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  • Orient Paper: Loeb's Not the Right Firm for the Investigation [View article]
    No, I am not goading ad hominem attacks at all. I was long ONP. After I did my original due diligence (which I feel I did poorly at this point), I read all the promoters of the stock to find anything negative I missed to show I might be wrong. This includes Rick Pearson, Eric Jackson, Harbinger, Roth, etc. Most claimed to have visited and were highly complimentary of the company.
    Then I read the Muddy Waters report which concerned me greatly - I immediately realized that this was the due diligence I should have done and my due dililgence was poor.
    The clincher for me was the Rick Pearson video posted on youtube. ONP was presenting itself as a fast growing, cutting edge company operating more efficiently and effectively because of leading advanced technology. The video looked to me to show the oppositve - a small, antiquated factory working inefficiently with old, dilapidated equipement. Frankly, it was shocking to me.
    I sold my long position at a substantial loss. I then shorted the company. It appeared to me to be a certain fraud.
    Shocking as it may seem, it also seemed there was a large operation promoting companies like ONP who profit from these companies in one way or another. Some may be unknowing of any fraud, some may just be indifferent and not do their due diligence to know one way or another, and some may be co-conspirators. I don't know.
    But it does appear that a whole host of people come up in support. At the lowest level are posters and bloggers on sites such as this and yahoo. Many of them simply are inflammatory, making insults or shamelessly pumping the stock. Then there are the commentators like Doug from, Rick Pearson, and Erick Jackson who cheerlead the stock with what they imply is good due diliigence but they fail to provide the type of verifiable facts and evidence or reasoning therefrom that good due diligence entails. Then there are the firms that deal directly with the company, the IR firms like Crocker, analysts like Harbinger and Roth Capital, investment banks, lawyers, accountants, and so on.
    So, anyway, if ONP is a fraud, it has a lot of support.
    My goal is to try to keep the focus on facts and evidence, particular that are verifiable, and sound reasoning therefrom. I think everyone should do their own due diligence and make their own conclusions. With the vast support of ONP but their failures to provide good information in my opinion, I have been trying to provide such information.
    Thus, I wrote two instablogs. One instablog took the information directly from ONP - from its own SEC filings, its website and its CFO - and showed the problems and inconsistencies that make the ONP story not believable in my opinion. As a result of my method, ONP could not complain about the source of the information - it was themselves.
    The second instablog looked at the video of ONP by the promoter Doug at To an undiscriminating mind, the video might appear to help ONP's cause. I beileved that to a discriminating mind, the video was further evidence of the inconsistencies and problems with ONP so I provided the analysis.
    What I recommend is one review the evidence itself - ONP's SEC filings, its website, and the two videos by Rick Pearson and Doug and judge for themselves.
    A discussion using facts and evidence and sound reasoning is helpful. One using personal attacks and speculation are not helpful in my opinion.
    Rather than question me, I recommend that you question all those who are posting sites pumping ONP and making personal attacks and insults on others, without providing facts, evidence, or sound reasoning.
    Jul 25, 2010. 12:35 PM | 4 Likes Like |Link to Comment
  • Are Chinese Stocks Becoming Irrational? [View article]
    good post and points. I agree with you. I suggest caution wherever you choose to invest. China may turn out to be one of the best places to invest in for the 21st century. However, I would make sure to do your due diligence and be careful. There is a lot of corruption in China. It can also be difficult whenever you invest in a foreign country where you don't know the language as it can inhibit your ability to do due diligence. That said, China certainly has had an incredible record the last 30 years and appear to be learning to unlock human potential such that their future may be incredible too, although they do have hurdles and difficulties to address (as does everyone).
    Jul 25, 2010. 01:24 AM | Likes Like |Link to Comment
  • Orient Paper: Loeb's Not the Right Firm for the Investigation [View article]
    I don't believe that the Muddy Waters article generated confusion or that they didn't understand Chinese business practicies - they both own and operate companies in China.
    Also, good business operations and accounting practices don't change depending on what country you are in. You don't get a wink and nod for unacceptable business practices or committing fraud because you are in China.
    The allegations of fraud and shell companies are valid by any standards. Operating fraudulently is not excused or a good business practice in China or anywhere else.
