How a 25-Year-Old Investor Spurred Lumber Liquidators’ Plunge(bloomberg.com)
bloomberg.com
How a 25-Year-Old Investor Spurred Lumber Liquidators’ Plunge
http://www.bloomberg.com/news/articles/2015-03-04/how-a-25-year-old-investor-spurred-lumber-liquidators-plunge
8 comments
I hope that your health improves quickly. I sympathize as I'm highly sensitive to many products that outgas VOCs. Avoiding these chemicals requires discipline and can be expensive, but the improvement to immediate quality of life is worth it (not to mention possible long term health benefits).
For home items, my strategy is to try to purchase products containing as much natural content as possible. Solid woods as opposed to particle board or MDF, natural fiber rugs if possible, avoid scented products and harsh cleaners. However, even this isn't fool proof. During a recent carpentry project I discovered that some softwoods outgas these compounds as well.
In my case, VOC sensitivity seems to be the result of cumulative exposure: On a large architectural project I spent many weeks inside a buttoned up building that was being painted. Came down with severe respiratory symptoms that resembled a bad flu. Eventually I recovered but ten years on I'm sensitive as a canary to the stuff.
I recommend that folks work in a well ventilated area or use a charcoal filter respirator when using anything having significant fumes. Even small doses of these chemicals are probably worth avoiding.
For home items, my strategy is to try to purchase products containing as much natural content as possible. Solid woods as opposed to particle board or MDF, natural fiber rugs if possible, avoid scented products and harsh cleaners. However, even this isn't fool proof. During a recent carpentry project I discovered that some softwoods outgas these compounds as well.
In my case, VOC sensitivity seems to be the result of cumulative exposure: On a large architectural project I spent many weeks inside a buttoned up building that was being painted. Came down with severe respiratory symptoms that resembled a bad flu. Eventually I recovered but ten years on I'm sensitive as a canary to the stuff.
I recommend that folks work in a well ventilated area or use a charcoal filter respirator when using anything having significant fumes. Even small doses of these chemicals are probably worth avoiding.
Thank you for the post and here's hoping for a speedy recovery for your whole family (and the Chihuahua).
I have sold short stocks in the past that I have believed were fraudulent (and they always eventually went to zero, although riding them there can be a challenge).
But I think your story represents the best example I've ever seen of how short sellers have an incentive to add information to a market, and how this can make participants better off.
I have sold short stocks in the past that I have believed were fraudulent (and they always eventually went to zero, although riding them there can be a challenge).
But I think your story represents the best example I've ever seen of how short sellers have an incentive to add information to a market, and how this can make participants better off.
Years ago, I spent a week at a friend's summer house, in an attic area that had just been roughed in with chip board. I was sleeping there but away from it entirely the rest of the time and from the house most of the time -- attending a week long event in another town.
I became quite sick by the end of the week. In retrospect, the outgassing from that chip board did quite a number on me.
I have no difficulty at all believing people who put in manufactured materials and end up sick. E.g. also the Chinese drywall scandal that became prominent a few years ago.
I regret that "cheap" has so permeated our culture that avoiding it has become a marginal market with correspondingly elevated prices.
And even when you pay more, today it's not a guarantee that the basic materials involved will be higher quality. Lots of McMansions stuffed full of such stuff. I watched one go up a few years ago across from my parent's place, and despite the tony location and price, they didn't do the exterior correctly. We're waiting for the water issues to manifest.
I became quite sick by the end of the week. In retrospect, the outgassing from that chip board did quite a number on me.
I have no difficulty at all believing people who put in manufactured materials and end up sick. E.g. also the Chinese drywall scandal that became prominent a few years ago.
I regret that "cheap" has so permeated our culture that avoiding it has become a marginal market with correspondingly elevated prices.
And even when you pay more, today it's not a guarantee that the basic materials involved will be higher quality. Lots of McMansions stuffed full of such stuff. I watched one go up a few years ago across from my parent's place, and despite the tony location and price, they didn't do the exterior correctly. We're waiting for the water issues to manifest.
Terrifying/sad/fascinating story. Did you ever take an extended holiday over that time and notice general improvements to your health?
Yes. My Chihuahua has seen the best improvements after being out of our home for a week while we went on vacation- we also felt better too.
I assumed we had a mold problem, but those test recently came up negative.
I should note I have the least issues, but I spend the least amount of time at home.
I assumed we had a mold problem, but those test recently came up negative.
I should note I have the least issues, but I spend the least amount of time at home.
Document everything. Get a sample [tested]. Talk to a lawyer. I hope you and your family get well soon.
You should get the floorboards and glue tested, you might have a lawsuit on your hands.
Is this the laminate, PVC planks, or some other that you're referring to? Thanks.
It's the laminate.
Here's a pic: http://i.imgur.com/vF4zo56.jpg
Here's a pic: http://i.imgur.com/vF4zo56.jpg
Thanks again for the response and the photo. I was expecting the more inexpensive compressed fiber-board stuff. I'm replacing old flooring in my house, and I want to avoid anything like what you described.
Sorry you had to deal with that. I worked with some formaldehyde containing (out gassing) material once. It was not fun. After I started developing nose bleeds we got that crap out of our lab and started using masks around it.
Sorry you had to deal with that. I worked with some formaldehyde containing (out gassing) material once. It was not fun. After I started developing nose bleeds we got that crap out of our lab and started using masks around it.
The idea of private citizens both being able to investigate companies for wrong doing and earn income for their work appeals to me. No lawsuit, no legal process. After doing some investigations, just some quick transactions on a trading account, and a blog post later.
There was a case study of short selling on NPR's Planet Money a few weeks ago: http://www.npr.org/2015/01/30/382587945/winning-at-short-sel...
Basically, the guy discovered a Chinese test prep company (think College Board) that had recently started to be listed on American stock exchanges, and discovered that their payment system returned an error. He emailed their support address, and it bounced. He hired a guy on Craigslist to go look at their business address in China, and it was discovered to be empty. He shorted the ever living crap out of the stock, broke the news, and won big.
Basically, the guy discovered a Chinese test prep company (think College Board) that had recently started to be listed on American stock exchanges, and discovered that their payment system returned an error. He emailed their support address, and it bounced. He hired a guy on Craigslist to go look at their business address in China, and it was discovered to be empty. He shorted the ever living crap out of the stock, broke the news, and won big.
Did he engage in insider trading? He traded on material, non-public information, although one could certainly argue that the non-existence of a business is public information.
You have to get the information in breach of a duty of confidentiality (and in exchange for some personal benefit) in order for it to be illegal, at least in the US. If you discover something on your own, you're free to trade on it.
Attempting and failing to buy your product is one of the most public bits of information there is.
Observing the lack of any activity at your claimed corporate headquarters is pretty public too.
Observing the lack of any activity at your claimed corporate headquarters is pretty public too.
If you wanted to follow in the guy's footsteps, you might want to move a jurisdiction that's more accommodating of insider trading?
Odd, it doesn't appear to be on their podcast :/
Pretty sure it's this one:
http://www.npr.org/blogs/money/2015/01/21/378851598/episode-...
http://www.npr.org/blogs/money/2015/01/21/378851598/episode-...
Thanks!
I heard the story on the podcast, so I'd think it's still available.
> He shorted the ever living crap out of the stock, broke the news, and won big.
Wait, I thought shorting meant he effectively sold shares to some other, unfortunate, investor.
It sounds like he participated in a pump and dump scheme/scam.
Wait, I thought shorting meant he effectively sold shares to some other, unfortunate, investor.
It sounds like he participated in a pump and dump scheme/scam.
>It sounds like he participated in a pump and dump scheme/scam.
"Pump and dump" means touting a stock using false information, and then dumping the shares before others realize that the information is false. On the other hand, information advantages (as long as they did not come from company insiders) are completely legal. This guy had an information advantage over those who bought the shares because he invested the time to investigate the company and others didn't. You are saying that outworking others is a "scheme/scam".
"Pump and dump" means touting a stock using false information, and then dumping the shares before others realize that the information is false. On the other hand, information advantages (as long as they did not come from company insiders) are completely legal. This guy had an information advantage over those who bought the shares because he invested the time to investigate the company and others didn't. You are saying that outworking others is a "scheme/scam".
Everyone who sells a stock is sending a clear signal that they think the money they are getting is worth more than the stock they are selling. So, I'm hard pressed to consider it a scam when someone acts in a completely transparent manner.
Also, why does it matter that he shorted the stock? What if he had previously purchased it off of a hot tip then, upon further due diligence, had decided the company wasn't as valuable as he had previously thought? There still has to be a counterparty to that trade.
