cwericb

Well first off, I don’t know what due diligence anyone could have done in this case. At best, right now we have a series of unsubstantiated accusations made by a biassed individual with a questionable track record. Further, the fact that some analysts have dropped coverage really only says that at this point they don’t know what is really going on either. Secondly, while I have been trying to suggest that it is a bit early to climb on the “TRE is a fraud” bandwagon others seem to have their minds made up that the company has no value whatsoever and subscribe 100% to that view. Then when I say it is too early to make that decision I am accused of defending TRE - which I am not. Thirdly, when it is suggested that this discussion has no place on a value investing board I have to wonder what ever happened to the theory of looking at companies that are on the wrong side of public opinion? This MAY be a classic case of that. Everyone is entitled to their own opinion. I’m just surprised that some here have been so anchored in their view that TRE is a fraud that they don’t even want to consider that it might not be and that the company may have some value. Yes you may be right, but don’t confuse due diligence with guesswork and rumours. Furthermore, one of the points I was trying to make a couple of weeks ago was that this might be an interesting play for some small change or a bit of a flyer. I was soundly criticised for that suggestion but it is hard to ignore the fact that the share price has at least doubled since then.

While we criticise Chineese companies for being rife with fraud, it's almost embarrassing that we use two American companies (one of which was run by a Canadian) as examples of massive fraud.

Perhaps I am naive, but I still find it hard that a company as large as TRE and one that has been around for so long as it has can be a complete fraud. Surely you would have to be brave and/or stupid to go out and bet the grocery money on this - but as far as that lottery ticket is concerned even TRE probably gives you better odds of doubling your money. :)

"If nothing else this whole episode should be a bit of a learning experience." What did you learn? Ask me in a couple of months.

Haha. Hard to think of $200 million as small change, but everything's relative. Still you would think that Wellington would have to see some sort of justification for investing in TRE. They wouldn't just throw away one or two hundred million at this point unless they were pretty sure there was a good chance of making a profit. If this was a zero and a complete fraud, as MW says, it would be pretty embarrassing for Wellington and I doubt they would put themselves in that position. I think it comes back to what I suggested previously, while the company has no doubt posted some fuzzy numbers, it may well still be a viable proposition and has a certain value - perhaps not $25, but somewhere in excess of the $2-3 per share it was selling at. As far as due diligence is concerned, that's pretty well impossible when you don't know who to believe. Tomorrow may give a better indication of where this is going. If nothing else this whole episode should be a bit of a learning experience.

We have discussed the credibility (or lack thereof) of analysts and MW. They all have their own axes to grind. However, when a Boston based, worldwide company like Wellington has the confidence in Sino to pick up 28,000,000 shares of this company, it is rather hard to put this down as the act of someone not knowing what their doing. They are considerably larger than Paulson and as they have an office in Beijing and one would think that they wouldn't gamble that kind of money unless they had researched Sino very well. While it is possible that they had purchased those shares before the MW report, the markets certainly seem to see this as a sign of support. TRE share price dropped to as low as $1.29 and less than a week ago was just above the $2.00 mark. Today the price is bouncing around $4.75 in heavy volume - and that's with the US markets closed for July 4th. It will be interesting to see what happens tomorrow.

“Where are all the people coming from that are buying all these new houses? The market simply can’t sustain these prices.” Couple of rough quotes from my father 1968-70

oec2000 You make some good points and I would find it hard to disagree with much of what you have said, other than the fact that I am not ‘wedded’ to a positive outlook on TRE and being away for the past week or so may have caused me to overlook some new facts. If I have given the impression that I have been defending TRE, it was only because I was trying to make the point that I am still not completely convinced that TRE is worthless. It certainly is not a $25 company any longer, but is it $0? I guess I have been playing devil’s advocate which may have given the appearance of defending the company. “...a good test of your open-mindedness is to ask yourself what it would take for you to say TRE is a sell” Okay, obviously it was a sell at $20, $10, etc but is it a sell at any price, $3.00, $1.00? If the company is a complete fraud and is worthless, than as you said in your last paragraph, it is a learning experience that will make me more cautious and suspicious in future. While that may be a good thing, I find that there is a fine line between suspicion and paranoia. Getting overly cautious can lead to the point of staying clear of any investment with a large amount of risk. There has to be a balance between risk and reward that makes the risk worthwhile. As far as your YLO experience is concerned, I looked at that a long time ago but as an advertiser I find that their prices are so high that I really have doubts that they are sustainable.

