TRE - Sino-forest put.

[Estimated Profit]

This smells too much like FFH in2003.

 

Way too many similarities.

 

This feels too much like an attack to be legit, everything lines up:

 

Quiet period before earnings

Innuendo, no proof, market action too quick to not be collusion amongst players with very deep pockets, big names with bad associations being quoted, here Madoff, Ponzi, back in the day, Lay,Skilling, Enron, fraud... Fraud... FRAUD.

 

Illiquid stock, company has little time to defend itself...

 

The only thing different is it didn't happen memorial day, a holiday Monday on an inter listed stock.

 

I can't have more faith in MW than in the various investment houses from ?

BMO, TD, BNS, Dundee etc. Etc even though Institutional Imperitive is strong with these ones.

[alertmeipp]

Hold or buy is the action one make. The decision one could made is don't do anything until more info comes along. If you have shares, your action is HOLD. If you don't, your action is NOT BUY. See the difference? It's funny that what some think make clear sense, others think it's non-sense sometimes.

 

Actually, I won't blame myself for losing money if I were straight commons. Just the way I do naked put without spread is stupid and I sold more than the amount i want to own.

 

In short, I am not prepared for 70% drop.

[alertmeipp]

This smells too much like FFH in2003.

 

Way too many similarities.

 

This feels too much like an attack to be legit, everything lines up:

 

Quiet period before earnings

Innuendo, no proof, market action too quick to not be collusion amongst players with very deep pockets, big names with bad associations being quoted, here Madoff, Ponzi, back in the day, Lay,Skilling, Enron, fraud... Fraud... FRAUD.

 

Illiquid stock, company has little time to defend itself...

 

The only thing different is it didn't happen memorial day, a holiday Monday on an inter listed stock.

 

I can't have more faith in MW than in the various investment houses from ?

BMO, TD, BNS, Dundee etc. Etc even though Institutional Imperitive is strong with these ones.

 

The part I frustrated the most is TSX was halted but pink sheet was not. One can easily manipulate the price in the less regulated pink sheet and when TSX opens, it creates a panic effect.

 

[given2invest]

I bet you guys are big Glenn Beck fans.  :)

 

Nobody is manipulating anything.  If the company is legit and healthy then this will be the buying opportunity of the century. 

 

Do you realize that there are NO shares borrowable to short on Interactive Brokers but there are 10's of millions I can buy at the current price level?  My point is, I can't even enter a short position if I wanted to (and send the price down) but I can buy (as can anyone else) essentially unlimited stock at these levels. 

 

The market is pure capitalism.  If this was such an obvious manipulation, many large funds would be foaming at the math to buy all the shares they could and maybe some did today.  But all this talk about short manipulation makes me lol. 

[Hoodlum]

I know next to nothing about this company and skimmed the report so I can't comment on whether it's a fraud or not or whether the CFO adequately refuted MW claims.  What I can say is MW has been right every time they have initiated on a china stock and their report was very damning.  Of course, I'm telling you nothing the market doesn't already think.    

 

The market is not perfect.  The MW report had 2 main claims against TRE and that is what the press release from TRE tried to refute.  Most of the rest of the MW report tried to pull stuff from the past to show some kind of trend to back up their 2 main points.  The first item was clearly refuted as the revenue in question was clearly disclosed in the 2010 Q1 & Q2 MD&A.  I am surprised MW missed this.  The 2nd claim comes down to land ownership.  MW claims they don't own the land while TRE says they do and that MW assummed they only purchased in Gengma, when they puchased in 25 other counties of Yunnam province.  The auditors will likely come back and say nothing is wrong, but MW will say "where's the proof of the land records" and try to drag this out as they know TRE won't release that information for confidentiality reasons.  

 

In the end, if Paulson doesn't see anything wrong then he will buy shares at these depressed prices and there are only so many shares that can be shorted.  I think MW has bitten off more than they can chew and are not accurate in their reporting of TRE, regardless of how successful they may have been in the past.  I picked up some share of TRE today for the first time.

 

[alertmeipp]

I bet you guys are big Glenn Beck fans.   :)

 

Nobody is manipulating anything.   If the company is legit and healthy then this will be the buying opportunity of the century.   

