TRE - Sino-forest put.

[Parsad]

Wow, I never thought I'd see the day when boardmembers would be all warm and fuzzy over Hempton.  How times change!

 

Hempton's a smart guy, but when you associate with unsavory characters, your intellect should be the last thing on any rational person's mind.  Cheers!

 

http://securities.stanford.edu/1037/FFH_01/200695_o01n_064197.pdf

[S2S]

^ I understand there is history between John Hempton and Fairfax, as well as the emotional rollercoaster many boardmembers experienced back in those days.

 

That being said, automatically going long in investments shorted by the parties named in the legal proceedings (Stephen Mandel's Lone Pine Capital, David Einhorn's Greenlight Capital, Dan Loeb's Third Point, or even The Devil himself, he-who-must-not-be-named's SAC Capital) would have proven a disastrous (if not historically so) investment strategy over the years!  ;D

[Guest Hester]

Dundee (the analyst that called the MW report a pile of crap) dropped coverage, RBC dropped coverage, Paulson sold out completely.

 

Is there anyone still left that doesn't think this is a fraud? Maybe Pat Byrne will come to the rescue and help Sino sue reality.

[FFHWatcher]

Dundee (the analyst that called the MW report a pile of crap) dropped coverage, RBC dropped coverage, Paulson sold out completely.

 

Is there anyone still left that doesn't think this is a fraud? Maybe Pat Byrne will come to the rescue and help Sino sue reality.

 

Sounds like Hester is trying his best to be a shiit disturber?  Not the first time.  The more you antagonize others (on purpose) the less others may regard your posts.  And you wouldn't be posting as much as you are about this if others opinions did not matter to you.  Just my opinion of course.

[libor.plus1]

Now THIS is how you answer to a short attack:

 

MW released a set of concerned questions yesterday targeting SPRD. It wasn't a full report by any means, just some questions. That very day, SPRD set up a conference call for the following day, where they will announce dividends. No bullshit, no committees, no we'll see in 3-6 months,  just.. here, here's money. Stock is up huge.

[given2invest]

Now THIS is how you answer to a short attack:

 

MW released a set of concerned questions yesterday targeting SPRD. It wasn't a full report by any means, just some questions. That very day, SPRD set up a conference call for the following day, where they will announce dividends. No bullshit, no committees, no we'll see in 3-6 months,  just.. here, here's money. Stock is up huge.

 

Still kind of absurd.  Here's 5 cents a quarter!  In 75 years we will have returned today's stock price! 

[cwericb]

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.

[S2S]

^ Feel free to claim the same "high road" as many times as you like, but please be aware of the neat little feature that allows us to see your earlier posts on this subject.

 

"it seems to me this is not a 50:50 bet"

 

No, it is not. The downside is the loss of $4 a share. The upside may well be $10-20 per share or more. As far as working out the numbers on TRE is concerned, I don't know how anyone can do that with any certainty when the numbers themselves are being questioned. As I said before, this is more of a gamble than an investment. Many people buy lottery tickets. I like the odds better here. I hope no one bets the grocery money on this, but I think my chances are just as good or better here than dropping a few dollars at the local casino. Time will tell, but if this drops back a little more tomorrow I might find some more loose change.

 

Just because there are some very good investors on this site doesn't mean that some can't take the odd gamble now and again. Anyone who invests in the market is a gambeler to a certain extent, it is just a matter of degree. I know of no stock that is 100% assured to increase in value. Sometimes there is nothing wrong with taking the ocassional longshot.

 

 

 

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.

 

It's cool to decry others for "immediately jumping the Block's MW bandwagon" - all of us have thick enough skin to take some criticism, no matter how unfounded. But if your "homework" is solely done through (a) superficially comparing the reputation of Carson Block and the various sell-side analysts, who by the way have mostly withdrew their opinions, (b) even more superficially, suggesting a similarity in outcomes between the Sino-Forest and the Fairfax situations, I'd suggest you do some more homework.

[nelis]

My only take in this argument is the following:

 

It appears that Broglaboy is involved!  That's right ... good old Mr. John Hempton.

And he was sooooooo right about Fairfax?!? :)

 

http://brontecapital.blogspot.com/2011/06/paulson-sino-forest-loss.html

 

It reminds me of a Munger quote:

 

"Those people who say that they've never done it before and will never do it again; have done it before and will do it again."

 

[cwericb]

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.

[Guest Hester]

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.

 

I think the odds - no guarantee - but the odds of accuracy are in RBC's favour. IMHO.

 

As far as the credibility of analysts is concerned, I dont put a lot of faith in any of them and have said that on several occasions.

 

lol

 

You did the exact same thing that you are accusing others, unfoundedly, of doing. You jumped on the sell side analyst's bandwagon based on "reputability" rather than facts presented. And now of course they are all gone and are trying to forget that they ever got near Sino-Forest.

