Ever since Enron's ( ENRNQ) stock tanked last fall, I've been trying to reason with myself and avoid overreacting. No one could have predicted the fall of Enron, I say, to soothe myself for being foolish enough to hold the stock through the bankruptcy filing. Then I look around at my other stocks and tell myself: Enron is an isolated situation. No need to panic.
Both rationalizations are designed to make me feel better. But even I can see that they are mutually exclusive. If no one could have found out the level of misconduct at Enron, then lots of companies could do what Enron did, and I wouldn't have a clue about it until it was too late. Does it really matter whether Enron fooled Arthur Andersen, its auditor, or whether Arthur Andersen was in on it? I wasn't in on it, and I don't see any possible way I could have been.