GlobalSpeculation.com
Bargain hunting for the sport

Bottoms:
SKBI – $6 http://investorshub.advfn.com/boards/read_msg.aspx?message_id=54530254 SKBI…NICE growth/profit machine…Here’s the kicker…

SKBI’s new vaccine production plant will add $12M – $14M to the top line next year @ 70% margin. Recent Hubei acquisition will add approx $4-$6M to the top line next year at approx 40% margin. That’s approx $10M EXTRA in gross profit next year not counting organic growth or anything else. That’s more than Skystar has in gross profit for the first 6 months of this year ($7M) and first 6 month EPS is $0.49.

HUGE Q3 coming up also. SKBI could easily come in w/ $1.80 – $2 EPS for FY2010 and $3++ for FY2011 (based on approx 7.1M shares outstanding). Also, Skystar mentioned that they have enough cash on hand to complete the Jiangsu based micro-organism facility which they already have a deposit on. Micro-organisms = approx 70% profit margin. (The Jiangsu acquisition is projected to be completed in the third quarter of 2010, so we’ll see what happens. That’s only a couple of weeks away.)

SKBI’s Rodman & Renshaw presentation is well worth a listen IMO.

Next year’s estimated growth is mind boggling, especially when adding in organic growth and the Jiangsu based micro-organism facility if and when the acquisition is complete.

Current share price = $6.50.

CNAM – China Armco $3
CCME – China MediaExpress Holdings Inc (Public, NASDAQ:CCME – $7
UTA – Universal Travel Group (Public, NYSE:UTA) – $4
LPH – Longwei Petroleum – $2
CHBT – China Biotics $9
LTUS – Lotus Pharmaceuticals $1

lots of bottoming happening in this space.

Resources:

http://www.ripoffreport.com/brokerage-companies/www-stockholderloan/stockholderloan-com-deceptive-48d52.htm

http://www.scribd.com/doc/37761821/Exhibit-10-Stanley-Morris-Letter-July-21-2010

http://www.scribd.com/doc/37592330/China-Armco-Metals-Sued-for-Securities-Fraud-Kexuan-Yao-Fraud-Board-Cover-Up-Chinese-Stocks

http://www.scribd.com/doc/37761933/Exhibit-13-Points-and-Authorities-Yao-vs-FUnd

Finally found it:

http://www.scribd.com/doc/37761933/Exhibit-13-Points-and-Authorities-Yao-vs-FUnd

Haha, this pretty much sorts it all out. This is definitely a stock loan agreement as I had hypothesized. Tony Gentile looks to me to be a professional scam artist… looking to close out and retire on this 1 deal. To CNAM longs: we’re good to go.

It is obvious to me that Tony Gentile probably saw an opportunity to do the following:

1. Find a stock with a small float
2. Give a stock loan.
3. (illegally) Sell all your stock on one day and try to drive the price down so far that the stock loan triggers and defaults (thus crisnic would be able to keep the difference in money).. usually with a stockholder loan there is a price that if it closes below the firm guaranteeing the loan gets to liquidate and flush the toilet on your stock and keep the proceeds. unfortunately, it appears that gentile tried to preempt driving the price down this far and came up short…. hence step 4
4. Fail on step 3, panic, don’t finish the loan, threaten lawsuits, break laws, push money into off-shore accounts and duck and run! the next step is to crash your websites and disappear into the cayman islands or some place like that with a briefcase full of cash. after all, if he can ever get the stock price of CNAM to drop below (i’m guessing $1.92), then he can come out of this one ahead by liquidating the rest of CNAM and sending Yao his money… and then writing the agreements after the fact, but i’d say this is unlikely. i’ve talked to several longs out there, we’re really locking up the float between just a few of us… maybe i should call my brokers and ask them to stop loaning out my shares? haha.

why a stockholder loan?

http://www.stockholderloan.com/about.php

why did i guess this?
because i’ve almost done them in the past. i’d love to do a stockholder loan on some of my stocks…

anyway, yeah. so Gentile didn’t even draft a final contract. they took Yao’s shares, illegally unrestricted them, and began liquidating them, and then cut a check for $1M to Yao.

how is this behavior remotely close to legal? it’s not. based on this and all the other dealings Tony Gentile has been involved with,

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=53185613&txt2find=gentile

i’m going to argue in favor of CNAM on this one.

FYI:

I had tried to do a stockholder loan in the past:

1. Transfer unrestricted shares to loan agent.
2. Receive a percentage of the market value of the shares as cash
3. For a given preagreed upon period of time you still have rights to the shares upon expiration of the loan agreement as long as the stock stays above a preagreed upon price. If the stock goes below that price within the time frame, the stockloan agent can liquidate the security, as the security is collateral.

Just imagine that the stockholder loan is like pulling equity out of your home… I believe they call it a home equity loan. Where, at the end of paying off the loan payments, you still own the home — at least in regards to participating in upside home appreciation.

That’s why it’s appealing, it’s a way to margin securities that are not marginable… Usually there are agreements such as: “you can’t use the proceeds to buy back into any security, etc.”

In regards to your question:

Yao didn’t anticipate being ripped off by this guy. I’m sure Yao likely took 50% of the all-time CNAM low as a reasonable figure that the CNAM price would not drop below. (or some margin of safety, hence the low price)

Crisnic cannot sell restricted shares. In fact, if you read the agreement. They are deceptive in a multitude of ways, so long that it’s not really worth my time listing. That said, to answer your specific question:

“Crisnic’s agent paid a New York attorney to erroneously opine that Yao’s restrictions could be removed” – PAge 3

“Some yahoo poster” is right…. lol, Barron Worden’s recent purchase has 0 relation to this. It’s a month of difference.

Yahoo posters are likely short. They’ve been trying to create aliases and post here, I’ve blocked them all (at least when it’s obvious and it’s a new account with it’s first post being 100% biased towards spewing negativity and poorly planned rumors)

It is worth noting here the positives.

I figured that maybe Yao had funded his large Form 4 purchase with the Crisnic money, but if Crisnic never paid him any money…. well then he did it right out of pocket!

That’s even more bullish, haha.

I got bored and since there are haters of BDO Limited, I figured I’d look through the statements of BDO Limited Companies…

My findings indicate that haters are likely just haters. I know someone in my life who is deeply troubled with worry at the moment. The way you conquer worry and fear is with facts. Well, there are a lot of unsubstantiated rumors rolling around these days all big and bad as if they know what they are doing.

Our default reflex is that the world knows what it is doing, and that is extravagant nonsense, -Jeremy Grantham

So, here we go. Some of these stocks had BDO Limited and another independent auditor, others just had BDO Limited. In fact, the largest fraud of them all had both. In fact, the largest fraud of them all could have been detected by a zombie MBA like me. Red flags all over. That said, I don’t think you can fake as much of this stuff as those that are running around screaming fraud claim you can.

http://seekingalpha.com/author/chinese-company-analyst/instablog/3

GFRE

To the Board of Directors and Stockholders of
Gulf Resources, Inc.

