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The Following Sino Forest Sell-Side Analysts Should Be Terminated Immediately

Tyler Durden's picture


As we pointed out the day after we broke the news that Paulson is about to suffer a historic loss on the Sino Forest Chinese fraud (a loss that has now been realized), the Paulson analyst who suggested this humiliating investment for the man who is now best known for hiring Paolo Pellegrini, have long since seen the pink slip. The story however does not end there: below we present again the sell side analysts who had Buy and Outperform ratings on what is now the biggest financial ponzi fraud since Madoff. In order to protect the reputation of such host firms as Raymond James, Dundee Securities, TD Newcrest, Credit Suisse, RBC, BMO and Scotia Capital, we urge the management teams to immediately terminate the following sell-side "analysts" whose work on TRE.TO was nothing but piggybacking on groupthink, doing absolutely no actual due diligence, costing clients billions in losses, and whose names will now forever be enshrined in the pantheon of "most worthless sellside analysts" ever.

TRE.TO analyst coverage as of June 3.

In fact, the termination round should start with Dundee's Richard Kelerats:

Funny how quick Kelertas changes his opinion on a topic in which he was absolutely certain as recently as 6 days ago:

Mr. Kelertas didn’t mince his words. From the get-go his goal was to explain “why Muddy Waters’ research is a pile of crap” and he went about his attack by addressing specific issues that Mr. Block has raised.

“All indications are that there are no fraudulent activities, no overstatements. We believe in the company. We trust the company after they have come through with various disclosures,” Mr. Kelertas said.

If Sino-Forest has done nothing wrong, why hasn’t its stock rebounded from its devastating drop? Mr. Kelertas has a theory. For starters, before the report was released, markets were already nervous because QE2 is winding down and there are fears of a Chinese economic slowdown. But more important, there was a growing short position in Sino-Forest’s stock so investors were primed to jump at anything overly negative. Plus, allegations of wrongdoing against China Forest Holdings Co. Ltd., another Chinese forest plantation operator, broke earlier this year, so investors had that weighing on their minds.

Or, and here's a thought, sellside analysts are worthless, piggybacking, groupthink-pursuing pieces of s....cum?



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Tue, 06/21/2011 - 08:57 | 1388520 NoBull1994
NoBull1994's picture

Probably more than a few buyside analysts as well.

Tue, 06/21/2011 - 09:06 | 1388538 quintago
quintago's picture

To Laprade's credit, the rating was "under review". How many sell/strong sell ratings are handed out? Not many, therefore they are nearly all worthless. I agree though that these are are the bottom of the pile.

Tue, 06/21/2011 - 09:11 | 1388560 Tyler Durden
Tyler Durden's picture

It was not under review 24 hours earlier when the MW report hit. This was just the first rating to be put to N/A

Tue, 06/21/2011 - 09:15 | 1388572 quintago
quintago's picture

In that case let's strap a jar with a rat inside to his face, apply heat to the end of the jar and allow the rat to chew its way out.



disclaimer: I'm joking

Tue, 06/21/2011 - 09:35 | 1388650 Popo
Popo's picture

Please.  Most analysts are 26 year old sniveling douches out of B-school who have zero real-world experience and are told they're smart by their bosses.   They really have no idea how retarded they are.   It's not so much malicious behaviour as much as it is plain cluelessness.  Most don't realize they're part of a racket, because they're (a) not particularly smart and (b) colossally inexperienced.

The tragedy of course, is that people listen to them.

I'll never forget sitting in a meeting with a young analyst who truly thought she was an expert on an industry because she had prepared for a couple of weeks,  written a report -- and of course, gone to Princeton.  In this case, she was opining on the video game industry to a room full of industry veterans.  It was horrifying.  Never mind the fact that she had never played a video game.  She was 100% wrong on both the financial and strategic analysis,  and had no idea how little she herself knew.  ...but.. Everyone scribbled notes and took her word for it because she had the pedigree of a big bank name behind her.

Her analysis proved to be disastrous.  

She's a managing director now.

Tue, 06/21/2011 - 09:40 | 1388694 Arius
Arius's picture

now, this about sums it all up ....

Tue, 06/21/2011 - 09:01 | 1388524 lizzy36
lizzy36's picture

One wonders where the "Conviction Buy" Enron analysts landed?

Tue, 06/21/2011 - 09:05 | 1388547 firstdivision
firstdivision's picture


Tue, 06/21/2011 - 09:25 | 1388617 SparkyvonBellagio
SparkyvonBellagio's picture


Tue, 06/21/2011 - 13:09 | 1389392 riley martini
riley martini's picture

 Isn't Sino a Canadian Corp I would bet most of the Chinsee RMs are instigated by criminals in US banking.

