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Fuzzy Logic: Those Who Fail to Learn From History...
I firmly believe the influx of people (many "quants" but others as
well) in Finance over the past decade who posess little-to-no knowledge
of Financial history contributed to the bubble and the resulting
collapse.
Unfortunately, many of these people who know not the many, many
lessons of financial history are lured into finance by the promise of
money and all that comes with it. More unfortunately, despite the many
and various lessons of which we've been recently reminded during/after
this most recent crash, many of these people are still among us.
Today, I read an article about China Media Express Holdings,
and how its going to be the biggest short squeeze the author has ever
seen/of 2011. My 1st reaction was that whoever this author was (I'd
never heard of him), he must not have been around for very long.
Remember Volkswagen (to use but one recent example)?
Apparently the short thesis is that the company is a fraud. I do
not know this company well, so I can't speak to that point, however, I
CAN and will now, for your viewing pleasure, proceed to destroy the
author's rationale for why the firm ISN'T a fraud. He says:
1. CCME has been fully vetted by Starr International -- headed by Hank Greenberg --4 months. Also on the board of directors and checks monthly numbers.
Big deal. Remember AIG Financial Products?
Bang-up job they did! Surely all the problems started after Greenberg
left (debatable). Regardless, numbers can be fudged, easily. More on
this later. Additionally, 4 months is not a sufficiently-long track
record for this point to be used to support a long thesis in my opinion.
2. CCME has been independently vetted by Global Hunter -- 3 months.
What the hell is a Global Hunter? Is that a video game? Again, 3 months is not a very long time at all...
3. CCME has a top four auditor, Deloitte.
Deloitte was also Bear Stearns' auditor...
4. It is #1 on the Forbes China List of Small-to-Medium Sized Companies with the Greatest Potential.
If you get your investment advice from Forbes you should just give me all your money now and save yourself the trouble.
5. Its Zack's Rank is #1.
Its not even on the top 10. What the hell is this guy talking about? It wasn't on the top 10 last year, either! Is there another Zack's I don't know about?
6. Investors Business Daily gives CCME top marks, best marks out there actually.
Yea, "top marks" for EPS growth, but IBD doesn't even rate CCME as the top stock in its group! High EPS growth alone does not a solid long-thesis make.
7. Its CFO is a former auditor of Price Waterhouse Coopers, who just bought $1.5 million of stock.
I'm more inclined to consider this an orange (if not red) flag, rather than a green one. Sure, it's good for a CFO
to have a solid grasp of accounting, but posession of such knowledge
can be used for trickery, as well. Again, more on this later
8. Dividend policy starting in the next 90 days.
And the point is what, exactly? No firm that was eventually proven a fraud paid a dividend? Challenge.
9. Signed contracts with Apple(AAPL_), Nike(NKE_), Sony(SNE_), Adidas, Toshiba, etc.
Have all of these companies confirmed these contracts not only exist, but exist as CCME has represented?
10. Independent investors have visited the company and not found indication of fraud.
Ask Sam Antar, co-mastermind behind the Crazy Eddie fraud(s). Just because you can't see fraud doesn't mean it isn't there.
11. Mike Koza, who has averaged 33% a year for almost 10 years, owns CCME.
What % of his portfolio does his CCME holdings represent? How long
has he held it for? What's his investment thesis? Is it a momentum
play or a fundamental one? In order for this last point to hold any
credibility as a reason to be long the stock, each of these questions
needs to be addressed.
Oh, and one last thing: The firm that last year called Rino International a fraud has just initiated coverage on CCME, referring to this firm as a fraud, as well.
Their rationale seems to be a bit stronger than Bradford's:
Muddy Waters LLC has initiated coverage on China MediaExpress Holdings, Inc. (CCME) with a Strong Sell rating and an estimated value of $5.28.
- Muddy Waters, LLC believes that CCME is engaging in a massive “pump
and dump” scheme whereby it significantly inflates revenue and profits
in order to enrich management through earn-outs and stock sales. - We estimate that CCME’s actual 2009 revenue was no more than $17 million (versus $95.9 million it reported).
- The data CCME provides to advertisers shows that it has fewer than half of the 27,200 buses it claims to have.
- The CTR reports that the Company uses to support its claims contain
gross errors that we conclude are due to manipulation by the management. - We estimate that over half of CCME’s network buses do not actually
play CCME content. Rather, drivers play DVD movies that are often
provided by passengers. - We caught CCME’s management telling a particularly
egregious lie – that its new website (www.switow.com) has entered into
an agreement with Apple (or one of Apple’s) distributors. Neither is
true. - Similar to RINO, CCME is an obscure company in its industry. Media
buyers who would have to know it if CCME were to be believed have never
even heard the Company’s name before. - CCME’s core audience is sub-Greyhound Bus demographic.