We have audited the accompanying consolidated balance sheet of Gulf Resources, Inc. (the “Company”) as of December 31, 2009 and the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for the year ended December 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Gulf Resources, Inc. at December 31, 2009, and the results of its operations and its cash flows for the year ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

/s/ BDO Limited

Hong Kong, March 2, 2010

F-2
Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and
Stockholders of Gulf Resources, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheet of Gulf Resources, Inc. and Subsidiaries (the “Company”) as of December 31, 2008, and the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2008, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.

/s/ Morison Cogen LLP

Bala Cynwyd, Pennsylvania
March 12, 2009

CHBT
To the Board of Directors and shareholders of
China-Biotics, Inc.

We have audited China-Biotics, Inc.’s internal control over financial reporting as of March 31, 2010, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). China-Biotics, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Item 9A, Management’s Annual Report on Internal Control Over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

- 81 -

In our opinion, China-Biotics, Inc. maintained, in all material respects, effective internal control over financial reporting as of March 31, 2010, based on the COSO criteria .

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of China-Biotics, Inc. as of March 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended March 31, 2010 and our report dated June 14, 2010 expressed an unqualified opinion thereon.

BDO Limited

Hong Kong, June 14, 2010

ONP
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Orient Paper, Inc.
We have audited the accompanying consolidated balance sheet of Orient Paper, Inc. (“the Company”) as of December 31, 2009 and the related consolidated statements of income and comprehensive income, stockholders’ equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2009, and the result of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 28, 2010 expressed an unqualified opinion thereon.

/s/ BDO Limited
Hong Kong, March 28, 2010

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

DAVIS ACCOUNTING GROUP, P.C.
A Certified Public Accounting Firm
1957 West Royal Hunte Drive, Suite 150, Cedar City, Utah 84720
(435) 865-2808 • FAX (435) 865-2821

REPORT OF REGISTERED INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of
Orient Paper, Inc.:

We have audited the accompanying balance sheet of Orient Paper, Inc. (a Nevada corporation) as of December 31, 2008, and the related statements of operations and comprehensive income, stockholders’ equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Orient Paper, Inc. as of December 31, 2008, and the results of its operations and its cash flows for the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Respectfully submitted,

/s/ Davis Accounting Group P.C.

Cedar City, Utah,
March 19, 2009.

GPRC

GPRC’s was a scan in the SEC Filing:

Report of Independent Registered Public Accounting Firm

Anyway.. it was JUST BDO

SPU
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of
SkyPeople Fruit Juice, Inc.

We have audited the accompanying consolidated balance sheet of SkyPeople Fruit Juice, Inc. as of December 31, 2009 and the related consolidated statements of operations and comprehensive income, stockholders’ equity and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of SkyPeople Fruit Juice, Inc. and subsidiaries as of December 31, 2009, and the results of its operations and cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

BDO Limited
Hong Kong
March 31, 2010

-75-
Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To The Board of Directors and Stockholders of

SkyPeople Fruit Juice, Inc.
Shaanxi Province, China

We have audited the accompanying consolidated balance sheet of SkyPeople Fruit Juice, Inc. (the Company) as of December 31, 2008, and the related consolidated statements of operations, cash flows, and changes in shareholders’ equity for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of SkyPeople Fruit Juice, Inc. as of December 31, 2008, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Child, Van Wagoner & Bradshaw, PLLC
Salt Lake City, Utah
March 27, 2009

WWIN
1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of
Winner Medical Group Inc.

We have audited the accompanying consolidated balance sheets of Winner Medical Group Inc. and subsidiaries (the “Company”) as of September 30, 2009 and 2008, and the related consolidated statements of income and comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended September 30, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Winner Medical Group Inc. and subsidiaries at September 30, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2009, in conformity with accounting principles generally accepted in the United States of America.

/s/ BDO Limited

Hong Kong, December 7, 2009

Here we go.. lets start to dig deeper:

CXTI – which is now caveat emptor
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
CHINA EXPERT TECHNOLOGY, INC.

We have audited the accompanying consolidated balance sheets of China Expert Technology, Inc. and subsidiaries (the “Company”) as of December 31, 2006 and 2005 and the related consolidated statements of income and comprehensive income, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of China Expert Technology, Inc. and subsidiaries as of December 31, 2006 and 2005, and the consolidated results of their operations and their cash flows for each of the two years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

BDO McCabe Lo Limited

Hong Kong, April 3, 2007

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
China Expert Technology, Inc.

We have audited the accompanying consolidated statements of income and comprehensive income, stockholders’ equity and cash flows for the year ended December 31, 2004 of China Expert Technology, Inc. (the “Company”) and its subsidiaries. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, as of December 31, 2004 the consolidated results of operations and cash flows of China Expert Technology, Inc. and its subsidiaries for the year ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America.

PKF
Certified Public Accountants
Hong Kong
February 22, 2005, except for the
restatement discussed in Note 2 to
the consolidated financial statements,
as to which the date is March 10, 2006

———NOTE ON CXTI————-
Just look at their balance sheet, income statement, and cash flow statement.. even a dumb MBA like me raises red flags all over…. haha
———-END NOTE——————

———-NOTE ON BDO McCabe Lo Limited———-
BDO Limited, renamed from BDO McCabe Lo Limited as from 1 May 2009, is the BDO member Firm in Hong Kong and is served by over 700 staff. As part of the BDO International network, we combine international expertise with the best available local business and advisory services: acting locally while thinking globally. Since our establishment in 1981, we have been committed to serve growing businesses and the people behind them, and continue to provide our client with the highest quality services
———END NOTE———————-

——–NOTE ON AUTHOR——–
He says:
If Orient Paper is serious about having third parties investigate critics’ claims, they should hire a law firm that is not actively involved in the Chinese RTO space, and can act as a more objective investigator. I provide dozens of potential law firms at the bottom of this article.

I say:
How do you get an auditor that isn’t involved in the space to audit someone that is in the space? (just laughing at the irony) Heck, I think that auditors that audit chinese coal should be able to audit intel? What? Why are you looking at me funny?

That’s like saying in a venn diagram, A has no overlap with B. Now, B should Audit A.
———–End Note————-

I’ve been patiently waiting for months to make this call. On January 1, 2009 I made the same call last time. Anyone who listened made very quick profits. The rest continue to live on the branch of life’s tree called, “Shoulda, Woulda, Coulda.” The timing is right again!

Are you interested in sticking it to the man? Are you interested in sticking up for the people that live within their means? Are you interested in making money doing it? If you own US Treasuries, you should consider selling them. If you don’t you should consider shorting them.

Buffett was right last time when he sold US Treasuries:

So … I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds.

Loosely translated: Buffett chose stocks over bonds because bonds were overvalued and stocks were undervalued. I hate how he’s misquoted all the time — kind of disgusting how most people just don’t understand him. Well, that was then. This is now. United States government bonds are overvalued yet again! The upside is limited. It doesn’t make financial sense to put your money into Certificates of Deposit or US Treasuries. They simply don’t pay enough. The upside is limited to fractions of fractions. They are in such “great demand” that they don’t have to offer attractive rates, because there are so many fools buying them.

