There's a developing story around Sino-Forest Corporation (TSX: TRE).

[randomness]

Muddy Waters Research accuses it of being a "a multi-billion dollar ponzi scheme", "accompanied by substantial theft".

John Hempton observes:

There is a cottage industry in doing forensic analysis of Chinese frauds. I have analysed many and put only a smattering on the blog.

But I have never seen anything this big or this amazing.

Read the report. I am in awe.

Felix Salmon explains:

What’s certain is that in the wake of all this, either Sino-Forest or Muddy Waters is going to lose all credibility: one of them is a multi-million-dollar fraud. Muddy Waters is short Sino-Forest, of course. If Sino-Forest turns out to be a slightly dodgy Chinese forestry company and not a Ponzi scheme, you can be sure that Muddy Waters has been covering its short all day and has banked a huge amount of money by putting out extremely misleading material. On the other hand, if Muddy Waters is right, then Sino-Forest is toast.

Comments

[achinhibitor.livejournal.com]

Salmon says "if I was a market participant trying to understand what was going on here, I’d certainly welcome some journalistic help in explaining what exactly Muddy Waters is saying and how credible they are." I can't imagine why. As one Canadian observed, "I'm convinced that the average IQ of North America could be raised significantly by eliminating every 'journalist' in the country." Or Dave Barry, "This is basic journalism procedure; it's what enables journalists who cannot correctly fill out their mileage reimbursement forms to write about the collapse of Enron."

[r-ness.livejournal.com]

I think you're being too hard on Felix Salmon here. He's a columnist, and there are definite differences in role between columnists and reporters.

Now, he may be asking some of his co-workers who are actual reporters to go find out something about the story.

Put another way, I don't expect Megan McArdle to go out and find this out, either.

[achinhibitor.livejournal.com]

True, I don't expect McArdle to investigate it, but I do expect her to understand what information is available. But journalists ... Let's just say the Boston Globe regularly confuses "million", "billion", and "trillion". I wouldn't send their reporters (or editors) to balance my checkbook, much less investigate a sophisticated fraud.

[achinhibitor.livejournal.com]

Maybe I'm wrong. The Toronto Globe and Mail had a intelligent article on Sino-Forest: http://www.theglobeandmail.com/report-on-business/key-partner-casts-doubt-on-sino-forest-claim/article2066110/