 

Do you realize that there are NO shares borrowable to short on Interactive Brokers but there are 10's of millions I can buy at the current price level?   My point is, I can't even enter a short position if I wanted to (and send the price down) but I can buy (as can anyone else) essentially unlimited stock at these levels.   

 

The market is pure capitalism.  If this was such an obvious manipulation, many large funds would be foaming at the math to buy all the shares they could and maybe some did today.   But all this talk about short manipulation makes me lol.   

 

manipulation in this scale is not obvious in most cases, just as fraud. You won't see through it until details emerge. The fact that no shares is borrowable prove what? All borrowable short to short is used up and rightly so... but what's your point on pointing that out?

 

I am not saying this is manipulation or fraud - I don't know until I see more info.

[Estimated Profit]

This smacks of a brolgaboy style post. Anyone around here who isn't aware that manipulation / short attacks happen hasn't been around for long.  This is all bringing back memories.

 

I bet you guys are big Glenn Beck fans.   :)

 

Nobody is manipulating anything.   If the company is legit and healthy then this will be the buying opportunity of the century.   

 

Do you realize that there are NO shares borrowable to short on Interactive Brokers but there are 10's of millions I can buy at the current price level?   My point is, I can't even enter a short position if I wanted to (and send the price down) but I can buy (as can anyone else) essentially unlimited stock at these levels.   

 

The market is pure capitalism.  If this was such an obvious manipulation, many large funds would be foaming at the math to buy all the shares they could and maybe some did today.   But all this talk about short manipulation makes me lol.   

[given2invest]

This smacks of a brolgaboy style post. Anyone around here who isn't aware that manipulation / short attacks happen hasn't been around for long.  This is all bringing back memories.

 

I bet you guys are big Glenn Beck fans.   :)

 

Nobody is manipulating anything.   If the company is legit and healthy then this will be the buying opportunity of the century.   

 

Do you realize that there are NO shares borrowable to short on Interactive Brokers but there are 10's of millions I can buy at the current price level?   My point is, I can't even enter a short position if I wanted to (and send the price down) but I can buy (as can anyone else) essentially unlimited stock at these levels.   

 

The market is pure capitalism.  If this was such an obvious manipulation, many large funds would be foaming at the math to buy all the shares they could and maybe some did today.   But all this talk about short manipulation makes me lol.   

 

Friend, I've worked at the largest investment bank and large hedge funds and have friends who currently work at all of them.  There are bad apples everywhere and I know this whole board thinks everyone who works at SAC is the devil, but I hate to break it to you - you're wrong.   

 

The point that the shares aren't borrowable is that there can only be 1 kind of seller hitting the stock down right now - long sellers.  Yes, I know Patrick Bryne wants you to think naked short sellers ruined his company.  Actually, lack of profits ruined his stock price - nothing more. 

 

It's a weekend, and I'm tired.  Bottom line:  Good luck with this one, I've said my peace - just like I did in the CCME thread on this website before it got halted.  I know almost nothing about TRE so I have no idea what will end up here.  I actually hope it's not a fraud.  I highly, highly, doubt it though.  But I have no skin in this game so it won't effect me either way. 

 

But don't tell me that I haven't been around long enough.  I'm certain I've seen as much "action" as you have. 

[given2invest]

I know next to nothing about this company and skimmed the report so I can't comment on whether it's a fraud or not or whether the CFO adequately refuted MW claims.  What I can say is MW has been right every time they have initiated on a china stock and their report was very damning.  Of course, I'm telling you nothing the market doesn't already think.    

 

The market is not perfect.  The MW report had 2 main claims against TRE and that is what the press release from TRE tried to refute.  Most of the rest of the MW report tried to pull stuff from the past to show some kind of trend to back up their 2 main points.  The first item was clearly refuted as the revenue in question was clearly disclosed in the 2010 Q1 & Q2 MD&A.  I am surprised MW missed this.  The 2nd claim comes down to land ownership.  MW claims they don't own the land while TRE says they do and that MW assummed they only purchased in Gengma, when they puchased in 25 other counties of Yunnam province.  The auditors will likely come back and say nothing is wrong, but MW will say "where's the proof of the land records" and try to drag this out as they know TRE won't release that information for confidentiality reasons.  