At the end of the day, this guy probably saved more investors from being taken by this scam because he exposed it early. Without the incentive to make money, he would not have hired someone to investigate their offices in China. Without that investigation, he would not have shorted the stock, sending the market a clear signal that the stock was over-priced, and written up his research. Without his signaling and research, more people would have bought the stock, creating a bigger scam, and destroying more wealth.
Also, why does it matter that he shorted the stock? What if he had previously purchased it off of a hot tip then, upon further due diligence, had decided the company wasn't as valuable as he had previously thought? There still has to be a counterparty to that trade.
At the end of the day, this guy probably saved more investors from being taken by this scam because he exposed it early. Without the incentive to make money, he would not have hired someone to investigate their offices in China. Without that investigation, he would not have shorted the stock, sending the market a clear signal that the stock was over-priced, and written up his research. Without his signaling and research, more people would have bought the stock, creating a bigger scam, and destroying more wealth.
The short seller did nothing wrong. Shorting simply means he borrowed the stock in order to sell it-- sell high, wait for the price to drop, then buy low in order to return the shares to the lender. The buyer on the other side of the short sale should have done more due diligence. No one forced them (be it a person or an institution) to take up that position.
The Chinese company (or some affiliate) was the one who had pumped the stock up. The short seller was just a regular market participant who was rewarded for his hard work and diligence.
The Chinese company (or some affiliate) was the one who had pumped the stock up. The short seller was just a regular market participant who was rewarded for his hard work and diligence.
If you listen to the story, he shorted the stock, knowing it was a fraud, and then exposed it.
He knowingly created more victims of the scam.
He knowingly created more victims of the scam.
His short position added information to the market. At least in theory, other investors could have asked "Why does this person think that this company is less worth than it's current value?" and done their own research.
The short position provided incentive for him to expose the fraud publicly. It would have been nice if he'd done this research and told everyone about his findings out of the goodness of his heart, but that's a lot of work for little personal reward. The ability to short provided an additional incentive to make the information as public as possible.
The short position provided incentive for him to expose the fraud publicly. It would have been nice if he'd done this research and told everyone about his findings out of the goodness of his heart, but that's a lot of work for little personal reward. The ability to short provided an additional incentive to make the information as public as possible.
> Wait, I thought shorting meant he effectively sold shares to some other, unfortunate, investor.
Why should we give a pass to investors willing to expose themselves to excessive risk from being uninformed about their investments?
Let's look further at this short selling behavior as it scales. What happens if investigative short-sellers become muckrakers noveau: sufficiently pervasive and influential that they collectively become the market "conscience" that so often seems missing?
Why should we give a pass to investors willing to expose themselves to excessive risk from being uninformed about their investments?
Let's look further at this short selling behavior as it scales. What happens if investigative short-sellers become muckrakers noveau: sufficiently pervasive and influential that they collectively become the market "conscience" that so often seems missing?
> Let's look further at this short selling behavior as it scales.
I'm not talking about general short selling. I'm talking about this specific case.
He discovered the company was a fraud, shorted the stock, and then exposed it. That stock had to be sold, to someone else, for the short to be profitable. This means he knowingly participated in the scam.
I'm not talking about general short selling. I'm talking about this specific case.
He discovered the company was a fraud, shorted the stock, and then exposed it. That stock had to be sold, to someone else, for the short to be profitable. This means he knowingly participated in the scam.
How is it a scam for a guy to do research on a company and then sell the stock when he decides said company isn't worth the current price. He isn't the person that made the company a scam, he just uncovered it. The poor sap on the other end didn't do as much research. Not they sellers fault. He can't be held responsible for the due diligence of every other investor in the world. That's basically what you are stating.
Every single stock transaction involves 2 people who think the opposite thing is going to happen. The vast majority of the time 1 of those participants knows more than the other.
Every single stock transaction involves 2 people who think the opposite thing is going to happen. The vast majority of the time 1 of those participants knows more than the other.
Yup, hard not to see it this way.
This exists - many manufacturing companies get hit up by chemical engineers who discover something in their product, backed by a lawyer. They get damages + fees and the product gets a "This is known to cause cancer in the State of California".
Are you sure you mean chemical engineer and not chemist? Chemical engineers are usually more concerned with, e.g., how to produce something to a certain level of purity, designing a process or plant to work effectively, etc.
When a company I was working for received these, they were generally from chemical engineers (by title), but chemists showed up sometimes too.
I think the engineering part comes in from the testing for a battery of things.
I think the engineering part comes in from the testing for a battery of things.
To be fair, everything gets "This is known to cause cancer in the State of California". The only thing that label tells you is that the state of California likes to pointlessly sacrifice lab animals.
