Monday, June 6, 2011

Bitten by a Chinese Duck

Sometimes you see a duck for what it is. Sometimes you take it for what it tells you it is.

The story of the week and perhaps the year is Sino-Forest. This is a Canadian-listed stock, but the company has forestry operations in the Peoples Republic of China.

Last Thursday, a research group called “Muddy Waters” put out a 39-page report on the company, stating in no uncertain terms that the company was a fraud. The company also has no qualms in saying that they are short the stock, and stand to gain financially if their allegations prove true.
Here is their website. You can download the report. Muddy Waters

This case got my attention for an obvious reason: I have stakes in the game. For disclosure purposes, a few of my clients owned some Sino-Forest bonds (10.25% 2014s). Bonds are rated BB by S&P, which makes them junk, but really good quality junk (two steps away from investment grade).

I went back over my notes to see why we bought these bonds back in 2009. Actually we didn’t buy these in particular, but received them in exchange for a shorter maturity paper. Anyway, at the time it looked like a good deal. The company had a very strong balance sheet including a great amount of cash, plus solid and consistent earnings. Those earnings are what struck me as the most positive, because I used to work for a paper company and I know a little about the industry. It’s a tough industry to make money in consistently. But Sino-Forest did and with very strong margins, so more power to them. Financials were audited by Ernst and Young, a big North American firm, so despite being a Canadian Firm born from a "reverse takeover, I thought it was ok. So I laid some coins down for my clients. Not a large bet, by any means. We always diversify a lot. Because stuff happens.

So now this report comes out. The stock plunged (although today it’s on the rebound). Bonds plunged. I downloaded the report and went over it on the weekend. I won’t lie and say I understand every detail. But there is a lot there. Mainly, an explanation of why those profit margins were so generous (they’re false!). Plus there are details about why certain representations that the company makes about its operations, such as size of the plantations, volume of sales, etc. are not realistic. It’s a very complete report.

The company is out today in full denial, offering details about their assets, including the original titles to their plantations. Questions have been raised about the authors of the report and their motivations.

After reading the report and looking over my notes, I fully expected to not being able to unload my clients’ bonds this morning. But lo and behold and bless the market makers souls, there was a market for them this morning, and I managed to unload them at 72%. Facing a possible total wipeout of the investment, this was a windfall for me and my clients. I am very satisfied. Of course, I could have held on and waited for explanations from the company or some sort of recovery in the case of bankruptcy. I preferred to accept that potential "duck bite".

There’s good reasons to give credence to the Muddy Waters report and I’ll give a few. I’ve been sort of in these guys shoes, so I can relate.

  1. These guys are not hiding.

This is not a random anonymous blog or post on a message board. Serious time and money was put into this report and the research to make it happen. Please, let's focus on the “what” and not the “who”. When I was being questioned about that bank report back in 2009, the reporters seemed to be more interested in me than what my report was implying.

The analysts at Muddy Waters have a lot to lose if they are wrong. They face fines, jail time, etc. They are totally in the open on this. They also can't just go and cover their shorts now that they are on the record. They have more than money on the line. They are sure, very sure.

  1. It’s a murky business.

“If it’s so profitable, why isn’t everyone doing it”. There are few competitors in the business, but Sino-Forest is the largest by far. Another company China-Forestry, turned out to be (surprise) a fraud. That said, if the business were so good, there'd be more competition and margins would drop at some point. Hasn't happened (according to the company).

  1. Too good to be true.
Ah. Those profit margins. Yes, there is great demand for materials in China, and I’d assume that’s true for wood chips. But if your margins are this big, it has to be that you worked your forest for several years (grew/planted). But most of Sino’s forests were recently acquired. You can’t have you cake and eat it too. Either you worked the forest and are entitled to those large margins (the time factor, if you will) or you didn’t and the margins should be lower. You shouldn't be able to make this kind of money by just "flipping" a forest.

  1. The Cash, the Cash!
One of the things that drew me to Sino-Forest bonds can also be a great litmus test. The cash. There is supposedly over a billion dollars in cash on the balance sheet. If Sino’s profits are false, that money is going to be missing somewhere. It’s either going to be in the value of the forests or in the cash balances (or both). Of the two, the cash is the easiest to check. If the cash isn’t there, we will know its all a lie. (Have these guys provide certified bank statements? I'd need to see those, ipso facto).

  1. There is more than what is said.
Although the Muddy Waters report is extensive, it probably doesn't contain ALL of the analysts’ suspicions and red flags. That’s usually the case. You only put down on paper enough to drive your point and what has the best documental support. The research is much more extensive and probably includes a ton of anecdotal information which is not in the reports because you can’t really put down things that don’t “seem” or “feel” right or for which the evidence isn’t totally conclusive. Again, I can relate. That whole picture, however, is what allows them to be comfortable with their conclusions.

Of course, I don’t know anything for sure, since I didn’t do the work. You never know for sure. Analyzing from the outside is difficult, because you don’t have access to all the information that goes into putting out the company’s financials. You can’t really go asking the company for access either, as in “would you mind if I checked your books for fraud?”

Nobody likes to accuse anyone else of wrongdoing, even in the face of overwhelming evidence, for many reasons. It’s mean and most good people don’t like to appear being nasty or not giving the “benefit of the doubt” to the offender.

So here’s the question that I ask when a straight one way or another answer is required: “If your loved one’s life depended on your correct (not politically correct) answer, what would you say?”
With that on the line (which fortunately it is not), I’d lean towards calling Sino-Forest a Canadian/Hong Kong duck. If so, it will set a new standard for Asian Fusion fraud cuisine. We shall know soon enough.
This one bit me. Ouch.


  1. Amazing. My jaw is on the floor at this whole scenario. Some third-tier law school flunkie puts out a report that you admit you can't even comprehend because it is so convoluted (I've read it as well and had the same reaction) and you assume that this clearly self-interested nobody who stands to rake millions from shorting Sino Forest is totally on the level? He's scammed you far worse than Sino Forest ever did. If you read the report more closely, you'll notice that Mr. Block does not even understand the basic tenets of Sino Forest's business model--he thinks they are in the business of felling trees and carting them to market. Did you see him on Bloomberg today? He was sweating bullets knowing that Jon Paulson et al are going to bury him. He's gotten away with this nonsense with a few smaller companies, but now he's gone and bitten off way more than he can chew. Sino Forest is a sound, viable business backed by titans and it is not going to zero. If I was a client of yours, I'd be furious that you dumped me out at 70 cents on the dollar based on a "hunch". Get off your tail and try doing some DD of your own. I'll say again--I'm absolutely shocked that you and seemingly the entire media are taking Mr. Block at face value when he is so clearly motivated by greed and the desire for his 15 minutes on CNBC.

