The Week ahead

The Contagion Spreads

The stock market is looking very bleak right now and the cause is Enron. More accurately, it's the second more critical look that all investors have toward the market in the aftermath of the Enron accounting scandal.

The markets were roiled last week and will be hit again next week by the same problem. Nobody trusts the accounting that leads to corporate earnings or balance sheets right now.

The current crisis of confidence is spreading and spreading rapidly. People are questioning their investments in the most solid of companies. Who knows what a thorough audit will do to recent earnings statements. How real were the earnings that drove the market in the late 1990's.

The worst case scenario here is a long term loss of confidence and continued slide of the market. Can this happen? To a degree it already has. Last weeks consumer confidence numbers were driven down by the stock market which was driven down by the Enron and the accounting crisis.

Can this spiral continue? Yes it can and this week might be the week how bad it can get.

To see our past issues, click here.
Last weeks column.

For our front page, click here.

Shmuel Protter
investmenttool.com