The S&P 500 is yielding more than they are for the next 5 years. Sure, the S&P 500 may have some downside potential, but it’s better to have some downside potential than to be guaranteed downside.

There are three ETF’s that will enable you to make some quick and very easy money. I own them all.

Three ETF’s you should be buying are:

ProShares UltraShort 20+ Year Treasury (ETF) (NYSE: TBT)

Direxion’s Daily 10-Year Treasury Bear 3X Shares (NYSE: TYO)

Direxion’s Daily 30-Year Treasury Bear 3X Shares (NYSE: TMV)‎

If you decide not to join me, you can always sit on the sidelines and watch them go up.

The most valuable ideas come from those who are going to be rich, not from those who are already rich. Given 2 people, one of which started with nothing and earned a million dollars and the 2^nd who inherited a million dollars — I know where I’m betting my money. As my friend John Lux pointed out to me, there’s another perspective to risk. There’s alpha risk and beta risk. Alpha risk is buying something that goes down and beta risk is not buying something that goes up. Avoiding these two risks generates obscene profits. I’d argue that by simply avoiding alpha risk, you’ll still generate obscene profits. You don’t need to buy everything that goes up.

The stocks I am buying are not risky, in comparison to any of the companies on the S&P500. I’m paying a little and getting a lot. What would your retirement plan look like if every $1 you put in today put out $1 every year going forward? So, you put down $60,000 and you get paid $60,000 every year going forward? Sounds too good to be true? You’d think so… In March 2009, it was more like putting down $60,000 and getting paid $240,000 each year going forward, and at a growth rate of 30%+. Talk about a great retirement plan! How do you think you make 20x your money? The value goes from a P/E of 0.25 to a P/E of 5.

Everyone else likes paying retail. They tend to pay more than 5x what I’d pay for the same company. Some of the companies I find they like to pay 10x more for. Ironically, the fastest growing sector in the world is the cheapest. This is great for me, because I’m making a fortune simply by making obvious decisions. I’m telling you that it may take a while, maybe 5 years, maybe 10. Who cares? These stocks at some point in time are going to destroy every index.

There are a lot of people out there that are concerned about what I would consider to be minor fluctuations in price. If the price is going from $1 to $10. Is it really a problem if it fluctuates plus or minus $0.50 when it’s trading around $1?

It’s all a matter of perspective.

By Glen Bradford

Today I want to help out the business man that has built something out of nothing, who has defeated the odds of mediocrity and through blood, sweat and tears is successfully running a multi-million dollar company that he has grown from infancy. There are Short Sellers out there that are illegally spreading rumors across Chinese Microcaps for their own profit.

Life isn’t fair. If people can screw you and make money, eventually some of them will try it. I operate in the darkest most forbidden corners of Wall Street. I am a bargain hunter for the sport. By definition, an undervalued company is a company that the market hasn’t valued correctly for whatever reason.

I rarely get the opportunity to point out faults anymore, and I want to tell you why just to illustrate that I’m not just a bashing fool. In a nutshell, I grew up as an individual that pointed out what everyone else did wrong and some of them hated me for it. I was an expert in picking out little inconsistencies like typos, missing parenthesis, periods, bad logic. I’ve even been marked down on exams for being overly accurate. Doing so was not effective. The idea is to get people to do what you want to do with the least amount of personal effort. Around the age of 22, I realized that for the most part it was in my best interest to compliment that which others do right and disregard all else. As such, you create positive feedback loops that reward good habits and success. Great success.

So, I wanted to illustrate a couple examples of this and illustrate how criminals can systematically short undervalued companies, do half-assed research, and continue to lie until they decide to cover their shorts and disappear in most cases. I also wanted to talk about ways that companies can combat this as it is fairly easy to deflect but imminently damaging if you don’t combat it head on.

1. 1. Oriental Paper (AMEX: ONP) is case 1. Muddy Waters Research, a firm that appeared out of thin air to profit directly from a stock price decline in ONP, visited ONP for 90 minutes and put together a very well spoken piece claiming that Oriental Paper is a scam. The idea was to spread fear. Fear is an emotion that drives action — in this case the action to sell. Oriental Paper responded to all the allegations as promptly as possible: http://finance.yahoo.com/news/Orient-Paper-Further-Responds-prnews-4256390971.html

Then Muddy Waters put out another piece almost immediately continuing to discredit Oriental Papers response, and then within a week they took down all of their “evidence against ONP” and is “moving on.” Effectively vanishing with their illegal profits.

This is likely because if they had left it up, they would be disproven systematically and sued in a court of law. I think they should be! They single handedly destroyed $80M in company valuation.

A few notes you should check out:

http://breakoutperformance.blogspot.com/2010/07/onp-is-doing-all-right-things.html

http://seekingalpha.com/article/219172-orient-paper-and-the-unfortunate-shady-corners-of-wall-street

http://seekingalpha.com/article/220373-taking-another-look-at-orient-paper-s-innocence

1. 2. China Biotics is case 2. Andrew Left, on his new website Citron Research asks, “Where are the stores?” That’s the core of the argument that he made against CHBT. China Biotics responded to this threat with a listing of their locations: http://www.chn-biotics.com/c4426/c4435/default.html

Citron then wrote another post discrediting the China Biotics update and continued to try to discredit China Biotics. This is still in action, but Jason Nevader helped write back against the lies: http://seekingalpha.com/article/223055-china-biotics-shorts-found-a-way-to-cover

A few notes you should check out:

http://seekingalpha.com/article/223055-china-biotics-shorts-found-a-way-to-cover

http://china.fixyou.co.uk/2010/07/on-saic-and-sec-filings.html

Alright, the meat of this article:

Once the leaders attack, more people fall in line and start attacking. I don’t believe that this is a coordinated attack, just a group of people that are aware that they can pitch in and help tear apart great companies for a profit and follow the leader to the next company. I could come up with a list of people involved in each case, whether they’re blogging, writing on message boards, submitting their articles to various syndicates, or what not. The point is that it’s not worth my time because these people change.

I’ve tried to develop a general system to illustrate the system that these liars use to rob companies of their market valuations:

The Illegal Short Selling Game Plan

1. Wait for weakness in the stock market.
2. Wait for some well-known shorter to start making accusations.
3. Write an article/research report/blog on a Chinese Stock.
   1. Point out discrepancy between SAIC and SEC filings.
   2. Point out that it’s a shell or reverse merger.
   3. Question the Auditors
   4. Point out a few stocks that share a similarity that got crushed
   5. Make a very limited video that neither confirms nor denies any business activity.
   6. Emphasize relative under performance.
   7. Link to an article from a website that sounds credible (at least 3).
   8. Use very biased language and don’t mention any of the positives.
   9. Wait for the company to come up with a response.
   10. Attempt to discredit their response.
   11. At this point in time, other lying short sellers step in and further attempt to discredit the company in question.
   12. Realize your profits if there are any.
   13. “On to the next one.”

Why am I doing all of this?