 

In the end, if Paulson doesn't see anything wrong then he will buy shares at these depressed prices and there are only so many shares that can be shorted.  I think MW has bitten off more than they can chew and are not accurate in their reporting of TRE, regardless of how successful they may have been in the past.  I picked up some share of TRE today for the first time.

 

 

I hope this is what ends up happening.  But I'll guarantee you this:  If it was so obvious that the MW report is fake and if the company's response was so strong, why is the stock where it is?  If it's "manipulation", well, shit - you should be buying hand over fist.  The manipulators just got you a dollar bill for 25 cents!  Like I've said repeatedly, TRE doesn't need capital so there is no way to drive them out of business with an analyst report.  There can be no run on the bank here.  All that can happen is the stock goes down, the company restores confidence over time (and pays out cash flow via dividends), and the stock price returns to it's "fair" market value. 

 

I want to repeat:  I have no idea the validity of the MW report.  They very well might have gotten it wrong.  I just highly doubt it.  I'm not sure why you'd take a PR by the company at face value if any of this stuff is true.  What do you expect them to say? 

 

Regarding Paulson, many smart investors have been duped with China stocks.  First Starr with CCME and then very sophisticated hedge funds with LFT.  Doesn't mean a lot having someone like Paulson involved.  He can be duped, too. 

[Liberty]

This smells too much like FFH in2003.

 

Way too many similarities.

 

This feels too much like an attack to be legit, everything lines up:

 

Quiet period before earnings

Innuendo, no proof, market action too quick to not be collusion amongst players with very deep pockets, big names with bad associations being quoted, here Madoff, Ponzi, back in the day, Lay,Skilling, Enron, fraud... Fraud... FRAUD.

 

Illiquid stock, company has little time to defend itself...

 

The only thing different is it didn't happen memorial day, a holiday Monday on an inter listed stock.

 

I wonder how often this happens. What you just described is similar to how I would describe what happened to EBIX a few months ago (with a few difference)...

[S2S]

given2invest,

 

I think at this point we just have to agree on the power of confirmation bias. We talked, talked, and talked some more (to be fair my humble contribution, mostly reply #21 and #43, does not stand up to yours), yet few listened.

 

Perhaps the fault lies with me.. "what we've got here is (a) failure to communicate"

 

Back to topic, I saw a few members citing sell-side analysts' (thus far) support of TRE. Let's not talk about how such argument sets a double standard - investors, here and everywhere, love to make fun of analysts' when they happen to hold differing opinions. Well, I happen to have decent access to sell-side research, and here are the latest updates from two leading of the biggest shops:

http://tinypic.com/r/sz7d5l/7

http://tinypic.com/r/10ne4om/7

 

People can talk all they want about Carson Block's "ill intention" (again, as you have pointed out, there is financial motives to every stock report), but what about the substance of MW research? I too work in the industry (though likely not nearly as long as you have), and I would have to admit that from the look of things, MW put in significantly more work than 95% of what passes for  equity research at institutions, on both buy and sell-side.

 

Last but not least, scorpioncapital's post below is worth quoting. There is certainly money to be made here for traders, but if one is to buy and hold TRE at this point, caveat emptor

excuse the pun, but some are missing the sino-forest for the trees here. You can't do business with crooked managements, or ethically borderline. Even if the minor allegations are true about the decisions these people made, I would consider not touching it, despite cheapness because the final outcome , whether now or years from now, can't possibly lead to superior investment returns.

 

 

[oddballstocks]

This thread is interesting, I followed the CCME and RINO disasters along with a few others and they all fit the same sort of pattern.  It's kinda like the really pretty girl who never has a guy, something just doesn't seem right about it.  It seems great except for that one nagging thing that can't be explained...

 

Stock manipulation seems to be a red herring when things go bad.  I know there is an emotional aspect of disbelief that the accusations are possible but I would think stock manipulation would be the least likely explanation.  

 

I have to agree with given2invest, anyone long who is able to rationally examine the situation and is convinced the allegations are wrong should be buying hand over fist.  If we believe the market is a weighing machine it should only be a matter of time before the truth comes out good or bad.

 

I have no position but I am extremely cautious of Chinese companies listed in North America.  There have been some articles out recently about how auditors have been duped, apparently many of the local banks work with the companies to falsify records.  Apparently a few times the auditor has gone to the main bank branch instead of the local branch and that's where things start to fall apart.