 On another subject Moodys just upgraded Nigerian lottery winners to AAA positive . Buffet and Paulson says it's a safe investment for Widows and Orphans safer than A Goldman MBS.

Tue, 06/21/2011 - 09:01 | 1388525 snowball777
snowball777's picture

Those aren't analysts...they're fluffers.

Tue, 06/21/2011 - 09:04 | 1388531 alien-IQ
alien-IQ's picture

"most worthless sellside analysts" AKA "future White House economic advisors"

Tue, 06/21/2011 - 09:05 | 1388534 LoneStarHog
LoneStarHog's picture

In order to protect the reputation of such host firms as Raymond James, Dundee Securities, TD Newcrest, Credit Suisse, RBC, BMO and Scotia Capital,...


BWHAHAHAHAHAHAHA ..."reputation"? ... "protect"? ... these are WALL STREET FIRMS

Tue, 06/21/2011 - 09:22 | 1388607 Terminus C
Terminus C's picture

Actually, four of them are Bay Street firms.

Six of one, half dozen of the other.

Tue, 06/21/2011 - 09:20 | 1388611 SheepDog-One
SheepDog-One's picture

'Protect' their phoney baloney jobs as market manipulators is whats really at stake!

Tue, 06/21/2011 - 09:11 | 1388535 Cdad
Cdad's picture

Wow Tyler, this is dangerous ground.  If we open this can of worms, think of all the other analysts who will also have to be terminated for other ridiculous calls on absurd bubble "stawks."

But I am with you because I know that real capital will not form in a banking system as putrid as ours.  Until such time as our nation commences with the delivery of massive piles of pink slips in the nonproductive and criminal banking sector, we can all look forward to more of the Summer of Recovery....a lesson Europe is learning just ahead of us.

There will be no restoration of confidence until the perpetrators of our economic demise meet justice and the banking system is cleared.

Tue, 06/21/2011 - 09:18 | 1388587 SheepDog-One
SheepDog-One's picture

Everywhere we look, EVERYONE should be terminated! Look at all the banks that had strong buys on Enron till the day it collapsed. Any 'Pets . com sell side analysts still around? Sure they ALL are! How about Moodys and S&P now Johny on the spot about Greek and Spanish banks....too bad they flat-out completely MISSED the entire bank failure disaster of '08 though!

These people are all ass hats!

Tue, 06/21/2011 - 09:28 | 1388629 Cdad
Cdad's picture

Agreed, Dog.

The story of corruption here in "once free market capitalistic" America is a long story.  As discussed recently by Charles Smith, corporate corruption is rampant, with high level executives essentially selling the US job market overseas while simultaneously looting the value of publicly traded stocks via their absurd option grants.

Add to this the hired hedge fund effect, that of ramping stocks up so as to facilitate insider selling and millionaire making, and you have a market that has rotted from the inside and is of very little value.  Of course, it is no surprise that America has lost her moral compass.  I don't think morality is covered on Dancin' with the Stars.

America has been hollowed out by bankers, "blue chip" corporations, and politicians.  Servicing short term greed has dealt a death blow to principles, morality, and the rule of law.

And on most days, it seems like few really care.


Tue, 06/21/2011 - 11:19 | 1389035 AbandonShip
AbandonShip's picture

I won't trust Wall St. until douchebags like Henry Blodget are gone.  Although, this D-bag may have partially redeemed himself:

Tue, 06/21/2011 - 09:07 | 1388540 Wolf in the Wilds
Wolf in the Wilds's picture

Ah, you should add the sell-side credit analysts as well!  They have done a "bang up" job of getting this credit into the Asian HY bond index.  Due diligence before a bond issue?  What is that these days?  And now, these investment banks are bringing out even more liquidity starved Chinese HY corporates in the the market.  Has anyone done a proper due-D on any of these new issuers?

Your guess is as good as mine.

Tue, 06/21/2011 - 09:04 | 1388543 Michael Victory
Michael Victory's picture

T calls for the axe.


Tue, 06/21/2011 - 09:08 | 1388545 firstdivision
firstdivision's picture

Cramer's proteges.

Tue, 06/21/2011 - 09:11 | 1388561 RowdyRoddyPiper
RowdyRoddyPiper's picture

Dream on Tyler...these clowns with CFAs and MBA's will keep their jobs because they acted along with their unable to think independently classmates. Brokers don't want truly innovative and independent threatens them. An ability to get along and go along is valued over all other traits.