I work for China Growth Partners, where we intend to work with the most undervalued companies in the world to get their story out to investors like ourselves. We are by investors, for investors. We actually invest in the companies we represent. How’s that for accountability?

Mark my words, if you buy CHBT or ONP at these prices, 1 year from now you will have a position with an unrealized profit. As a wise man once said, if a business does well, the stock eventually follows.

You can’t prevent bashers from writing their nasty reports from the beginning.

What can companies do to protect themselves?

1. Stock Buybacks.
2. Share splits that require shares to be covered and presented to transfer agents.
3. Share Dividends.
4. Video of operations.
5. Pictures of operations.
   1. Note that sometimes this is not appropriate as it may divulge company secrets.
   2. Seek legal action against the bashers and their supporters.
   3. Make an example of the bashers.
   4. These are just a few ideas. For more ideas I recommend contacting my friend John Lux @ lux.investor@gmail.com

A few potential resources that you may be interested in to learn more about this:

http://www.deepcapture.com/

http://stockbasher.com/exposing

Disclosure: Long CHBT, ONP

If you like these, you should buy the book.

==== Do you believe your scaling type of approach in entering and exiting positions is an essential element
in your overall trading success? ====
I think it has enabled me to stay with long-term winners much longer than I’ve seen most traders stay
with their positions. I don’t have a problem letting my profits run, which many traders do. You have to be
able to let your profits run. I don’t think you can consistently be a winning trader if you’re banking on being
right more than 50 percent of the time. You have to figure out how to make money being right only 20 to 30
percent of the time.

==== Did you feel out of place? ====
I felt very much out of place. I was in an artillery unit. Each hour we received weather reports, which we
were supposed to use to derive a composite adjustment factor. We filled out a form specifying the wind .
direction and velocity, air density, temperature, rotation of the earth, ; and other factors and performed a
mathematical process to derive a net t factor. Every time the weather report came in, it became a game to
see Is who could derive this factor most quickly. Before I was there, the speed & record was nineteen
seconds. On my second day there, I broke the record, and I eventually got the time down to nine seconds. I
thought this was great fun. Little did I realize that I was making enemies by the truckload.
The people who were there preferred the new guys being ignorant so that they could have the feeling of
helping to bring them along. Here I was, a new guy, a college kid, doing things better and faster than they
were. I also got three promotions in my first four months, which was unheard of in the marines. All of this
didn’t go over too well. It took me a while, but I finally realized that being a college hotshot was doing me a
lot more harm than good. I made an effort to blend in better, with modest success.

==== I’ve always been puzzled by the multitude of banks in the United States and worldwide that have
large rooms filled with traders. How can all these trading operations make money? Trading is just not that
easy. I’ve been involved in the markets for nearly twenty years and know that the vast majority of traders
lose money. How are the banks able to find all these young trainees who make money as traders? ====
There have been a lot of studies done on that question. A couple of years ago, I read a study on the
trading operations of Citibank, which is the largest and probably the most profitable cuirency trading bank in
the world. They usually make about $300 million to $400 million a year in their trading operations. There is
always some debate as to how they make that kind of money. Some people argue that Citibank has such a
franchise in currency trading that many of the marginal traders and hedgers in the currency market
immediately think of Citibank when they need to do a transaction-and Citibank can earn a wide spread on
those unsophisticated trades. Also, Citibank has operations in many countries that don’t have their own
central bank. In these countries, much or even all of the foreign currency transactions go through Citibank.
The study concluded that if Citibank traded only for the bid/ask spread and never took any position trades,
they probably would make $600 million a year.

==== When you’re interviewing someone for a job as a trader, how do you determine whether they have
that type of commitment? ====
Sometimes it’s obvious. For example, in an interview someone might ask you, “What time do I have to
come to work in the morning?” In my opinion that’s a very bizarre question. Come in whatever time you
believe is appropriate. “How late do I have to stay in the afternoon?” Leave whenever you want. I’m not
going to tell someone when to come in and when to leave.
==== Besides intelligence and extreme commitment, are there any other qualities that you believe are
important to excel as a trader? ====
Courage. It’s not enough to simply have the insight to see something apart from the rest of the crowd,
you also need to have the courage to act on it and to stay with it. It’s very difficult to be different from the
rest of the crowd the majority of the time, which by definition is what you’re doing if you’re a successful
trader.
Many people think that trading can be reduced to a few rules. Always do this or always do that. To me,
trading isn’t about always at all; it is about each situation.
So many people want the positive rewards of being a successful trader without being willing to go through
the commitment and pain. And there’s a lot of pain.

Sometimes the reason people lose is that they’re not sufficiently selective. Upon analysis, a trader may
find that if he only concentrates on the trades that do well and lets go of the other types of trades, he might
actually be successful. However, if a trader analyzes his trades and still can’t make money, then he probably
should try another endeavor.
What is the first rule of trading? I would argue that before anything else, the prospective trader must find
the approach that he or she is comfortable with-that is, the approach that suits the trader’s personality.
McKay cites this quality as the single most important element separating winners from losers, Each trader
must select the appropriate market arena, choose between system trading and discretionary trading,
fundamental and technical methods, position trading and spread trading, short-term and long-term horizons,
aggressive and conservative approaches, and so on. For all of these opposing choices, one alternative will suit
the trader’s personality, while the other will lead to internal conflict.
Karl Popper has championed the idea that all progress in knowledge results from efforts to falsify not to
confirm, our theories. Whether or not this hypothesis is true in general, it’s certainly the right attitude to
bring to trading research. You have to try your best to disprove your results. You have to try to kill your little
creation. Try to think of everything that could be wrong with your system, and everything that’s suspicious
about it. If you challenge your system by sincerely trying to disprove it, then maybe, just maybe, it’s valid.

My instinct was to not trade, but I had other concerns. I take the point of view
that missing an important trade is a much more serious error than making a bad trade. In any worthwhile
system, you have all kinds of backups to protect you (that is, to assure that you get out) when you take a
bad trade. On the other hand, typically, if you miss a good trade, you have nothing to protect you-that is,
nothing in the system will assure that you eventually get in. Also, missing a good trade can be demoralizing
and destabilizing, especially if you’ve been in the midst of a losing period. And like so many bad trading
decisions, it ends up costing you more than just the money lost or not made on the trade. Missing a major
trade tends to have a reverberating effect throughout your whole trading strategy. Sometimes it can be
weeks before you get back on track. For all these reasons, I felt that it was inappropriate to not trade.

==== Of course, you can’t actually prove that price behavior is random. ====
That’s right. You’re up against the problem of trying to prove a negative proposition. Although the
contention that the markets are random is an affirmative proposition, in fact you’re trying to prove a
negative. You’re trying to prove that there’s no systematic component in the price. Any negative proposition
is very difficult to confirm because you’re trying to prove that something doesn’t exist. For example, consider
the negative proposition that there are no chocolate cakes orbiting Jupiter. That may be true, but it’s very
hard to prove.
The random walk theory has the disadvantage of being a negative proposition. Nevertheless, in the
absence of any evidence to the contrary, it might be a plausible theory to maintain. At this point, however, I
think there is enough contrary evidence so that any academic who still espouses the idea that the markets
are random is not looking at the realities.