  2. Very interesting blog. I was reading through your older posts for more than a hour. Fun stuff. Bookmarked it.

    Just curious...are you retail? Who is your brokerage firm?

  3. Hey delano, your in denial, Carson may not be the exact professional prototype but you can't deny the facts. Any profit plus new equity issues keep getting put into land purchases and then supposedly sold for a profit in 6 months as standing lumber to be harveted in the future? here"s my 2 cents - the seller of the land to TRE is also the BUYER of the standing lumber, and any profit is paper as no mney has ever changed hands and eventualy is written off as bad debt, company goes bankrupt Carsen just caught them before then played the final act. I say get out while you can and recover your profits with some naked call selling or shorting the stock.

  4. lol...the Delano's of the world never learn. His gazillion word argument was purely ad-hominem. How about attacking the MERITs of the messenger's claims? I'm starting to believe that the Delano's of the world make it EASIER for frauds of the world to remain.

    There is nothing new under the sun.

  5. I don't have a direct position in SF. I'm a Paulson client. Spoke with Natalie Bishop at Paulson and Co. this afternoon after watching Mr. Self Storage pretend to be Gordon Gecko on Bloomberg. Wanted to verify that they think he's as much of a smoke show as I do. They do. We'll see who comes out on the right side of this one--you might be right, but given how little confidence Mr. Block's background and motives inspire, my bet stays on John Paulson's side of the table. He's worked closely with Sino management for years. He saw straight through the ocean of bullshit hiding the truth of CDOs, why the hell is the market so quick to assume he'd be completely blind to a fraud as overt at Muddy Waters claims this one is? (Hmm..perhaps because it would make such a scintillating headline and relieve envy?) Blockhead sees an elaborate conspiracy here because he wants to--otherwise his little career runs out of gas and he has to go back to managing storage units. He's not David to Paulson's Goliath folks, he's a dipshit who parlayed a lucky tip from his daddy on Orient Paper into enough fame to manipulate a stock with his blog. Funny how you don't think his revenues are at all suspect--Five homeruns out of five calls? I predict: when Carson Block goes down, he goes down hard. One last thought--in the scenario you proposed, the revenue streams generated over time by the harvesting of the standing lumber would retire the debt....that's not called a Ponzi scheme, it's called a business. A very cleverly and efficiently organized business. Wow.

  6. Anonymous--right. As in "Alex Dalmady".

  7. Well I will go out on a limb. I shorted Sino Forest stock today.

    I expect zero.

    MW is right.

  8. Well if I were a betting man I would probably go with John "Chinese Fraud Expert" Hempton over J.M. "anonymous incoherent ranting nut-job" Delano.

    What I love is everyone carping on about MW's motivations.
    Because everyone LONG a stock and talking their book is a paragon of virtue.

    Haters be hating, I guess.

  9. Delano is talking his book, if he's a client of Paulson he's down serious money this month. The reality is that the kind of analysis that MWR did here (also on CCME and other RTO stocks) requires feet on the ground, investigation etc.

    I understand that the CEO of MWR has now moved out of China. My guess is that TRE is one of several additional Chinese frauds he is going to "reveal". He may have decided that it maybe better to be out of dodge before the authorities decide that its the whistle blower that is the problem...

    MWR not only did a very compelling piece of research, they also did a massive data dump for those brave enough to make their own analysis of the data. BTW, MWR gave some of the bank letters and statement it reviewed to HSBC's fraud department...

  10. This comment has been removed by the author.

  11. I think Paulson's Advantage Plus had $10bn AUM roughly.
    So their 14% ownership of TRE was worth c.$650m and is $200m today so a 4.5ppt hit to the fund.

    Not a great day for sure but hardly time to close up shop.

  12. MW alleges that Sino does not own what they claim to own. What documentation does MW show to prove that it is owned by someone else? NONE!! What documentation does MW show to prove any of his claims? NONE!! MW understands the investor climate very well. He knows how skittish the herd is. And he has played this perfectly. He makes millions by bilking the common investor out of their money and so many people applaud these efforts. What ever happened to being innocent before proven guilty - not in the investment world. I wouldn't be surprised that MW is purchasing stock in Sino knowing that his "report" is a total fraud. This lawyer thinks he is so smart that he figures the way his report is worded that it will save him from litigation. We will see. I wouldn't be surprised if the Chinese government doesn't come looking for him...

  13. Mr Delano,
    I'd like to agree with you. Franky I don't know if sino is a fraud. However I do know that just because someone is not a smooth public speaker as the Muddy Water gut clearly isn't, does not mean they are not smart or well-informed. He almost certainly knows more about sino than Paulson or Ms.Bishop. If being well-spoken were the key to citijeff who is right, we would still be paying deference to the Brits. Paulson did get the housing bet correct but so did others. Does that make him smart or lucky? It's too soon to tell.

  14. Everyone, thanks for stopping by this humble blog and posting your comments. Just keep it civil, please.

    Mr. Delano, I don't do anonymous. I also don't do pretentious. I'm always open to admitting when I'm wrong (which is more frequent than I'd like).
    Your opinions are welcome here. In this case, I'm leaning towards MW's position. So we disagree. That's fine by me.
    We'll see how this plays out. Don't worry about me or my clients. They love me even if I screw up sometimes, because I always try to do my best. And that's why I love them back.

    As for those who are asking about me. I'm a fee-only independent investment advisor (SEC registered)/financial analyst. I work mainly with a handful of HNW clients, out of my house wearing a T-shirt and shorts.
    I do some smaller stuff with friends and family, but that's a work in progress. Maybe next year I'll open something to the public. (or Maybe not, I hate paperwork). Thanks for asking.

  15. What I don't understanding is why Mr. Block's positioning is used to repudiate his report. If Mr. Block had run the numbers and found that this company was the money-making machine it claims to be, he probably would have just gone long, or found some other dreck in the Chinese RTO space - lord knows there's more than enough of it. To go after a pink sheets-listed company with a market cap of $300M and a 7 month history is one thing, to take down a TSX-listed firm with 15-years' history, EV over $5 billion and some heavyweights anchoring the stock is altogether different. I mean it's not like MW's fire power is so large he needs to go short a few billion dollars worth of stock/debt - clearly there is something seriously amiss here.

    PS I don't get the infatuation with Paulson. He is clearly a very smart guy and derserves (and has received) huge plaudits for his CDO play. But that one monstrously profitable bet aside, he was an also-ran in the merger-arb space for years. His firm clearly can't model themselves out of a paper bag, seeing as he was calling for BAC at $40 at the end of 2010 (probably forecasting GDP growth of 4% in perpetuity). He is getting totally dummied this month (down 5 or 6 percent). Bottom line, one call doesn't make you a guru, no matter how big it is. Besides, his trade wasn't even as beautifully constructed as that other hedge fund - you know the one run by the astrology nerd. That trade paid for itself!

