, the former CEO of Enron who was released from jail in February last year, is back in the game. Let out of jail halfway through what was originally a 24-year sentence for insider trading, conspiracy, lying to auditors, and securities fraud, now he’s out – a new man – ready to get his hands on some of that sweet money once again.
The hero of imaginative accounting returns to a world where imagination is key to generating capital returns. And this time, he’s raising money for a project he was working on in jail – a digital trading platform for oil and gas.
From Reuters:
The venture, called Veld LLC, plans to profit by charging a fee for marketing stakes in operating oil and gas wells…
Investors can acquire holdings in between one and 10 wells, which the presentation described as “pods,” and will be sold to the investors as high-yield investments, the people familiar with the business pitch said on the condition of anonymity.
It was not clear how much Skilling is seeking to raise to launch Veld. He has been holding meetings with energy investment firms in recent months, the people said.
Skilling has been working nearly two years on the project, which was first incorporated by his wife in Texas in late 2018 and merged with a Delaware company with the same name the following year. The business is expected to be up and running by year-end, one of the people said.
However, at least one investor who listened to his presentation was reluctant to invest in the venture because of his Enron past, that person said.
There’s certainly an appetite for high-yield investments with interest rates heading ever lower. But is there enough appetite for speculating over individual wells to make his endeavour worthwhile?
One of the grand promises of crypto is to tokenise and fractionise physical assets so they can be traded easily and efficiently. For example: imagine being able to sell a 100,000th of your house, and using the proceeds to buy a similar fraction of your neighbour’s house up the street because you think their living room window has a nicer view, and you think it’ll increase more in value than yours will.
How far this attempt to slice up oil and gas operations into their constituent parts for investors will be interesting to watch. I need to ask what our energy specialists make of the endeavour – I’ll see if I can grab James Allen and Kit Winder to speak about it on our market broadcasts.
But I wonder what this announcement says about the broader investment space, where one of the biggest fraudsters of the 90s and early noughties is back raising money from investors.
I spoke to Charlie Morris yesterday about the grand corporate scandals of the early noughties, of which Jeff Skilling and Enron were one of the biggest. We were recording the discussion for subscribers to The Fleet Street Letter Monthly Alert, focusing on the ten financial crises Charlie has encountered in his career, and Charlie counts the corporate scandals which began in 2002 as one of them due to the tumult they caused across the market and the way it changed how market participants perceived the big companies.
I wanted to know if he thought we might see a repeat of such scandals, now that WuFlu lockdowns have been imposed and businesses which could paper over fraud with proof of economic activity can no longer “keep dancing”. Charlie thought a case of Enron was unlikely to occur now, as it was a conglomerate, and conglomerates are less in fashion now as they were back then – markets now favour businesses focused on a specific sector rather than multisector corporate behemoths that own bits of everything.
I wonder if there’s “fraud of a different flavour” lurking in the specialised industries. A lockdown is the worst thing that could happen for somebody just trying to duplicate what winners have done over the last several years without any original innovation or strategy. I reckon we’ve still to see the “fakers” get routed…
One last thing before I leave you for today – on a sombre note, I’m afraid.
Thirty-one years ago today, the People’s Liberation Army (PLA) acting on the orders of the Chinese Communist Party (CCP) began machine gunning thousands of students protesting for more liberty and democracy in Tiananmen Square. The PLA fired expanding bullets from their Kalashnikovs into the crowds and ran them over so many times with tanks that their bodies were crushed into pulp, to be scooped up later “in bulk” by bulldozers and incinerated.
On the day when real democracy and freedom come to China, we must erect another Goddess of Democracy here in the Square, monumental, towering, and permanent. We have strong faith that that day will come at last. We have still another hope: Chinese people, arise! Erect the statue of the Goddess of Democracy in your millions of hearts! Long live the people! Long live freedom! Long live democracy!
– Declaration written at the base of The Goddess of Democracy statue in Tiananmen Square
The papier-mâché statue of the “Goddess of Democracy” that had been erected by the students, some 33 feet tall, was crushed too, having stood for a total five days.
Following the massacre, several statues inspired by the original have been erected around the globe. The one in Washington DC was vandalised on Monday by protestors in the US. Another statue stands in Hong Kong, where victims of the massacre have been remembered every year since with a candlelit vigil allowed by HK’s greater freedoms than the mainland. Until this year, today – where such a vigil is no longer being permitted by the authorities due to the growing influence of the CCP in Hong Kong.
When you consider the approach to China taken by our government and those of our allies, it’s worth remembering that it is the same Chinese Communist Party, and the same People’s Liberation Army still in charge in China today. Hell, the same model of Kalashnikov that was used in the massacre, the Type 56, is still being produced by the same Chinese state-run company – Norinco – that made them at the time. Maybe state forces still load them with dum-dum bullets. Maybe we’ll find out, sometime in the not-too-distant future.
China’s behaviour in this second Cold War will have long-lasting consequences. Its actions will affect investors greatly, of that I’m sure – and it’s why I write about it in this letter. There will be plenty of investment capital lost as the confrontation between China and the US plays out. But as investors, we’re lucky – the main thing we stand to lose is money if our guesses and hopes for the future are wrong. If you find a moment today, remember those students back in 1989, who stood to lose an awful lot more than money, and did. Remember Tiananmen.
All the best,
Boaz Shoshan
Editor, Capital & Conflict
Category: Market updates