==== Is there anything unique about your approach to money management? ====
One drawback to many money management schemes is that they are wedded to the assumption of a
logarithmic utility function. Essentially, this model assumes that the increase in people’s utility for additional
wealth remains constant for equal percentage increases in wealth. The problem with this model is that it is
unbounded; eventually it will tell you to bet the ranch.
There is a technical objection to unbounded utility functions, which is known as the St. Petersburg
Paradox. I can give the thrust of it with a simplified example. Suppose you have a billion dollars. If your
utility function is unbounded, there has to be an amount of money that would have such large utility that
you’d be willing to flip a coin for it against your entire billion-dollar net worth. There’s no amount of moneyalthough
there may be nonmonetary considerations (perhaps an extra hundred years of life)-for which a sane
person would gamble away a billion-dollar net worth on the flip of a coin. Therefore, there must be something
wrong with unbounded utility functions.
We use only bounded utility functions in our work on risk management. The particular utility functions we
use also have the desirable technical characteristic of optimal investment fractions being independent of
absolute wealth level.

==== Can you expand on what you consider the normal human habits that lead to losing? ====
Decision theorists have performed experiments in which people are given various choices between sure
things (amounts of money) and simple lotteries in order to see if the subjects’ preferences are rationally
ordered. They find that people will generally choose a sure gain over a lottery with a higher expected gain but
that they will shun a sure loss in favor of an even worse lottery (as long as the lottery gives them a chance of
coming out ahead). These evidently instinctive human tendencies spell doom for the trader-take your profits,
but play with your losses.
This attitude is also culturally reinforced, as exemplified by the advice: Seize opportunities, but hold your
ground in adversity. Better advice to the trader would be: Watch idly while profit-taking opportunities arise,
but in adversity run like ajackrabbit.
One common adage on this subject mat is completely wrongheaded is: You can’t go broke taking profits.
That’s precisely how many traders do go broke. While amateurs go broke by taking large losses, professionals
go broke by taking small profits. The problem in a nutshell is that human nature does not operate to
maximize gain but rather to maximize the chance of a gain. The desire to maximize the number of winning
trades (or minimize the number of losing trades) works against the trader. The success rate of trades is the
least important performance statistic and may even be inversely related to performance.

==== Are there any other natural human tendencies that you think tend to sabotage success in trading?
====
There is what I refer to as “the call of the countertrend.” There’s a constellation of cognitive and emotional
factors that makes people automatically countertrend in their approach. People want to buy cheap and sell
dear; this by itself makes them countertrend. But the notion of cheapness or deamess must be anchored to
something. People tend to view the prices they’re used to as normal and prices removed from these levels as
aberrant. This perspective leads people to trade counter to an emerging trend on the assumption that prices
will eventually return to “normal.” Therein lies the path to disaster.

==== Having seen people who have survived as traders and those who haven’t, what do you think are the
characteristics that differentiate these two groups? ====
The people who survive avoid snowball scenarios in which bad trades cause them to become emotionally
destabilized and make more bad trades. They are also able to feel the pain of losing. If you don’t feel me pain
of a loss, then you’re in the same position as those unfortunate people who have no pain sensors. If they
leave their hand on a hot stove, it will bum off. There is no way to survive in this world without pain.
Similarly, in the markets, if the losses don’t hurt, your financial survival is tenuous.
I know of a few multimillionaires who started trading with inherited wealth. In each case, they lost it all
because they didn’t feel the pain when they were losing. In those formative first few years of trading, they
felt they could afford to lose. You’re much better off going into the market on a shoestring, feeling that you
can’t afford to lose. I’d rather bet on somebody starting out with a few thousand dollars than on somebody
who came in with millions.

==== Do you find it difficult to deal with the emotional impact of large losses? ====
In many ways, large profits are even more insidious than large losses in terms of emotional
destabilization. I think it’s important not to be emotionally attached to large profits. I’ve certainly made some
of my worst trades after long periods of winning. When you’re on a big winning streak, there’s a temptation
to think that you’re doing something special, which will allow you to continue to propel yourself upward. You
start to think that you can afford to make shoddy decisions. You can imagine what happens next. As a
general rule, losses make you strong and profits make you weak.

==== What advice do you have for dealing with the emotional pitfalls inherent in trading? ====
Some people are good at not expending emotional energy on situations over which they have no control.
(I am not one of them.) An old trader once told me: “Don’t think about what the market’s going to do; you
have absolutely no control over that. Think about what you’re going to do if it gets there.”
In particular, you should spend no time at all thinking about those roseate scenarios in which the market
goes your way, since in those situations, there’s nothing more for you to do. Focus instead on those things
you want least to happen and on what your response should be.

==== Is it meaningfully tougher to lose 4 percent when you are trading $100 million than when you’re
trading $1 million? ====
It is tougher. Dollars have a lot to do with it, too. There are plenty of traders I know who show track
records with an amazing cumulative winning percentage. I’ve seen situations where they might be up 1,000
percent over a five-year period, but if you examine their track record in terms of net dollars made or lost,
you discover they are actually down.
==== Because they made the large percentage returns with small capital and then lost money when they
were managing large sums? ====
Exactly. I’m not in the business of picking CTAs. But if I were, one of the first screens I would use would
be a person’s total dollar profit- how many dollars did the CTA pull out of the market. If that number were
negative, I would eliminate the CTA from consideration, regardless of the percentage return.

==== Are there any technical indicators in the public domain that you find useful? ====
Moving averages are useful. They’ll work if you watch your risk management. I believe you can make an
above-average return by using moving averages, if you’re smart about it.
==== Any indicators that yon consider overrated? ====
Most of the common ones: Fibonacci retracements, Gann angles, RSI, and stochastics. I haven’t found
anything there for any of these indicators.

==== So you believe in streaks? ====
Yes, not just in trading, but in most things in life. If a team has won eight games in a row, you don’t bet
against mem winning their ninth game.
==== Are there trading errors that you’ve learned to avoid? ====
In general, I don’t like placing stops. If you’re a big player, you really have to be careful about putting
stops into the market.

==== What you’re saying is that not all confident people are going to be good traders. However, are nearly
all good traders confident? ====
Yes, I would think that virtually all good traders are probably confident in their trading ability.
==== Do you remember when you really became confident as a trader? Is there some transition point that
you can recall? ====
I guess by the time I decided to go off on my own I was fairly confident. I knew I had to make money just
to pay my rent.
==== Was that confidence derived from the consistency of your retnrns? ====
Yes, I knew I was. getting statistically significant results.

