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Back to School With China Expert

|Includes: Armco Metals Holdings, Inc. (AMCO)

Recently there were some questions posed by an individual in response to our CNAM.OB article.  We are a little concerned about the lack of thought that went into his/her response.  In most cases, asking questions is a good thing when collaborating to discuss the issues at hand.  In some cases, asking the wrong questions can lead to embarrassment, especially coming from the mouth of someone whose pseudonym conveys a pretense of expertise in a particular subject, a pretense that we now know is false.  Here is our response to him/her.

Dear China Expert,

It seems like you really did your home work on finding useless information. Not one comment about industry or company fundamentals.  You should be asking about the one big order in the second quarter or if the company will be able to offset dilution once warrants become an issue. You should be asking if there will be any unforeseen expenses associated with the start up of their recycling facility or if they will need to raise more capital. Will CNAM.OB experience margin improvements from its new recycling endeavor and how long will it take the company to start seeing benefits from the facility?  How do they plan on growing their mature core distribution business?

But here were your concerns:

1. Q-Why did the company terminate its IR relationship early this year? 

A-Why don’t you call and ask them before you make assumptions.  It’s not uncommon for companies to change IR firms.

2. Q-Why doesn't the company have an English speaking spokesman? 

A-LMAO.   They do have English speaking representatives, at the company and its IR firm.  Do your homework.  Did you even call the IR firm?

3.  Q-Maybe they'd be attending some of the Chinese investor conferences at Roth or Rodman?

A-The CEO will be in town soon to meet with investors.  Their story has just begun to gain traction.  By the way they did have representation at the Rodman conference.  LMAO!!

4.  Q-Not one of the investors in the "deal" is a recognized investor in Chinese companies. hmmm. 

A-Maybe you don’t recognize them. hmmm

5.  Q-Overhang at $5.00.

A-Ok let me get this straight; you think the stock is going over $5.00 yet you still don’t like it. $5.00 is fine for investors who bought this stock between $1.00 and $3.00. I can handle more than a double. I am more concerned about fundamentals. But, what can I say, you are the expert.

5. Q-Its nice that the company on August 11, 2009, Armet obtained a RMB 90 million three-year line of credit from a financial institution guaranteed by the Company’s chairman and CEO, none of which have be drawn as of August 14, 2009; the interest is a floating rate not to exceed 5%.......Nonetheless..... Smells here???

A-Many loans are guaranteed by company directors.  You really don’t see this as sign of confidence?   Seriously???  What smells?  Please enlighten us?

6. Q-No Chinese fund has purchased any shares since going public. 

A-Who cares??? Most funds are late to the party any way.  They will come at higher prices as they inevitably always do.  As an expert you should know that you want to get into a stock before the institutions do.

7. Q-If management stays away.....then I will stay away.

A-Do you know how much stock insiders own??? 

8.  Q-Good luck pumping this to "retail" investors.

A-Are you telling me the very few stocks you have generously commented on are not driven by retail investors?

You need to stop overanalyzing and start to really understand how Wall Street operates.

Sincerely,

Maj
President
GeoInvesting