The cwericb of late June is quite good at criticizing the cwericb of early June.

[oec2000]

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.

 

"It's good to keep an open mind, just not so open that one's brains fall out."

 

Have you considered my comments on the TRE conf. call and the red flags from an earlier TRE presentation? They were based completely on TRE material; it was not simply a matter of jumping on Block's bandwagon.  It also seems like you chose to ignore the negative comments of Nomura analyst, Anissa Lee.

 

As far as the credibility of analysts is concerned, I dont 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 doesnt 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.

 

Lol. What do you think the RBC (and other sell side) analyst gets paid to do? You don't think they earn their keep by issuing positive reports for investment banking clients?

 

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 Sinos case but we have yet to know with certainty.

 

The only similarity between FFH and TRE is that they were/are the subject of short sellers. FFH has a business model that is understandable and a management team that is highly regarded. Their track record was consistent with and could easily be tied back to their actions and the prevailing economic environment. In addition, insurance company accounts are independently reviewed not only by auditors but by actuaries and government supervisors. TRE's business model, track record and oversight is in a completely different realm.

 

It is a joke to put Prem Watsa and Allen Chan in the same boat without making even the most cursory of analyses.

 

The only "analyses" that can be gathered from your posts are: a) I would rather trust the reputable analysts; b) the upside is much greater than the downside; and c) it could be a similar situation to FFH at $60. Given your own admission that "no one really trusts TRE's figures" and "I don't put a lot of faith in any of the analysts," you are left only with the FFH analogy. I don't get how this idea even merits a discussion on this value oriented forum.

 

With FFH, we were never close to the point where "no one trusted their figures."

 

In a situation where you can't trust the figures, who do you think is the patsy in the poker game with Allen Chan?

[cwericb]

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.

[cwericb]

"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.

[oec2000]

"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.

 

The "idea" that I am saying does not merit discussion is your method of using one similarity between TRE and FFH to qualify as analysis.

 

I did not say TRE was not worthy of reasoned analysis and discussion. Again, I refer you to my previous posts in which I repeatedly tried to inject some analysis into this discussion.

 

As for being open minded, do you see that I relied solely on info from TRE for my analysis? I actually started out looking for info to refute MW's claims. Unfortunately, what I saw were lots of red flags and so I formed my negative conclusion accordingly.

 

Being open minded means you should be indifferent to either opinion - buy or sell TRE. Any reasonable person reading your posts can see that you are tilted towards the buy side (nothing wrong with this) and your view has not changed much despite this evolution of the facts: All the "reputable" analysts (RBC, Dundee, etc) have withdrawn/changed their earlier opinions, Paulson has sold out, new "reputable" sources (Nomura, Globe and Mail) have come out with negative reports.

 

Accepting that we have to make decisions under conditions of uncertainty (since there is no advantage once all the facts are in), a good test of your open-mindedness is to ask yourself what it would take for you to say TRE is a sell. If you can't come up with a plausible scenario where your view goes from positive to negative, if you are so wedded to the view that the short story is unreliable because it comes from a disreputable character, then you have clues to your actual degree of open-mindedness.

 

I am responding to your post not to prolong the argument on TRE (which has long gone past the point of marginal utility) but because I think it has become an interesting exercise in understanding our psychological weaknesses and how we can avoid errors like TRE in future. As I discuss this, I am thinking about my own biases (and a similar hammering I am taking on a stock I am long - YLO - although the circumstances are very different; no suspicion of fraud) and learning about strategies to avoid them in the future.

[cwericb]

 

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.

 

[lessthaniv]

http://www.bloomberg.com/news/2011-07-04/wellington-controls-11-5-of-sino-forest-as-timber-producer-s-stock-drops.html

 

Wellington looks to have bought a significant chunk.

 

[cwericb]

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.

[ExpectedValue]

CV Starr had a China office, a lot of help that did.

[Parsad]

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.

 

Wellington manages something like $665B, so a $100M position or so in TRE is not much at all.  I wouldn't worry about what Wellington does, or anyone else for that matter.  

 

I don't like Block's conduct and the way he approaches this stuff, as well as the people who have associated themselves with this whole thing, but unless you can conduct enough of your own due diligence to feel confident in the stock, I wouldn't even consider touching this thing.  I do look forward to watching what unfolds.  Cheers!

[cwericb]

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.

[given2invest]

"If nothing else this whole episode should be a bit of a learning experience."

 

What did you learn?

 

[Ballinvarosig Investors]

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.

Can I interest you in a lottery ticket? ;D

[cwericb]

"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.

[given2invest]

"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.

 

Not sure how that will change anything.  Just because this turns out to be a fraud or not a fraud, how will it make a difference next time as the situation won't be identical, no?