Best of the Week
Most Popular
1.Crude Oil Price Trend Forecast 2016 Implications for Stock Market - Nadeem_Walayat
2.Odds of Winning Walkers Crisps Spell & Go olidays K, C and D Letters - Sami_Walayat
3.Massive Silver Price Rally During The Coming US Dollar Collapse - Hubert_Moolman
4.Pope Francis Calls For Worldwide Communist Government - Jeff_Berwick
5.EU Referendum Opinion Polls Neck and Neck Despite Operation Fear, Support BrExit Campaign - Nadeem_Walayat
6.David Morgan: There Will Soon Be a Run to Gold Like You've Never Seen Before - Mike Gleason
7.British Pound Soars on BrExit Hopes Despite Remain Establishment Fear Mongering - Nadeem_Walayat
8.Gold Price Possible $200 Rally - Bob_Loukas
9.The Federal Reserve is Not Going To Raise Interest Rates and Destroy Gold - Michael_Swanson
10.Silver Miners’ Q1’ 2016 Fundamentals - Zeal_LLC
Free Silver
Last 7 days
It Feels Like Inflation - 26th May 16
Negative Interest Rates Set to Propel the Dow Jones to the Stratosphere? - 26th May 16
S&P Significant Low has Occurred – Not Likely! - 26th May 16
Statistics for Funeral Planning in UK Grave - 26th May 16
Think Beyond Oil And Gold: Interview With Mike 'Mish' Shedlock - 26th May 16
Hard Times and False Mainstream Media Narratives - 26th May 16
Will The Swiss Guarantee 75,000 CHF For Every Family? - 26th May 16
Is There A Stocks Bear Market in Progress? - 26th May 16
Billionaires Are Wrong on Gold - 26th May 16
How NOT to Invest in the Gold Market - 26th May 16
The Black Swan Spotter...Which Saw the Oil-Crash coming; now says the “Invisible Hand” will push Brent to $85 by Christmas - 26th May 16
U.S. Household Debt Still Below 2008 Peak - 25th May 16
Brexit: Wrong Discussion, Wrong People, Wrong Arguments - 25th May 16
SPX is at Strong Resistance - 25th May 16
US Dollar, Back From the Grave? - 25th May 16
Gold : Just the Facts Ma’am - 25th May 16
The Worst Urban Crisis in History Could be Upon Us - 24th May 16
Death Crosses Across The Board Are IRREFUTABLE Stock Market Sell Signals - 24th May 16
Bitcoin Trading Alert: Bitcoin Price Stays below $450 - 24th May 16
Stock Market Crash Death Cross Doom Prevails - 23rd May 16
Did AMAT Chirp? Implications for the Economy and Gold - 23rd May 16
Stocks Extended Their Rebound On Friday - Will They Continue Higher? - 23rd May 16
UK Treasury Propaganda Warns of 3.6% Brexit Recession, the £64 Billion Question? - 23rd May 16
Stock Market Support Breached, But Not Broken! - 23rd May 16
George Osborne Warns of 18% Cheaper House Prices - BrExit for First Time Buyers - 22nd May 16
Gold Bull-Phase I Continues to Confound (The Trek to “Known Values”) - 22nd May 16 r
Avoiding a War in Space - 22nd May 16
Will Venezuela Be Forced to Embrace the US Dollar? - 21st May 16
Danish Central Bank Stumbles with Its Currency Peg to the Euro - 21st May 16
SPX Downtrend Underway - 21st May 16
George Osborne Warns of More Affordable UK Housing Market if BrExit Happens - 21st May 16
Gold And Silver 11th Hour: Globalists 10 v People 0 - 21st May 16
David Morgan: There Will Soon Be a Run to Gold Like You've Never Seen Before - 21st May 16
Gold Stocks Following Bull Analogs - 20th May 16
The Gold Chart That Has Central Banks Extremely Worried - 20th May 16
Silver Miners’ Q1’ 2016 Fundamentals - 20th May 16
Stock Market Rally At the End of the Road? - 20th May 16
British Pound Soars on BrExit Hopes Despite Remain Establishment Fear Mongering - 20th May 16
NASDAQ 100, FTSE, and British Pound - When Rare Market Data Screams, Listen  - 20th May 16
Unintended Consequences, Part 1: Easy Money = Overcapacity = Deflation - 19th May 16
The Federal Reserve is Not Going To Raise Interest Rates and Destroy Gold - 19th May 16
Stock Market Final Supports Are Broken - 19th May 16
Gold - Pro-Inflation? Anti-USD? - 19th May 16
Further Stock Market Uncertainty As Indexes Gained On Friday, Will Uptrend Resume? - 19th May 16
What This U.S. Presidential Election Tells Us About Her Millennial Generation - 18th May 16
Stock Market Trendline Broken on Fed Announcement - 18th May 16
An Incredibly Simple, Rarely Used Way to Book 170% Investing Gains - 18th May 16
Statistically Significant Stock Market Death Cross? - 18th May 16
Precisely Wrong on US Dollar, Gold? - 18th May 16
What You Can Gain From One Tech CEO's $355 Million Loss - 18th May 16
The ‘Tide’ has turned… NEGATIVE For STOCKS!!! - 18th May 16
Goldman Sachs's - Regulatory Climate is Chilling Deals; Hatzius Not Worried About a Recession - 18th May 16
Bitcoin Price Remains above $450 - 18th May 16
Crude Oil Price Trend Forecast 2016 Implications for Stock Market - 17 May 16
Could the National Debt Really Grow as High as $31 Trillion by 2023? - 17 May 16
Gold Price Possible $200 Rally - 17 May 16
Crisis Investing - Jim Rogers on “Buying Panic” - 17 May 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Why 95% of Traders Fail

Giving Up on Betting Against China Government Backed Corporate Frauds

Companies / China Stocks Nov 27, 2012 - 12:04 PM GMT

By: Bloomberg

Companies

Carson Block, founder of Muddy Waters Research, spoke with Bloomberg Television's Stephanie Ruhle and Tom Keene on "Market Makers" today about his report on Olam International and said that he's lost interest in betting against Chinese stocks.