    Finally, perhaps you should have the reports handy in front of you, rather than just relying on a faulty memory. The site is www.muddywatersresearc..., so it easy to look at it when you are posting to on your computers.
    1. Fraudulent RTO - can you provide a cite anywhere where Muddy Waters criticized ONP for doing a reverse merger or said it was fraudulent for doing a reverse merger. This argument should be easy for you to answer because it is not one they made.
    2. Dongfang Trading Company - you state that ONP is using this company for its import/export license. this makes no sense. ONP does not claim to be doing any importing or exporting. ONP claims to get its raw materials locally from Dongfang Trading Company from used paper obtained locally. If Dongfang is providing the used paper to be recycled, which ONP claims, Dongfang would have to have revenues and expenses and not be just a shell company. Furthermore, ownership of Dongfang by the Chairman would be required to be disclosed as it creates a conflict of interest.
    3. Overstating the Cost of New Equipement:
    Muddy Waters said that the manufacturer said on several occasions that they don't make the equipment of the size that ONP ordered. Do you have any specific information from the manufacturer that it does? If you do, please provide it. Otherwise, you have provided no facts, evidence or reasoning to dispute Muddy Waters claims, other than your pure speculation.
    Changing top 10 customers year to year.
    4. Changing Top 10 Customers Year to Year
    You state that ONP has a price advantage over other producers supplying low grade paper. Please provide the verifiable facts supporting this assertion. What is ONP"s price for this low grade paper and what is price of its competitors? How does ONP have a price advantage over other competitors which have the advantage of large economies of scale over ONP? Even if they had a lower price, they doesn't mean they can get sales immediately as new customers would be worried about quality, reliability, etc., so you would still need an explanation of how they would be able to acquire new customers at such large volumes so quickly. Based on the lack of detail or support for your assertions, it again appears that you are just speculating.
    5. High Inventory Turnover
    Again, you provide no facts or evidence, just pure speculation. ONP's own reports indicate that they are contracting, not expanding. In 2007, they reported in a video on their website 8 plants, 9 production lines, and 863 employees. Now, their website indicates two plants, 7 production lines and SEC filings say 600 employees. A recent supposed complete pictures of their operations show only 2 or 3 production lines. As far as modern manufacturing techniques, their CFO admitted they have no r&d facilities or r&d team. Besides the very small digital photo lines, the equipement for the other line appears old and small and inefficient. Using the same speculation you use, another way you might have very little inventory is if you produced very little product. Merely speculating as to possibilities is not the way to resolve questions, you need to look at facts and evidence. Your entire paragraph on this issue is just how you imagine it might be, not how it is based on facts and evidence.
    6. Some Important Things to Remember About China. Good operations are good operations everywhere and bad operations are bad operations every where. Fraud and lying may be more commonplace in China, but that does not make them more acceptable for a business to do or to investors looking to invest. The same principles of good business operations, sales operations, accounting, disclosures, etc. are important everywhere and don't change where you are. The average level of performance in those areas may be different, but it does not make them acceptable.
    In summary, you appear just to make up possible acceptable explanation but these are without any substance as you provide no facts or evidence in support of your points, only pure speculation. Furthemore, Muddy Waters made more and better arguments than you present here. I provided the site. I have also presented issues in my instablogs here on
    Jul 25, 2010. 01:20 AM | 1 Like Like |Link to Comment
  • Orient Paper: Loeb's Not the Right Firm for the Investigation [View article]
    Since you are anonymous - i am assuming that you are the anonymous dog on the internet you are referring to or are you just making a silly, sarcastic joke.
    I know that you would not be criticizing anyone for being anonymous when you yourself are, that would be hypocritical, which I am sure you are not.
    Jul 25, 2010. 12:25 AM | 1 Like Like |Link to Comment
  • Orient Paper: Loeb's Not the Right Firm for the Investigation [View article]
    Paul H. M.
    I find much humor and irony in the fact that you are the second poster stating people should reveal their identity and you don't reveal yours. You dispense advise without revealing your identity and yet you claim the most important thing in evaluating such advice is the person's identity. It reminds me of Douglas Hofstadter's writing's on Strange Loops.
    I have to disagree for two reasons.
    First, I would always do your own work rather than blindly trusting or relying on someone else. To the extent you rely on someone's elses work, I would trust but verify. In other words, you must evaluate the facts they present and see if they are verifiable and supportable. You must look at the reasoning to see if it makes sense or is logical.
