ItsAValueTrap

Do lawyers get to the play the game where they try to bias the jury during the jury selection process?

Hmmm....yes, I've heard there is a lot of fraud, but isn't that mainly in the companies that are not actually producing? Am I wrong in the assumption that if a miner says we mined XXX ounces and had revenue of say $100MM and have X amount in the bank, wouldn't that be audited annually? I know there have been blowouts (BRE-X?) but if a company is producing and has reported earnings and is paying dividends, wouldn't that reduce the chance of fraud? The problem is that it's about what these companies will make in the future. While there is less risk in producing miners, they may overstate future production and how long the reserves will last. There are also a lot of flawed properties out there. There is some problem with the property that most investors aren't wise enough to figure out, e.g. political risk. The more obvious flaws result in negative cash flows; these mines should be put on care and maintenance but insiders will run the company into the ground anyways because they are there to collect a paycheque and to sell a dream. People I would trust: Altius / Brian Dalton. Teck / Norman Keevil. Keevil doesn't run Teck anymore though. Brent Cook seems fine (and certainly far better than the investment banking analysts). He runs a newsletter though, so that means that he more or less has to make long recommendations. I'm not sure if going long exploration stocks is the best idea in the world. You might be much better off if you had never even heard of mining in the first place. He made some good calls on not buying Pretium and in staying away from hard rock lithium. I don't read his newsletter.

There's a lot of fraud (inflated technical reports, aggressive accounting) and corporate waste going on in the junior world. It's not a good place to look for longs. The assets are extremely difficult to analyze. You pretty much aren't doing your due diligence unless you have a tech of specialized engineers and access to data (and the property). The other way is to identify people with integrity, verify it, and to take their word. Unfortuantely, very few people in the junior mining world have integrity. Just look at all of the people who pay the shill website theaureport.com

altius

Otsog and warrior... I have some accounting questions. I'm shorting Avid, which is currently deliquent in its financial filings. The company stated yesterday that it is likely that the stock will be delisted from NASDAQ (and move to OTC/Pink). Here's what I don't understand about the accounting: 1- They fired their auditor (Ernst and Young) and are replacing them with Deloitte. Will this impact the length of time that it takes for the audit to get done? I assume yes. So it seems to me that this move will delay Avid's ability to file audited financial statements. 2- Avid paid $4,069k in audit fees for YE2011. Audit fees represent 1.6% of Avid's current $322M market cap. Autodesk and Adobe paid similar audit fees, but their market caps are >34X Avid's.

turney duff's book suggests that cohen knew about the laws. when SAC had inside info on nortel, he had an analyst send him a bearish email so theres a legitimate story as to why they shorted nortel and went short tech stocks.

If you have a retail account, you may be better off just buying the put instead of making a synthetic put. The put may be cheaper if the broker won't pay you the full rate for lending your shares out. 2- I think the opportunities in shorting leveraged ETFs have mostly been arbitraged away??? If the borrow was free, you could print money by shorting both the bull and bear ETFs. ([link=http://glennchan.wordpress.com/2012/11/07/leveraged-etfs-a-market-inefficiency/]I've explained this on my blog[/link].) Because these ETFs may burn through 5-20% of the AUM in transaction costs each year, this would generate easy profits.

This is something that I'm curious about. The US has many pump and dump stocks that have no real business attached to them. In Canada, our pump and dumps are usually attached to some junior exploration company. There is a part of them that is an actual business. Why is that? Is there something about the US legal system or the SEC that allows the pure pump and dumps to proliferate?

To answer the original question... you should look into the history of John Malone and Liberty Media. You definitely see what happens when companies are leveraged to the hilt. When Malone started off as the CEO of TCI, TCI almost went bankrupt. Those were not fun times. One of the bankers' weaknesses is that they sometimes don't want to push a company into bankruptcy and take it over (even though that's what they ought to do). If they push the company into bankruptcy, then they'd actually have to figure out how to operate the business. They'd also have to immediately recognize losses, which banks sometimes don't want to do for perverse reasons. Fast forward to 2008/2009. Malone had to sell shares of Liberty Media (LMDIA at the time), presumably due to a margin call. Liberty shares skyrocketed after the sale. During the financial crisis, Sirius XM ran into a lot of trouble. Bondholders were about to take over the company. With only a few days until Sirius' debt was due, Malone came in and refinanced the company. This became a massive home run investment for Liberty Media (now LMCA). Sirius' profits were steadily growing but it ran into liquidity issues since too much debt was due and the capital markets were frozen due to the financial crisis. This created an opportunity for Malone to come in and make a really great investment. Hopefully there will be another crash and the heavily leveraged Liberty companies will trade at huge discounts again. Some relevant blog posts of mine: http://wp.me/p1mOGr-y8 http://wp.me/p1mOGr-iE

