Tuesday, June 21, 2011

I got yesterday's post wrong

Yesterday's post was as error-ridden as anything I have ever published.

On the most important matter: I thought the Globe and Mail story on Sino Forest would drive the stock down at least 50 percent.

The last time I saw a major paper of record come right out and agree with a shortseller that a major company was a fraud was...  well... never.

I thought that would be significant. I thought it would be game-over.

The stock was down less that 15%.

I have a word for my preconception: wrong.

On the size of the theft in global history - well obviously I was not broad enough. I have to exclude all thefts in the nature of war or invasion (dispossession of the American Indians, Australian Aborigines etc). I have to exclude thefts in the nature of revolution (eg the end of Communism in Russia). I have to exclude thefts by Government (Yukos). I have to exclude thefts from Government in quasi war (eg theft of the reconstruction funds in Iraq).  I could go on.

However $2 billion neat stolen (still not proven but in my view looking likely) is a larger net theft than Madoff and about as large as they get in financial markets. But then I am likely to be shown to be wrong on that too.


John

16 comments:

Peter Tang said...

Paulson selling out as well - surely the end if nigh?

Anonymous said...

http://www.zerohedge.com/article/paulson-dumps-all-sino-forest-holdings-750-million-realized-loss

dsquared said...

It's surely most likely that the biggest financial fraud is one that none of us have heard of because they haven't been caught yet. Since credible estimates put the total size of "carousel" VAT fraud in the EU at EUR50bn a year, for example, there is plenty of room for there to be a much bigger thief than Madoff somewhere out there.

Frozen in the North said...

Not sure you were wrong, don't forget that at $2 lots of people are covering their short, driving up the price.

Moreover, if you bought at $25, and its at $2, it now looks like a cheap option! Maybe the company only overstated its assets (as opposed to complete fabrication), it remains that at $2 there's not much reason to sell anymore!

C said...

You're not wrong, just early. Need to build in psychological inertia, loss-aversion, self-denial, etc. Stock's gotta work its way down the rationality ladder...

Anonymous said...

SEC Charges Carson Block and Muddy Waters LLC in Stock Manipulation Ring

http://www.briefingwire.com/pr/sec-charges-carson-block-and-muddy-waters-llc-in-stock-manipulation-ring

this is shocking! so we are now only allowed to write buy recommendations?

Anonymous said...

"On the most important matter: I thought the Globe and Mail story on Sino Forest would drive the stock down at least 50 percent."


Does this change your impression as to the importance of mainstream media?

On a side note, it's interesting that people no logner even bats an eyelash at figures in the single billion dollar range--if a story doesn't involve hundreds of billions or trillions, it doesn't seem to generate scandalized feelings anympre.

Anonymous said...

Check out Kid Dynamite's blog to catch the fabricated rebuttal, if you haven't already.

Detlef Guertler said...

"Come on John, it would be far too ironic if a newspaper felled a tree company. A Paulson & Co. withdrawal, on the other hand, is all too real."

http://ftalphaville.ft.com/blog/2011/06/21/601351/fact-or-fiction-sino-forest-edition/?updatedcontent=1

Nemo Incognito said...

Speaking of where the hell is China Development Bank on the rationality ladder? HRBN beggars belief these days.....

IF said...

Short the rumor, cover the news?

At some point even a fraud might become a value play. Aren't people making money with Madoff claims right now?

John Short said...

You were right. It went as low as C$1,30

rcyran said...

Wasn't Bre-X a $6bn fraud? I think that might qualify as a bigger corporate fraud in modern history.

PS -If this is the worst correction you've ever written, then you're doing pretty well!

Anonymous said...

I'm not sure you were wrong John. TRE was down 40% after it was revealed that there was a hoax going around saying that the SEC charged Muddy Waters with Fraud.

That hoax held the stock up for a day.

Scott said...

True, you messed up yesterday's post. Like many you worry about chump change, when the real theft is "money". It is hard to think in trillions when you deal with millions.

Anonymous said...

G&M is a left-wing rag (I just read an article by them saying that men shouldn't be allowed to be politicians).. and their story was investigated by some kind of freelancer questioning some bureaucrat, but ultimately asking questions based on the reporter's own limited information and assumptions - the water is as 'murky' as ever.

The real puzzle is why does Allen Chan hold a crazy amount of SF stock, and why hasn't he fled (perhaps he is fleeing now, maybe they are over there shredding paper and laundering money.. but it doesn't look that way).

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