==== You come from an academic background and even did your thesis on a subject related to the
markets. I’m sure you’re quite aware that most of the academic community still holds to the efficient market
hypothesis. Obviously, what you’re doing couldn’t be done if that theory were right? ====
The markets are clearly not a random walk. The markets are not even efficient because that assumption
implies you can’t make an above-average return. Since some people can do that, I disagree with the
assumption.
==== But still, I’m sure a lot of your professors believe in the efficient market hypothesis. ====
Right, and that’s probably why they’re professors and why I’m making money doing what I’m doing. Also,
I think it’s amazing what you can do when you have real money on the line. A person in an academic setting
might think that they have tested all possible types of systems. However, when you have real money on the
line, you can start to think pretty creatively. There is always something else to test. I think that the academic
community just hasn’t tested many of the approaches that are viable. Certainly, if you just spend a short
time doing an academic study, you’re not going to find anything significant. It can’t be any other way. If it
were, everyone would be rich. But if you spend every day of your life researching the markets and have
adequate computer support, you can find stuff that works.

==== They underestimate the difficulty of the game and overestimate the payoff? ====
Exactly. Also, some people blame everyone except themselves when they lose money. It galled me to
read in a recent Wall Street Journal article that some guy actually won a lawsuit against his brokerage firm
because he lost all the money in his account. The point is that it wasn’t even a matter of his broker giving
him bad advice; he was calling his own trades! He sued the brokerage firm, saying that they shouldn’t have
allowed him to trade his account the way he did. I believe it’s a free country, and if you want to trade, you
should have every right to do so, but if you lose money, it’s your own responsibility.

==== Your long-term performance has far surpassed the industry average. To what do you attribute your
superior track record? ====
George Soros has a philosophy that I have also adopted: The way to build long-term returns is through
preservation of capital and home runs. You can be far more aggressive when you’re making good profits.
Many managers, once they’re up 30 or 40 percent, will book their year [i.e., trade very cautiously for the
remainder of the year so as not to jeopardize the very good return that has already been realized]. The way
to attain tmly superior long-term returns is to grind it out until you’re up 30 or 40 percent, and then if you
have the convictions, go for a 100 percent year. If you can put together a few near-100 percent years and
avoid down years, then you can achieve really outstanding long-term returns.

Soros is also the best loss taker I’ve ever seen. He doesn’t care whether he wins or loses on a trade. If a
trade doesn’t work, he’s confident enough about his ability to win on other trades that he can easily walk
away from the position. There are a lot of shoes on the shelf; wear only the ones that fit. If you’re extremely
confident, taking a loss doesn’t bother you.

==== What are the major misconceptions people have about the stock market? ====
They tend to confuse short-term volatility with long-term risk. The longer the time period, the lower the
risk of holding equities. People focus too much on the short term-week-to-week and month-to-month price
changes-and don’t pay enough attention to the long-term potential. They look at all movement as negative,
whereas I look at movement as a constructive element. For many investors, the lack of sufficient exposure to
high-returning, more volatile assets is their greatest risk. In my opinion, investment vehicles that provide the
least shortterm volatility often embody the greatest long-term risk. Without significant price movement, you
can’t achieve superior gains.

==== What are the traits of the people who are successful in this business? ====
They’re open-minded and flexible. They’re also risk takers, because they believe in what they’re doing.

==== That routine being what? ====
My approach is to confront losses even before they materialize. I rehearse the process of losing. Whenever
I take a position, I like to imagine what it would be like under the worst-case scenario. In doing so, I
minimize the confusion if that situation actually develops. In my view, losses are a very important part of
trading. When a loss happens, I believe in embracing it.

==== You said earlier that you were drawn to a trading career because of the analogy to playing cards. Do
you then see trading as a form of gambling? ====
I’d say that gambling is the wrong term. Gambling involves taking a risk when the odds are against you.
For example, betting on a lottery or playing a slot machine are forms of gambling. I think successful trading,
or poker playing for that matter, involves speculating rather than gambling. Successful speculation implies
taking risks when the odds are in your favor. Just like in poker, where you have to know which hands to bet
on, in trading you have to know when the odds are in your favor.

==== Specifically, what traits would you look for? ====
Essentially, I would look for people with the ability to admit mistakes and take losses quickly. Most people
view losing as a hit against their self-esteem. As a result, they postpone losing. They think of all sorts of
reasons for not taking losses. They select a mental stop point and then fail to execute it. They abandon their
game plan.

==== What do you think are the greatest misconceptions people have about the market? ====
In my opinion, the greatest misconception is the idea that if you buy and hold stocks for long periods of
time, you’ll always make money.

==== What would you say to the trader who says, “I’m making money overall, and I’m using stops to limit
my losses, but I still have a lot of anxiety about trading. I still can`t stand to lose.”? ====
I would tell that trader to think of each trade as one of the next one thousand trades he’s going to make.
If you start thinking in terms of the next one thousand trades, all of a sudden you’ve made any single trade
seem very inconsequential. Who cares if a particular trade is a winner or a loser? It’s just another trade.

==== That is exactly the attitude I find so fascinating. Your portfolios went from being up sharply the night
before to a 15 percent loss the next morning. Most people would have some very negative emotions in that
type of situation. How were yon able to respond with such emotional aloofness? ====
You have to put it into perspective. I’m fond of thinking of trading in terms of scores of years. If I live long
enough, I’ll trade for fifty or sixty years. I figure that, over that time span, I’ll see devastating declines,
spectacular advances that I virtually can’t believe, and everything in between. If you have done mental
rehearsals to see how you would react in different catastrophic situations, then when such an event occurs,
you become curious.

==== Is this advice that you give to people in general-try to be an observer of yourself? ====
Absolutely. I couldn’t recommend it more. If instead of saying, “I’m going to do this trade,” you say, “I’m
going to watch myself do this trade,” all of a sudden you find that the process is a lot easier.
==== How does having this observer help your trading? ====
The observer is able to say, “You’re getting greedy on this trade, watch out.” You might be straining and
struggling because some of your indicators are bullish and some are bearish, and you don’t know what to do.
The observer might say, “How about doing nothing? You don’t have to trade.” This concept is something I
would recommend not only for trading but for life in general. There’s no reason why you have to struggle and
strain and claw your way through life.

==== Does it ever bother you when you lose? ====
Not at all. It never bothered me to lose, because I always knew that I would make it right back. I always
knew that no matter what happened, I

How many times have you heard someone put down an idea you’re excited about by saying, “If it’s such a
good idea, why isn’t everyone doing it?” This is the battle cry of mediocrity. Think about it for a minute. Any
investment opportunity that everyone else is doing is by definition a bad idea. I would always recommend
doing the opposite. The reason markets get out of line is because everyone is doing the wrong thing. The
good trader always sticks with his own ideas and closes his ears to the why-isn’t-e very one-doing-it cry of
the crowd. He’ll make a trade against the crowd at a conservative level that he can afford, and then get out if
he’s wrong. That’s what a stop is for. could go into any marketplace, with any amount of money, and make
a living.
You need to have the courage to stand up against the crowd, decide your position, and execute it. One
experience that really brought this home to me was when I was taking flying lessons. I had the theory down,
but not very much experience. I was coming in for what was my second or third landing. When I was only
about twenty or thirty feet above the mnway, several gusts of wind blew the plane all over the place. I fought
the plane down for what was probably the worst landing ever in history. When I finally brought the plane to a
stop, I was actually chuckling at how terrible a landing it was, wondering what the instructor would say.
“Well, that was really impressive,” he said.
I laughed a little more and asked, “What was impressive about that? I thought it was terrible.”
He replied,. “I have never seen any other beginner do that. Any other beginner would have taken his hand
off the stick, given up, and expected me to land the thing. You hung in there and implemented the program
all the way until the landing was complete.” He paused for a moment and added, “You’re right, though, it was
terrible. Just terrible.”
I thought about that later and realized that that is the trait you have to have to trade.

