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floridahockeyman
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Full-time practicing attorney (over 26 years), part-time investor (maybe 15 years +/-). 1981 graduate from Syracuse University's Maxwell School Of Public Citizenship - Magma Cum Laude, Phi Beta Kappa. 1984 graduate of Vanderbilt University School of Law. Happily married, with one daughter. Play... More
  • Is Pearson that dim a bulb ... or worse? 17 comments
    Feb 23, 2011 3:36 PM | about stocks: CCME

    My astonishment was triggered by his piece published by TheStreet.com earlier this date.  You can link to it here:

    http://www.thestreet.com/_yahoo/story/11019423/1/shorts-impact-on-china-stocks-lasting.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA#disqus_thread

    Either way, his arguments fail to survive the guffaw test.

    Let's examine his "logic," shall we?

    //A primary problem with China small caps is that the investor base is largely dominated by retail investors as opposed to large institutions. Once burned by a stock collapse (whether justified or not), retail investors are more likely to say "never again" and abandon a stock regardless of how its fundamentals change. There are certain groups of China-focused investors (myself included) who continue to play these stocks on the fundamentals, but the fact remains that some outside capital that had previously been attracted is no longer chasing the individual stock in question, which results in a lower share price.//

    Pearson conveniently ignores the growing institutional following of CCME for one. Secondly, he ignores the fact that even the despicable shorts (Citron, MW) have said that the company must be a fraud BECAUSE the numbers are simply too good to be true. Well, he can't have it both ways; if in fact the 10-K bears out the numbers (which I remain quite confident of), then every single institution with a stake now, as well as many watching the stock but waiting until the 10-K is released to take action, will create a tremendous amount of new buying pressure!

    //An additional problem is the ubiquitous lawsuits that are filed almost as soon as the short report hits the new wires. Despite the fact that many of these lawsuits have no substantial basis (aside from simply quoting the short-sellers), their lawsuits create two problems. The first is "headline damage," which is simply that new investors who are researching the stock see a dozen or so lawsuits under the company's news headlines and decide to invest elsewhere.

    The second is that these lawsuits are in fact time-consuming and expensive for management to defend against. The cost of defending against the lawsuits can create a temporary drag on earnings and can also create a distraction for management, which is trying to execute a business plan but is instead forced to expend time, money and effort in a lawsuit.//

    LOL. Is this guy for real? As he acknowledges, the suits are baseless and grounded only in self-serving short-seller propaganda. As an attorney with over 26 years litigation experience in federal and state courts, I can predict with a reasonable degree of certainty that the cases filed to date are going NOWHERE but the trash can.

    And not only are the allegations of the existing suits baseless, but the entire premise of the lawsuits will be utterly destroyed when the 10-K is released. Watch all the class action lawyers scurry for an exit then...

    Thirdly, these lawsuits are NOT a drag on mgmt's energies and time. The attorneys handle 99% of the work, and the executives are consulted only periodically. And since I predict these lawsuits will be deep-sixed soon after the 10-K is issued, what expenditure of mgmt energies are we really talking about? ;-)

    Lastly, Pearson conveniently ignores the fact that publicly traded companies get sued from time to time and all have insurance to protect themselves in that event. Lawsuits like this do NOT cause a drag on earnings.

    //The final problem is just simple math. A stock that falls 50% needs to rise 100% to regain its original price, and a rise of 100% takes time and a lot of investor conviction.//

    Perhaps this is the dumbest assertion of all. The author neglects the huge short interest in the stock, the fact that even the short sellers have said that the numbers are extraordinary (if true), that institutions are plowing into the stock, and that a lot more money (long-term capital and undoubtedly shorter-term momo cash) will literally POUR like a great Niagra Falls of pent-up demand into CCME after the 10-K is released.

    In short, I give this article an "F." Frankly, this clown should be embarrassed for writing such amateurish tripe.

    Disclosure: Long CCME

    Stocks: CCME
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Comments (17)
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  • Mike Labadi
    , contributor
    Comments (8) | Send Message
     
    Great counter point, clearly Pearson has an agenda to bail out some shorts or is influenced heavily by their direction on what to publish.
    23 Feb 2011, 03:49 PM Reply Like
  • LEGaLiZeIT
    , contributor
    Comments (402) | Send Message
     
    Great points Florida! Glad to have some legal weigh-in on the matter of the numerous lawsuit filings. The fact that shorts have to go great lengths such as to make their case from a pretend long position is indicative just how high the stakes are on this security. Thanks for ironing out the manipulation for the rest of us :)
    23 Feb 2011, 03:50 PM Reply Like
  • theericman
    , contributor
    Comments (9) | Send Message
     
    Excellent point!! Pearson should be ashamed of himself for writing a piece of crap with the intention of distorting the truth. If that wasn't done intentionally, he must have sub-par intelligence. Thank you for clarifying some of the key problems with Pearson's piece.
    23 Feb 2011, 03:52 PM Reply Like
  • BullMarket
    , contributor
    Comments (63) | Send Message
     
    Excellent response. Perhaps the title is rather strong language. "Thoughtless" or "ill-thought" is probably more appropriate than "imbecile". These are the links to the recent Rick Pearson articles so folks know what you are responding to as we get further removed from the date of publishing.
    www.thestreet.com/_yah...
    www.thestreet.com/_yah...

     

    Also your fine Instablog analysis is now a headline at the Friends of CCME Facebook Page: www.facebook.com/pages...

