# Sino-Forestcorp TRE-T



## Jeebs (Jun 1, 2011)

I was wondering what people's thought are on Sino-Forestcorps current situation.

Currently down another 62% @ $5.82/share as of my typing this.

Obviously these charges are of a very serious nature but has herd mentality turned this into a value play?

What price point would people consider entering at?

* I am not considering entering as my portfolio is still very young but I still like to examine current events in the market to see if there's anything to learn from them.


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## Toronto.gal (Jan 8, 2010)

I traded the stock a couple of times back in March.

Have never stayed more than a day with anything that has a Chinese connection. 

There have been enough stories like this in recent months: RINO, CCME & a few more. I would stay away completely.


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## Potato (Apr 3, 2009)

I put a post up on the blog about it this morning. Went long just a few days ago at $19, then bailed at just about the bottom today at $5, so got burned pretty badly.

I wouldn't say there's a price where I'd consider getting in, as much as more information I'd need to have: if it's worthless, then I'm not sure it's worth speculating even at $1 or $2; if it's not, then I was happy buying in at $19, and anything up to the low $20's would be a good buy. Just too hard to say at this point what the truth is.

Muddy Waters is unconventional, but does have a pretty good track record at calling frauds so far. However, Sino-Forest doesn't fit their usual target profile. I _want _to believe in TRE (in part because I was briefly a part owner). Their release hit a few good points (e.g., about their business being to sell standing timber, and not actually to harvest all the wood they sell as they sell it). It's a small thing, but I can't help but wonder why that couldn't have been said at 9am instead of 10:30. I lost a lot of confidence there. The release also doesn't address the main points about related-party transactions potentially being complete shams, or the points about foreign current/investment restrictions.

I don't know what to believe at this point.

I'm kind of surprised at how relatively stable the price is after trading resumed today. Basically just bouncing between $5 and $6. No huge violent swings. Today I wish I had some L2 quotes to see if it's because someone's putting a floor under it, or a ceiling over it (or maybe both).


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## CanadianCapitalist (Mar 31, 2009)

I'm sorry to hear about your investing experience in Sino-Forest. I hope it wasn't a large position.

Here's Potato's post on TRE for interested readers: 
http://www.holypotato.net/?p=993


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## Potato (Apr 3, 2009)

CanadianCapitalist said:


> I hope it wasn't a large position.


Larger than I'd like: about 2.5%. Enough that I'm going to have to start composing my consolation post for the end the year about how I was beaten by the passive portfolio.


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## Toronto.gal (Jan 8, 2010)

Potato said:


> I put a post up on the blog about it this morning.


Yes, I read it.

I'm very sorry Potato.

I wish you had listened to your little voice inside, but you were as diligent as you could have been, so don't beat yourself up; you invested a modest % plus you salvaged what you could. There are positives to such experiences as well and I'm sure you'll become a better investor because of it.

Try to enjoy the weekend and put this behind you.


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## andrewf (Mar 1, 2010)

I've had a number of people tell me that reporting standards in China are no longer a concern. This experience would seem to suggest otherwise.


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## Xoron (Jun 22, 2010)

andrewf said:


> I've had a number of people tell me that reporting standards in China are no longer a concern. This experience would seem to suggest otherwise.


I was burned by UTA. I was down about 40% and sold (luckily the day before trading halted.) I've been following UTA and CCME. Those two alone have made me swear off ALL Chinese RTO stocks trading in the US. If it looks too good to be true, it probably is.

Auditors are walking away from these companies every day. And you see so many ambulance chaser lawyers trying to get class action lawsuits certified against the companies. Too much uncertainty, and not enough upside to make me want to wade back into that mess.

I'm sticking with small/mid cap value stocks.


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## CanadianCapitalist (Mar 31, 2009)

Potato said:


> Larger than I'd like: about 2.5%.


It probably stings but at least it is no larger than a flesh wound, not a mortal hit to a portfolio. I hope your winners make up for losses such as this.


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## jerryhung (Mar 28, 2011)

Trust me, I have WAY MORE in TRE and some more added WED & THURS, 2~3 hours before Muddy Water report and halted ($17-$18)...O-U-C-H!!

I find Potato's blog post kinda in hindsight, I don't blame him, I want to believe in TRE too

I am still waiting to see how this turns out
On one hand, TRE has Paulson, many banks, CPP, and etc.. all on board, I hope they did do their due dilligence better than any one of us can

And 1 report = loss of $4 BILLION in 24 hours? WOW... 
I'm sure Muddy Waters has BIG SHORT position and HUGE gains now

Even if report is "mistaken", it'll be hard for TRE to sue/re-claim the loss

SIGH... I was debating whether to sell at $6 today too (1/3 of my cost)
and I hold PUT options too... MAN..


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## humble_pie (Jun 7, 2009)

there is not a single investor in individual stocks who has not owned a security that has melted away like quicksilver. It's small comfort to say when the loss is fresh, but no one could have researched his purchase of sino forest more carefully than did Potato.

little of the muddy waters story is yet known. This is the firm that broke the tre story on june 2. Muddy is largely carson block, a 34-year-old US lawyer who does not practice, who is not barred, who lived for a period of time in china, who learned to investigate chinese firms that commenced trading in US markets with reverse takeovers, or RTOs.

the rest is very recent history. Block typically takes a short position, unveils considerable decay or significant missing assets in the chinese company, and the investigations then blow up as rino or ccme scandals.

close behind block, and perhaps the éminence grise in the story, is veteran san francisco investigative reporter herb greenberg. Greenberg has long been a titan among muck-raking journalists who specialize in digging out fraud in publicly-traded companies. My tentative guess would be that greenberg came first in the let's-expose-chinese-RTO-fraud campaign, and he soon found a perfect puppet & spokesperson in carson block.

i'm using the word puppet deliberately. In the videos showing block presenting the muddy waters research, greenberg is always present at his side, sitting excitedly on the edge of his chair, tossing in comments that the puppet forgets to provide. Meanwhile block himself is eerily zombielike, speaking in short simplistic sentences with a blank expressionless face. Together, they are an odd couple.

Potato has pointed out, very astutely, that sino forest is the sole canadian company to have been swept up in the muddy waters fishing net; that sino forest has been operating in canada since 1995; that the timber is being sold standing which is why it's not being harvested; and that the company has had & continues to have directors who are well-known canadian businessmen.

one would be inclined to think that, this time, muddy waters has gone too far, and a libel suit against waters, or specifically against carson block, will soon be launched. Save & except for one disquieting fact. When analysts asked sino forest's ceo to see the forest certificates after the company's recent AGM in toronto, the ceo refused. Not a good sign.