[Ballinvarosig Investors]

Friend, I've worked at the largest investment bank and large hedge funds and have friends who currently work at all of them.  There are bad apples everywhere and I know this whole board thinks everyone who works at SAC is the devil, but I hate to break it to you - you're wrong.   

 

The point that the shares aren't borrowable is that there can only be 1 kind of seller hitting the stock down right now - long sellers.   Yes, I know Patrick Bryne wants you to think naked short sellers ruined his company.  Actually, lack of profits ruined his stock price - nothing more.

Completely agree.

 

I have an acquaintance who goes through all these Chinese companies in an effort to try and uncover a genuine company, It reminds me of a quote from The Snowball where a friend of Buffett asks him what he's looking for a golden needle in a haystack full of gold. In this case, what if there is no gold, but merely a haystack full of sh!t? Even at the top echelons of Chinese "capitalism" (Baidu for one), insiders are trying to deceive shareholders out of what's they own.

 

One of my best friends in the world is Chinese; he is the bravest individual I have ever met (and this is coming from someone whose grandfather was gassed, and went over the top at the Somme in WW1). This is a man who has had members of his family made disappear (tortured and executed) because they dared to speak up against the government. When he protested, he was one of the lucky ones, given the choice to leave rather than just rot in a prison and die. If the Chinese goverment does this to their own citizens; what kind of respect do you think they will pay towards the shareholder rights of foreigners?

 

For the record, this is the reason why Charlie Munger's comments on the superiority of the Chinese system over the American one disgust me. The American system has failings, but at least you're not trying to execute the dissidents that disagree with it.

[RusticFrank41]

This is a very interesting discussion, with so many fascinating concepts mentioned. Having read the MW "expose" and the company's ( TRE) response I am amazed at the imbalance between the response and  the accusation. I am not much of an investment guru, remarkably ignorant in fact, but I do know how to read and interpret the written word. MW calls TRE a "Ponzi scheme" and a " fraud from its' inception". It accuses the officers of being "thieves". These are not mild accusations. I would expect that if MW are wrong they will be bankrupt regardless of how much money they may have made in their history and the names of the would truly be mud forever. Any prudent person will have checked and rechecked each item in their accusations, they will have documented and have legal proof of same, or face catastrophe. However I am appalled by the  spelling and typographical errors in the document. It appears amateurish.

    The response to the accusations of " Ponzi scheme", "fraud"and "thief", has been, we have struck a committee, and hired counsel and by the way, they missed the point on these two items. Surely any other multi-billion dollar company would state something to the effect that "the MW report is a noxious and perfidious attempt to destroy a perfectly reputable company and we have instructed our lawyers to seek redress by filing suit immediately in the courts against each and every member of this nefarious entity whose name, Muddy Waters, so aptly describes ,not only the odious minds of its principals,  but also its ethics and morals. We have also instructed our counsel to prepare documentation demonstrating the truth of every financial transaction and each legal entity with which TRE does business which  MW challenges in its report." In other words, I would expect TRE to be angry and show it. 

    What kind of entity could expect to get away with this type of attack if it is all fabricated? This is the corporate equivalent of attempted murder, surely? But it is all very interesting. Hell, I haven't been this excited since the hogs ate Lukie. 

[finetrader]

http://www.theglobeandmail.com/globe-investor/sino-forest-scrambles-to-defend-its-reputation/article2046252/page1/

[finetrader]

another article:

http://business.financialpost.com/2011/06/03/the-sino-forest-buzz-saw/

[alertmeipp]

 

The point that the shares aren't borrowable is that there can only be 1 kind of seller hitting the stock down right now - long sellers.   Yes, I know Patrick Bryne wants you to think naked short sellers ruined his company.  Actually, lack of profits ruined his stock price - nothing more. 

 

 

Of coz, u can't get short after the report, because most of the float available to short was shorted. That's how the ppl in the know profit. Naked short is another issue altogether but it would be involved here too. Who knows. I don't want to be conclusive here until I see details.

[alertmeipp]

I know next to nothing about this company and skimmed the report so I can't comment on whether it's a fraud or not or whether the CFO adequately refuted MW claims.  What I can say is MW has been right every time they have initiated on a china stock and their report was very damning.  Of course, I'm telling you nothing the market doesn't already think.    