Block, who compared Olam to Enron, said, "China has gotten harder in the sense that the government has really taken the side of the frauds. The government is working with a number of these companies to try to conceal records that are public. When you are up against that sort of strength of the ability to revise history, it becomes very difficult."

Block on whether there are less opportunities in China right now:

"China has gotten harder in the sense that as we have communicated a little bit with the media in the past, the government has really taken the side of the frauds. The government is working with a number of these companies to try to conceal records that are public. In some cases, we think revise them. When you are up against that sort of strength of the ability to revise history, it becomes very difficult. That is one of the reasons we're not that interested in China anymore."

On his allegations against Olam:

"Olam has morphed its business from just being a standard ag commodity trader into investing upstream and production assets as well as midstream and downstream, so that's processing and distribution. The problem is, it has been burning cash the entire time it has been public almost. It has not been free cash flow positive since fiscal 2006. What the company tells investors is that these investments that it's making in these upstream, midstream, downstream assets, there is a gestation period and that these will have high ROIs. We looked very closely at a number of capital projects that the company has embarked on and we found that many of them are performing very poorly. The company has seemed to mislead investors about the state in which the number of these projects are in."

On whether Olam's problems are due to a bad business plan or bad accounting:

"It is certainly at least both. Business planning and business execution is generally very poor with Olam. On the accounting side, and this company has an amazing track record with accounting, between fiscal 2006 and 2010, a tremendous number of revisions in its accounting statements between its Q4 annual statements and the audited statements. It is important to note that in Singapore companies publish Q4 statements. Even subsequent to 2010, when you move into 2011, it has had some issues. We look at these accounts and we think, at best, the accounting departments or accounting functions are incompetent."

On comparing Olam to Enron:

"The comparison to Enron, let's be clear. Enron stands for a lot of things. Maybe you could say that Enron in a lot of ways failed because it was legal fraud. In other words, not so much the criminal actions with the off balance sheet debt, but the way that they used accounting gimmicks that were legal to book future income in the present. The problem with doing that, which Olam makes ample use of that as well--in fact, the noncash accounting games that it has taken over the past three fiscal years, equate to about 40% of reported net income over that time. The problem is, if you buy an asset today and to build a model and then book all of the estimated future income today, next year when you go to report, you will have a bad comparison and what might you do? You might go out and buy another asset for the sake of buying another asset."

On whether he's heard from Olam's major shareholders:

"So far I've not had any notes. Our business model is speaking truth to power. There is a lot of power here. It is a little bit scary to be looking at a sovereign and saying you have made a sizable investment in a company that is not actually what it seems to be. We're happy to have a dialogue with Temasek, Cap Guardian, major shareholders. But so far, we have not."

On whether investors didn't do their homework:

"I would not say that. It is extremely difficult to look at this company. It operates in 65 countries. Our business model enables us to focus on a company for months at a time, to do nothing but look at the company. The amount of time and resources we have devoted to looking at Olam is something you cannot expect an investor with a diversified portfolio to do."

On whether he's worried about liability issues:

"We prepare every report as though we are going to litigate it and as though we are going to speak with regulators about the report. I am not trying to sound overly confident, but we anticipate that. If we have to defend it in court and then we will defend it in court. It is the nature of the game."

On when the report on Olam was released to hedge fund clients:

"It gets reported. There is a lot of speculation that we have hedge fund clients. The money that is involved in these trades belongs to people who researched the names. We don't call around and sell these reports. Everybody is involved in the research."

On why he advocates short selling:

"There are several important reasons why short selling is good. We are really one of the most important checks in the marketplace on bad companies, especially those that are misleading investors or outright committing fraud. We have economic incentive to investigate what it is that they are doing, especially when you have companies that are perpetually raising capital from the market and doing so in ways where investors don't understand the true state of these companies, you need short sellers to point these out. You can look at Enron. Jim Chanos was very involved there. That's a big part of why the story got out."

On whether his relationship with Michael Steinhardt and whether Muddy Waters will start looking like a hedge fund:

"I need to clarify that. I met Mr. Steinhardt a few months ago--first time I ever met him. It was a big thrill to meet somebody like that. It was a very interesting conversation. He talked with me about how difficult short selling is. You can be right, but still lose money. Might we look more like a hedge fund? I think in a way we are a group of people who pool their capital generally. We kind of operate in a sense like a private fund. In terms of taking outside capital, we have no plans for it. Every now and then we discuss that possibility, but to be honest, I do not think we can continue communicating with the market our short ideas the way we do now if we took outside capital."

bloomberg.com

Copyright © 2012 Bloomberg - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife