Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold Is the Winner of the U.S. Presidential Election - 31st Oct 20
Gold and Silver Prepare For Another Price Advance - 31st Oct 20
Gold Is Likely to Win This Election - 31st Oct 20
Why Trump Can Still Win 2020 Election - Establishment Mainstream Media Wrong Again? - 31st Oct 20
Why Budgies Need their Own Feeders - Parakeets Feeding UK - 31st Oct 20
Can Trump Still Win? US Presidential Election Forecast Matrix 2020 - 30th Oct 20
Why a Biden Win will Keep Metals Prices Rocking - 30th Oct 20
Is Silver the Next Bitcoin? - 30th Oct 20
A New World Monetary Order Is Coming - 30th Oct 20
Do These Explanations Make Sense for This Intraday Stock Market Turn - 30th Oct 20
US Presidential Election Forecast Matrix, Stock Market Uncertainty - 29th Oct 20
Stock Market Turning? Look For These Support Levels - 29th Oct 20
Silver: A Conceivable Dead-Cat-Bounce on the Cards - 29th Oct 20
Stocks are Strong but be Aware of this Continuing Pattern - 29th Oct 20
The Most Profitable Way To Play The Gold Boom - 29th Oct 20
Why You Should Hire An Accountant To Complete Your Tax Return - 29th Oct 20
Global Banking: Some Sectors Look as "Precarious as Ever" - 28th Oct 20
Silver Price Minor Dip Possible Before 2nd Major Upleg Starts - 28th Oct 20
�� How to Carve a Simple and Scary Pumpkin Face for Covid Halloween 2020 �� - 28th Oct 20
Gold Price One Last Dip Likely Then Major Upleg to New Highs - 28th Oct 20
Smart Money Is Going All-In On This New Gold Frontier - 28th Oct 20
Gold Stocks Still Correcting - 27th Oct 20
Gold and Crypto: Is This How Charts Look Before A Monetary Collapse? - 27th Oct 20
Silver's Coming Double Trigger Shotgun Price Explosion - 27th Oct 20
The $126 Billion Gold Opportunity in Australia - 27th Oct 20
Tips to Breeze through Your Spanish Classes Online - 27th Oct 20
Try The “Compounding Capital Gains” Strategy Today - 26th Oct 20
UK Coronavirus Broken Test and Trace System, 5 Days for Covid-19 Results! - 26th Oct 20
How the Coronavirus is Exacerbating Global Inequality, Hunger - 26th Oct 20
The Top Gold Stock for 2021 - 26th Oct 20
Corporate Earnings Season: Here's What Stock Investors Need to Know - 25th Oct 20
�� Halloween 2020 TESCO Supermarkes Shoppers Covid Panic Buying! �� - 25th Oct 20
Three Unstoppable Forces Set to Drive Silver Prices - 25th Oct 20
Car Insurance And Insurance Claims and Options - 25th Oct 20
Best Pressure Washer Review - Karcher K7 Full Control Unboxing - 25th Oct 20
Further Gold Price Pressure as the USDX Is About to Rally - 23rd Oct 20
Nasdaq Retests 11,735 Support - 23rd Oct 20
America’s Political and Financial Institutions Are Broken - 23rd Oct 20
Sayonara U.S.A. - 23rd Oct 20
Economic Contractions Overshadow ASEAN-6 Recovery - 23rd Oct 20
Doji Clusters Show Clear Support Ranges for Stock Market S&P500 Index - 23rd Oct 20
Silver Market - 22nd Oct 20
Goldman Sachs Likes Silver; Trump Wants Even More Stimulus - 22nd Oct 20
Hacking Wall Street to Close the Wealth Gap - 22nd Oct 20
Natural Gas/UNG Stepping GAP Patterns Suggest Pending Upside Breakout - 22nd Oct 20 -
NVIDIA CANCELS RTX 3070 16b RTX 3080 20gb GPU's Due to GDDR6X Memory Supply Issues - 22nd Oct 20
Zafira B Leaking Water Under Car - 22nd Oct 20
The Copper/Gold Ratio Would Change the Macro - 21st Oct 20
Are We Entering Stagflation That Will Boost Gold Price - 21st Oct 20
Crude Oil Price Stalls In Resistance Zone - 21st Oct 20
High-Profile Billionaire Gives Urgent Message to Stock Investors - 21st Oct 20
What's it Like to be a Budgie - Unique in a Cage 4K VR 360 - 21st Oct 20
Auto Trading: A Beginner Guide to Automation in Forex - 21st Oct 20
Gold Price Trend Forecast into 2021, Is Intel Dying?, Can Trump Win 2020? - 20th Oct 20
Gold Asks Where Is The Inflation - 20th Oct 20
Last Chance for this FREE Online Trading Course Worth $129 value - 20th Oct 20
More Short-term Stock Market Weakness Ahead - 20th Oct 20
Dell S3220DGF 32 Inch Curved Gaming Monitor Unboxing and Stand Assembly and Range of Movement - 20th Oct 20
Best Retail POS Software In Australia - 20th Oct 20
From Recession to an Ever-Deeper One - 19th Oct 20
Wales Closes Border With England, Stranded Motorists on Severn Bridge? Covid-19 Police Road Blocks - 19th Oct 20
Commodity Bull Market Cycle Starts with Euro and Dollar Trend Changes - 19th Oct 20
Stock Market Melt-Up Triggered a Short Squeeze In The NASDAQ and a Utilities Breakout - 19th Oct 20
Silver is Like Gold on Steroids - 19th Oct 20
Countdown to Election Mediocrity: Why Gold and Silver Can Protect Your Wealth - 19th Oct 20
“Hypergrowth” Is Spilling Into the Stock Market Like Never Before - 19th Oct 20
Is Oculus Quest 2 Good Upgrade for Samsung Gear VR Users? - 19th Oct 20
Low US Dollar Risky for Gold - 17th Oct 20
US 2020 Election: Are American's ready for Trump 2nd Term Twilight Zone Presidency? - 17th Oct 20
Custom Ryzen 5950x, 5900x, 5800x , RTX 3080, 3070 64gb DDR4 Gaming PC System Build Specs - 17th Oct 20
Gold Jumps above $1,900 Again - 16th Oct 20
US Economic Recovery Is in Need of Some Rescue - 16th Oct 20
Why You Should Focus on Growth Stocks Today - 16th Oct 20
Why Now is BEST Time to Upgrade Your PC System for Years - Ryzen 5000 CPUs, Nvidia RTX 3000 GPU's - 16th Oct 20
Beware of Trump’s October (November?) Election Surprise - 15th Oct 20
Stock Market SPY Retesting Critical Resistance From Fibonacci Price Amplitude Arc - 15th Oct 20
Fed Chairman Begs Congress to Stimulate Beleaguered US Economy - 15th Oct 20
Is Gold Market Going Back Into the 1970s? - 15th Oct 20
Things you Should know before Trade Cryptos - 15th Oct 20
Gold and Silver Price Ready For Another Rally Attempt - 14th Oct 20
Do Low Interest Rates Mean Higher Stocks? Not so Fast… - 14th Oct 20
US Debt Is Going Up but Leaving GDP Behind - 14th Oct 20
Dell S3220DGF 31.5 Inch VA Gaming Monitor Amazon Prime Day Bargain Price! But WIll it Get Delivered? - 14th Oct 20
Karcher K7 Pressure Washer Amazon Prime Day Bargain 51% Discount! - 14th Oct 20
Top Strategies Day Traders Adopt - 14th Oct 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

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.


© 2005-2019 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

6 Critical Money Making Rules