     

    -Andrew
    23 Feb 2011, 03:55 PM Reply Like
  • floridahockeyman
    , contributor
    Comments (7) | Send Message
     
    Author’s reply » Andrew

     

    Good suggestion. I have included a link to the Pearson article in my most recent edit.

     

    Best, Jim
    23 Feb 2011, 04:03 PM Reply Like
  • floridahockeyman
    , contributor
    Comments (7) | Send Message
     
    Author’s reply » Thanks, all.
    23 Feb 2011, 03:58 PM Reply Like
  • Streetdog
    , contributor
    Comments (31) | Send Message
     
    Excellent job of putting Pearson's thinking in its place. On the lawsuits: unless there is a genuine surprise lurking in the 10-K (which I strongly doubt), a first year paralegal could handle the motion to dismiss.
    23 Feb 2011, 04:04 PM Reply Like
  • floridahockeyman
    , contributor
    Comments (7) | Send Message
     
    Author’s reply » Thanks. Yeah, regarding the suit complaint that I reviewed, it relied entirely upon assertions made by Citron and Muddy Waters, two infamous short sellers whose own column disclaimers prominently disclose that the reader can't rely on a single word written by either of them.

     

    It would be pretty funny stuff if it didn't involve something very serious, i.e., what I regard as the flagrant abuse of our already strained legal system.
    23 Feb 2011, 04:43 PM Reply Like
  • nero2000
    , contributor
    Comments (23) | Send Message
     
    My objection to Pearson's drivel is that encourages investors to choose stocks like sheep -- buy only what everyone else is buying. If anything bad is said about a stock, run for your life and let the short-sellers have their way.

     

    This sort of gutless investing is not only soul-sapping, it isn't even profitable. Risk and reward is the formula. Thorough research and buying when other people are scared is the surest way to make money.

     

    Thanks for the point-by-point, Florida.
    23 Feb 2011, 11:32 PM Reply Like
  • BlueSkiesLP
    , contributor
    Comments (11) | Send Message
     
    You talk like a timid Rangers fan. A Montreal Canadiens fan would have totally destroyed an intellectual midget like Pearson.

     

    Just kidding! I have to admit I thought your article was extremely well written and balanced, even though you like the Rangers.

     

    You did forget to mention the part where he says Global Hunter "could only verify 50% of the revenue flow and bus counts." He implies with this statement that this is all that could be verified, leaving the reader the impression that the other 50% could be in doubt.

     

    If one actually reads the Global Hunter report, it is obvious that the analyst just stopped checking after reviewing 50% of the revenue from largest clients and buses from biggest bus operators because everything checked out 100% with what company was claiming and there was no reason to continue checking.

     

    As you say, either a very poor analyst...or someone paid by the short funds.
    24 Feb 2011, 08:55 AM Reply Like
  • m2010
    , contributor
    Comments (2) | Send Message
     
    Sweet! I added this article to the top of the CCME iBox page.

     

    Keep kickin' butt n takin' names!

     

    Majik
    24 Feb 2011, 10:22 AM Reply Like
  • BullMarket
    , contributor
    Comments (63) | Send Message
     
    I was going to add it after the name change. Thank you for doing this.
    -Andrew
    24 Feb 2011, 10:44 AM Reply Like
  • BullMarket
    , contributor
    Comments (63) | Send Message
     
    Just wondering, was your comment permitted to be published under Pearson's article in the comments area?
    -Andrew
    24 Feb 2011, 04:56 PM Reply Like
  • floridahockeyman
    , contributor
    Comments (7) | Send Message
     
    Author’s reply » Not yet. I resubmitted it this a.m. with the "softer" title; we'll see.
    25 Feb 2011, 09:18 AM Reply Like
  • floridahockeyman
    , contributor
    Comments (7) | Send Message
     
    Author’s reply » it's there now - been busy most of today, but apparently it's been up for 7 hours now... ;-)
    25 Feb 2011, 04:41 PM Reply Like
  • bobobobabbins
    , contributor
    Comments (135) | Send Message
     
    Great article. Your points are right on.

     

    I know you were hard on Pearson but to be fair, he may not be "in on it"... but rather just scared because he got burned over the last few months and is struggling to figure out what's going to happen next and is confused as to why these short-attack stocks haven't bounced back (and wrote that article w/ a little too much emotion, a little "too little" logic).

     

    Remember, he got f****ed after recommending ONP before the MW/Citron hit pieces and looked bad (even though he was right). If he were to take a stand right now and get burned again, his job could be on the line.

     

    Of course, he could be completely in on the scam.

     

    All I'm saying is I'm willing to give him a few more months to see how he responds to 10-K season before passing judgment on him.

     

    The quality Chinese ADRs (CVVT, WATG, CNIT, CELM, JADE, CADC, etc.) are having a huge day so this may be the beginning of the end of the witchhunt.
    25 Feb 2011, 01:35 PM Reply Like
  • bobobobabbins
    , contributor
    Comments (135) | Send Message
     
    The guy who should be fired from thestreet.com is Scott Eden. I hope everyone on this site goes back and reads his articles (like the one that glorified John Bird/W Mushman for his investigative work into Chinese companies).

     

    For anyone w/ journalism experience (even high school), you'll be amazed at how many ethical breaches he's made in his articles.
    25 Feb 2011, 02:13 PM Reply Like
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