    It makes no sense to just trust a big firm with a good reputation to give you accurate information. Usually, only a few people in that big firm do the work and those people may do high quality or low quality work and they may have integrity or they may not.
    More problematic is the large number of people who have gone broke trusting a big firm with a "good reputation". If you would like historical examples, I can provide them as they are numerous. I personally agree with Charlie Munger has a healthy skepticism of the entire accounting profession. And, of course, most people have a healthy skepticism of the entire legal profession.
    I think ONP was not successfull in refuting the allegations of Muddy Waters. I think that if Muddy Waters were incorrect, it would have been quite easy for ONP to refute their allegations with independently verifiable information. More importantly for me is the inconsistencies that ONP has had in their own SEC filings and website as well as the video evidence presented by the ONP promoters, which made ONP appear much different than the picture I imagined of them from their SEC filings and their own website.
    I would have a lot of skepticism towards anyone, regardless of their entity, who simply states they have investigated it and ONP is not fraudulent. I would need independently verifiable facts and sound reasoning. However, at this point, I think we have plenty of evidence presented to make our own sound conclusion.

    Jul 24, 2010. 07:15 PM | Likes Like |Link to Comment
  • Orient Paper: Loeb's Not the Right Firm for the Investigation [View article]
    Thank you. Your writing is very good and even more so for someone who English is not their first language.
    By the way, the ChineseCompanyAnalyst has writte postively about a Chinese smallcap company - YUII - and has reported he has a long position in it. I have no position, information, or opinion on it.
    Carson Block and Mr. Regan both as long as you can get on a Chinese company - they both own their own companies in China and live and work there.
    i have no doubt that there are plenty of very good Chinese companies. As Charlie Munger is reported to have said at Berkshire's 2010 conference, "China is setting a new record for advancement of civilization at a very rapid rate. It's fun to watch." See link at
    Also, it might be good for you that they don't allow short selling in your country. Short selling is a difficult way to make money. Mohnish Pabrai has commented persuasively on the problems with short selling as in investment strategies in articles, books and interviews. See www.grahamanddoddsvill....
    Thank you very much for your kind words and have a great weekend yourself.
    Jul 24, 2010. 12:16 PM | Likes Like |Link to Comment
  • Orient Paper: Loeb's Not the Right Firm for the Investigation [View article]
    The purpose of some short selling is to hedge your position and to limit your downside risk. This is not the purpose of all short selling. Jim Chanos has a fund where he only shorts and does so to profit, not to hedge risk. David Einhorn expects each short to be a good bet in and of itself and make a profit and does not short to hedge and limit risk, although it appears that he likes the benefit it has of smoothing out his returns.
    I have no evidence that Waldo Mushm or ChineseCompanyAnalyst shortsell to scare and create panic and benefit from it and you present none, so I can't respond to this point. As I noted in response to Dutch Trader, anyone presenting knowingly false information or information that have no basis to believe in is being unethical and, if the information is material, may be acting illegaly, whether it is done by short sellers to reduce the perceived value of hte company or whether it is done by the Company or its shareholders to inflate the value of the company.
    I believe that anyone who does such things should be investigated and prosecuted. However, in this case, it appears to me that the investigation should be into the company as I noted discrepancies in ONP's own representations in its SEC filings and on its website in one of my previous instablogs.
    Jul 24, 2010. 05:19 AM | Likes Like |Link to Comment
  • Orient Paper: Loeb's Not the Right Firm for the Investigation [View article]
    Dutch Trader;
    I and others have been talking about whether ONP was committing a fraud and you have been criticizing us as short sellers. Understand I was long ONP until Muddy Waters and my own followup caused me to believe there is extensive fraud at the company and reverse my position and sell. I then shorted ONP because I was convinced of its problems. Understand I have never shorted any company ever before.
    Your analogy is simply incorrect. When I shorted, I borrowed the shares from a broker, specifically JP Morgan, who I asked directly asked permission from and who agreed and knowingly lent them to me. I have no reason to believe that JP Morgan did not have the right to loan the shares to me. I didn't borrow the shares from some unknowing or unwilling person. If JP Morgan loaned something that wasn't theirs or that was someone elses and they had no permission or right to loan, JP Morgan has done something wrong, not me.
    Thus, to correct your analogy it would be as if my neighbor borrowed my car with my permission. Now, if I didn't have ownership of the car or the right to lend it, then I would be at fault, not my neighbor.
    The second part of your analogy about returning the car damaged or injuring others with the car is also incorrect. A short seller merely sells the shares. The short seller actually sells the shares at the highest price he can, much like a person who owns the stock does. The reason is because the short seller only profits if he buys the stock for less. Whether other people who own the stock are willing to sell it for less is up to them, not the short seller. Effectively, the short seller cannot do anything to damage the stock by short selling. Thus, a short seller cannot return stock in damaged condition; a short seller buys back the stock and returns it to the borrower, who sale price depends on the best offer of anyone who wants to buy it.
    Of course, I do agre with you that what would be descipable, unethical, and illegal is for a short seller to make false statements or allegations, without any basis, against a company to persuade people that it is worth less than it really is in order to get people to sell their stock for a lower price than it is worth. There is no dispute that this has been done by short sellers and it is obviously completely wrong. However, I don't believe this is the case with Muddy Waters, the chinese company analyst, myself, or others regarding ONP. We have just been presenting facts, reasoning and analysis. On the other hand, the response from the company and its promoters I believe does not meet the genuine criteria.
    With regards Muddy Waters, they have done their research and investigation and made many specific factual allegations. If the facts they presented are fabricated and falsified by them, I would agree with you that it would be immoral, despicable, unethical and, I believe, illegal. However, I don't believe that is the case. They have reasoned from the facts and made opinions and conclusions that is fine if they honestly believe them, even if they are wrong, but again are immoral and the rest if they don't believe them and they are falsified. I think it is relatively clear to separate the facts from their research and investigation from their opinions and conclusions, which I don't put as much weight on. They also provide extensive information so that somebody, like yourself, could go about verifying whether they presented the facts truthfully or not. ONP, in my opinion, does not do this.
    I very much appreciate your last post (not sure about the smooth talker part, though). It appears we at least have some agreement in some parts - presenting material facts that you know are not true or have no basis for believing are true is immoral and unethical (and I believe illegal) whether you are a short seller or the company or long the stock. Are remaining disagreement is that you believe that short selling is immoral, whereas I, along with the Catholic Church I think, that short selling is not immoral.
    To answer your remaining - yes, I believe short sellers short primarily to make money just as I believe that people buy stocks primarily to make money.
    Jul 24, 2010. 05:11 AM | Likes Like |Link to Comment
  • Orient Paper: Loeb's Not the Right Firm for the Investigation [View article]
    Dutch Trader:
    You haven't provided any facts, reasoning or evidence that shows short selling is immoral in anyway. You didn't respond to any of my points. Indeed, you apparently agree with me on the Roman Catholic position, so I assume you are retracting with your religious argument as well. Again, you make a conclusory statement without any evidence that 99% of short selling is illegal (nor not done responsibly or in moderation - whatever that means).
    Jul 23, 2010. 07:47 PM | Likes Like |Link to Comment
  • Orient Paper: Loeb's Not the Right Firm for the Investigation [View article]
    Dutch Trader:
    I am not sure that you are in agreement with the Catholic Church on short selling. I do not believe that the Catholic Church has ever declared or considered short selling to be immoral or any kind of sin. We can write and get the official catholic position on it if you doubt what I am saying. Certainly, many catholics, including clergy, have shorted and are shorting stocks.
    Again, I addressed your claim of negative economic and social consquences and you have not responded to my points. At this point, this is just a conclusory statement by you without support.
    As far as making a quick buck - it is much easier to lose money shorting and very hard to make money at it. Historically, people long stock do better than those that short it, so it is not generally an easy, quick buck. As far as selling something you don't own, you have borrowed it and are obigated to buy it back and return it. How is this different than a company borrowing money and giving it another company to purchase equipment to attempt to profit and then pay back the money? Is that immoral as well?
    Some forms of short-selling may be legal (currently), but legality is never a moral justification in my opinion. No amount of excuses can erase or balance out the inherent immorality of selling something that you do not own along with the negative economic and social consequences that can result from that attempt to "make a fast buck".

