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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Jurgis Bekepuris who wrote (38007)	5/24/2010 9:58:17 AM
From: Spekulatius	Read Replies (1) \| Respond to of 78476

re Chinese companies - Barron's had a number where the "1/3 fraudulent" was referenced as well. I agree that this does not make it true. I do think it's a little naive to assume that those irregularities that you are mentioning are all due to inexperience. I have not seen many pharma upstarts buying convention centers from related parties (AOB). Also for unsophisticated players they have set up nice legal structures (3 layers of holding companies, US, Cayman, Hongkong) that will make it very hard to enforce liabilities should any bad thing happen to shareholders. Then there are issues with double books ( a menace in China) where the Chinese tax books don't match the us books (according to shortsellers, we can't substantiate that because none of us understand the language enough or has the means to look into Chinese tax records. I also mentioned the cement company (forgot the ticker) where the owner don't really own the shares, but a contract with the owners who are running the enterprise. These are a lot of yellow and red flags for me. Your mileage may vary. I can tell you one thing - if there is a panic over the Chinese small cap fraud, you will be able to get a good and the bad ones at prices you never consider possible.

To: Jurgis Bekepuris who wrote (38007)	5/24/2010 10:15:06 AM
From: Madharry	Read Replies (1) \| Respond to of 78476

i was reading a summary and summarized that about two years ago i guess the same presenter offered a list of chinese small caps that he was shorting that showed a large descrepancy between net profits and operating cash flow. Hes said he did pretty well with those shorts. The point that I came away with was to be extra careful looking at chinese small caps and see if they are actually generating cash or just increasing a/r and inventory for example.