Everyone loves to give California a hard time, but they've done more to bring US product safety into the 21st century than any other US state. I'd describe California and the EU as being similar, and the rest of the US to be worse than either (some by far).
Fortunately since international companies want to sell all over the US and Europe, it has meant that this is the new baseline most of them shoot for. "Legal in California" means legal in the US (and likely EU).
It is better for everyone. It really is.
Fortunately since international companies want to sell all over the US and Europe, it has meant that this is the new baseline most of them shoot for. "Legal in California" means legal in the US (and likely EU).
It is better for everyone. It really is.
So, because they've done good they are immune from criticism?
Off the top of my head, I've witnessed this label at parking garages and Starbucks drink counters. For public locations, if the label's concern were legitimate wouldn't it be appropriate to fix the situation instead of just fostering an environment of ignored signage and faux consent?
Off the top of my head, I've witnessed this label at parking garages and Starbucks drink counters. For public locations, if the label's concern were legitimate wouldn't it be appropriate to fix the situation instead of just fostering an environment of ignored signage and faux consent?
Is there a reason you frame every argument as a hyperbole?
The cancer argument California politicians follow is based on non-scientific or non-conclusive research. The legislation that dictates this is Proposition 65 and its considered a public policy failure. Its the anti-vax and holistic crowds dictating policy.
It also has the secondary effect of making REAL cancer warnings seem trivial. "Oh cigarettes are bad? So are electric cords and pepsi according to California!"
It also has the secondary effect of making REAL cancer warnings seem trivial. "Oh cigarettes are bad? So are electric cords and pepsi according to California!"
Can you cite any research to back your position?
Absurd regulations (like putting worthless "product may cause cancer" labels on everything) have resource costs. These resources could be put to better use.
A lot of CA regulation is like the TSA. The cost per life saved (or harm avoided / prevented) is astronomical. There are far better uses for the resources squandered.
Absurd regulations (like putting worthless "product may cause cancer" labels on everything) have resource costs. These resources could be put to better use.
A lot of CA regulation is like the TSA. The cost per life saved (or harm avoided / prevented) is astronomical. There are far better uses for the resources squandered.
> It is better for everyone. It really is.
Except of course when they get it wrong and have to reverse course, as seen in the news over the last several years in the case of flame retardants for furniture.
Except of course when they get it wrong and have to reverse course, as seen in the news over the last several years in the case of flame retardants for furniture.
What's the latest verdict on flame retardants? Last I heard, the conclusion was that they are carcinogenic, but you have to weigh the risk of dying of cancer in twenty years against the risk of dying in a fire tomorrow, and the best guess seemed to be that they save more lives than they cost.
Lately, the dialogue is skewed against flame retardant treatments, though this is probably as much because of Toxic Hot Seat as anything else.
So, my sense of the current "wisdom" is that the cancer and toxicity issues are significant, especially for firefighters, and the retardants offer relatively little protection against fires. A big factor in the turnaround is that the California standards were primarily concerned about protecting against dropped lit cigarettes, and so many fewer people smoke, particularly indoors.
So, my sense of the current "wisdom" is that the cancer and toxicity issues are significant, especially for firefighters, and the retardants offer relatively little protection against fires. A big factor in the turnaround is that the California standards were primarily concerned about protecting against dropped lit cigarettes, and so many fewer people smoke, particularly indoors.
Law of unintended consequences?
http://newscenter.berkeley.edu/2012/11/15/pbdes-and-neurodev...
edit I didn't notice but zerocrates had already pointed this out.
http://newscenter.berkeley.edu/2012/11/15/pbdes-and-neurodev...
edit I didn't notice but zerocrates had already pointed this out.
And what would the label say if it was Texas? "Materials meet FDA GRAS specifications?"
Oh wait there wouldn't be one.
Oh wait there wouldn't be one.
Yeah this is pretty great. Good work and good result. My only caveat would be unscrupulous people spreading unfounded rumors or uninformed opinions passing as fact which could result in innocent companies suffering from lack or rigor on the did of citizen investigators. At least it appears sixty minutes did son of their own investigation --althouh I imagine they went in with guilt in mind, which worked out in this case, but can result in different outcomes in other cases.
From The Fine Article:
"When Zhou began looking into the Toano, Virginia-based company back in 2013, he says he found online complaints about its Chinese-made flooring. So he bought products from Lumber Liquidators and paid to have them analyzed. The results led him to publish a post on investing website Seeking Alpha on June 20, 2013, that advocated shorting the stock because the tests showed levels of formaldehyde above California requirements."