    Of course there are enough arguments that argue and explain that short selling can be good, some points you mentioned already.
    Jul 23, 2010. 07:22 PM | Likes Like |Link to Comment
  • Orient Paper: Loeb's Not the Right Firm for the Investigation [View article]
    Dutch Trader:
    Okay, so your point has nothing to do with ONP specifically, you just have a problem with short selling generally. I don't have a problem with short selling. I don't believe that selling short is acting counter to the person who owns the shares. In fact, if the company is really a good company, the person that owns the shares has an opportunity to buy the shares from the short seller. If the company has done so well that people will not sell except for a higher price, the owner of the shares has the opportunity to sell for a higher price when the short seller has to cover or buy back the shares.
    Most good companies make money or have cash flow to fund their operations. Raising capital is necessary for expansion - which may or may not be a good idea - or for funding current operations when those operations haven't been able to fund themselves. Economic value is not automatically created when capital is raised - it can be created or, as it often is, it can be destroyed.
    What is clearly immmoral - and I am surprised that you don't address this is a more serious fashion - is fraud by a company to transfer wealth from purchasers of its shares to themselves. Short sellers sometimes do a service is helpfing to short circuit these frauds earlier than would occur otherwise and save investors from losing money they otherwise would have lost.
    Where is your moral outrage for companies that have looted and pillaged money from their shareholders for their own gain and economic benefit? Although many capital raises have been beneficial, there have also been a great many capital raises that have stolen money from purchasers of stock, such that it is a red flag to investors to examine the capital raises for the value they have added to or detracted from the company. It is very suspicious when a company repeatedly does capital raises and is unable to fund its operations from its own earnings. Often, the company either is losing money such that it shouldn't be in business or it is looting from shareholders. In those cases, short sellers can be helpful to put an end to these practices earlier than otherwise would occur.
    Jul 23, 2010. 06:15 PM | Likes Like |Link to Comment
  • Orient Paper: Loeb's Not the Right Firm for the Investigation [View article]
    Dutch Trader:
    Again - you believe I am in the Muddy gang. You hope I don't advise clients to buy or sell Chinese Stocks as a licensed investment advisor. These are all unsubstantiated speculation or insults based on no facts or evidence that are verifiable and no reasoning from those facts or evidence. Instead, I have posted two instablogs based on the facts and evidence presented by ONP and its promoters. The first details the inconsistencies and problems with the representations of ONP itself, based on its own filings and website. The second details the problems with the videos submitted by two promoters of ONP, Doug from and Rick Pearson, writer for I appreciate comments that are based on verifiable facts and evidence and reasoning therefrom. Not unsupported statements of speculation and insults without a basis.
    Jul 23, 2010. 05:48 PM | 1 Like Like |Link to Comment
  • Orient Paper: Key Pieces of Evidence for Fraud [View article]
    some people would do anything they could to make money on a long or short position but most people wouldn't. I am concerned about your view that anyone who is short would do anything to make the price go down. Is that projection on your part because that is how you are? It is certinaly not how I am.
    The problem her is that you are not presenting any facts about ONP or reasoning based on those fats. Rather you are just speculating. Can ONP be fraudulent and bounce up? Sure. Is that a good way to invest? I doubt it.
    If ONP is actual worth more than its price, I hope it goes up and I lose money on my short. I should not make money based on the wrong analysis. However, as my posts suggest, I question that ONP is worth anything near what it claims. If I am right, I think I should do well. If I am wrong, I think I should do poorly.
    There are very good reasons for this and to have this view, even if you lose money on a trade you were wrong about. Think about it.
    Jul 23, 2010. 04:09 PM | 1 Like Like |Link to Comment
  • Orient Paper: Loeb's Not the Right Firm for the Investigation [View article]
    CSMhater: muddy waters doesn't claim that it owns stock in ONP and have never reported that it has or did.

    Willem55 and Dutch Trader and Phubaiguy: you provide no facts or information, just unsupported speculation conclusory opinions.
    Jul 23, 2010. 03:25 PM | 2 Likes Like |Link to Comment
  • Video of visit to ONP [View instapost]
    would you find it despicable if ONP and its promoters are attempting to make millions from false representations regarding the company?
    Jul 23, 2010. 03:13 PM | Likes Like |Link to Comment