 

The market is not perfect.  The MW report had 2 main claims against TRE and that is what the press release from TRE tried to refute.  Most of the rest of the MW report tried to pull stuff from the past to show some kind of trend to back up their 2 main points.  The first item was clearly refuted as the revenue in question was clearly disclosed in the 2010 Q1 & Q2 MD&A.  I am surprised MW missed this.  The 2nd claim comes down to land ownership.  MW claims they don't own the land while TRE says they do and that MW assummed they only purchased in Gengma, when they puchased in 25 other counties of Yunnam province.  The auditors will likely come back and say nothing is wrong, but MW will say "where's the proof of the land records" and try to drag this out as they know TRE won't release that information for confidentiality reasons.  

 

In the end, if Paulson doesn't see anything wrong then he will buy shares at these depressed prices and there are only so many shares that can be shorted.  I think MW has bitten off more than they can chew and are not accurate in their reporting of TRE, regardless of how successful they may have been in the past.  I picked up some share of TRE today for the first time.

 

 

I hope this is what ends up happening.   But I'll guarantee you this:   If it was so obvious that the MW report is fake and if the company's response was so strong, why is the stock where it is?   If it's "manipulation", well, shit - you should be buying hand over fist.   The manipulators just got you a dollar bill for 25 cents!   Like I've said repeatedly, TRE doesn't need capital so there is no way to drive them out of business with an analyst report.   There can be no run on the bank here.   All that can happen is the stock goes down, the company restores confidence over time (and pays out cash flow via dividends), and the stock price returns to it's "fair" market value.   

 

I want to repeat:  I have no idea the validity of the MW report.   They very well might have gotten it wrong.   I just highly doubt it.   I'm not sure why you'd take a PR by the company at face value if any of this stuff is true.   What do you expect them to say?   

 

Regarding Paulson, many smart investors have been duped with China stocks.   First Starr with CCME and then very sophisticated hedge funds with LFT.   Doesn't mean a lot having someone like Paulson involved.   He can be duped, too.   

 

I agree. Who is on the short side on the long side doesn't matter here. It's the facts that matters. After all, WB lost 80% on Irish bank too.

[Myth465]

I wouldnt fight Muddy Waters though I have no dog in this fight. Either they know what they are doing and plan on being the next Jim Chanos, or they are a small time deal who have built up a positive loop and are now cashing in on their prior wins. Personally inmo there is more money to be made by being the next Chanos (the short seller all the business channels have on call).

 

This is a game of do you know your holdings. I own 14 stocks. 4 were bought on metrics or as a trade of some sorts, and the rest are longer term holdings. If a report came out on one of my holdings I would hold 5, sell 5, and buy 4 hand over fist. I dont know TRE or EBIX and its moments like these that make it hard to double down. If you hold you are now in the game show - Do you know your stock.

 

Door A - Big money if you double down and know your stock.

Door B - Recover if you know your stock and hold.

Door C - Big loss / growing loss if you double down or hold and you dont know your stock.

 

Pick your door, your prize awaits. I can only buy something in this situation when I have been watching for years and have a deep understanding of the business and full confidence in Management. If you knew and trusted Prem you won big, if you stuck to your bias and quoted the PE of some bus company in China that you read about on VIC then ...........

 

In the interest of full disclosure I lost money on Irish Banks and CHCG. I still speculate and hangout in bars, but I know what I own and why I own it. If its simple metrics I would sell. If you been listening to calls for years and know the Management team by voice, name, and can just about quote them (because you have been involved for years and have heard the spill over and over) then I would hold or buy. Im like that with 8 companies. That list keeps growing every year. I cant wait for my fat pitch.

 

Also there is a huge difference between an Auditor, Forensic Accountant, and Analyst. Some people think all three jobs entail the same. Just because you know accounting doesn't mean you know how to spot fraud .....

[nwoodman]

Top post Myth. The longer I do this the more I weight management integrity above all else.  As you rightly point out, this is something that can only be gauged over years.

 

 

Cheers

Nwoodman

[Guest Hester]

Ok, I've been following this thread and just HAD to sign up so I could reply.