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## ddkay (Nov 20, 2010)

Bre-X was owned by as many retail investors as pension funds - OMERS QPSP, OTPP etc. How many institutional funds held Enron? They aren't any less vulnerable to fraud than the rest of us. In fact they get questioned a little less just because of immense their size and complicated accounting. Though it has to be said any "Chinese company" actually operating overseas has come under serious scrutiny these last 12 months. Condolences to Potato, jerryhung and anyone else that lost money here.


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## humble_pie (Jun 7, 2009)

some international etfs took a sino forest hit along with retail investors.

bloomberg reports that biggest sino forest shareholder is john paulson with more than 14%.

other significant holders known to date are vanguard, black rock & hartford etfs. 

for anyone interested in whether tre owns or does not own all of them trees, here's a not-bad story from london financial times, including link to company teleconference with poyry forest:

http://tilt.ft.com/#!posts/2011-06/21926/4.2bn-question-sino-forest-corporation-2


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## andrewf (Mar 1, 2010)

I suspect some institutional holders of TRE may just be indexing. CPP holds an awful lot of Canadian public companies to be making any meaningful attempt at stock picking.


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## humble_pie (Jun 7, 2009)

*just a chip off the old block*

as it turns out there's another significant older male muddying the waters. He's william a. block, carson block's father.

the two are partners in daddy's WAB capital, run out of a private home in pacific palisades california. Seems - numerous stories in the internet - pater et filius have a history. Are well-known for years of pink sheet, chinese RTO & other shady stock promoting & shorting, aka pumping & bashing.

some of the internet stories are too nasty to post in a family forum, though.

daddy's website, minus the recently-removed "about us" page:

http://www.growthequities.com/wab_home.html

canada's sino forest is by far the biggest company the blocks have ever aimed at.


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## Four Pillars (Apr 5, 2009)

Sorry to hear about your losses, Jerry and Potato.

I'll say one thing - if I bought a stock at $20, I wouldn't sell at $5. No guarantee this is a fraud or if it is a fraud that it is a 100% fraud a la Bre-X.


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## CanadianCapitalist (Mar 31, 2009)

Four Pillars said:


> I'll say one thing - if I bought a stock at $20, I wouldn't sell at $5. No guarantee this is a fraud or if it is a fraud that it is a 100% fraud a la Bre-X.


Why not? $5 sounds better than $0 to me.


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## andrewf (Mar 1, 2010)

Four Pillars said:


> Sorry to hear about your losses, Jerry and Potato.
> 
> I'll say one thing - if I bought a stock at $20, I wouldn't sell at $5. No guarantee this is a fraud or if it is a fraud that it is a 100% fraud a la Bre-X.


This is anchoring. You should only hold at $5 if you think that it's a good investment at that price. It doesn't matter what you paid (except from a tax perspective).


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## Soils4Peace (Mar 14, 2010)

Due to trimming a couple of months ago, I am up $200 plus whatever my remaing shares are worth. Now I am looking at trimming some other small-mid caps caps. Whew!


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## I'm Howard (Oct 13, 2010)

I sense some one going to Jail, you hold massive shorts than you start a rumour that makes you very rich, I am going to buy some, it looks like a Fallen Angel?


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## Toronto.gal (Jan 8, 2010)

I definitely agree with CC & would have sold as Potato did in this situation as this year alone, many stories coming from China have gone to $0. IMHO, it's always better to cut one's losses when no quick & credible evidence proves a very serious allegation false, like TRE refusing to provide proof of ownership of forests [as humble mentioned]. The number of frauds keeps growing, here is another recent example:

*"Since March, more than two dozen companies based in China have disclosed auditor resignations or accounting problems, according to the U.S. Securities and Exchange Commission.......In other words, Longtop Financial Technologies isn't a bad apple in a barrel of otherwise sound fruit. Instead, it's symptomatic of a big problem that has tainted an entire sector."*

http://money.msn.com/investing/the-big-fraud-in-chinese-stocks-jubak.aspx

Also, let's say the allegations are proven to be false [I don't have any examples of this to speak of], but wouldn't the stock then at least double in short term as many would reinvest again and hence recover a big portion of their losses? I'm thinking if this were the case, the money salvaged alone and reinvested at rock bottom prices would help recover the losses fast.

Anyway, the point I'm trying to make is that even if allegations were false, with the information available as of Friday, selling was the right thing to do.


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## Four Pillars (Apr 5, 2009)

CanadianCapitalist said:


> Why not? $5 sounds better than $0 to me.


Call it "pride".


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## humble_pie (Jun 7, 2009)

toronto.gal asks, in a rhetorical question:

_" ... let's say the allegations are proven to be false [I don't have any examples of this to speak of], but wouldn't the stock then at least double in short term as many would reinvest again and hence recover a big portion of their losses? _

well, here's an example. In june 2010 carson block attacked chinese papermaker Orient paper, calling it a fraud, blah, blah, blah.

as with sino forest, ONP's stock plunged some 60%. The allegations proved to be base & without merit. Muddy waters ceased publishing its "research" & moved in to other targets.

orient paper never recovered, though. Once trading as high as 12-14, today it changes hands at 3.59.

there are 2 things i find astonishing about these stories. One is that anybody would particularly believe carson block. His language & his ideation are simplistic, near juvenile. It's not difficult for him or anyone to keep getting up & saying company XYZ is a fraud, the factory they're showing never belonged to them, they're lying.

it's true that some big name accounting firms are quitting some clouded small US-traded chinese companies. But how many firms are quitting only because they don't know. Because they are relying on local sub-contacts in china & let's face it, these have been tiny companies to date & their accounts as clients are not worth any risk to large prestigious accounting firms. Lots of tiny, vexatious, troublesome clients get dumped in every business, all the time. There are even business advisors in canada right now advising doctors on how to dump a third of their patients & replace them with others who are either less trouble or less sick, therefore more profitable ...

the 2nd thing i find astonishing is that wrongfully-accused chinese companies never seem to sue or even fight back. Like, orient paper got trashed, and they never said Peep.

tentatively one could attribute this to the massive culture gap. It must be as difficult for a small chinese paper packager out in hebei province to understand what north american stock markets are doing to his company's reputation as it is for us to understand what they mean, exactly, in baoding city, when they talk about subsidiaries or inventory ...

sino forest is the biggest of the block targets to date. It's perhaps the only one with enough powerful north american interests on board to be able to fight back.

co. has hired osler hoskin harcourt. I would not expect co. to say anything other than what their lawyers strictly approve. Co. has set up a blue-ribbon committee to investigate. I would expect some committee members to travel to china. It could be weeks before sino forest has anything substantive to say for itself. In the meantime i'd hesitate to interpret paucity of public information as any sign of company guilt.