  16. Agreed WellRed. Block's position (short) gives him credibility in my eyes. The money where the mouth is.

    As for Paulson. He's human. We all are. You see Ernst & Young on the Financials and you figure they're good. So maybe he didn't send anyone to China to count trees. I didn't either. Of course, there's no way that kind of DD is cost-effective at my scale. But if you're taking 15% of the company, maybe you should commit some resources to a little fraud insurance.

  17. I am somewhat familiar with Paulson's investment process, as I worked at a similar shop and also know some people there...detecting this kind of fraud is not their bread and butter (They don't go out looking for a fraud).

    I'm going out on a limb here and say this Sino Forest situation actually validates Paulson as an amazing investor - how many times has he been duped by a fraud? If this is the first/only, I wouldn't sweat it. Think of how many people were duped by Countrywide, Bear Stearns, Lehman, WaMu, Freddie/Fannie, etc.

    The Delano's of the world encouraged me to short more china frauds in the past, and indeed more Sino Forest yesterday. Thanks Delano!

    To be fair to Delano (and others), I've been covering this China fraud theme for about a year..the end game for the Delano types have tended to be: (1) eventually become quite incredulous themselves, join the shorts, and warn future investors (2) get exposed as fools and/or frauds, as they continue to deny reality.

  18. Also, people who undermine/discredit Carson Block yet worship at the feet of Paulson...need I remind you of history?

    Who/what was Paulson in 2006? I have utmost respect for him, but I know for a fact he was a middle of the road hedge fund guy who had provided steady, boring returns. His AUM was < $1.0 billion. I worked for a hf at the time that was much larger.

    Why not give Block (and many others mind you) on this China fraud trade, due credit? I don't think you can worship/respect Paulson, yet undermine BLock. You can't have it both ways.

    See, I as an investor, like to look at where the puck is GOING, not where it's come from.

    Also one last thing: great blog MR. Alex!

  19. Me delusional? You all are still telling yourselves that Sino Forest is a fraud? The brunt of Block's accusations have already been incontrovertibly debunked. The company has proven it has all the cash and all the plantations that were on its books. All that remains for SF to respond to is the matter of the AI's--Siemens has 2000 of them. Are they a fraud too? Please, go try and short Siemens. I give credit where credit is due. My respect for Paulson comes from the fact that he is a prescient, self-made investor who does not need to resort to fraudulent stock manipulation in order to generate outsized returns--as opposed to a smug, opportunistic little vulture backed by his (criminal) father's hedge fund who goes around killing companies with lies. Do you conceive of yourselves as savvy because you are on the short side of this? Do you think you are one of the enlightened ones because you know that all RTOs are frauds while the rest of us are naive, gullible dopes? The truth is you are blindly following a trend without doing any critical thinking of your own. If you were actually making judgments using your own intellect, you'd have realized by now that Carson Block has hoodwinked you and pretty much the entire market. I realize I'm venting here, and I'm sorry to be so antagonistic, but seeing one unscrupulous jerk take down a legitimate company that many people have devoted their lives to building absolutely disgusts me.

  20. btw--you don't do pretentious Alex? No. Of course not. You're just a humble guy, working in his shorts, who might deign to open his services to the public someday...

  21. J.M. Delano, Anonymous here again (I posted the two posts prior to your last two). Thanks for your response. I guess I'm trying to understand where you're coming's a pity we're on "opposing sides" here.

    Few things:

    (1) Beyond the logic and arguments, what is at stake for you personally? Are you long Sino Forest directly, or indirectly as a client of Mr. Paulson?

    (2) "The brunt of Block's accusations have already been incontrovertibly debunked." I (and the market so far) respectfully disagree. I've been following this space (as well as frauds in the past), and the tactics the accused Companies employ are not for the faint of heart (for ALL involved). As to specifics:

    (A) I don't think Carson Block ever claimed the cash was not's just that the debt level is 2x the cash, so the "they have cash!" argument doesn't help.

    (B) Equally important: the business has never generated any positive free cash flow (cash flow from operations less cash from investing activities); it has sustained itself with OPM, other people's money (through debt and equity issuance). This, by the way, assumes Sino Forest's financials are to be trusted. If not, it's only worse.

    (C) Others (sellside analysts, who have every incentive to promote this company) in the past expressed these very same concerns, and specifically wondered what exactly Sino Forest does, and wondered how they own and operate with the level of timber assets they claim. They issued 'sell' ratings. Lest you need a reminder: Sell side analysts will not issue 'sell' ratings unless they really, really have to.

    (D) The above points I bring up...You don't have to trust me; Go look for yourself (I have).

    (3) What does this means? Any remaining value for equity and debt stakeholders boil down to the value of their timber assets. We may simply agree to disagree, but the evidence that Muddy Waters provides seem more compelling than what Sino Forest has provided so far, that Sino Forest is overstating their timber holdings;

  22. Anonymous:

    1.)Nothing tangible at stake. I co-manage a private portfolio that is partially invested with Paulson. Of course it irks me to see 2% of Paulson’s advantage fund potentially wiped out, but whatever happens with SF will not have a lasting effect on the portfolio or my personal bottom line. What I am incensed about is Carson Block, and how he has managed to invert the fraud/whistleblower dynamic to capitalize on the market’s paranoia about Chinese companies. He is a scourge, and it is maddening to me that nobody else seems to see it—not even smart people.

    2.) “Tactics not for the faint of heart”. Agreed. I’m often stunned by the lengths some companies will go to to turn a buck. (Bp, Dow Chemical, Altria, and Goldman are a few that come to mind.) In this case however, I’m certain that Sino Forest isn’t one of the bad apples. Their management and history are on a totally different level. Yes, they have a byzantine network of ais and are playing cute tax games involving a dizzying number of entities—can you name a billion dollar international company whose structure/balance sheet looks like a local f’ing Quiznos? If you went around assuming that every company with a complex organizational hierarchy was a fraud the Dow would be at 1000. But the cash burn you say, the cash burn!