 

I think anyone who is long or thinking of going long is making a mistake. One comment made about looking for gold in a gold haystack is right on. This area is rife with fraud, and it seems to me people, including management, have little counter points to MW's claims. Another Buffettism would apply, The market is a hurdle race, and one should try to jump over the 1 foot hurdles. This is a 5 foot hurdle, and you might jump it, but I doubt it.

 

Surprisingly, after all the replies this thread has gotten I have seen little if any talk about the substance of the report. Unfortunately, the talk has been debating whether there is evil short manipulation and on the history/legitamacy of MW. I encourage everyone, long or short or apathetical, to carve out an hour of their weekend and actually read the report, if you haven't already. It is some of the best and in depth research I have seen, second to few, save Einhorn's Allied Capital research and Ackman's MBIA.

 

More importantly, I think the Fairfax vs. shorts saga has had a nasty effect on some as they are way too cynical on the nature of short sellers. Yes, shorts got Fairfax way wrong, but they're right more often than not. Cases of corporate malfeasance/fraud are more common than short selling manipulation by a factor of a thousand. Even cases of long buying manipulation are much more common. I wouldn't put your guard down on management dishonesty just because a short is after them.

 

The comparison to the FFH episode is crazy. This is much more analogous to CCME. One comment even suggested that MW set out on a plan to get RINO, CCME, DGW, and ONP right just so they could convince people that they are legitimate and get a big manipulation hit on Sino. This theory is crazier than the Obama birth certificate and Osama still alive conspiracy theories put together. But really, the history of MW shouldn't matter, the similarities to FFH shouldn't matter. The only thing that should matter is the facts, and the MW report has 40 pages of pretty damning ones.

 

By the way I'm neither long nor short and don't plan to be either.

[given2invest]

The last 10 or so replies have been fantastic.  I don't feel there is much left to say about the matter. 

[alertmeipp]

Very nice discussion indeed, it comes down to whether you know your company good enough to act properly when the news like that hits. I am frozen in TRE case because it's hard for me to tell whether some of allegation are true or not. As far as I know, doing business in China is all about relationships and it's definitely less rigid than here. There are millionaires or even billionaires out there who got rich because they know so and so. At the end, fact is fact is fact and nothing else matter. MW or TRE's business is on the line. I will be pissed if TRE does a 100 pages report back to counter MW's point just like FAIRX did on JOE as I have already took my lost on puts.

 

Anyways, this saga leads to discover a list of Chinese companies. My focus now is trying to do a basket approach on the Chinese co. Many of them looks awful cheap to me. I think even 1 in 3 turns out to be fraud, it will make awesome returns. TRE will be on my list. Thinking to do 10% allocation on them.

 

Thoughts?

 

 

[Myth465]

Very nice discussion indeed, it comes down to whether you know your company good enough to act properly when the news like that hits. I am frozen in TRE case because it's hard for me to tell whether some of allegation are true or not. As far as I know, doing business in China is all about relationships and it's definitely less rigid than here. There are millionaires or even billionaires out there who got rich because they know so and so. At the end, fact is fact is fact and nothing else matter. MW or TRE's business is on the line. I will be pissed if TRE does a 100 pages report back to counter MW's point just like FAIRX did on JOE as I have already took my lost on puts.

 

Anyways, this saga leads to discover a list of Chinese companies. My focus now is trying to do a basket approach on the Chinese co. Many of them looks awful cheap to me. I think even 1 in 3 turns out to be fraud, it will make awesome returns. TRE will be on my list. Thinking to do 10% allocation on them.

 

Thoughts?

 

 

 

Not for me but I wish you luck. Seed capital is scarce and shouldnt be squandered. I have realized that I dont know much, and know nothing about China. Buying a small or midcap holding hoping to stick it big just doesnt work for me. It worked in Korea for Buffett, but Korea wasnt riddled with fraud. I think its hard to make money off a basket with a few total losses.

 

Add HOGS to the list. Nice story not sure why its down 15% today. Some major fund guy owns it and the Chinese love pork.

[given2invest]

Anyways, this saga leads to discover a list of Chinese companies. My focus now is trying to do a basket approach on the Chinese co. Many of them looks awful cheap to me. I think even 1 in 3 turns out to be fraud, it will make awesome returns. TRE will be on my list. Thinking to do 10% allocation on them.

 

Thoughts?

 

Run far, far, away.  Hey, you asked for my thoughts.    :)