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## ddkay (Nov 20, 2010)

Muddy Waters released a 40MB set of supporting documents on its case against Sino (haven't seen these before). Unfortunately there isn't very much of it in English. Sino has a lot of explaining to do http://www.muddywatersresearch.com/research/tre/tre-supporting-docs/


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## humble_pie (Jun 7, 2009)

haven't looked - but what language is it in. Chinese ?

this would be sheer perversity imho. Childish. Like, we have volumes of sinister evidence, ya ya ya, but we're not telling you what it is, nyah nyah nyah.

muddy waters website screams a.m.a.t.e.u.r. This is another example. Any decent litigant - and i bet this case will go to litigation - would supply serious evidence from the get-go. Would pay for a translator if they had anything to say for themselves. jmho.


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## humble_pie (Jun 7, 2009)

ps 

why does sino have a lot of explaining to do just because muddy posted what is maybe the Old Testament in chinese on its website.

did you read muddy's 40MB ? does it contain serious allegations ? if not, why would posting up what might be gibberish require sino to explain anything at this point in time ...

pps 

his law degree is from chicago-kent college. This is a downtown night school. Have no idea whether or how it's accredited. Absolute bottom of the prestige barrel reputation-wise. Had no public career as a lawyer. Applied to ny state bar association but (complicated story) seems he failed to pay dues or maybe flunked the bar exam ...


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## ddkay (Nov 20, 2010)

It's mostly in Chinese, I can't understand the main text. But they do annotate parts of it in English.


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## Potato (Apr 3, 2009)

Thanks for the condolences, everyone.

Sino has a better response out today: http://www.sinoforest.com/Uploads/SF MW Press release 06 06 2011 Final.pdf

I don't think I'm confident enough to buy back in.


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## FrugalTrader (Oct 13, 2008)

TRE is up over 50% today! Congrats to all those who had the courage to buy in Friday.


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## Jeebs (Jun 1, 2011)

It looks like Sino is coming out a lot harder against these allegations this week.


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## humble_pie (Jun 7, 2009)

love that zombie face !!

http://www.bloomberg.com/video/70530586/

the mouth moves & you can hear a voice, but otherwise it's hard to know if muddy waters' carson block has been stunned ... or drugged ...

a ghost of a smile at the very end.

journalist erik schatzker asks block How much do you stand to make [on the sino forest short] ?

a leer crosses the zombie face for a split second, followed by Well-again-i-mean-that's-we-don't-comment-on-that's-more-specific-than-we-get.

if you're short in sino forest & you know it, clap your hands. Carson block says TRE is going to zero.

stk meanwhile up 2.67 at 7.90 on the day.


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## humble_pie (Jun 7, 2009)

a shout-out to the experienced short artists in this forum, please.

there is serious institutional interest in TRE in both canada & the US. How easy would it have been for the big players to get together & mount a buying campaign this morning in order to induce a short squeeze ...


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## Jeebs (Jun 1, 2011)

can you explain the term 'short squeeze' for me please.


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## HaroldCrump (Jun 10, 2009)

Jeebs said:


> can you explain the term 'short squeeze' for me please.


http://www.investopedia.com/terms/s/shortsqueeze.asp


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## Jeebs (Jun 1, 2011)

Thanks.

Learn something new every day


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## jerryhung (Mar 28, 2011)

humble_pie said:


> a shout-out to the experienced short artists in this forum, please.
> 
> there is serious institutional interest in TRE in both canada & the US. How easy would it have been for the big players to get together & mount a buying campaign this morning in order to induce a short squeeze ...


Great idea!!

Well, my costs are still $15 but today's jump to $8 is definitely better than $5 and I think I have more faith now in TRE than Muddy Waters now


Sino-Forest has released documents on its website now (Data Room)


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## ddkay (Nov 20, 2010)

Muddy Waters to Release More Sino-Forest Research After Sparking 71% Slump By Matt Walcoff - Jun 6, 2011 9:08 PM ET


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## humble_pie (Jun 7, 2009)

quite a few are asking Who is behind carson block.

cash on hand roughly = debt. They would get all lands & timber for free.


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## kildozer (Mar 29, 2011)

the days low so far is 3.67


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## Dibs (May 26, 2011)

Muddy Waters ‘Pre-Marketed’ Sino-Forest Report to Hedge Funds, Dundee Says


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## larry81 (Nov 22, 2010)

TRE just hired PwC to clear things out.

Its a good drama to follow !


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## FrugalTrader (Oct 13, 2008)

Anyone buying TRE at these levels?


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## larry81 (Nov 22, 2010)

I am not


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## CanadianCapitalist (Mar 31, 2009)

FrugalTrader said:


> Anyone buying TRE at these levels?


Not me. The MW report has enough red flags for me to stay on the sidelines. For example, it says that TRE sells standing timber to AIs who fell the logs, truck it to a chipping facility and transport chips to buyers. But apart from one, TRE won't reveal who these AIs are for "competitive" reasons. There may be nothing to it but it seems a very odd arrangement to me. It is certainly very opaque.


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## ddkay (Nov 20, 2010)

Ernst & Young and now PwC apparently have been able to see this coveted list of customers. The investigation could carry on for months and the market isn't usually patient with this stuff. Maybe I'll pick up a few hundred shares when its under a buck.


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## Potato (Apr 3, 2009)

I keep following it thinking I'll dive back in, but I haven't yet, and likely won't until after the results are released next week at the earliest.

I liken it to when you're afraid there might be a spider in the shower: before you get in you shake the towel and have a scan around, and it looks clear, so you get in. Once in, I might have ignored banging at the door or the water turning cold, since I wasn't afraid of the Psycho or broken hot water tank scenario, but if I so much as see a black hair that might resemble a spider leg poking out of the drain, I'm running out of there screaming.