So while others might indeed lie, we seem to have enough confirmation from the subsequent investigations that Zhou did not. And there was no reason to believe he lied, this is a target rich environment after all.
And while 60 Minutes is entirely untrustworthy (I've watched them lying on the air for decades, since the '70s), likely would have started with "guilt in mind", in this case they chose a worthy target.
"When Zhou began looking into the Toano, Virginia-based company back in 2013, he says he found online complaints about its Chinese-made flooring. So he bought products from Lumber Liquidators and paid to have them analyzed. The results led him to publish a post on investing website Seeking Alpha on June 20, 2013, that advocated shorting the stock because the tests showed levels of formaldehyde above California requirements."
So while others might indeed lie, we seem to have enough confirmation from the subsequent investigations that Zhou did not. And there was no reason to believe he lied, this is a target rich environment after all.
And while 60 Minutes is entirely untrustworthy (I've watched them lying on the air for decades, since the '70s), likely would have started with "guilt in mind", in this case they chose a worthy target.
And while 60 Minutes is entirely untrustworthy ...
Wait, what? Any proof for that statement? How come they are still on air? Why wasn't their parent broadcaster sued out of existence, if what you claim is true?
Wait, what? Any proof for that statement? How come they are still on air? Why wasn't their parent broadcaster sued out of existence, if what you claim is true?
Benghazi coverage, the Bush National Guard story coverage, their NSA/Snowden fluff piece, etc. It's not hard to find credible criticism of 60 Minutes, even if you can't tell just by watching it.
http://www.cjr.org/behind_the_news/60_minutes_bad_run.php
http://www.cjr.org/behind_the_news/60_minutes_bad_run.php
The first one that comes to mind was their fraudulent reporting about the audi 5000 and "sudden acceleration" in the 80s. Their lies almost destroyed an entire company.
http://en.wikipedia.org/wiki/Audi_100#Reported_sudden_uninte...
http://en.wikipedia.org/wiki/Audi_100#Reported_sudden_uninte...
And before that, in 1980, a hatchet job on the Jeep, must have been the CJ-7 both because of the date and how difficult it was for them to roll it, even using robot drivers that manipulated the steering wheel twice as fast as a human can while gunning the engine.
There was plenty of less overt stuff in the '70s. Then you might mosey through this list, which only has the worst of the worst: https://en.wikipedia.org/wiki/60_Minutes#Controversies
Per that, it took 15 years for Audi sales to recover.
There was plenty of less overt stuff in the '70s. Then you might mosey through this list, which only has the worst of the worst: https://en.wikipedia.org/wiki/60_Minutes#Controversies
Per that, it took 15 years for Audi sales to recover.
It would be interesting to see if anyone associated with the show has made money of this - surely if you know, a week or two before it airs, of a piece that's going to destroy the reputation of a company then you can trade on that to great effect.
On the one hand, I'd love to believe that people were rational and would actually examine the data before rushing to follow some advice they got on a site like seeking alpha, so that bad actors wouldn't be able to profit by spreading false accusations. Not having to rely on a drawn-out (and sometimes unreliable) legal process would be great.
On the other hand, we have plenty of evidence that people are really bad at being suspicious of the often unreliable stuff they read on the internet. For example, measles has made a roaring comeback in the USA, so even when their own children's health is involved, it seems people aren't willing to actually read farther than a couple of emotionally-charged blog posts before making decisions.
On the other hand, we have plenty of evidence that people are really bad at being suspicious of the often unreliable stuff they read on the internet. For example, measles has made a roaring comeback in the USA, so even when their own children's health is involved, it seems people aren't willing to actually read farther than a couple of emotionally-charged blog posts before making decisions.
The trend in measles cases is troubling, but to call it a "roaring" comeback is hyperbole.
http://www.vox.com/2015/1/29/7929791/measles-outbreak-2014
tl;dr Measles was imported to a group of unvaccinated Amish by a resident returning from a missionary trip. The Amish accounted for a large portion of those infected in the US. The good news is that many Amish opted to take the vaccine after seeing the effect of measles in their community.
Here is an older article (2024)
http://www.nytimes.com/2014/05/30/health/measles-cases-in-us...
A few snippets from the article.
* France, the world’s most popular tourist destination, had an outbreak of 20,000 cases from 2008 to 2011.