Only time will tell how this shakes-out but today, it looks like
that call for a massive short-squeeze was not only premature, but
extremely naive. CCME is already down 33% on the news today.
I don't like engaging in ad-hominem attacks but the author, Glen Bradford's investing experience/background (provided in his bio),
in consists of a bachelors in engineering combined with an MBA (one of
those 3+2 programs), which he completed less than a year ago. It also
looks like he's been trading his own account for 2 or 3 years (maybe
more?) quite successfully.
I don't know Glen, but from reading this article and a few of his
others, he strikes me as one of the people I mentioned earlier. A guy
with brains and drive who thinks he can "make it" in Finance, yet
possesses little-to-no knowledge of the many lessons learned by
investors past.
If you don't know the stories of LTCM, Enron, Tyco, Worldcom, Adelphia, Global Crossing, the S&L Crisis, how portfolio insurance contributed to the 1987 crash, or countless other lessons going back centuries, then you have no business investing your or anyone else's money.
Actually, wait. Go ahead and try to be an investor, just don't be
surprised when your ignorance comes around to bite you in the ass.
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I totally agree w/Satan's objections here (under no other circumstance could I see aligning myself with the Prince of Darkness, tee hee) in that there is no original thought, just regurgitation of others' work (Barron's article, etc.) and trying to put a proprietary or out of consensus "spin" on it. Readers and contributors @/to ZH expect and demand more. Taking a Bloomberg article and adding a few off colour expletives and essentially summarising it does not fly here.
There needs to be much more "diligence" as you call it in order to be credible, otherwise you might think about secunding yourself back to Dealbreaker where you can really sway the conversation in judging vending machine contests and in the description of your amorous encounters blow-by-blow, just sayin'. This is in no way an ad-hominem attack, just a little constructive advice. Further, concise and impactful sentences do not require exclamation points ad nauseam.
If you really want to show that you are well-plugged in to the the "finance" industry in its totality, you would already know (or do the work to glean) that Hunter Global is a hedge fund whose PM spun out of Maverick several years ago (and perhaps you could have pulled a multi-year time series of their 13Fs and analysed the "winningness" of their largest positions) and that the portfolio insurance meme has widely been discredited as the cause of the 1987 crash. Talk to some derivatives practioners who were around at the time to gain some perspective if you don't believe me.
Other than that, I salute your willingness to put your thoughts out there to try and gain a following for your blog. Please consider this advice as constructive so that you take your analyses one step further to REALLY prove that you have done your homework properly.
NAMASTE
I once held a position in ACLN. Selling European used cars in Africa. Remember them. Went up 50% in 6 months on my holding and I didn't sell. Their CEO rang the opening bell when they were listed on the NYSE, etc. etc. They were a complete fraud, with made up books, made up ships, everything. Learned a lot with that one.
Thanks for sharing! I'm glad you learned from the experience. It's easy to buy-into the newest hot stock or industry, but one should only do so with extreme skepticism and diligence (if at all)!
Waiting for a call asswipe! Make a fucking call or shut the hell up!!!!
analcyst you are a fucking SAP
Satansanus
Any chance you could assemble an argument against the above article amongst the hissy fit? Don't get me wrong i'm all for personal insults if they're aimed at a persons professional incompetence based on sound and reasonable argument or evidence. When you're ready to get serious rather than hissy sissy fitty, fire away...
Anal Cyst, Youve jerked off the last three collumns one puffing your own dick and two putting others down. Do you have any ECONOMIC topics to share?
How about a trade call DIPFUCK?
another shit stain from the #1 Douchebag fuckchoy on ZH. Congrats you are the only complete fucking nobody with an ego bigger than dennis rodman.
I bet you stiff people with the tab all the time cause you think,' fuck it Im awesome'
Do tell, what exactly would you like me to write about?
Have you actually read - in full - anything I've ever written? Your comments suggest either you haven't.
I knew that was you gayjewboy. Im gonna punch a bitch then wait for you to log in as ANALcyst
That sounds like fun work. Finding bad companies and getting your positios set then announcing your strong sell recommendation. They should talk their book and book their talk. It is hard for these small rebels to make money so more power to them. A subscription based newsletter is hard work and little reward unless you play with your own money too.