  23. A. quick point—yes in the report MW did state that much of the cash would likely have disappeared, having been stolen by the management. He then backed off in his live interview with Bloomberg, saying that what makes Sino Forest a Ponzi is the cash burn.
    B. By your logic Sirius has been a fraud/ponzi for most of its existence. And all biotechs are frauds. Every internet startup is a fraud. You say sixteen years of cash burn makes Sino Forest a ponzi—I say it is going to make them a timber giant in China, a country which has a raging appetite for the stuff. Do you need to agree with the vision?—no, but Sino Forest has the right to pursue it without being prematurely sandbagged.
    C. Sell side analysts--Who? When? They wondered what Sino Forest does? Odd that they gave sell ratings without bothering to roll up their sleeves and find out. I have little faith in all but a very few analysts. Most of them make their decisions from their desk using 9 parts sentiment and 1 part reason/research. But for the sake of debate, lets say these sell ratings came from legit sources who did a lot of homework--there's a huge distinction between questioning a company's vision/organization and screaming at the top of your lungs that it's a fraud in order to profit from its downfall.

  24. I don't care whether or not Sino Forest is a "great" company. I just care that it is a legitimate capitalistic enterprise/effort that a lot of people have invested time and money in and it is being unfairly wiped out by a snake oil salesman. That's why I'm wasting my time being incendiary on this blog and others--I figure I'll steal a page out of that idiot's own book and scream fraud until people start to wonder whether or not Carson Block really is what he claims to be, and whether or not they really feel comfortable driving Sino Forest out of business based on the word of one shady character. Right now you think he has ten professionals beating the street in China—are you sure about that, just because he said so? Who are they? What are their credentials? How the heck did they miss that Sino Forest doesn’t actually harvest any timber? If the report is so impressive, how could it include such glaringly stupid mistakes such as not considering the possibility that Sino Forest might own plantations in more than one county of the same province? I suspect its because MW is just Carson, his father, and a couple of his former frat brothers with no real experience or credentials. It’s time to question the Grand Inquisitor.

  25. It's interesting here. May I join?

    1) Negative cash flow can not be a sign of fraud, especially in a fast-growing economy. A lot of large companies with sound fiance inside China have continuously expanded their business for the past 20 years. They earn a lot, but spend more, and they grow fast.

    2)Years ago a Canadian analyst did go to China to check Sino-Forest's business, and he did recommended sell more than once, but the stock did go down at all. He then actually changed his career and joined a forestry company. A little ironic?

    3)MW's report has its merits. Though no hard evidence indicated SF's timber holdings are fabricated, the past standing timber sales and the company's revenues in 1994-1997 are questionable according to the evidence the report provided.

    4)Cash balance could be fabricated. I am from China, and I have knowledge of companies using its complicated corporate structure and special relationships with different banks and then arranging cash on bank accounts for the purpose of passing audit.

    5)Let aside sending people into China to investigate like MW did, I saw questionable and inconsistent numbers in SF' filings.

    Anyway, this is quite a game, which takes time to play out. I have no position in SF, just like to watch the game.

  26. "Nothing tangible at stake."

    J.M. Delano: why not? By shorting, MW has put their money where their mouth is; why haven't you gone long? Why aren't you backing up the truck for your personal account at a bargain price?

    If you're worried about short sellers messing with the equity price, then just buy the bonds at 72 cents on the dollar and hold them to maturity until 2014.

    Why don't you have a book to talk?

  27. Funny you should say that. I have withheld thus far because I don't think it matters what the truth is--Carson and the army of velociraptors he has gathered are winning at destroying the stock. As has been in the case in the past, I think it will not matter even if Sino Forest is exonerated of all the allegations--the taint on their reputation will seriously impede their future prospects as it is true that they are dependent at this point on the ability to raise capital. That said, out of pure spite, I attempted to buy in heavy this afternoon and was barred by Merrill Lynch from purchasing a "toxic stock". Unbelievable. They are actually helping to destroy Sino Forest. I am going to make a stink in the morning. If Merrill still will not let me purchase the stock, I'll open a damn interactive brokers account and pull every last penny of the portfolio from Merrill.

  28. "The brunt of Block's accusations have already been incontrovertibly debunked. The company has proven it has all the cash and all the plantations that were on its books."

    The stock is down 70% and the bonds have a substantial haircut. That is the opposite of "incontrovertibly debunked": the overwhelming majority of market players are still... uh, "controverting". And this is not a Mom-and-Pop stock, these are mostly institutional investors who read the report and voted with their wallets.

    Re: cash balances, recall that in their resignation letter as China Media Express auditors, Deloitte cited "issues related to the authenticity of bank statements" and "a loss of confidence in bank confirmation procedures". I.e., if indeed a fraud as hinted or alleged, some local bank employees could have been in on it.

  29. Market players. Right. The same market players who ditched SF based on a report so obviously flawed it looked like it was written by a cast member of Jersey Shore and was published by a firm that employs one person who has no formal background in accounting, finance, or business. That's a compelling argument. At this point, whatever. Do what you want, I'm done. I'll end my opining with this. Whatever happens with Sino Forest, I guarantee you that sooner or later Carson Block is going to be exposed for a fraud. Can't wait to read the headlines. Good luck all.

  30. JM Delano:

    This is the original 'anonymous'. Firstly, thanks for your thoughts and honesty so far. I've looked forward to our conversations the last few days. I hesitate to write another post, especially given you said you'll "end opining with this". I personally hope these conversations continue. As I said yesterday, it's a shame we're on 'opposing teams'. That said, I wanted to get back to some of your questions, and also...please, don't buy the stock. Please. I have too much respect for you, at this point (that said, I agree with you on Merrill..they're not doing their job). So a few things:

    (1) Skeptical sell side analysts and reports - I will email you the exact analysts/reports (email me at

    (2) "By your logic Sirius has been a fraud/ponzi for most of its existence...etc" Very good point. I agree with you...this can be a separate conversation in and of itself, but here's what I think is the gist of it: We both agree Sino Forest's survival DEPENDS on external capital (debt + equity), but we disagree on the current & future value of its assets, its business. You think Sino Forest is on its way to building a mini timber empire in China, because you are "certain that Sino Forest isn’t one of the bad apples"; I, on the other hand am skeptical, because I believe it requires very little (and just a few of Muddy Water's claims) for Sino Forest's intrinsic value to be less than $1.00.

    (3) Your comments/opinions of Carson Block/Muddy Waters - You come across as mostly a thoughtful, considerate, respectful, and self-aware gentleman, except when talking about Carson Block/Muddy Waters. What's your exact problem with him? You don't seem like the type of guy who would write off a person simply because he didn't go to Harvard, his father has a questionable background, he talks his book, he has found a niche he does well, and now he's looking to enter the spotlight.

    (4) I get angry when people, certain media folk, use this opportunity to bash John Paulson, make 'news' of non-news. They seem almost as if they derive happiness from others' misery. So...why are you sounding like them, when you say "I guarantee you that sooner or later Carson Block is going to be exposed for a fraud. Can't wait to read the headlines."

    (5) A certain sell side analyst has been vigorously defending Sino Forest. I find the reasoning he provides questionable, and his reliance on a certain known shady operator, Benjamin Wey, as downright scary.

