What Wall Street Misread

Not quite. In a courtroom shocker, Scrushy walked when a federal jury in Birmingham, Ala., acquitted him after 21 days of deliberation.

Said Andrew Stoltmann, an adjunct professor at Northwestern University School of Law, on TheStreet.com: "This verdict is the equivalent of O.J. Simpson, only it's for Wall Street."

How did Scrushy beat the odds? Simple: image manipulation. Prosecutors goofed by trying the case in Scrushy's backyard of Birmingham, Ala., where Scrushy is a well-known, charismatic figure who never lost his image as a local boy made good. The born-again Christian was able to make much of his religious conversion both before and during trial and became a frequent worshipper and preacher in Birmingham's African-American churches.

The strategy appears to have become a blueprint for former Enron chairman Ken Lay, who is preparing for his own criminal trial. Recently, Lay gave a speech defending his actions at Enron, and he dropped in a number of references to God throughout. Legal watchers doubt Lay's efforts will play with the jury pool in Houston, where Lay is still reviled. Then again, they said the same thing about Scrushy.

Death of the Consumer

For four years, experts have been predicting the American consumer was going to close his wallet. Guess what? They've been wrong.

In 2005, it was rising interest rates that were going to put the kibosh on consumer spending. When that didn't happen, it was the collapse of the mortgage refinancing market. Then it was higher gasoline prices. Then it was swollen credit accounts.

Sure, each of these has taken a toll. But in the big picture, experts keep overlooking a key fact: Americans like to shop. And they still have money left over from their home refis to keep the addiction alive. The Federal Reserve estimates that in 2004, consumers pulled out nearly $600 million in equity from their homes through a combination of cash-out refinancings and home equity loans.

While it has become more costly now for consumers to turn their homes into ATMs, they still have a lot of cash sloshing around from earlier refinancings. Wall Street analysts say there's a considerable lag between the time a consumer takes equity out of his home and puts that extra money to work.

So, consumers should have extra cash to burn well into next year. And when the runs out, there are always those credit cards to turn to again. The truth is, consumers will keep spending until they fear there won't be any money coming in to pay the bills. Even then it will probably take some prodding.

The American consumer has easily outlasted the wisdom that says he's doomed. In 2005, it was wisdom itself that lacked stamina.

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