Remember the idiot "analyst" at Bank of Montreal Nesbitt Burns who exclaimed "he had seen the gold!" at the Bre-X site in Indonesia...well, he still works there.

Tue, 06/21/2011 - 09:11 | 1388562 Greeny
Greeny's picture

Now it's probably time to buy and run it back to $20/share :)))

I'll be watching this Pig..

Tue, 06/21/2011 - 09:09 | 1388565 beanieville
beanieville's picture

They should have bought Pandora instead.

Tue, 06/21/2011 - 09:13 | 1388566 Josh Randall
Josh Randall's picture

Fat, drunk and stupid is no way to go through sell-side analyst life, son. 

Tue, 06/21/2011 - 13:12 | 1389410 strannick
strannick's picture

Rich, unaccountable and stupid seems to be a very acceptable way for these folks to go through life.

Tue, 06/21/2011 - 09:13 | 1388570 I am a Man I am...
I am a Man I am Forty's picture

wonder what Scotia Capital is going to come up with, with their "under review" recommendation

Tue, 06/21/2011 - 09:10 | 1388571 ThisIsBob
ThisIsBob's picture

I remember Paulson teklling some congressional hearing a couple of years ago that the way he made all his nmoney was from good old fashioned hard work and analysis.  Apparently you can lose it that way too.

Tue, 06/21/2011 - 09:10 | 1388574 SheepDog-One
SheepDog-One's picture

WORTHLESS anal-cysts! 

Never believe a word any of them say!

Tue, 06/21/2011 - 09:15 | 1388579 I am a Man I am...
I am a Man I am Forty's picture

like I said before, if the CFO and CEO couldn't completely discredit the muddy water report in 15 minutes (they said they needed 2 to 3 months), then this was a fraud

Tue, 06/21/2011 - 09:12 | 1388580 casey13
casey13's picture

SEC Charges Carson Block and Muddy Waters LLC in Stock Manipulation Ring
The Securities and Exchange Commission has charged Carson Block and Muddy Waters LLC in a stock manipulation ring, 6/21/2011 - Washington, D.C., June 21, 2011 — The Securities and Exchange Commission has charged Carson Block and Muddy Waters LLC in a stock manipulation ring that allegedly published false information, causing a drop in the market prices of at least three stocks and generated more than $240.2 million in illicit profits when they sold shares short then repurchased the shares after a significant decline on the market.

Additional Materials

Litigation Release No. 21053

SEC Complaint

The SEC alleges that Carson Block, who resides in Hong Kong carried out the market manipulation schemes with others he met through a stock web site, which is operated by Matthew Brown of Aliso Viejo, Calif. Block, Brown, and other participants in the schemes often timed the manipulative trading to coincide with false or misleading press releases issued by Muddy Waters LLC. The three companies were Sino Forest Corporation, Duoyuan Global Water Inc., and Orient Paper Inc.

“As we allege in our complaint, Carson Block and his accomplices around the country met through the Internet and planned to short sell the stock in the companies prior to release of the Muddy Waters Report that made allegations of impropriety, fraud, and theft. Carson Block and his associates approaches several large hedge funds and investment firms first to market their “research” and promised great returns upon the release of their “research”. The results for each of the companies that were targeted were catastrophic and have resulted in a serious loss of market value and public trust in the management of these companies. ,” said Scott Friestad, Deputy Director of the SEC’s Division of Enforcement. “Carson Block went so far as to himself write some of the misleading press releases that denigrated these stocks so they could line their own pockets with hundreds of millions of dollars.”

The SEC’s complaint, filed in federal district court in Delaware, charges six others in addition to Carson Block:

According to the SEC’s complaint, these fraudulent schemes generally followed the same pattern. In 2010, Carson Block and his accomplices arranged for large blocks of shares to sell on the open market. The vast majority of the shares sold short were done through the accounts of Muddy Waters LLC for the personal benefit of Carson Block. The defendants then notified the hedge funds and investment firms of their intention to publish their report and were paid approximately $2.7 million dollars for “research” supplied by Muddy Waters LLC. As a result shares were sold short in the days immediately prior to the release. After artificially deflating the market price of the stocks, Carson Block and his accomplices then recovered the shares the sold short on the open markets and collected the illicit proceeds.

The SEC’s complaint alleges violations of the antifraud, registration, and other provisions of the federal securities laws. The complaint seeks to have the court permanently enjoin each defendant from future violations, require disgorgement of ill-gotten gains with prejudgment interest, and impose financial penalties. Additionally, the Commission seeks to have certain defendants barred from participating in stock offerings.