  31. Alright Anonymous (why Anonymous btw?) It's lunch and I can't resist a direct question. As to us being on opposing teams--I'm posturing a bit. We can on be on the same team if/when there's a next one. As to my bashing of Carson Block--
    Good question. Ever just despise somebody from the moment you set eyes on them? The site of him evokes a visceral response of animosity in me. What’s it all about? Not entirely sure. But the parts of it I can see clearly are: First off, there’s a mega distinction between John Paulson and Carson Block. Paulson saw a problem in the market and bet against it. Carson Block on the other hand, placed a bet against a problem, then went out into the market to create it. That offends my sense of fair play I suppose. Secondly, something about Block reminds me of me. The bad me--the person I’d be if I made no attempt to walk a line and just freely indulged my worst impulses. I see him on television and I think to myself, here’s an arrogant, greedy, fame-ravenous individual who doesn’t have the chops to back up the role he’s playing—which he’s playing for all the wrong reasons—and yet it’s working, because everybody is buying his b.s. Listen carefully to what comes out when he opens his mouth and you’ll hear him using a Bud Fox fantasy to justify euthanizing companies that he knows full well aren’t nearly diseased enough to be put down. He wants big money and big status right now at any cost, and he’s either too lazy, too inept, or too impatient to earn it on merit. (Sign of the times?) Instead, he’s resorted to gaming the system and fraud. That’s all the MW report on Sino Forest can be called. It wasn’t an impressive piece of research. It was shoddily thrown together bit of National Enquirer reporting containing flagrant inaccuracies and gross exaggerations specifically designed to crash the stock. The market bought it because it had pretty flow charts and pictures and the “technical” portions were totally incomprehensible. Carson knew that he could baffle everyone with bullshit (amazing how many people initially called the report ‘extensive’ and ‘damning’ without understanding any of it) and that xenophobia would lend credence to the parts he’d fudged. He’s clearly smart enough to have been aware that the report was way wide of the mark and that what he’s doing is disingenuous and borderline criminal. (That’s why he’s so paranoid that ninja assassins are coming after him and refuses to give out his address.)

  32. As a result of that POS report, many decent people’s careers are going to be completely destroyed. They will walk away with nothing and little chance of being hired to an equal position elsewhere due to the stigma while Carson Block moves on to the next target or endeavor with millions of fresh dollars in his pockets. I’m no bleeding heart. I get that those are the breaks of capitalism. But I won’t hold back from telling you I don’t like the guy, admire him, or have a shred of respect for him and I certainly won’t hold him up as some kind of iconoclastic hero. In my mind, he’s far more like Madoff than Sino Forest—that’s why I’m eager to see him taken down.

  33. Another anon here. Pretty good discussion here so far, my take on it is that neither party, MW or SINO, is completely innocent here. 2 of MW accusations doesn't seem to hold up to scrutiny:

    1) harvested timber sales - company said they sold standing timber, not harvested timber
    2) Yunnan province purchases- see company website

    These are major holes in MW's accusations. Also MW admitted that they have not done an accounting tour-de-force, yet they accuse the company of fraudulent accounting practice. Slinging around that kind of accusation without substantial backup is extremely unethical.

    From an investment point of view, I don't see how you can short the stock at this point. 2 main accusations looks like they won't hold up, and SF has been fairly proactive in addressing the issues. MW has not commented on the 2 accusations that the company has debunked, and for the most part have not elaborated further. Also, this Carson Block character just looks like a slime bag, ie asking ONP for 300k to write a positive report, then write a negative one after being turned down. As a betting man, if SF can put further dents into MW's accusations, the stock is an easy double, if not triple from here.

    Disclosure: Just got long SF

  34. Delano I am the 'original' anon.. will go by 'DYU' from hereon so I don't hog the 'anonymous' designation.

    First want to address this newbie 'anon' friend:

    1) Don't buy the stock. If you have, sell asap.

    2) Do more homework before buying a stock (especially one accused of fraud and that is dependent on external capital), especially when you're betting against people who have a track record of detcting frauds and who specialize in it.

    3) Specifically the 'holes' you mention above and some other points you bring up don't reflect thorough due diligence. I take that to mean you either have not thoroughly analyzed this or you are a shameless promoter. I doubt the latter. A hint: All the Muddy Water mudslinging ALWAY brings up ONP. Did you thoroughly study that situation? Did you study the history of the tactics fraudulent mgmt employ against short sellers? Read "Fooling Some of the People All of the Time" and other books (not to mention historical examples like Enron BRE-X etc)

    I'm short but open to going long once I stop hearing the same recycled arguments you and other longs borrow from Sino Forest's mgmt team and the 2 idiotic sell side analyst cheerleaders that have faith in Sino religiously. Don't mistake PR for truth.

  35. Delano:

    Sadly I've looked forward to coming to this blog every night to dialogue with you (and others). Wanted to share a few thoughts with you. Am eager to hear your what you think:

    1) Utmost respect - I don't feel the same way as you do about Carson Block/Muddy Waters, but I have a great deal of respect for how you feel, and can understand where you're coming from. I can't and don't hold that against you. Prejudice out in the opens seems a much safer creature than prejudice in denial. And we're all prejudiced.

    2) Why I See Things Differently - You were intensely personal and honest. Let me return the favor: I personally believe that the many analysts who have been warning about Chinese reverse merger stocks are heroes, if there can be such on Wall Street. Specifically:
    (a) They catch the bad guys, and do the job that authorities/regulators/insiders/investors/auditors/ibankers/boards SHOULD be doing, but often can't/don't/won't
    (b) Protect the little guy by limiting losses AND provides opportunity to recoup losses by betting against the fraudulent company.
    (c) Are transparent about their thesis and evidence; if not, the markets don't budge.
    (d) have largely democratized their ideas, giving everyone a chance to participate.
    (e) Protect American wealth from theft/fraud and limits additional theft/fraud
    (f) Helps China's capital markets mature more quickly; win win for Americans AND Chinese, as capital is diverted from immoral/shady operators. Theft costs ALL, except for the thieves (though, when caught, it can cost them too).
    (g) Gives me, an investor HUNGRY for returns in this perilous "return-free, risk-full" environment (courtesy of Bernanke the Money Printer), opportunities to generate alpha in excess of inflation.
    (e) They have skin in the game, and they better be right, because: "If m right I make 2x; if I'm wrong, my losses are unlimited, and my reputation is killed" C'mon, if you know how short selling works, this is a no brainer.

  36. Oh, and a few thoughts to ponder:

    1) I get the sense you're not inherently opposed to short selling (in fact you sound like you wish you could short the 'Carson Block' stock if it existed). So let's just assume (for argument's sake) that Sino Forest is a fraud, and Carson Block knows it (or is 99% sure). What should he do, and how should he go about it?

