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Red Flags on Investors: Chinese MediaExpress and Fear

|Includes: China MediaExpress Holdings, Inc. (CCME)

Throughout these past few weeks, there has been a swell of activity due to researchers publishing reports on why they believe Chinese MediaExpress (OTCPK:CCME) is a fraud.  These articles have significantly brought down the market cap of the company, and yet many people have poked holes in the research of Citron, Muddy Waters, and recently Chimin Song who posts articles here at Seeking Alpha.  Yet, the general trend has been downwards for one reason: fear.

Fear makes it very easy to herd people together whether it is fear of losing family due to terrorists to fear of losing all your money in a stock.  Whether the researchers are right are wrong at this point is insignificant to them since they all professed short positions and have reaped their rewards.  As we all know from high school, it is easier to spread a negative rumor that instantly destroys someone's credibility than it is to rebuild it.

I would urge everyone to not simply react but do your research

1) Are the arguments sound?  Are there holes that puts their research in question?
2) Are there important counter points to consider?  See http://ccme-info.xanga.com for counterpoints to the shorters.
3) Who are the people publishing research?  Are they really the experts they make themselves out to be?  Do they actually have a trading background and successful experience?  Do they have a reputable past or have they proven their expertise in the stock market?
4) Will the individuals benefit if you believe their viewpoints?

For the many who post, comment, and even put out reports, I'd be surprised if any significant portion of them can even read Chinese or understand how business is done in China (Google translate is not exactly perfect especially for something this important).  Seek out the experts, not the shouters.  If in doubt, then stand on the sidelines and don't invest either long or short.

At the end, these shorters are bright whether they are wrong or right.  They know how people work and fear trumps all for many people.  The fact that there have been frauds make it ripe for fear, but in the same vein, just because one Middle Eastern person is a terrorist doesn't make them all terrorist.  Yet fear sometimes will drive people to  believe so.  

As a disclaimer, I am long CCME, but I'm trying to place a more balanced view.  Do your research, vet the credibility of everyone who posts an article, and finally make a good investing decision.  This research could reinforce your short position, but at least you aren't fear driven at that point.

Educate yourself and make a wise decision whether long or short and happy investing.



Disclosure: I am long OTCPK:CCME.