==== What do you do to prepare? ====
I go through a mental process. I decide what I’m going to do when X, Y, or Z happens. IfX, Y, or Z is a
surprise, then you’re part of the crowd.

==== Basically, your plan was to let the market run until there was some sign of meaningful weakness.
====
Right. Unfortunately, when the market dropped, it lost 25 percent of its value in one day. Needless to say,
that was a particularly painful loss. But the point is that I still ended up with a large profit on the trade.
In fact, this trade raises the whole question of how you view drawdowns. Most people don’t distinguish
between drawdowns in open equity and drawdowns in closed equity. [The distinction is that open equity
refers to unrealized profits on an existing position. In effect, what Ritchie is implying is that he views a given
loss differently if it is a partial surrender erf profits on a winning trade as opposed to if it is a drawdown in
a'losing trade.] If I protected open equity [i.e., open profits] with the same care I protected closed equity, I
would never be able to participate for a long-term move. Any sensible overall risk control measure could not
withstand the normal volatility in such a move.
==== In other words, in order to score the really large gains, you have to be willing to see those gains
erode significantly before getting out of the market. ====
I can’t see any other way. If you get too careful about not risking your gains, you’re not going to be able
to extract a large profit,

==== Is your advice to people then: Forget what`s out there and do your own work? ====
My advice to people has always been: Stay out of the business; stay completely away from the market.
For novices to come in and try to generate profit in this incredibly complex industry is like me trying to do
brain surgery on the weekends to pick up a little extra cash.
I have a friend who knows three doctors who got together to invest in a stud race horse. When they took
delivery of the horse, they found that it was a gelding. My friend was teasing them about this and asked if
they had ever thought of inspecting the horse. You won’t believe this, but it turns out that they had thought
of it, but they didn’t go any further. So he said, “Well, you guys are all doctors; did you ever bend over and
take a look under there to make sure he had the necessary tools?” If you asked those three doctors
today what their mistake was, I’m sure they would tell you that they should have inspected the horse’s
valuables. They still wouldn’t have learned the lesson: DON’T INVEST WHERE YOU DON’T KNOW WHAT
YOU’RE DOING. If they invest in another horse, they won’t get a gelding, but they’ll make some other
mistake just as laughable……. My willingness to
lose is fundamental to my ability to make money in the markets.
==== And that’s not true of most people? ====
That’s right. Most people come into this business without a willingness to lose money. They also enter the
market with unrealistic expectations. Even if they’re lucky enough to pick a successful trading advisor, they’ll
likely to pull their money out the first quarter he has a drawdown. So they end up losing even though they
may have been in a winning situation.

==== I assume that you probably long ago passed the point where your trading profits took care of any
personal needs or financial security you might envision. In your own case, if the charity aspect were not
there, do you think you would still be trading? ====
I’m not sure that I would be. I just don’t know. Incidentally, let me correct your use of the term charity. I
don’t think in terms of charity. I think in terms of investing in the poor. If someone is starving and you hand
him a buck, you’ve taught him that what he needs is for someone to give him a handout. I prefer to invest in
the poor-to provide capital so they can enhance their own productivity. What the poor need are cottage
industries that allow them to become self-sufficient. That’s the type of funding I believe in, and it may not fit
the conventional view of charity.
I know what I’m going to say can be easily misconstrued, but if I could set up a system where I could
make money off the poor, then I would have achieved my goal. I know that sounds crass. Of course, my
objective is not to make money off the poor, but the point is that charity tends to spawn dependency. That’s
why the Great Society war on poverty was such a failure. In contrast, if I can establish someone in a business
where he can return my money, then I know his situation is stable.

==== Aren’t you concerned that by helping Westernize these villages, their way of life will be destroyed to
their ultimate detriment? ====
It’s a commonly held belief here in the civilized West that the cultures and life-styles of isolated peoples
are to be valued and preserved. And I find that view romantically attractive. I would be inclined to agree with
this premise if only I could find someone in one of these cultures who would stop laughing at it.
An Indian I know named Bee was once read a newspaper article about his beautiful culture. Bee
responded by asking, “Where does this man live that he could be so foolish?” He was told that the man lived
and worked in Caracas. “Why does he sit up there in his comfortable office and write this nonsense about
us?” Bee asked. “Why doesn’t he come down here with his family and join us? Then we can all enjoy this
beautiful place together.” They’re mystified by our lack of compassion. Academics make compelling
arguments extolling the beauty and virtues of Indian culture, but I agree with the Indians.

==== How can people identify what goals would make them happy? ====
One NLP exercise that deals with this question is having people imagine themselves at the end of their
lives. Some people are reluctant to do this exercise, but when I tell them to go ahead and imagine that it’s
been a very long, healthy, and active life, they’re more willing to try it. Then I ask them to look back on what
they have accomplished, and see whether they wish they had done something else or something more.
Although it’s a mind trick, by adopting this end-of-life perspective, unconscious expectations are revealed,
and people find it easier to make an assessment about what they really want to fill their lives. I ask my
clients, “What is really worth the time of your life?”
159
159
The idea for this exercise came out of an experience I had when I was in college. I worked as
an orderly in a hospital ward that typically had lots of elderly patients. Over the course of three years, I
spoke to hundreds of people who were near the end of their lives. I asked these people how their lives had
been, what they liked about their lives and what they regretted, if anything.
==== What did you find out? ====
I found out that falling in love at nineteen was important. I found out that the willingness to take risks into
the unknown, like leaving one’s small hometown, was important. On the other hand, just simply retiring
because of age was something many of them felt was the biggest mistake of their lives.
One thing that really struck me was that not one of these people said they truly regretted anything they
had actually done-what they regretted was what they hadn’t done. They regretted that they had wasted their
lives on petty pursuits. They hadn’t identified their important values and then done everything they could to
fulfill them. The les
son I learned from this experience was the same one emphasized years later in NLP: If we don’t live true
to our values and fulfill them, we experience disappointment and emptiness.

Fernando Quote:
Not that it really matters. Just as with any large population set, the average hedge fund (or average mutual fund) is just as clueless. Thats why hedge funds or mutual funds as a investing-method can never beat their respective index returns on average. Average anything sucks balls =).
-Fernando

I’m a believer in the theory that the average investor loses money in the markets. On average, people believe they are above average. Most investors believe that they can beat the markets and not lose money without doing much homework. My grandma continues to buy bonds that I find absolutely revolting and have yelled at her about. I am not smart enough to come up with my own ideas as I lack creativity. That’s ok, because I use Prim’s algorithm to effectively sort through ideas of others and augment the good ones and discredit the bad ones.