"I don't get how this idea even merits a discussion on this value oriented forum." Well gee, you've certainly had your share of posts for something not worth discussion. :) Nothing wrong with discussion, so long as one keeps an open mind.

Jeez you guys take everything so literally. 1) No, I don’t have a lot of faith in analysts, but yes, in general I would have more faith in an analyst from RBC than some acknowledged short seller from a two guy firm that I had never heard of before and who has some baggage. If you feel all analysts are themselves frauds, than you are entitled to your own opinion. 2) I am not jumping on anyone’s bandwagon, I am still trying to keep somewhat of an open mind on this. Usually where there’s smoke there’s fire. I am waiting to see how big the fire is before I decide the company is a total sham. Also. I am not comparing FFH to TRE as companies - give me a break! I am simply comparing the fact that they both found themselves in similar situations. And for the umteenth time, I am not defending TRE. Obviously this discussion is going nowhere because most here have their minds made up that TRE is a total fraud, the stock is worthless and the story is over. You may well be right, I guess I am waiting for some more information before reaching that conclusion. Perhaps I am not alone as TRE closed up about 20% today. If I had bought yesterday and sold today perhaps I would be an idiot - but an idiot with 20% more than he had yesterday - which brings me back to my original point that it just might be possible to make a little money here if one wanted to take a bit of a flyer.

Sorry if I am a little obtuse here, but I’m not sure what you see in the quotes that conflicts with what I just said. ? As far as the credibility of analysts is concerned, I don’t put a lot of faith in any of them and have said that on several occasions. However, when I read of Mr. Block asking for a $300,000 payment to produce a positive report (Orient Paper) it certainly doesn’t help his credibility in my mind. As far as others are concerned I doubt an RBC analyst (for example) would keep his job long under those circumstances. By your post it seems that I couldn’t have made my point very clear. What I was saying is simply that some people were very quick to accept Blocks report. He may be the most honest, thorough, an accurate guy in the world, but he is still in a position to benefit from driving the share price down. As far as “homework” is concerned it is generally agreed that at this point no one really trusts TRE’s figures. Unless one has access to the real figures (assuming TRE’s are not correct) then I don’t know how you would crunch any numbers. Correct me if I am wrong, but FFH was a victim of malicious rumours and a vicious attack by short sellers in an attempt to drive the share price down for profit. TRE is the subject of accusations of fraud similar to what FFH went through and these accusations are also made by a short seller who profits from the decrease in share price. But the difference is that we know the rumours about FFH were essentially wrong. That may or may not be true in Sino’s case but we have yet to know with certainty.

Been away for a while and catching up on this thread. Not to stir the pot but... I don’t think anyone here has ever said that TRE was not a fraud. It may be. It may not be. Or it may be somewhere in between. However, I was surprised to see that there were so many here who immediately jumped on the Block's MW bandwagon and accepted the findings (?) of a less than reputable source at face value. I still find this surprising. Admittedly being a bit contrarian, but wouldn’t investors be better served to follow situations like this closely with an open mind? And don’t bother jumping on me for this next sentence, but there are times when buying opportunities will come up because Mr. Market follows the herd mentality (as above) and beats up a stock because of bad or intentionally misleading information. (Eg.FFH) And, if my facts are right, at the time FFH was in the crapper, there was reason for legitimate criticism and in fact, did they not later have to restate some of their financials? Didn't mean it was a fraud though. If, say, several major banks, came out with a report like MW’s than one would have been more inclined to believe everything it said. But has everyone forgotten the saying, “consider the source”? Don’t for one minute think that I am advising anyone jump into TRE with both feet, but yes I think there is still a chance that it might be worth more than two bucks. Sure it may well be worthless, but I wonder how many here would have been just as vocal a few years ago in agreeing that FFH was definitely a zero? The point here is that when a situation like this arises, there is no harm in looking at it with a more open mind rather than simply agreeing right away with a somewhat questionable source. Wish I had bought FFH at under $60.