So before I bought Sino-Forest, fraud was my biggest fear, and I didn't allay it by obtaining first-hand concrete knowledge, which would have given me the confidence to see something like this as a buying opportunity. Instead, I relied on weak heuristics and an analyst report that claimed the governance was good. 

Then the MW report hit, alleging fraud, and it all fell apart: _exactly _what I was afraid of. MW had a good hit rate (~3 for 4) with these Chinese RTOs, and I had heard of them before this broke, so I wasn't about to just dismiss them as a short-seller with dreams of market manipulation.

On the other hand, MW is the noisy kid brother of the cottage industry that is exposing RTO frauds. I don't want to just attack the source, since that's not a strong foundation for investing, but he strikes me as someone more interested in market manipulation than justice. His reports haven't seemed as thorough or solid as say John Hempton's, and so far the frauds have been low-hanging fruit. Sino-Forest, if it is a fraud, is a step up. His best part of the analysis (both playing to his strengths and making SF look bad) was the one about how impossible it was to harvest all those trees Sino-Forest sold... but that was smacked down with the first release that said it was a sale of standing timber. I'm not sure tracing related party transactions and capital flows into and out of the country is really his forte. Then the paper reports that he spouts off about having all this other evidence on the analysts' conference call he hosted, yet he hasn't released it. Maybe waiting for another Chinese holiday for maximum impact.

I still don't know what to think. The company has released some documents (though it took a few days). The bank statements look real enough, complete with hand-written notations (presumably linking transactions to entries in the ledger/accounting system). But we've learned with other frauds that the companies can and do fake bank statements: you have to get an auditor to go down to the bank and confirm with the bank that the money is there as specified. 

Various analysts have said they've physically gone over to view the operations, but Poyry might have had the same problem: they can say there are trees there, but who owns them? Plus other, much smaller, less well-executed [alleged] frauds have put up the potemkin factories for analyst visits before, only for private investigators to find the sites empty or idle weeks later.

Fraud is insidious. It's quite difficult to prove something _isn't_ a fraud, particularly when there is so much suspicion after all the recent cases, and from halfway around the world with a massive language and cultural barrier. You can't believe anything the company says without 3rd party verification, and the balance sheets become useless -- if it was a matter of pine beetles or wildfires, banks not lending or demand drying up that hammered the share price to a third of book value, I'd probably be buying like crazy. But book value is unreliable if there's a chance it's all a lie anyway.

I forget his name, but one talking head on BNN put it [approximately] thusly: "What else were they going to say? It's like they went to I've been targetted by a short seller dot com and printed off the fill-in-the-blanks press release." The company's been doing the dance, and releasing some of the documents is a bit better than par, but it's still not fundamentally different than the dance that an actual fraud would do. That's partly because there isn't much more for them to do. Offering the analyst tour in July and specifying that the analysts could pick the locations was a good step at helping to remove the potemkin element. The Dundee analysts' comments after the close today were also heartening.

So I'm not buying yet, but I keep turning it over in my head, and think I might if there was some good 3rd party evidence of authenticity: an auditor in a bank branch verifying cash, or signing off on the annual report, or maybe a supplier of eucalyptus seeds/seedlings confirming that SF is indeed buying sufficient quantities to do the planting they claim they are. I feel close to having the confidence to buy in again.

Plus my bias is to want to believe. After all, I bought in and lost money, so deep down inside, I want to be vindicated on that prior decision and have this one come out fine in the end. That forces the rational part of me to be extra careful before buying back in.


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## Four Pillars (Apr 5, 2009)

FrugalTrader said:


> Anyone buying TRE at these levels?


I'm tempted - but I'm trying to hold off, since if I buy - it would be just guessing/gambling.

@Potato - If you wait for verification that the company is legit - you'll be too late. Or you will have saved yourself some money.


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## HaroldCrump (Jun 10, 2009)

larry81 said:


> TRE just hired PwC to clear things out.


Wasn't Deloitte the auditors for CCME?
PWC were also the auditors for the rogue Indian software firm Satyam Computers.
After what Arthur Anderson did and what happened to them, these big 5 * auditors mean squat.


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## Potato (Apr 3, 2009)

HaroldCrump said:


> Wasn't Deloitte the auditors for CCME?
> PWC were also the auditors for the rogue Indian software firm Satyam Computers.
> After what Arthur Anderson did and what happened to them, these big 5 * auditors mean squat.


Well, I'd agree that the auditor's signature on the annual report means squat on an ongoing basis, but once they get tipped off about the fraud they're more careful before signing off. I didn't follow the Longtop scandal too much, but I believe that's what happened there. The auditor signed off on cash balances for years just based on the statements the company put in front of them, then after a tip-off they tried to take the statement to the bank to actually verify it.



Four Pillars said:


> @Potato - If you wait for verification that the company is legit - you'll be too late. Or you will have saved yourself some money.


I think you're partially right. I'd expect the stock to jump up to some level like maybe $10 - $12 as soon as solid proof is presented, but I doubt the opportunity will be gone entirely right away. The fear and uncertainty discount will be here for months yet. But you're right, in all likelihood I won't be able to buy in as low as I sold out once there's something approaching certainty.


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## humble_pie (Jun 7, 2009)

i keep on wondering if it's a takeover attempt. Babyface is only the spokesman.

amount of cash is staggering. Most companies with big cash get nervous, take steps to bring cash down because of hostile takeover possibilities.


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## humble_pie (Jun 7, 2009)

it was easy to out mode's purchase of 16-year lagavulin yesterday  but this shorting business in TRE is a far more difficult kettle of fish.

i am wondering if it's possible that the short position in sino forest is largly naked. Naked shorting is selling stock that can't be borrowed for a legitimate short. Sometimes because the brokers can't find any to borrow. But quite often, in the penny stocks & the pink sheets - and TRE is pink-sheet-listed SNOFF in the US - the stock doesn't even exist. In canada, most of the brokers do it. Specifically, they are willing to fill naked short orders ... for certain clients.

naked shorting is illegal in the US of A, but a lot of the traffic has been driven north to canada. It flourishes here in part because we don't have a strong national exchange commission that's capable of policing scandals. The mounties' imet division & the provincial commissions do their best, but they are splintered & weak so a lot slips by unnoticed. 

it's said that organized crime has a foothold in the naked shorting business.

some say that US institutional naked shorting is what brought on the market collapse of 2008/09.

in the US, a small easily-identifiable group of experienced journalists have kept the spotlight shining on shorting & naked shorting stories, saying that the practice is the fastest & best way to expose lies, fraud, flimflam promotion, skullduggery & borderline criminal behaviour by some publicly-traded companies & their underwriter/brokers.

in focusing on the large group of chinese RTOs in both the US & canada, one would have to say that Babyface et al had the greatest chance of frequent home runs as well as the least chance of being sued for libel. Because allegations, both against & for the chinese companies, are exceedingly difficult to prove due to language & culture issues.

it's an astoundingly difficult case. I bet there's not an imet mountie or an osc investigator in the whole of canada who understands what is going on.