Complete article available at SEC newswire.

Tue, 06/21/2011 - 09:16 | 1388598 SheepDog-One
SheepDog-One's picture

OH see a stock DROPPED in that case...cant have that. Manipulating stocks upwards is just fine, as long as the Criminal Syndicate AKA Wall St is getting their take.

Tue, 06/21/2011 - 09:30 | 1388659 The Profit Prophet
The Profit Prophet's picture

And let's just forget the fact that Paulson and Goldman pulled a similar manouver with the mortgage fraud they discovered early!!!  What a f***ing joke!

T.E.I.N. everyone!

Tue, 06/21/2011 - 09:18 | 1388590 gaugamela
gaugamela's picture

Who is the Paulson team member PM / Analyst that recommended this to him? I would be interested to know how soon he/she got fired.

Tue, 06/21/2011 - 09:15 | 1388591 Greeny
Greeny's picture

Chinese fraudsters all over US Markets look a the

Bloomberg Chinese Reverse Mergers Index

From 200 to 100 in 6 month, not bad ;)

Tue, 06/21/2011 - 09:20 | 1388597 Goldtoothchimp09
Goldtoothchimp09's picture

so the SEC is suing because these guys exposed fraud for a living!?  that's ripe!  They should be compensated handsomely for their work!

Tue, 06/21/2011 - 09:21 | 1388602 SheepDog-One
SheepDog-One's picture

Looks like they stepped on the embedded pumper fraudsters toes! Someone shorting the crap out of a FED bubble stock...hell cant have THAT! Lets call it 'manipulation'.

Tue, 06/21/2011 - 09:18 | 1388605 lizzy36
lizzy36's picture

Lets face it, sell side analysts are there to preposition financing's

Sino raised $2B in equity since 2007. That is over $35m in fee. Bookrunners on the equity side were Dundee, TD, and Credit Suisse.

For a total list of deals down since 2002 see:

Tue, 06/21/2011 - 09:25 | 1388616 Goldtoothchimp09
Goldtoothchimp09's picture

I would say Dundee, TD, and Credit Suisse did a ton of damage and should be prosecuted for perpetuating a fraud!  The Muddy Waters analysts are the only competent actors in the bunch!

Tue, 06/21/2011 - 09:26 | 1388621 SheepDog-One
SheepDog-One's picture

In other words, they are there to pre-route the 401K contribution free money into this garbage and pocket their slice.

Tue, 06/21/2011 - 09:20 | 1388613 SparkyvonBellagio
SparkyvonBellagio's picture

LOL Now that's an 'outing'. LOL




Tue, 06/21/2011 - 09:22 | 1388619 Goldtoothchimp09
Goldtoothchimp09's picture

Our government is conglomerate of incompentent THUGS!!!

Tue, 06/21/2011 - 09:27 | 1388628 BinAround
BinAround's picture

Hey capitalists, time is money. If an analyst cannot rely on financial statements or auditors, he must verify the sources of revenues himself.  But that is impossible. He can't spend hundreds of hours. Only a 2 and 20 hedge fund could afford such investigative costs.  Investors can simply avoid Chinese companies because of widespread fraud.  But the analyst would get sued for saying "the company is probably a fraud but I haven't spend 200 hours to prove it".   

Tue, 06/21/2011 - 09:32 | 1388674 oogs66
oogs66's picture

then don't cover it, don't put on a recommendation!

Tue, 06/21/2011 - 10:34 | 1388878 longontents
longontents's picture

Please.  I think the firms in question can manage the costs of adequate research.  If they can't, they shouldn't be making any recommendations in the first place.

Tue, 06/21/2011 - 09:24 | 1388630 The Axe
The Axe's picture

Please add photos of Penguins!!!!

Tue, 06/21/2011 - 09:28 | 1388633 monopoly
monopoly's picture

This crap just goes on and on. For me, now, this is a good time to hold a lot of American confetti. Market going nowhere. Lets see how the Greek people continue to make sure European bankers get fat pay checks and perks at their expense.

Waiting and watching for the turn in miners. They are so under valued now. But, can become more so. Slow summer so far.

Tue, 06/21/2011 - 09:30 | 1388660 cheesewizz
cheesewizz's picture

Cant they get a computer to do the DD?  Real people just don't get it...

Tue, 06/21/2011 - 09:31 | 1388668 oogs66
oogs66's picture

can you add the analysts at Moody's, S&P, and Fitch who all took the time to give it Ba2/BB/BB- ratings?


Fitch had actually upgraded it from BB to BB+ on 12/2/09 so allegedly as recently as then someone looked at it.  They downgraded it 2 notches yesterday to BB- and left on negative outlook.