“There is no way that Sino is a complete fraud, as they invariably have some trees/business, it would be impossible to fake everything. But just because it's only a partial fraud doesn't mean the stock has any value. Remember, there's a lot of debt, that would pick through this corpse if it turned out to be a fraud, likely leaving nothing for the equity” Good point Hester. oec2000 you said: “It's amazing that some continue to call this a buying opportunity on the sole basis that the company "must be worth something between zero and $20+ and then rationalising this speculation by saying that it's ok because we are not betting the family farm on it and dismissing the red flags because we don't like or trust the guys waving it." If you are attempting to quote me, please read what I said more carefully... 1 At no time did I say it was a buying opportunity. I simply posed the question. Buying opportunities come at times when the market turns against a company for various reasons. I was pondering the fact that this could be one of those times similar to FFH at $60. 2. Again, if this was an attempt to quote me it is a miss-quote as I do not recollect saying or inferring that. I posed several questions as points to consider. They were not statements. What I said was “Of course a lot of investors don't think [that this is a buying opportunity], but isn't that what makes a buying opportunity? I don't think anyone should be betting the family farm on this, but I certainly think it deserves some thought.”

"There's a big difference between questioning an idea and questioning a person." Words of wisdom. Note to all. Check out any discussion on Stockhouse or Yahoo boards and you will see a big difference from this board. Those boards are becoming so cluttered with idiots that they have pretty well lost any value as forums. While discussions here can at times become a little heated we all have to try to keep our discussions gentlemanly (or lady-like as the situation dictates). When we debate a subject it is important to remember that rarely is any subject black or white. Before I post anything I try to ask myself, will this look foolish when someone reads this two weeks from now and will someone read this in a different way from that which I intend. This is why I often hit the delete button before the post button.

libor.plus1 ..... I pretty well agree with everything you said in your last post. I am just a little surprised that there are some others here that seem to be taking that report almost as gospel and seem to be convinced that, as Block would like us to believe, that SF is a complete fraud. Time will certainly tell here, and there may well be some truth in what Block says. However, the bottom line is that here we have a company that has been around for quite a while, was trading in the mid-$20's and now is $2+. Now if his report is completely correct, the company is probably a zero. But even supposing that his report has some truth to it, is it damaging enough to cut the value of the company by 90%? Or, let's just say for the sake of discussion that Block's report was concocted for nefarious reasons and is essentially a work of fiction. Then what is the stock worth? So if the truth lies somewhere in between, and that seems more and more likely, than do we have a buying opportunity here? Of course a lot of investors don't think so, but isn't that what makes a buying opportunity? I don't think anyone should be betting the family farm on this, but I certainly think it deserves some thought.

What I got from the article was that the 80% depreciation was a number that they estimated was due to the damage done by the MW report. Of course the 80% is an educated guess, there’s no formula that you can use in a situation like this. They maintain their neutral valuation and assign the same value, depreciated by what they feel is the effect of Block’s report. IF the MW report is essentially false there is no formula for assessing that damage so they make an educated guess. Certainly Block could be right, and I definitely don’t have a lot of respect for analysts in general and have made comments here before as how they wait for a big move in a companies share price and then. In hindsight, they make a forecast. But this is a bit of an unusual situation. At this point I think few, if any know enough about Block to say that he has more he has more credibility than RBC, Credit Suisse and Dundee. At least they have more reason to make an objective valuation. “Also, it seems like they already had a neutral rating on the stock when it was trading around $20+. Now they are still neutral when its a fraction of that?” Come on now, right or wrong it was the ‘Report’ itself, not necessarily anything that Sino did that caused the price to drop by 80%. Obviously no analyst would have predicted the price would drop by 80% because of some report that comes from out of left field. It is reported that not long ago Mr. Block visited Orient Paper and then offered to write a glowing analysis if they would pay him $300,00. Orient refused. Block then released a damming report driving the price down no doubt after he had shorted the stock. Several months Orient proved Block’s report was wrong. Is that the sort of person you would have faith in? Do you believe the MW report is correct? Do you believe Sino is a total fraud and is worthless?