Peak-Oil throws a wrench into my gears and complicates any future foresight that I’d be able to have on my own. That said, at least I don’t deliberately create misinformation to try to drive down the prices of the most undervalued opportunities and drive up the prices of the most overvalued opportunities. Here are some of my latest favorites:

On Thursday we landed a fun indicator: “Only 48 times has this number been at current levels in the past. 47 out of those 48 times, the market was higher 3 months later.”

Will recently noted:
“Has anybody else noticed that large-cap quality names are very cheap as well? If I managed billions I’d be going to town right now. MSFT, PG, JNJ, ABT, IBM, and so on have grown free cash flow at a healthy clip over the past decade and have recently been using it for massive buybacks and nice dividend increases. P/FCF rates are in the low teens, while revenues and net income are still growing at a decent rate.

I don’t think we’re at the end of the secular bear market for U.S. stocks yet, but how cheap can these get? At current prices these companies could buy back all of their stock in less than a decade.”

Bill Alpert is still trying to short the cheapest and best opportunities in the world. Herb Greenburg is right there alongside him. The short interest in some of the cheapest, fastest growing companies that I know of is surely an unprofitable long-term strategy.

US Treasuries as a “long term asset” is a fallacy. The FED, although they may be the biggest idiots in the room, still gets the privilege of buying as many of them as they want as they have an infinite supply of money. Don’t go short until the FED starts tightening.

Glen,

Thank you for your response. The Morgan Stanley and education reference was not to establish my superior intellect, but as you point out, that is a fact. I went to Rutgers (middle of the road School), but the proximity to the Manhattan provided adjunct instructors with the exposure to some of the best minds in investing. BTW, my dissertation was derivatives on valuation, quantitative in nature and professionally has nothing to with investing in the market in individual stocks. Now that we both agree on my superior intellect, settle down and learn. It’s free too.

What I was trying to point out in my earlier note (which you missed as expected), was that I don’t belong to that one bit club of below par beings, you are trying to establish your expertise with.

Got to go to work and will make it short.

China experts need to have been to China and need a team of analysts on the ground to constantly follow any firm. It is obvious, you consider neither prerequisites before dishing out your recommendations. The Chinese are heady with free markets and disposed to inside deals and lining their own pockets. The below par beings do act on your recommendations. One of them did lose a fair bit and asked to me look into CYXN. Reverse merger and reverse splits firm – stay away from.

So be careful with your recommendations and provide full disclosure of the nature/basis of your analysis. State if you have been to China to meet the management, do channel checks and on-going analysis/channel checks or is the basis of your recommendation SEC filings.

As for CYXN, I can see, you know your tables of 12. That is a good start. CYXN for 2011 and 2012 (eps of $2/share and $3/share), even taking into account the insider dilutions. CYXN will uplist before the end of 2010 and the store expansions will turn in positive cash flow (rolling 6 months out). Their current expansion is largely driven by cash flow from Con Ops. 20% growth rate would make it a $40 stock (2011). With the China discount (reverse merger/reverse split/inside deals), it is probably a $10 stock by end of 2011 and 20 by 2012.

The potential for your blog to harm unsuspecting below par beings should not be underestimated. Take it for what it is worth.

Later,

Anil

On Fri, Aug 20, 2010 at 9:14 PM, Glen Bradford wrote:
> Anil,
>
> Occasionally I run into someone who is clearly superior to me in intellect.
> I think that this may be the case in this particular situation. I’m
> not particularly certain whether your reference to my education as two
> bit is positive or negative — mostly because I don’t know where the
> average school is — and if the average school is one bit, that puts
> me at quite an advantage.
>
> I agree that it is unlikely that I would be able to pass your 2 hour
> Morgan Stanley as I am confident that I would be incredibly unfamiliar
> with the various topics that would be required to know if my intent
> was to pass it. I unfortunately am not good enough to work for Morgan
> Stanley. I do not have a Ph.D and as you may have noticed — I was
> not in any of the financial electives that my MBA school offered me.
>
> It is true that I am an ignorant fool. As such, maybe you will have
> mercy on my soul and enlighten me on this particular occasion. In the
> past, CYXN has issued shares at an incredible discount to their
> current market valuation and I was curious if you could give me an
> idea of what their Earnings Per Share are set to look like for 2010, 2011, and 2012.
>
> My old EPS estimate was $1.80/Share. It was $0.15 before the 1-12 reverse split.
>
> Thanks for your patience, as I rarely get the opportunity to interface
> with a financial superior.
>
> Glen
>
> —–Original Message—–
> From: Anil Vijayan [mailto:vijayan.anil@gmail.com]
> Sent: Friday, August 20, 2010 8:07 PM
> To: Glen Bradford
> Subject: Re: Updates on CYXN
>
> Glen,
>
> A response after a quick scan of a news story does not fool me. You
> knew nothing of this company when you recommended it or since. Your
> MBA (from a two bit school) and blog to pose as an expert (China) does
> not fool me one bit. If anybody takes your picks, they deserve to
> lose. I follow 15 other ignorant fools who blog to pose as experts.
>
> When in NY, come and take the analyst’s 2 hour exam we give our
> analyst’s trainees before they start. The exam after the two year
> training, you will not even know, what hit you.
>
> I work for Morgan Stanley and have a Ph.D in Finance and have seen
> plenty of hustlers like you.
>
> I happen to think CYXN is extremely poised to grow.
>
> Good luck peddling your expertise.
>
> Later,
>
> Anil
>
> On Thu, Aug 19, 2010 at 8:09 PM, Glen Bradford
> wrote:
>> CYXN financing terms were absurd.
>>
>> —–Original Message—–
>> From: Anil Vijayan [mailto:vijayan.anil@gmail.com]
>> Sent: Thursday, August 19, 2010 7:24 PM
>> To: Glen Bradford
>> Subject: Re: Updates on CYXN
>>
>> Glen,
>>
>> This was one of your top three value picks with the strategy to not
>> lose capital. The stock is down 60%.
>>
>> What do you call it? What prompted the drop?
>>
>> Thanks, Anil
>>
>> On Thu, Aug 19, 2010 at 7:02 AM, Glen Bradford
>> wrote:
>>> http://seekingalpha.com/author/glen-bradford/articles/symbol/cyxn.ob
>>>
>>> http://www.youtube.com/watch?v=BovthPByLTo
>>>
>>> I honestly haven’t followed CYXN.ob for a long while. Also, if you
>>> can
> —
>>> please refrain from accusing me of pumping in the future.
>>>
>>> Thanks,
>>>
>>> Glen
>>>
>>> —–Original Message—–
>>> From: Anil Vijayan [mailto:vijayan.anil@gmail.com]
>>> Sent: Wednesday, August 18, 2010 8:11 PM
>>> To: gb
>>> Subject: Updates on CYXN
>>>
>>> Glen,
>>>
>>> You were pumping this stock for a while. 60% haircut since.
>>>
>>> Thanks,
>>>
>>> Anil
>>>
>>>
>>
>>
>
>