    2) "Shoddily thrown together bit of National Enquirer" - Like I said earlier, I respect how you feel about Block and I'm not looking to change it. The moment you said 'visceral'... understood. Now, his research...if his research is as you describe it, how would you describe sell side research, and even GOOD buyside research? Here's where I'm coming from: I've been in the business, and I've seen top notch short seller research (the kind you pay good money for). I can tell you that Block's work (and track record) is indistinguishable from their work, as far as I can tell.

    3) "Many decent people's careers are going to be destroyed" - I hear you man, and I'm with you. If the accusations are all true (or true enough that the stock is worth zero and bondholders can't/won't get back more than 50%), it's a shame that the sin of a few can cause so much damage to the many. In that case, the least WE can do is to help the victims. If the accusations are absolutely false, I personally am less worried that people's careers (other than Carson Block's) will be destroyed. Heck, I'd go after Block myself (with your help of course), as that would mean I lost a lot of money.

    4) C'mon Delano, you seem like you've been around enough to know that going after fraudsters is no joke. Have you read "Fooling Some of the People, All of the Time?" by David Einhorn? Fraudsters have, and will go after you, if you try to expose them. Please, I think despite your personal feelings about Block, death threats are no joking matter, especially given he has uncovered several frauds already.

    5) Remember how Rep. Weiner just last week was denying he tweeted all that sexual stuff, that someone hacked into his computers, hired investigators... blah blah blah...what has he been saying this week? Sorry, but this is what fraudsters do. The pattern is so predictable, and Sino Forest is playing it perfectly to the script.

  37. Just like to respond to a few points raise by DYU above:

    The stock is down some 80% since the allegations came out, that should mean that the market is about 80% convinced that MW is right. Based on what we know so far, I'm far from 80% convinced. MW does not have ANY evidence to substantiate their claims, they just have pieces of confusing information that they conveniently used to support their arguments:
    a)The use of AIs: this in itself is not illegal, it's a common practice in china
    b)The convoluted corporate structure: Again, not illegal, and another common practice in China since the tax code is quite complicated
    c)Harvested timber sales not possible - company has issued rebuttal, and MW looks to be wrong here
    d)Questionable timber assets - remains to be seen, MW has not provided any evidence that SF does not own the forests, let's see what SF can provide
    e)Ponzi Scheme - in the sense that they require external capital to survive. again, that itself is not a ponzi scheme, as a previous poster have pointed out that many high growth companies such as Sirius require external capital to continue. questionable accusation at best.
    f)Questionable dealings in the 90s - possible, it was definitely a little bit of a wild wild west back then, but the company could have cleaned up its acts since then, I don't see how this is relevant, MW floated this point to paint the company as unethical

    So all together, based on the above, it's far from certain that MW is correct. SF probably walks a tight rope between legal and illegal, but can anyone really be 80% sure at this point that the company is a fraud?

    Also on the ONP case, I stopped reading about it once I found out that MW confused the name of an unrelated company to be a subsidiary of ONP. That is just shoddy detective work, and I doubt MW really didn't know that the two companies are unrelated. They know that China is a bit of a black box for foreign investors, they know that the names are confusing, and most foreign investors aren't smart enough to realize the difference right away, and they know that people will sell first and ask questions later when the word fraud is thrown around.

    You made the point that MW has skin in the game and their losses can be unlimited if they're wrong. Well right now we don't know who's right or wrong and they're already up 80%. They're gaming the system.

    As far as buying the stock here, it's a pure spec play. I don't believe that this is as clear cut a case as the market believes, and the risk reward in the stock is mispriced at these levels.

  38. Dyu--the sticking point in this debate is that I can't understand why you won't at least acknowledge that in this case, Block is just guessing--lobbing shit against the wall to see if it sticks. The gaping holes in the report and the ignorance expressed by them reflect that. You say fraudsters stick with their story until the very end--he's doing just that. Notice how he has not made good on the threat of further research/evidence? He's got no more ammunition. There is no "resident accounting monster". I love his quote, "this is just another day at the office for us" Hilarious. He has no office and there is no "us". He's already covered the majority of his position by now--you must know that. If you won't accept that, you stand a very good chance of getting badly hosed here. The real irony? Given the strength of your convictions and the strength of mine, and all the evidence, I'm starting to think it likely that this is a case of fraud exposing a fraud, in which case, sadly everybody loses. Although the fact that Paulson is still in and supporting the company would worry me a bit if I were in your shoes...

  39. well--no, still thinking about that. Not everyone loses. The company will be kaput. Block's reputation will be kaput. And anybody who jumped in on the short will make a dumb-lucky, extremely high-risk return.

  40. I wrote a review of Muddy Water report on my blog:

    Thank you.

  41. Congratulations Alex!!!
    Mr Delano incendiary posts are certainly raising your blog rating. It's a free upgrade!
    You must thank him.
    My point : MW is probably overstating the bad , maybe they mixed standing trees and harvested trees, unmeasured acres, etc etc. The bullish call from a RBC Cap analyst suggests a NO FRAUD, probably a mix of mismanagement, profits overstated, irregular bookings, etc etc.
    THERE IS CERTAINLY SOMETHING WRONG IN THIS COMPANY. A couple of law firms are now targeting Sino and these guys usually know where to pull the trigger.
    And worse... as Delano says, a 3rd tier unknown dude undermined a Paulson pick!!
    Well... I remember an almost unknown analyst that a couple of years ago finger pointed one of the largest bank scams!! Gotcha?
    Bottom line: You do not need to be at Merril or Morgan to read between the lines in a balance sheet. Saludos!!

  42. Hey Mr. Saludos, Delano AND I have raised Alex's blog rating. Just saying.

  43. Pardon me Mr.DYU..
    Unfortunately I did not mention you because you actually posted rational, supported, logical, messages.
    You just said: Do not to buy a broken stock (and sell it), do not buy any call from PR and sell side analysts (RBC Cap??), do more homework with chinese rev mergers, etc etc.. That is ABC!!
    The new kid in this block is Mr Delano that just blame and blame and blame MW and Mr Carson.

  44. Haha fair enough. Delano is a good man in my opinion. He's not like that Dundee Securities guy; Delano has honor and integrity. Fine, he was a bit sensationalist, but he admitted to it. i don't think you find many people like that. Besides, I (and many writers on this post) were equally sensationalist.

    Delano, I have a few thoughts I'll write tomorrow or Monday in response to your Friday comments. Haven't forgotten but spent most of the day today at the hospital...

  45. Check Bronte Capital's post out:

    Anonymous With No Position, but it smells like a fraud.