Ha! And I was worried that I might make a comment about those guys that would get me sued when I should be more concerned about getting ‘wacked’

I still don't know who's right here but Both RBC and Dundee have come out with positive reports on TRE. Now Credit Suisse joins them. "We believe TRE's shares face a long road to redemption, but the process is fluid and subject to change as new information becomes known. At the current levels, we believe shares clearly highlight the market's loss of confidence as implied metrics on many measures are well below historic levels. Ongoing efforts to improve disclosures, among other things, may help slowly regain market confidence. Our financial model remains unchanged since the start of recent share price volatility, but, we apply an 80% discount to our C$28 NAV to obtain the C$6.00 target. That target is also supported by a conservative liquidation scenario. We retain our Neutral rating." http://community.nasdaq.com/News/2011-06/update-sinoforest-corp-down-14-as-credit-suisse-crunches-the-q1-numbers.aspx?storyid=80825#ixzz1PO4m8OVu What I don’t understand is why some people here are so quick to dismiss the reports from reputable firms like RBC, Dundee, and Credit Suisse and jump on Bock’s band wagon when we already know that he stands to profit hugely from TRE’s demise, who supposedly previously tried to extort money from Orient Paper, who operates a hole-in-the -wall company with a staff of two (?), and who gives no fixed address. AND he distributes this report to the general public absolutely free of charge just out of the goodness of his heart. Perhaps Mr. Block is a philanthropist?

"Management seems to be active, giving presentations Canada and US-wide :" Much more impressed with managements efforts to promote the company now than a year ago. At one time it looked like you could make a quick buck here (and I guess some of us did), but now this has developed into more of a good longer term investment. I don't know if anyone has noticed but NBSK was up another $10 this week and as the dollar has slipped a few cents from it's high this should all help. 'management last bot in around 1.5, buying at 1.25 seems good deal." I am thinking that I may pick up some more if the price slips back any further.

oec2000 It comes down to who you feel is more reliable or reputable Muddy Waters or say, RBC. Now RBC, Dundee, etc could be wrong but I would have a lot more faith in their analysts than I would have in Mr. Block. If really believe that MW's reports are more likely to be correct, knowing that they have mislead people before and knowing that they have a vested interest in destroying TRE, than I simply have to disagree. I think the odds - no guarantee - but the odds of accuracy are in RBC's favour. IMHO.

"They go after the messenger instead of the message" But if you can't trust the messenger....

Glad to see we are not taking ourselves too seriously. I tend to agree with libor.plus1. I think (hope?) that the current slide has been a factor of the time of year, the after effects of the quake in Japan, markets getting a little ahead of themselves, and a general lack of positive news. I am hoping to see better figures next month and then an upturn in the Fall. I sometimes get very pessimistic about the long term, but I temper those thoughts with the realization that Asia is capable of such a huge demand. When you unleash a century's pent up demand over just a few years - by half the world's population - that is a driving force that may well balance out a lot of problems. I remember seeing pictures of those huge multi-lane highways in China taken 20-30 years ago and marveling that there was almost no cars or trucks on those roads. I see pictures of the same roads today that are gridlocked with bumper to bumper traffic and yet less than 10% of the population owns vehicles. The demand for all things will be staggering.

The beginning of the end of this controversy? http://business.financialpost.com/2011/06/07/muddy-waters-sino-forest-research-pile-of-crap-dundee/#more-60753

And just one more quote from that article................. "Furthermore, Mr. Kelertas claimed that this isn’t the first time that Muddy Waters has acted dubiously. He said a researcher with the short seller told management at Orient Paper Corp., the first Chinese company targeted by the short seller back in 2010, that he would write a research report for them in return for US$300,000. Mr. Kelertas said Orient Paper declined the offer and two months later, Muddy Waters issued their initial report calling the company a fraud. Mr. Kelertas pointed out that since then, Orient Paper has refuted every single claim, while Deloitte & Touche, hired as independent auditors found Muddy Waters guilty of using false information." Yup, Mr. Block seems like a fine upstanding guy to me. So Dundee still has faith in TRE, are they alone? No "RBC Capital Markets analyst Paul Quinn also came out in favour of the company, maintaining an Outperform rating on the stock" So who do you believe? The guy with no address or RBC, Dundee, Paulson? As someone said back a while ago, "if Block is right some heads are going to roll" Of course, right or wrong, Block probably made millions.

Interesting comment from a respectable organization: “We are going to provide you with some information on why Muddy Waters research is a pile of crap,” said Richard Kelertas, an analyst at Dundee Capital Markets, during a conference call he held with clients on Tuesday afternoon. “We believe there’s nothing true in that report.” Yet some on this board would choose to believe some guy living in China who will not give his address because of death threats and who stands to make a killing as TRE’s stock price goes down? Anyone who defends the Block report or and his associates should read the following: http://business.financialpost.com/2011/06/07/muddy-waters-sino-forest-research-pile-of-crap-dundee/#more-60753