It was just a few months ago that Enron was the nation's seventh largest corporate behemoth. Today the firm is bankrupt and likely to be de-listed from the New York Stock Exchange.

Thousands of employees have been canned and thousands of employees have lost big pension-fund balances -- a double-whammy for many households. And while Enron executives were free to sell their shares, employees were locked-in by company pension rules as values plummeted.

As to shareholders, they too lost big: This is a company that saw stock prices fall from $89 a share in September, 2000 to less than 70 cents today.

Here we have a firm reputedly worth $100 billion a year ago and no one is quite certain how such a valuation was established. It created markets to hedge prices for energy, cables, ad time on television, and who knows what else. Even when explained, the transactions are so convoluted as to be incomprehensible.

Does anyone see this happening in real estate?

There are things in real estate which can be enormously complex -- look at a commercial lease if you want a good case of eye-strain. But real estate exists, it's not an accounting fantasy. If you sell an office complex for $100 million you get, well, $100 million and the buyer has a tangible asset.

Imagine if those Enron employee pension plans were invested in the company office tower rather than company shares. Now the employees would be landlords. They would have an asset and they would be getting rent. If Enron went bankrupt, the employees would still have the building. And no, it's not the best situation when your tenant goes bankrupt, but it's far better than owning a swooning stock. Maybe the building could be sold, re-let or made into condos...surely someone has a good idea for adaptive re-use.

You feel terribly for the employees and the shareholders, and you wonder:

Where were the accountants? (Oh, whoops, they were busy destroying documents....).

Where was the federal government? (Oh, whoops again, Enron was the political's best friend, making big contributions to both Democrats and Republicans in Washington and elsewhere. To their credit, at this point it looks like no politician of any stripe reached out to help Enron in its moment of need.)

Enron's essential business strategy was to create markets that would anticipate future price changes. Absent time travel, this strategy requires a mammoth leap of faith because it assumes one can know what will happen before it does.

In theory, if you know that the value of power generation is going to increase you would buy now and sell later. And if you know that the worth of optical fiber cables is going to plummet, you would sell today and buy in 2003.

You could go further and not directly buy power, cables, or tomorrow's ad time. Instead, you could obtain contracts to acquire the right to buy or sell power, cables, or whatever. Such contracts, or derivatives, could then be bought or sold. If you made a market for such paper and got others to buy and sell, you could then benefit not only as a buyer or seller of both commodities and contracts, but also by getting a fee from each transaction made by others.

The catch, of course, is that no one knows what will happen tomorrow, much less a few years from now. Very bright people have proven terribly wrong when looking into the future -- just think of the Nobel laureates at Long Term Capital Management, a company that incorrectly racked up enough esoteric contracts to worry Wall Street itself.

The Enron failure is more than a bankruptcy and more than still another company with declining share values. It's an example of a firm that makes something mere mortals cannot understand. At the end of the day there aren't 12,000 widgets ready to be shipped, just changes to accounts here and there. To know what Enron is worth you must rely on company management, accountants, and stock analysts....

It is very much in our national interest to have strong financial markets. For Wall Street to succeed, investment decisions need to be made with the best possible information, and in the past decade the Internet has provided more data for investors then has been available in the past. The presumption, of course, is not only that there is more data, but also that data from companies and government sources is generally accurate.

The real worry -- the one that should make everyone nervous -- is that Enron's failure will raise issues of public confidence which may impact the marketplace in general. Imagine the fallout if one day the public decides Wall Street has had too many Enrons and that the best place for its dollars are simple savings accounts. After all, while savings accounts earned some interest in 2001, during the same period the Dow Jones Industrial Average, the S&P 500, and the Nasdaq composite index all fell.

For more articles by Peter G. Miller, please press here.

Published: January 15, 2002

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Peter G. Miller, also known as OurBroker®, is the author of six real estate books -- including The Common-Sense Mortgage -- and is the original creator and host of America Online's Real Estate Center. Peter's weekly columns appear in more than 100 newspapers nationwide, he is also published in a variety of other media outlets and he is a frequent speaker at national events and conventions. Peter welcomes your questions, comments, and news releases via e-mail at .