  46. DYU--sincerely hope it's nothing serious, and if it is, best wishes. Also thanks for the props, which I'd return by saying you're the only person here who articulates a counterpoint well enough to be worth dignifying with a response. Keep my eyes out for your next post--have a feeling tomorrow/ tuesday should provide clarity as to which direction this thing is ultimately headed...

  47. I added a very small long position on Tuesday in TRE, mainly for the lulz but also with the intention of earning some commission money back I've paid out in the retirement account. Nobody loves a good stock fraud story more than me and MW's success with previous Chinese stocks has been exemplary but there's something about the current play that doesn't ring true to my ears. A comment Block made about "letting the accounting dogs loose" or something along those lines could be part of the theatre but it seemed odd at the time that the "accounting dogs" hadn't already given the books a good chewing over. I expect that the stock price will receive a little bump after the earnings release on Tuesday and then MW can issue a followup with the intention of driving the price back down. The easy money has obviously already been made but a series of well timed releases should produce some tradeable downside moves I would think.

    FWIW, I don't hold Block's shorting or the issuance of reports against him anymore than I hold positive reports issued by investment banks against. All we can ask is that the authors and participants tell the truth and that the regulators hold them to that.

  48. Delano,

    I appreciate the kind regards. I am fine, but the love of my life was not (she's ok now, thank God).

    I wanted to directly respond to one of your questions from last Friday: "I can't understand why you won't at least acknowledge that ... Block is just guessing"

    I acknowledge that I am not certain Sino Forest is a fraud. In fact, I don't think Carson Block is certain either. So what? What's wrong if we are guessing?

    I don't think guessing is all that bad. In fact, I believe 'guessing', faith, and instinct are important and largely un-appreciated. They've helped us, the human race, to stay alive and occasionally flourish (I think the geeky term for all this is 'heuristics').

    That said, I don't think all guesses are equal. Then what are we left with? Well, a wise man once told me: "It is better to have weak faith in a strong object than to have strong faith in a weak object."

    Which 'object' is stronger? Caron Block's claim or Sino Forest's claim?

    (A) Muddy Waters' claim: Sino Forest is too good to be true (another way of saying Sino Forest is a fraud).


    (B) Sino Forest's claim: We are accused of fraud, but trust us because Muddy Waters are Shock Jocks/Bad Boys and they misunderstand/misrepresent our Business. Also we have the evidence/documents to prove it. Trust us, they're real (note that no one has cited those documents to defend Sino Forest other than...Sino Forest).

    Let me close with the following thought (again): Doesn't Sino Forest's behavior resemble that of a certain New York Congressman, Anthony Weiner? He was "lying and denying' just until last week... Keep that in mind, with Sino Forest.

  49. newbie anon:

    I appreciate your thoughts, hopefully you'll be back. It's kind of a late response, but wanted to respond to your previous comments:

    1) Probability of fraud = 80% - It's tempting to say that the market is 80% convinced that Sino Forest is a fraud. However, I fear that approaching it this way has a 'value at risk' like feel...and you know how that works out with extreme events.

    I'd like to propose a different perspective. What if the market is really saying that it doesn't really know the odds, but that it thinks it is much more likely than not, and much much more consequential than not, if true. If you look at the mechanics of options pricing of such situations, and the history of how implied volatility has been priced, it's clear that there is a well-warranted volatility premium for such scenarios. I personally think there is a 'vol premium' (in this case a lower stock price) whereby the fat-tailed events justify that premium.

    2) 'Harvested timber sales not possible' rebutted by the company satisfactory - I disagree. Muddy Waters claim still apply to Sino Forest's supposed customer/counterparty. As Muddy Water's prefaced, the scenario he's wrong is where the operational logistics are top secret ( something like secret tunnels?).

    3) Ponzi - Look, I understand what you're saying, I personally invest in tech (long and short), so the emphasis really was that external capital has ALWAYS funded Sino Forest, whereas with tech businesses the point of external capital is for the business to ramp up to a point where it can fund itself with profits, and eventually return cash to owners.

    Sino Forest should be compared more to a REIT that is in acquisition mode...yet even growing REITs return capital to shareholders. Lack of dividends/buybacks in its long history not bother you despite super high ROEs, profit margins, cash balances, etc.? "Questionable at best" seems questionable at best.

    3) ONP - increasingly looks like, in that you have zealous mgmt team who trashes Muddy at every occasion, yet ONP was caught with their pants down on accounting issues just a few months ago.

  50. DYU--'Carson is just what?' Yikes. What if he's dead wrong? It really doesn't bother you at all that he wiped out 3 billion or so on a guess with totally fabricated "hard" evidence? Can you honestly say if you'd been long SF you'd be rationalizing Block's scam under the guise of heuristics? Guessing is fine, but taking down a company by publishing specious evidence of fraud is horses$%t stock manipulation. It's really gotten under my skin that everyone's being so blase about that. It's like when I had to sit through Obama's election campaign and I felt like I was taking crazy pills. (Nothing against the guy but he was just a deft politician--definitely not the second coming of Christ.) Galling sometimes to watch who we/the media choose to demonize/worship and how quickly we can do an about face. When Sino Forest grinds back up and you're hemorrhaging cash trying to cover, will you still be batting for MW?

  51. Strangely quiet here...I just sat through the conference call. I recommend you panic, and get out of Sino Forest.

    They rudely cut off the lone skeptical analyst, saying they have a long queue, yet in that long 'queue' they allowed Richard Kelertas, the fool who has been shamelessly promoting Sino Forest, 2 chances to ask questions.

  52. Delano,

    Did you listen to the conference call today? I recommend you do so, if you are still interested in defending the company.

  53. Great discussions here !! I am doing a bit of work on this topic. The truth must come out..with all that I see now, at this moment I am leaning more for MW. I do not think MW is totally accurate but definitely Block is onto something.

  54. Block doesn't have to be 100% right for the stock to be worth (intrinsic value) zero.

  55. SF management did a very lousy job on the call. Jake you are right that Block does not have to 100% right. However so far, most accusations are not proven by "hard evidence", especially the evidences that are required by the court.

    Can someone enlighten me on that?

  56. I agree the the call was pretty lousy, management was short on answers on some fairly simple questions, and didn't really provide anything new to dispute the accusations, and the market certainly punished SF for it. That being said, a few things we need to keep in mind:

    1)the most important thing is proof that SF owns the forest, but this in itself is challenging, as SF lists as one of the risk factors that they may not be able to obtain all the necessary certificates to prove ownership of forests, and that they're working on obtaining them, but in the mean time, their ownership could be subject to dispute. I know, this sounds shady, but it is what it is, you either believe this or you don't.