Same with puts...you need to be right about timing, and premium paid. Try it on the really flawed companies out there (especially the pump and dumps)... you'll find out what I mean. My blog post (http://wp.me/p1mOGr-y8) covers the dangers of shorting common stock. With put options you avoid almost all of those problems.

What do you do about the borrow on RVLT? I shorted it briefly and quickly covered; the borrow seems crazy expensive and the chance of buy-ins might be high. (I use Interactive Brokers.) The problem with selling calls is that you are still somewhat exposed to the cost of the borrow. If the stock goes up and the borrow gets expensive, the counterparty may exercise their call early to collect the borrow. This happened with Tesla. I'm obsessed with short selling but almost every trade looks crowded right now. 2- I've written about the dangers of short selling common stock here: http://wp.me/p1mOGr-y8

Didn't Charter emerge out of bankruptcy?

The best way to short is to buy puts. If you short common stock, there are multiple ways that you can lose money even if you're right.

CGA FU EBIX CHLN LLEN HGSH NQ TTS RVLT JRCC I guess choosing stocks like STPFQ would go against the spirit of this contest? If you choose 10 bankrupt stocks (especially the ones that are the most flawed), then you will have a really good chance at being #1 because you need an extreme result to be #1.

It's interesting to see the difference in quality between top short sellers and VIC. Top short sellers would be: Muddy Waters Citron Gotham City Research alfredlittle.com / Jon Carnes Bronte Capital For example, you can look at Tile Shop Holdings (TTS). There's a writeup on VIC that was posted first. Gotham put out a really good piece on Tile Shop. The Bronte Capital blog has some posts on TTS after all of this. In this case, I think Gotham's research is #1 in quality because they did detective work and figured out the undisclosed related party transaction.

Not a book, but the UK version of Kitchen Nightmares is very interesting.

Hmm I think you're right. Nevermind folks...

Parsad! You can have a field day with this one. ;) Looks like it.

http://www.nj.com/news/index.ssf/2013/08/nephew_of_crazy_eddie_founder_gets_prison_in_his_own_investment_scam.html I'm not sure how true this is. I couldn't find any other sources that say this. New Jersey has a system that shows court cases. A "Sam Antar" appears three times for very small cases (a few thousand or less). The case above probably would have gone through the 'united states district court southern district of new york'. I don't have access to PACER / don't know how to use it.

Ironically, Tim Sykes promoted a penny stock on his website. His hedge fund also lost a lot of money before he shut it down.

I meant that Buffett originally studied technical analysis until he discovered Ben Graham. I didn't think of Sanborn though... haha

Buffett originally started out as a chart guy ;)

Market makers would beg to differ... http://www.stocktrading.com/wsjknight1.shtml

It's a little worse than that. They have to trade illiquid products every day. This generates massive transaction costs over a year and is the reason why you have to pay a few to several percent to short them. I've written about it on my blog: http://wp.me/p1mOGr-dX I have no idea if the put options are a good idea. If markets exhibit excess volatility most of the time, then it would make sense that these ETFs will lose money most of the time (and in a small number of cases, make a ridiculous amount of money). This would affect the distribution of future prices. You'd also have to make a forecast about the cost of the borrow. It could be that the options are priced pretty close to what they should be; the leveraged ETFs aren't that difficult to analyze. Of course I could be wrong because I haven't really looked into playing the options on these ETFs.

the put options were never dangerous. He takes money In and invests it. And if he loses, which was highly unlikely, he would have paid way down the line, a fraction of the net worth of the company. the media had a hissy fit about them. And that was so annoying that he probably wishes he never did it. Because it was annoying when people who did not understand what he was doing had a platform to misinform. The put options were safe because he knew what his total exposure was when he wrote them. She's saying that the put options are the reason why Berkshire lost its AAA credit rating, which affected the ability of its reinsurance business to get good rates. With a AAA rating, his reinsurance units could have written a lot of business and he could have invested all of that float.