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## ddkay (Nov 20, 2010)

Felix Salmon brought up a good point tonight. Just who is Benjamin Wey, and why is Dundee defending themselves by citing him?

Muddy Waters Sino-Forest research ‘pile of crap’: Dundee
China expert of the day, Benjamin Wey edition


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## humble_pie (Jun 7, 2009)

i am wondering why they keep looking for the short positions in canada.

couldn't they have shorted snoff.pk instead.

oh-oh. Rumour has it which are the 2 broker firms with big short positions in snoff. I do believe one can find this on the reg sho list. Not that i've looked. Yet.


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## jerryhung (Mar 28, 2011)

humble_pie said:


> i am wondering why they keep looking for the short positions in canada.
> 
> couldn't they have shorted snoff.pk instead.
> 
> oh-oh. Rumour has it which are the 2 broker firms with big short positions in snoff. I do believe one can find this on the reg sho list. Not that i've looked. Yet.


I think NAKED SHORT is illegal in US, hence Canada
It was in the Globe article yesterday

Globe has some interesting comments too, and I agree
1. OSC is useless 2. It's so hard to track down short sellers
http://www.theglobeandmail.com/glob...eager-to-talk-to-osc/article2052615/comments/


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## humble_pie (Jun 7, 2009)

tomorrow is a milestone for sino forest.

sometime before 8:30 am est the company will upload its quarterly earnings statement on its website. 

at 8:30 the teleconference will get underway. Analysts are expected to grill the company. 1-888-231-8191. All lines might be booked unless you arrive early. Replays available on the website & by phone at 1-800-642-1687 pass code 681-2259277.


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## ddkay (Nov 20, 2010)

Quarterly is out: http://newswire.ca/en/releases/archive/June2011/14/c5680.html


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## humble_pie (Jun 7, 2009)

any thoughts so far ddkay ?


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## ddkay (Nov 20, 2010)

not really. not yet. the conference call will be more interesting


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## humble_pie (Jun 7, 2009)

lol all communication overloaded & down.

what strikes me in news release is the distortion caused by evaluation of convertibility of the bonds. This resulted in a 53 million charge to the quarter (march 31) being reported but would result in a 450 million gain to any accounting as of june 1, because of collapse in share price.

the directors have moved to eliminate this feature in the bond indentures, so the distortion will not persist past Q2, although it seems it will be present in the next quarter reports.

news reports are picking up "loss" & "company will continue to be stressed by short-seller allegations" in their headlines, which is normal & OK for the media, but these phrases are a bit lopsided. (headlines are often lopsided imho.)


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## kcowan (Jul 1, 2010)

When a foreign company is listed in the US as .pnk versus an ADR, does that put it in a different category for your investing?


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## CanadianCapitalist (Mar 31, 2009)

For those of you interested in TRE, here is FP coverage of the conference call:

http://live.financialpost.com/Event/Sino-Forest_speaks


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## Sampson (Apr 3, 2009)

@ kcowan,

I treat those holdings as part of my Foreign exposure. Doesn't matter where they trade, it is where they earnings come in from that I'm interested in.


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## humble_pie (Jun 7, 2009)

kcowan not sure why you are asking but sincerely hope you would not buy the dot pk version, because the more liquid & efficient market in TRE for anyone with canadian dollars is toronto.

and not to worry about any scandal-ridden whiff of the dot pk world being passed onto SNOFF.

do you see that eff at the end of snoff. Stands for foreign. It means snoff trades within the foreign section of pink sheets. This is a highly respectable section as you'll see if you browse it on pink sheets' website.

little-known fact is that all canadian stocks that are not already interlisted trade in this pink sheets' foreign section, usually with an eff at the end of the symbol. These are called tracker stocks. Their purpose is to serve US residents who don't have canadian broker accounts.

there are distinguished giants among the dot pk eff stocks. Best known is switzerland's Nestle. Also - surprise - canada's bombardier trades in the US only as an eff stock in dot pk.


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## HaroldCrump (Jun 10, 2009)

Apparently, market is not impressed with their disclosures.
Stk is down ~ 14%.


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## Toronto.gal (Jan 8, 2010)

*Clarity Insurance* used to have very clever & funny commercials regarding the meaning of 'clarity'. Did you guys ever watch them?  

Anyway, this TRE situation reminds me of just that word, 'clarity' [or lack thereof].


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## humble_pie (Jun 7, 2009)

harold i mentioned earlier this am

that if TRE didn't have the idiosyncratic valuation of the conv debentures on their books - which they're recently removed - they wouldn't have recorded that 53 million loss & they would have had a gain that surpassed Q1 a year ago ...

also i have to review but my 1st tentative take is that they are serious about denying muddy, & they are enraged, & they will spend what it takes to clear their name, & they will sue the daylights out of em.

i'd imagine there are others, hedge funds etc, behind muddy. At one point i even wondered if it might be paulson himself, anxious to buy more or possibly take out the entire co, lol.

right now analysts & journos are having the usual first kneejerk reaction imho. They're reporting the superficial. Later on more interesting stuff will bubble up.

i'd also wondered previously about whether the muddy short position was in SNOFF rather than TRE.

did some research & yes there is indeed a large naked short position in snoff. Naked short is worse than short. It means the brokers themselves cannot deliver. Shares are FTD - failure to deliver.

the snoff FTD position shows up on the Reg Sho list of delinquent naked short stocks maintained by the SEC.


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## kcowan (Jul 1, 2010)

humble_pie said:


> ...little-known fact is that all canadian stocks that are not already interlisted trade in this pink sheets' foreign section, usually with an eff at the end of the symbol. These are called tracker stocks. Their purpose is to serve US residents who don't have canadian broker accounts...


Did not know that. Thanks HP!

Is there any significant tracking error?