The other two didn't even downgrade yet, just put on watch.  Boody's had it at Ba2 since July 2004, and now on watch -ve since June 7th.




Tue, 06/21/2011 - 09:37 | 1388678 A Man without Q...
A Man without Qualities's picture

FT Alphaville have a great schematic of the Sino-Forest structure.

I don't know where to start with this nonsense.  Foreign "investors" are actually investing in a British Virgin Islands entity, which is merely a hold co for the trees.  Any cash flows from the (secret) AIs who pay the plantation owners directly.  So, your investment has no cash flows supporting it, apart from what is raised in the capital markets.  In fact, it's actually even worse, because the BVI is actually holding onshore companies, which are the owners of the trees, but which have local credit facilities, therefore are senior to foreign creditor claims.

Investors who buy into the China story should be advised - this sort of arrangement is not that unusual (apart from the bit about the cash going from the AIs to the plantation owners, that's just plain dodgy.)  You're a hell of a long way from the assets, you are subordinated to all local investors / creditors and you've got no control.  These sorts of equity analysts don't seem to have the intelligence to understand basics or how corporate structures have a big impact on risk.  

Tue, 06/21/2011 - 09:56 | 1388753 longontents
longontents's picture

Paul Quinn of RBC now says:  "Either a material difference in ownership, financial results, and legality of the company's legal structure exists, with a loss in equity value, or it does not, and the company's equity value increases measurably. While we remain objective to either possibility, further clarity is required to reach a definitive outcome." 

Wha?  That must be code for:  "Mommy, get me a wet cloth and wipe my eggy face."

Someone didn't do his homework.  Naaaananaaaanananaaaaa....

Tue, 06/21/2011 - 10:04 | 1388774 longontents
longontents's picture

or they were party to a fraud.  Either way...

Tue, 06/21/2011 - 10:32 | 1388885 A Man without Q...
A Man without Qualities's picture

Schrodinger's Cat meets corporate finance?

Of course, this might be what the fucking auditors supposed to investigate before signing off the accounts... so in theory, you could sue them if it weren't for the fact that, post Enron and Andersons, they have turned themselves into limited partnerships on a local basis, so the parent company has zero financial risk...

Tue, 06/21/2011 - 10:22 | 1388855 oogs66
oogs66's picture

personally I think the funniest thing now that the equity analysts have all dropped out, that Paulson is out, and Muddy Waters seems to be staying short so it goes to zero, that the stock goes back to 12.  It would seem like Karma for everyone

Tue, 06/21/2011 - 10:34 | 1388876 Debt-Penitent
Debt-Penitent's picture


Lists!  Give us lists of names!

The demons have a name.

Tue, 06/21/2011 - 11:49 | 1389113 Double down
Double down's picture

Five out of seven work for Canadian firms.  I am sooo fucking proud to be Canadian! 

Where is that Bill Gross article about education? 

Tue, 06/21/2011 - 13:44 | 1389526 Contra_Man
Contra_Man's picture

"Voted 2008-09 Best Risk-Managed Banksters in the G20", didn't you just say..?

XFN-T or HFD-T? Hummmm... so hard to decide with a succulent 7% juicy sovereign risk-free yield - apparently...

and it takes years to build a reputation, ... and nowadays years to slowly lose it (RBC-T/N).

Tue, 06/21/2011 - 12:49 | 1389327 riley martini
riley martini's picture

 Chiness companies aren't the only fraud Corp least we forget : City Group,BOA, Washington Mutial, Fannie, Freddie, Lehman, Goldman, Aig, Bear stearn, Moodys, S&P, Enron the list is to long for a comment. Managers and Politicians walked with $billions while the suckers got the tax write off and the citizens got the bill for the recovery.

Tue, 06/21/2011 - 14:22 | 1389666 alexanderstollznow
alexanderstollznow's picture

is anyone at ZH going to be immediately terminated when there is no QE3?

Wed, 06/22/2011 - 05:41 | 1391137 eye82
eye82's picture

Muddy Waters had a couple of teams on the ground incl private investigators and were able to read original Chinese documents.  There is no way sell-side analysts and probably most buy-siders in the US can compete with this level of due diligence. You have to rely on published documents and if it was signed off by PWC etc there is an element of trust you have to put into it. It's a bit more complicated than you would like it to be...

Fri, 06/24/2011 - 09:33 | 1398206 longontents
longontents's picture

PWC is only now involved - they didn't sign off on shit prior.  I think that's part of the issue.  There wasn't adequate vetting.

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