    2)AIs - most people will point out that no cash ever flows into the BVI. Again, sounds shady. But if it's true that there's a tax charge for transferring money from China into the BVI, then it would make sense that SF would rather leave the money offshore and reinvest it into the business.

    3)WFOE - but why don't they establish WFOEs and transact through them? I'm not familiar with chinese law in this area, but SF says that 43-44% of their assets are owned through WFOEs, so they are doing this. I don't know why they haven't transitioned more of their BVI companies into WFOEs, I think that's a question that should be posed to the manangement

    4)Taxes - SF has no idea if AIs pay their taxes, so they reserve 100% against it. This is the aspect that bothers me the most. Why deal with risk? Why not deal 100% through WFOEs? It's hard to believe that the auditor would let something like this go.

    So the call is short on answers, and raises some additional ones, overall I'd give it a D-. On the positive side, the CEO gave his personal guarantee that they'd be vindicated. Not sure if this means anything, the market obviously doesn't think so, but if SINO was a 100% fraud, I doubt he would come out and say something like that.

    The analyst tour in July should shed some more light on the situation. Given all the info out there, I still think the truth is somewhere in the middle. SF may have overstated some #s, but it's not a ponzi scheme. We will see in time.

    Disclosure: LONG SF

  57. For posterity, in case someone is reading this in the future, Sino-Forest fell 32.53% on the Toronto Stock Exchange on June 14.

    Sounds like it was a really poor conference call.

  58. It's very difficult to sort through the issues in this situation. I honestly have no strong opinion on whether of not this is a fraud, but I think one has to consider a few things:
    1) There is no real proof of anything in the MW report - it is really an argument about looking, quacking, smelling like a duck. Perhaps that was the idea all along - MW had suspicions, hoped to create enough uncertainty that an investigation had to be launched, and then further hoped that their suspicions are proved correct. So far this plan has worked spectacularly.
    2) There could well be very reasonable explanations for how Sinoforest arranges and conducts all of their businesses. I know it looks very messy, and if people were prone to conduct some monkey business it gives them lots of opportunity, but that is the nature of doing business in China. It still could be all legitimate.
    3) Even the much criticized desire for them to keep the names of their suppliers and timber wholesalers confidential is not completely unreasonable. I know of lots of companies that try to do the same thing with either their suppliers and other business partners, for the same reason. Having an ongoing verification program in place with a reputable independant auditor might go a long way to reaching a compromise on this issue.
    4) The company has fallen well short of providing clear explanations for all the questions that are rightfully being asked, but that could well be more due to their inexperience and lack of sophistication regarding how to deal with the market than anything else. I sympathize a little with them here, since it is easy for anybody to write critcal remarks about the company, often citing misunderstood "facts" or flawed arguments, but it is much tougher for them to respond to everything out there given the legal and other constraints they have. But clearly they should be devoting more effort in this area if they want to have credibility.

    Should be an interesting few months...

  59. DYU--just saw these last comments as I'd moved on to Alex's new post. Read the call transcript and went long today at $3.15 in my 401(k). This stock at these levels is downright stupid cheap and well worth what little risk is left in my mind. Might get out when you all cover and buy back again in a few months when the dust clears if it looks like the market is gonna give SF a second chance. Why I pulled the trigger, let's rehash.

    1.) MW report complete bullsh%4t. Go see today's statement on MW's site and tell me what you think of their objections to the con call. Even more watery than SF's answers to analyst questions. It's over. Block knows he's losing credibility and that he screwed the pooch on this one--he's getting scared about the repercussions and has lost his fangs. (That's what I see anyhow.) You guys aren't ready to admit it yet but you're getting close. First it was a Ponzi. Then it was a massive fraud. Then it was a lesser fraud. Then it was, 'maybe it's a fraud.' Now it's 'there could still be a little fraud going on somewhere in the company. Hooey. The screaming lunatic (me) has been right all along. Block was the bigger scam. Man up and own it don't sidestep/backpedal. Little accounting/tax shadiness is a different animal than a Ponzi/massive fraud. And it's looking more and more like they might not even be doing ANYTHING wrong.

    2.) Hiring PWC to do an extensive audit is putting a high-caliber gun to the temple if SF is a fraud. Why bother? Why not just dance off the stage, grab the cash you allegedly "stole" from the company and retire to Mexico never to be seen again?

    3.) I'm being paid, (handsomely) by a certain interested party, to malign Block and MW and undermine his reputation in the blogosphere. Please let me know if you'd like to retain my services.

    (Number three was a joke.)

  60. So many people here who believe the path to wealth is through the destruction of others. Our whole society has become one of selfishness, greed, and an occasional glimmer of kindness (by someone else of course) as we cheer this MW crook who consipired with multiple hedgefunds to manipulate this stock. If you cheer him, then you also are cheering Bernie Madoff who fleeced his jewish friend network.

    The stock market has become a place where manipulation is commonplace, whether we talk about 'expert networks', insider trading, manipulated options expirations, abusive short-selling without an uptick rule, or we talk about so-called research done by a lawyer that himself hired a team of lawyers, but not a single accountant or industry expert.

    I for one wish Carson Block and his father William will be found and tortured, since that is what they (and others on wallstreet like them) do to honest investors with 401k retirement accounts. If you think that's excessive, let me remind you of the carnage that Bernie Madoff (and his sons) did to the lives of innocent victims.

    Fortunately, I recovered some losses from the financial 'mortgage' crisis and can live a humble retirement. It's not the retirement that I had planned, but it's all that I can manage 2 meals a day. But I'd gladly serve a life in prison for just one chance to personally convey my strong dislike for one of these wallstreet theives who have destroyed so many lives without one care in the world.

  61. To Anonymous above (June 15,2011 6:13 PM) : Wow, what a great post - I just want to thank you for this ! Snce this SF/MW saga started, your comment is the only one that stands out for me : you speak with eloquence and much wisdom. BRAVO !! Everything else to date has been just noise : )

  62. I agree, capitalism opens doors to people whom want a world of honest trade and business practices. Nothing wrong with making a profit, it's all a part of business.
    Unfortunately, crooks will be crooks, they come in the play with bad intentions from the start and create havoc within the ranks. Everyone falls victim to it all and the the balance of business gets thrown out of whack. As a matter of law, people like this should be publicly exposed so that the rest of us can keep an eye out for them. Perhaps a *warning, stay away* web site of facts and events that turned lives upside down should be created, it might help, if nothing else it would make it more difficult for these asses to exist.(with pictures as well)! It's not a public lashing but it's better than being victimized by scum bags.

  63. Toronto's Globe and Mail newspaper published an investigative report on Sunday about Sino-Forest . The company issued a rebuttal.