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## humble_pie (Jun 7, 2009)

yes tracking error for tracker stocks is gigantic.

eff stock buying & selling is effected by a broker network but all trades end up on toronto. No US broker maintains any inventory of the underlying canadian. So the brokers network together to get the job done on the home exchange.

btw same thing works for euro, asian & all overseas stocks. All have US tracker stocks.

there is also, always, a currncy exchange to deal with.

to make a long story short, a small retail trade of maybe a few thousand shares of a tracker stock would cost about $100 more in assorted fees than if investor bought straight on toronto.

inv will not see these fees; they will be embedded in the quoted bid & ask, the way bond fees are embedded, for any tracker stock he might be interested in.

once canadian stocks graduate to trading on organized US exchanges, the arbs can step in & keep the excess fat off the bone. I have never understood why bombardier remains a tracker stock. I assume it's because their big US institutional investors are well equipped to buy & sell directly on toronto ... and bombardier doesn't want small fry US investors ...


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## Toronto.gal (Jan 8, 2010)

What a day for TRE, -32%; wonder about tomorrow.


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## runner39 (Mar 11, 2010)

*Take a chance on Sino Forest (TRE)?*

any opinions?


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## Eder (Feb 16, 2011)

My opinion with this company's business plan, and I quote their CEO 

"Essentially, Sino-Forest acquires trees in China through subsidiaries in the British Virgin Islands, which hold the trees for roughly three years before selling them to undisclosed customers known as “authorized intermediaries” 

I would run.


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## humble_pie (Jun 7, 2009)

you'd run ?

and i can't think of a multinational that doesn't have subsidiaries in offshore tax havens. Use em for storing anything & everything. Oil tankers. Profits. Cash. Even trees.

a current risk is that trading might be halted while waiting for the company to carry out its investigation. They're talking 2-3 months. That's next fall. And quite often, halted or delisted companies never make it back. They stay in the OTC markets for the rest of their natural lives.


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## humble_pie (Jun 7, 2009)

btw i totally doubt the "quote" is verbatim from CEO alan chan. He doesn't talk like that.

looks like something a journo would write lol.


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## Eder (Feb 16, 2011)

humble_pie said:


> btw i totally doubt the "quote" is verbatim from CEO alan chan. He doesn't talk like that.
> 
> looks like something a journo would write lol.


Sorry, I looked for the article I cut this quote from but cant find it....was on the Financial Post I think.

I was just doing some fast research into this company to see if they are perhaps a worthy risk.


Ahhh here it is
http://www.canada.com/story_print.html?id=5f0355e9-9d03-4dfd-a025-9d21fd53212e&sponsor=


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## humble_pie (Jun 7, 2009)

eder,

that is not a quote & your original message is not quite right.

your original paragraph was just the journo speaking, not the CEO, as i've mentioned.

your link today shows only National Post, but i believe the writer is peter koven of natpost.

koven is paraphrasing what he heard alan chan of sinoforest saying; but he most definitely is *not* quoting chan.

good journalists like peter koven provide verbatim quotes within quotation marks only. Whenever you see the kind of paraphrasing that you're misinterpreting, it's only the journalist re-arranging the information. Quite often, subjectivity gets in the way & the flavour of the remarks gets slightly altered.

in this case, the identity of sino forest's customers is the achilles heel of the affair. We all know - you should know - that CEO alan chan himself would never, as in never, use the word "undisclosed" about TRE's customers because it carries a hint of doubt.

but it's OK for a journalist to employ this word in summarizing what the CEO had to say, because in reality questions swirl about these customers, and their existence or non-existence is a vital issue.


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## Eder (Feb 16, 2011)

Seems like the company Sino Forest says it bought 200,000 hec from says the actual amount is like 10% of that. Pass the popcorn!!

http://www.theglobeandmail.com/glob...ts-doubt-on-sino-forest-claim/article2066110/


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## MoreMiles (Apr 20, 2011)

This is an *investment* forum.
Canadian Money Forum > Money Topics > Investing

Any one trading Chinese RTO at this point is trying to gain from gambling their luck. If you are lucky, you win big, if not, you lose everything. It is like "double or nothing"... 

So in my opinion, discussion of speculating on such a stock should not be included here. It should be included in a gambling forum, along with Texas Hold'em and BlackJack.


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## Eder (Feb 16, 2011)

MoreMiles said:


> This is an *investment* forum.
> Canadian Money Forum > Money Topics > Investing
> 
> Any one trading Chinese RTO at this point is trying to gain from gambling their luck. If you are lucky, you win big, if not, you lose everything. It is like "double or nothing"...
> ...



You do realize that if you know how to play Texas Hold'em is not gambling?


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## alphatrader2000 (Aug 18, 2010)

Just the fact that these guys with such big market cap delisted from US should be a red flag!


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## Dibs (May 26, 2011)

The Globe and Mail are doing some fine reporting in China. Here is their follow up article...
http://www.theglobeandmail.com/repo...-the-truth-behind-sino-forest/article2066964/


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## kcowan (Jul 1, 2010)

Good work G&M. And risking the wrath of the Chinese government too. They were probably called by the company...


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## humble_pie (Jun 7, 2009)

for some time now i have been wondering what giant entity is behind the campaign to destroy sino forest. At one point i even wondered if it might be paulson himself, trying to acquire the whole company.

i also wondered whether the destroyer-acquiror might be an arm of the chinese government.

here is a forbes article with good insight into china's current economy & its emerging weaknesses:

http://blogs.forbes.com/gordonchang/2011/06/12/is-sino-forest-a-sino-fraud/

author gordon chang writes:

_On top of this, Beijing is continuing to renationalize the economy. So it should come as no surprise that gargantuan state enterprises are taking advantage of this regressive trend to obtain for themselves the lucrative opportunities that have been created by smaller companies.

Consider the plight of Zhejiang Glass, the first privately held Chinese enterprise to go public in Hong Kong. The troubled concern, which has more debt than assets, looks like it is being forcibly nationalized by local governments grabbing assets ...

Other private businesses are also being taken over by government officials looking for any excuse to plunder the private sector. As they say in China, “The Communist Party is now the economy.”_

the recent globe & mail stuff is just the investigation-du-jour imho. Two experienced china-based field reporters, who happen to be married to each other, dug up spokespersons for gengma in yunnan province who said their company never sold sino forest as much land or trees as TRE later was to claim.

one day later, this am to be exact, sino forest says the globe reporters interviewed the wrong gengma at the wrong address.

