There is a business expression that you should only lose in the stock market what you can afford to lose; like this play money is gravy for amusement. The story of Sino-Forest, a Chinese company, an alleged forest resource company that that was proven to be a smoke and mirrors operation with fictitious and creative account that many have been using general ouija board principles in place of financial accounting is a bit tragic for the small stockholders who got scammed, but more a fascinating look at the uber-rich who can afford to absorb such heavy losses and use it against profits elsewhere in their vast and labyrinthic empires. The question is always how such sophisticated and astute investors could be buffaloed by ornery fraudsters from the farm leagues…
Sino-Forest has tumbled 67 percent in Toronto since short seller Carson Block’s Muddy Waters LLC research firm said in a June 2 report that the company was overstating its assets. Shareholders have lost C$3.3 billion. Hedge-fund firm Paulson & Co., formerly Sino-Forest’s biggest shareholder, told clients that it sold its entire stake in June after losing C$462 million on the investment. …
…The OSC, Canada’s main securities regulator, said Aug. 26 that officers and directors of Hong Kong- and Mississauga, Ontario-based Sino-Forest may have engaged in acts “related to its securities” that they “knew or should have known” perpetuated a fraud. Two days earlier billionaire investor Richard Chandler, the company’s biggest shareholder, increased his stake, filings also show. …
…Chandler, a New Zealander who Forbes said last year had a net worth of $3.1 billion, bought 1.2 million shares of Sino- Forest Corp. on Aug. 24 at C$4.65 apiece, filings show. The purchases increased his holdings to 48 million shares, or 20 percent of the company. …
Sino-Forest closed at C$4.81 on the Toronto Stock Exchange on Aug. 25, the last day before trading was halted. The shares plunged 72 percent to $1.38 in U.S. over-the-counter dealing on Aug. 26, the last day of trading before they too were halted, giving the company a market value of $338.4 million. Read More:http://www.bloomberg.com/news/2011-08-30/sino-forest-insiders-including-ex-ceo-sold-83-million-of-shares-since-06.htmlaa
But, is it really surprising? When same “expert” investors will spend millions on a Duchamp ready-made, a Damien Hirst and most Picassos, that they would equally throw money into a pit for worthless stock. It does lend credence to those who think the stock market is a giant casino filled with high rollers. As Mark Blyth explained in an interview on Bloomberg on August 31, something is very amiss when before the financial crisis 40% of profits on the S&P 500 were from financial companies though they make up only 10% of the market value….
…Mr. Block has shown that at least some of these businesses are not what they claim to be. Over the past 13 months, his Muddy Waters reports – which rely on his own business experience in China as well as unconventional investigation tactics (such as misrepresenting himself in face-to-face and telephone discussions with Chinese companies), have shattered the share price of most of his targets. Some, including Rino International Corp. and China MediaExpress Holdings Inc., have been delisted from major U.S. exchanges.
Of course, his work has also been a profitable venture for Mr. Block, who compiles short positions in the companies he reports on, ready to cash in as their stocks decline. So how is it that a 35-year-old former lawyer, and aficionado of 1990s gangster rap rivals Tupac Shakur and The Notorious B.I.G., has been able to ferret out questionable corporate activity that eluded so many other equity analysts and high-profile investors? In the case of Sino-Forest, for example, all seven analysts who covered the company rated the stock a “buy” before Mr. Block published his report. “I know a lot more about … China than these [analysts] will ever know,” he says. Read More:http://www.theglodmail.com/report-on-business/careers/careers-leadership/the-lunch/article2099190.ece
Mark Blyth:The European sovereign debt crisis is little more than a huge ‘bait and switch’ perpetrated on the publics of Europe, by their governments, on behalf of their banks. We need to remember that what we refer to today as the ‘European Sovereign Debt Crisis’ began as a private sector financial crisis back in 2008, when ‘too big to fail banks,’ writing deep out of the money options on taxpayers, quite unexpectedly (to some) blew up. Fearing a financial Armageddon, governments transformed private bank debt into public debt via bailouts, lost revenues, lower growth, higher transfers, and yawning deficits. The unavoidable result across the European continent was a massive increase in government debt. While painting this as a story of fiscal irresponsibility has some plausibility in the Greek case, it simply isn’t true for anyone else. The Irish and the Spanish, I and S in the eponymous ‘PIGS’ were, for example, considered ‘best in neoliberal class’ in terms of debts and deficits until the crisis hit. Public debt is a consequence of the financial crisis, not its cause. …Read More:http://triplecrisis.com/how-to-turn-a-continent-into-a-subprime-cdo/
…In explaining this to their voters states such as the UK insisted that the problem was runaway spending under the last government, so spending had to be cut now or else the UK would become Greece. Other states, notably Germany, insisted that ‘more rules’ and greater discipline for those impecunious budget-falsifying Southerners, would fix the problem.
Unfortunately, neither of these ‘fixes’ will work since these ‘objects of blame’ are not to blame for the crisis. Banks used to bail sovereigns, now sovereigns bail banks and citizens get to pay for it, through bailouts, lost output, higher unemployment, slashed services, tighter credit, and the costs of reinsurance to make sure that it doesn’t happen again, until it does. The problem began with the banks and continues to lie with the banks and blaming the state for a banking problem will not fix a banking problem. But what it has done, in a quite unexpected way, is to turn all of Europe into a continent-wide Collateralized Debt Obligation (CDO).
When the financial crisis hit Europe, the initial response was a smug schadenfraude over the plight of highly levered and hopelessly interconnected Anglo-Saxon finance-based capitalism. But quickly it became apparent that those inter-linkages were global, that many of the ‘primary-dealer’ banks that had been given truck-loads of cash by the Fed to stay afloat were in fact European, and that CDOs and CDS exposures wound up in the most European of places.
Rather than recognize this private-to-public debt-transfer as a structural inevitability that Europe as a whole had to deal with (after all, what is the EU for?) Germany painted the crisis as a struggle between the parsimonious North and the profligate South while the British cheered from the sidelines and the French organized the press conferences for the Germans.
The Anglo-German answer to this misdiagnosed crisis, now universally applied, was austerity: voluntary internal deflation in the profligate periphery to reduce wages and prices to levels commensurate with their external financial position. In other words, the Germans thought it was a good idea to run the functional equivalent of a gold standard in a democracy despite their own supposedly deep historical memory of what happened the last time we tried this… Read More:http://triplecrisis.com/how-to-turn-a-continent-into-a-subprime-cdo/
( England )…Around 700,000 people have seen their fortunes wiped out by the recession, a study revealed yesterday.
The report, from research firm Datamonitor, reveals for the first time the number of ‘rich’ people robbed by the downturn. It also highlights how hard the recession has hit the value of savings and investments, which may take decades to recover their value….Some of the biggest victims have been the elderly who invested in ‘safe’ companies which used to pay generous dividends, such as Lloyds Banking Group and Royal Bank of Scotland.
Michele Gorman, a financial analyst at Datamonitor, said: ‘The affluent population will recover, in terms of the size of the population and their assets. But it will take time because we are not through the crisis yet.’
The report comes after an investigation by Britain’s leading independent economic institute into how much money people lost during the recession.
The average person lost £11,300, equal to £22,600 for a couple, according to the Institute for Fiscal Studies.
Read more: http://www.dailymail.co.uk/news/article-1306144/700-000-wealthy-people-wiped-credit-crunch.html#ixzz1Wkjk1iXB