The legion of Sino-Forest defenders who came out after the damning report from Muddy Waters now appears to be in full retreat. It looks like Muddy Waters got it right, and some high-profile folks got caught unaware. John Paulson decided to cut his losses on Friday and sold completely out of the position - dealing his investors a loss of as much as $720 million.
As bad as that is, things took a turn for the surreal yesterday before the open. At 9:25 a.m. yesterday, five minutes before the open, ZeroHedge tweeted that the SEC had charged Muddy Waters and Carson Block with stock manipulation. That didn't smell right for a number of reasons. First and foremost, the SEC has no jurisdiction over Muddy Waters (a firm based in Hong Kong) or Sino-Forest (a stock traded on the Toronto exchange). I sent this reply to ZeroHedge three minutes later.
Then the story got legs. Before long, it was all over Twitter and StockTwits. The press release looked legit, but there wasn't a single thing on the SEC website about it. About an hour later, the SEC published a statement that the press release was a hoax and that there was no current SEC action against Muddy Waters or Carson Block.
Now think about this for a minute. Some desperate long went to a lot of trouble to pump up the stock before the open, presumably to score a better exit price. Now that Paulson has silently agreed with Carson Block's assessment of the company, it's like rats trying to get off a sinking ship. The stock was down another 27% yesterday.
There are two things you should take away from this story:
1) Emerging markets stocks are not for little boys in short pants.
and
2) If you're not on Twitter you are really shooting yourself in the foot from an investment and market knowledge standpoint.
Those of you who think Twitter is for teenage girls to tweet about American Idol are completely missing the boat. I shudder to think what yesterday's Sino-Forest hoax might have cost some investors who believed the bogus release. Anyone on Twitter or StockTwits knew it was a fake before the open.
If you don't have a Twitter account, take five minutes and set one up now. You don't ever even have to tweet anything. Just use Twitter like a radio and listen. See what's going on in the market the instant it happens, long before CNBC catches a whiff of it and can put something together on screen.
Here are the steps:
1) Go to Twitter and create an account
2) Follow @EddieBraverman
3) Pull up the list of people I follow. You should probably follow most of them too.
4) Download TweetDeck or TweetDeck for Chrome. Don't skip this step, you'll thank me later.
5) If you're an active trader or have an interest in trading and trading ideas, join StockTwits as well. If you do, you can follow me on StockTwits at @EddieBraverman. I use StockTwits only to discuss stocks, however, so make sure you follow my Twitter feed to get everything (including my drunken 144-character rants).
Seriously, guys. Twitter is where the best information is at. Just ask Hosni Mubarak.
It could also work the other way around... If a rumor gets tweeted and spreads like wildfire and it proves to be wrong, then I'd rather not be the first to hear about it because I wouldn't want to act on emotions thinking I could be the first one to get in on the action before everyone else.
this is a terrible argument
How so? It was ZeroHedge that originally tweeted about the SEC lawsuit, and a lot of people use ZH as a reputable source. How many people do you think traded off the original tweet?
^^...or you could get a twitter so you don't trade on false information like those who believed the SEC hoax. It goes both ways but I'd rather be up to date v.s completely out of the loop.
Enjoy becoming aware of things hours after I am
HAHAHA @ Hosni Mubarak comment
I met with Cheah Cheng Hye (google him) on the day Sino Forest fell, he held a relatively big position (3rd or 4th largest holder). He was completely shocked and suprised by what was happening and reaffirmed his belief that backdoor listings of Chinese companies are incredibly risky.
He did say if it was a fraud, it was an incredibly well executed one and beleives that few Asian companies have the skill/ingenuity to enact a fraud of this scale and complexity.....
I know a lot of people are trying to figure that out. Carson Block is threatening a lawsuit to expose whoever did it, but I'm not sure it's actionable. I mean, there's nothing that says a press release has to be factual. Impersonating the SEC might be a bigger problem, but I'm not sure it rises to the level of illegality. I could be totally wrong though.
We shall see. I'd sure like to know who did it.
If you're a long term buy-and-hold investor, obviously avoiding every bit of noise is appropriate and I'm pretty sure Warren Buffet isnt checking twitter every two minutes.
On the whole however, the more information (from a wide range of sources) increases your understanding and gives you more tools to make a decision
Great piece
@EddieBraverman #WINNING!
Is this a good stock to buy now at $2.40?
It's probably a good buy in this sense of the word:
Not sure about that one brah: http://www.google.com/finance?q=TSE%3ATRE
Though I have 30-day holding restrictions so I'm not touching it.
LOL. Anybody else smell cat?
Impersonating the SEC is likely very illegal, California has even enacted a law making it illegal to impersonate someone wrongly online:
California’s SB 1411, which adds a layer of criminal and civil penalties for certain online impersonations, goes into effect starting today. The consequences include a fine of up to $1,000, and/ or up to a year in jail. There has to be intent to harm, intimidate, threaten, or defraud another person – not necessarily the person you are impersonating. Free speech issues, including satire and parody, aren’t addressed in the text of the bill.
It's time for Tim Sykes to step in.
The whole situation leading up to this event included some rather odd and strange irregulatities. I for one am fearful that this could be the begining of the Asia sell down. While obviously this will not have the major trigger effect like the Lehman Brothers collapse had on the US and world fincial markets, it could very well be the precurser that Bear Sterns was, only for the Chinese raw materials sector. This is actually very disturbing news comming from a country that is experienceing double digit GDP growth fueled almost exclusively by the construction industry. Even more worriesome is for outside investors who now must fear lack of transperacy when making investments in China.
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