& on & on it will go. Next we will hear that gengma has close ties to the communist party, or the translator confused mus & hectares, etc.

i for one think sino forest is no kind of stock to touch, but it's a vitally important story that people might want to keep an eye on. A metaphor for change in china. In a nutshell, could the PRC be wanting foreigners out of valuable national chinese resources.


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## HaroldCrump (Jun 10, 2009)

humble_pie said:


> In a nutshell, could the PRC be wanting foreigners out of valuable national chinese resources.


While at the same time, aggressively acquiring national resources of other countries.


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## ddkay (Nov 20, 2010)

Hot off the press: Paulson dumps its entire Sino-Forest position (G&M)

http://www.scribd.com/doc/58334795/Paulson-Document

TRE will probably get halted or close at 0 tomorrow.


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## runner39 (Mar 11, 2010)

be positive it's going to $20!!!


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## FrugalTrader (Oct 13, 2008)

Down 20% this morning!


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## runner39 (Mar 11, 2010)

throwing in the towel, should have played the lotto


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## HaroldCrump (Jun 10, 2009)

Down nearly 50% since yesterday's close now, and falling.
Wow, what a disaster for the genuine investors.


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## ddkay (Nov 20, 2010)

There's rumours on bay st. squawk boxes this is getting halted indefinitely today or tonight*. Time to recover what you can before it's too late.


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## humble_pie (Jun 7, 2009)

they might halt on toronto but it's my working belief until corrected that snoff dot pk will continue to trade in US of A.

also there's a gray over-the-counter market in canada, isn't there. I have no idea how to access it or get quotes from it.

rabble n rubble in the internet says that worse than paulson news is rumour that TRE's bankers could call in their loans due to impossibility of evaluating company's assets.


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## Toronto.gal (Jan 8, 2010)

runner39 said:


> throwing in the towel, should have played the lotto


Did you just buy on June 15th when you asked for opinions here? I wonder what logic you used to take such a big chance.  At any rate, I hope you didn't lose much.


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## ddkay (Nov 20, 2010)

If any Canadian banks need a sellside analyst I'm available for hire. Looks like anybody can do this job.


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## CanadianCapitalist (Mar 31, 2009)

TD Newcrest had a "ACTION BUY" on this stock before suspending coverage. At least, TD suspended coverage in the wake of the first Muddy Waters report. RBC and Dundee analysts kept their ratings and even price targets on TRE until as recently as yesterday. Great job guys!


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## ddkay (Nov 20, 2010)

Yup. I'm just going to leave this screen cap here for the archives.


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## humble_pie (Jun 7, 2009)

well i don't know.

anyone pointing fingers of blame at analysts who recommended tre for years & years might remember that the canada pension board probably held or still holds tre; the finger-pointer's own pension could very well hold tre; and omg even the finger-pointer's canadian equity etf could. very. well. hold. tre.

therefore never send to know for whom the bell tolls
it tolls for thee.


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## spatrick (Jun 21, 2011)

Well, I've been fleeced.

Owned about 10K of TRE-T before the crash, and then bought and additional 5K when it was $4.90, hoping for a bounce.

I've been reading conflicting reports here and around the Internets, and as a new investor really have no idea what to do now.

Sell tomorrow AM?

Wait a little longer and hope? 

At the moment I'm out 12K, which is about 10% of my total portfolio. 

Advice?


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## Eder (Feb 16, 2011)

I think you already know what to do but it sticks in your craw


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## Jon_Snow (May 20, 2009)

Spatrick, that really sucks.

Your scenario is exactly the reason why I don't pick individual stocks. Index funds and ETFS only.


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## ddkay (Nov 20, 2010)

yeah humble you mentioned some ETFs here that held sino-forest earlier in the thread - hartford, blackrock, vanguard, henderson. As of March 31, CPP held 813,000 shares of sino-forest.

While sell-side analysts do play a role in decision making you're right it's not entirely their fault. Rarely a sell-side analyst will be given resources to do on-the-ground in-depth research on companies. They depend on the auditors for number accuracy. They have reports to write, marketing material to prepare for clients, clients to meet with, etc. Most ratings and price targets are based on simple discounted cash flow analysis, other funny financial models and not being too far off from consensus.


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## Four Pillars (Apr 5, 2009)

TRE is up 21% today. No idea why.


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## ddkay (Nov 20, 2010)

At this point it's trading like a penny stock so who knows. This blog post was circulating today http://www.metalaugmentor.com/eforum/?p=6994


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## humble_pie (Jun 7, 2009)

ddkay are you a fan of metalaugmentor.

mildly interesting. He uses 1st person plural but language signature clearly says there's only one writer. A bit pompous. And fekete. Gold standard monetary economics. Uber right wing. Maybe its time has come.

here's a oneliner from anonymous that sums up the life & times of sino forest:

_" there are some things about business deals in china that cannot be divulged to shareholders, you know what i mean ?"_


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## FrugalTrader (Oct 13, 2008)

Four Pillars said:


> TRE is up 21% today. No idea why.


Could be short sellers closing their positions. Ie. Short covering


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## HaroldCrump (Jun 10, 2009)

Wo...stock's shooting for the moon this afternoon.
Already up ~ 45%


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## avrex (Nov 14, 2010)

HaroldCrump said:


> Wo...stock's shooting for the moon this afternoon.
> Already up ~ 45%


Obviously some investor is taking a chance that Muddy Water's is wrong.
Sino-Forest Surges After Wellington’s Disclosure of 11.5% Stake


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## Abha (Jun 26, 2011)

Not sure if the two Wellington subsidiaries are related but Mark McQueen has been a staunch supporter of the CFO of Sino Forest and he may be doing his friend a favour here.

Just my opinion though. 

http://www.wellingtonfund.com/blog/2011/06/02/whats-a-muddy-waters/


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## ddkay (Nov 20, 2010)

Bigtime Investors Lose Big on China - 06/23/11 - TheStreet.com



> The gigantic investment manager Wellington Management has made some pretty hefty bets on a number of Chinese stocks that are now halted or delisted. The firm built an 8.2% stake in China-Biotics, the yogurt-culture company in Shanghai, despite the fact that China-Biotics had spent the previous year defending itself against report after report by short-sellers and the Chinese media alleging that the company isn't what it says it is. The Nasdaq exchange halted trading in China-Biotics last week after it failed to meet the deadline for filing a 10-K report with the SEC. But it doesn't stop there for poor Wellington, a spokesman for which declined to comment. The firm holds 5% of Jiangbo Pharmaceuticals ( JGBO ) , whose shares have been halted since May 31; 3.7% of Yuhe International ( YUII ) , a provider of "day-old chickens" whose shares were halted on June 17; and 2.2% of Puda Coal ( PUDA ) , whose shares were halted on April 11. Wellington also recently unloaded an 800,000-share position in China Electric Motor ( CELM ) , a company whose auditor resigned after finding alleged irregularities. CELM was delisted by Nasdaq earlier this month.


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## Abha (Jun 26, 2011)

ddkay said:


> Bigtime Investors Lose Big on China - 06/23/11 - TheStreet.com


Looks like they are playing the Chinese lottery.


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## Franky Jr (Oct 5, 2009)

Well it is now up 302% from its low last month. I don't even know.


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## kcowan (Jul 1, 2010)

Franky Jr said:


> Well it is now up 302% from its low last month. I don't even know.


The people that think they know are buying. Good for them!


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## Abha (Jun 26, 2011)

Franky Jr said:


> Well it is now up 302% from its low last month. I don't even know.


Damn it. This fell off my radar. Should have been paying closer attention.

The easy money has been made so it's probably best not to chase.


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## King Tut (May 3, 2009)

Abha said:


> The easy money has been made so it's probably best not to chase.


IMHO buying sino-forest is not investing.... it is speculation... you might as well buy a lottery ticket!


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## Abha (Jun 26, 2011)

King Tut said:


> IMHO buying sino-forest is not investing.... it is speculation... you might as well buy a lottery ticket!


I like playing the stock lottery.

I'd rather put $100 on a Bank of Ireland or a National Bank of Greece or even a Bank of America than the 649 or Lotto Max.

I like my odds better in equities because at least I have a chance of making some money.


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## jerryhung (Mar 28, 2011)

Wow, another +20% today

Google Finance
Last 5 days = +87%
Last 1 month = +193.5%
Last 3 months = -68%


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## rookie (Mar 19, 2010)

conspiracy theory:

sino forest and muddy waters are in cohorts with unknown forces. first sino publishes results with a few probable holes. muddy promptly flags it. sino takes its own time to respond and when it does, does it poorly. while the stock drops to pennies and all the dust settles down, the unknown forces start buying. seeing the volumes and price increases, first speculators jump in and then later on, unsuspecting retail investors jump into the bandwagon. after the stock reaches respectable levels, unknown forces start reaping their moolah.

spectacular movie story enacted in broad daylight for all to enjoy.


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## Franky Jr (Oct 5, 2009)

rookie said:


> conspiracy theory:
> 
> sino forest and muddy waters are in cohorts with unknown forces. first sino publishes results with a few probable holes. muddy promptly flags it. sino takes its own time to respond and when it does, does it poorly. while the stock drops to pennies and all the dust settles down, the unknown forces start buying. seeing the volumes and price increases, first speculators jump in and then later on, unsuspecting retail investors jump into the bandwagon. after the stock reaches respectable levels, unknown forces start reaping their moolah.
> 
> spectacular movie story enacted in broad daylight for all to enjoy.


haha I like this, I wouldn't be at all surprised if this thing dropped a lot again simply due to profit taking (even ignoring the chance of muddy being correct). But for those who got in near the $2 levels I hope it goes back to $20. And remember; it's not gambling if you know you're going to win.


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## PaperDog (Aug 18, 2011)

Looks like on Sedar , for Q2 2011 financials , that the auditors refused to sign off on the 2nd quarter. wow.


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## ddkay (Nov 20, 2010)

OSC have asked 5 executives including CEO Alan Chan to resign from the company for misrepresenting company finances, stock halted - BBerg


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## webber22 (Mar 6, 2011)

After all the litigation is over, the stock might be worth a few pennies


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## al42 (Mar 5, 2011)

Pink sheet quote down to 2 bucks now.

http://finance.yahoo.com/q?s=SNOFF.PK&ql=0








ddkay said:


> OSC have asked 5 executives including CEO Alan Chan to resign from the company for misrepresenting company finances, stock halted - BBerg


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## CanadianCapitalist (Mar 31, 2009)

Maybe Carson Block will turn out to be mostly right after all...


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## Abha (Jun 26, 2011)

Apparently the OSC suffers from schizophrenia and have rescinded their order.


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## ddkay (Nov 20, 2010)

The order was varied because OSC realized those actions could be obtained after a hearing


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## ddkay (Nov 20, 2010)

Over the weekend Allen Chan resigned and Judson Martin (bio) was appointed as new CEO: http://www.sinoforest.com/Uploads/SF-Press Release-28 Aug-2011 FINAL.pdf


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## HaroldCrump (Jun 10, 2009)

Several pension funds have initiated a class action lawsuit against the [ex]-management because it's come to light that management had been selling their stakes consistently since 2007.
The saga continues...


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## Abha (Jun 26, 2011)

HaroldCrump said:


> Several pension funds have initiated a class action lawsuit against the [ex]-management because it's come to light that management had been selling their stakes consistently since 2007.
> The saga continues...


It's amazing that so many smart people missed the red flags on this company. If I was a client of one of the firms that recommended this stock and I went on the recommendations of these star analysts I would be furious.


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## Toronto.gal (Jan 8, 2010)

Abha said:


> It's amazing that so many smart people missed the red flags on this company.


You mean rich too [not only smart]. But the one most puzzling to me was Richard Chandler as he bought just in the last month or so and right up to the day before trading was halted, I mean what was he thinking?  

Mind you, had he gotten out in time, he would have profited big in a very short time [as Buffett did with BAC].


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## Abha (Jun 26, 2011)

Thought this was an applicable read.

http://business.financialpost.com/2011/09/01/sino-forests-numerous-lessons/


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## Dibs (May 26, 2011)

Saturday, the Globe and Mail published a long but interesting report on forestry in China with a Sino-forest backdrop.

The empire Sino-Forest built and the farmers who paid the price


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## CanadianCapitalist (Mar 31, 2009)

And this story is now in its end game:

Sino-Forest files for bankruptcy protection, seeks buyer


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## HaroldCrump (Jun 10, 2009)

Yep, and they are still pursuing the lawsuit against Muddy Waters.
Company is still insisting they was no wrong-doing/fraud.


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## avrex (Nov 14, 2010)

Hmmm.... Did the auditor, Ernst & Young get off easy?


Ontario approves $117-million settlement with Sino-Forest auditors.


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