The 2014 CDC MMWR report if you want
http://www.cdc.gov/mmwr/preview/mmwrhtml/mm6322a4.htm?s_cid=...
http://www.vox.com/2015/1/29/7929791/measles-outbreak-2014
tl;dr Measles was imported to a group of unvaccinated Amish by a resident returning from a missionary trip. The Amish accounted for a large portion of those infected in the US. The good news is that many Amish opted to take the vaccine after seeing the effect of measles in their community.
Here is an older article (2024)
http://www.nytimes.com/2014/05/30/health/measles-cases-in-us...
A few snippets from the article.
* There were fewer than 200 cases last year (2013); the record low was 37 cases in 2004.
* Eighty-five percent of this year’s cases were in people not vaccinated because of religious, philosophical or personal objections, Dr. Schuchat said.
* Almost half the cases were part of a continuing outbreak in Amish communities in Ohio
* In an unusual twist, over half were ages 20 or older. They may have included adults whose parents refused to vaccinate them years ago, she said.
* Forty-three of the 288 who contracted the virus were hospitalized, most with pneumonia. None died.
* There were 60 cases in California, mostly in the San Francisco Bay Area and in Orange County, where large numbers of wealthy parents refuse to vaccinate their children.
* France, the world’s most popular tourist destination, had an outbreak of 20,000 cases from 2008 to 2011.
The 2014 CDC MMWR report if you want
http://www.cdc.gov/mmwr/preview/mmwrhtml/mm6322a4.htm?s_cid=...
I prefer this graph:
http://www.washingtonpost.com/wp-apps/imrs.php?src=http://im...
http://www.washingtonpost.com/wp-apps/imrs.php?src=http://im...
Without fact finding you end up with results like this http://en.wikipedia.org/wiki/Jonathan_Lebed
Kid used message boards to pump and dump stocks until the SEC intervened.
Kid used message boards to pump and dump stocks until the SEC intervened.
Recent similar story of kid with penny stocks and internet hype: http://www.theverge.com/2014/12/3/7319277/whiz-kid-penny-sto...
Wasn't there this russian guy who did this with bio-tech companies? Spread some rumors and used them to make profitable stock trades. I can recall him being hired by some american/foreign hedge fund after ...
Further investigation would show it's OK. The main losers would be the investors who believed the false information. So that's not a problem.
I'm going back and forth on this kind of activity and profit driver. Two points of view (ignoring spam artists and other bad actors):
1. It's bad because it's not objective. Reporting organizations tout themselves as objective. Very often in financial reporting, you see a disclaimer: "Author does not have an interest in Company." Having a financial stake in the news biases the author towards findings that support his position, rather than seeking the truth.
2. It's good because it encourages accuracy. In the era of clickbait headlines and mantras of "publish first, verify later", the idea that the author could have something riding on the accuracy of his investigation is appealing. It rewards writers in more than reputation.
1. It's bad because it's not objective. Reporting organizations tout themselves as objective. Very often in financial reporting, you see a disclaimer: "Author does not have an interest in Company." Having a financial stake in the news biases the author towards findings that support his position, rather than seeking the truth.
2. It's good because it encourages accuracy. In the era of clickbait headlines and mantras of "publish first, verify later", the idea that the author could have something riding on the accuracy of his investigation is appealing. It rewards writers in more than reputation.
Anyone with a solid platform can make a lot of noise. Our blog has an article[1] that gets more traffic than you can imagine, and it's been part of the cause for some serious changes in a billion-plus dollar industry.
Never underestimate the power of the pen and some quality research.
[1] https://blog.priceplow.com/protein-scam-amino-acid-spiking
Never underestimate the power of the pen and some quality research.
[1] https://blog.priceplow.com/protein-scam-amino-acid-spiking
I wasn't aware free form amino acid padding was a real issue. Do you have any idea if this a world-wide problem or of particular US-interest only? I bookmarked your site, thanks!
Thanks! It's world-wide, but I believe European labels are more strict in terms of having to explain what exact doses you are using of the aminos.
But that doesn't mean you can't lie, or get screwed by your raw material supplier. That's why the companies that actually follow the existing laws and test their incoming and outgoing product have been way on top of this and those crappy suppliers.
FYI - About to post a blog article in an hour or two that you'll enjoy. It's about the ongoing NY Attorney General supplement testing fiasco.
But that doesn't mean you can't lie, or get screwed by your raw material supplier. That's why the companies that actually follow the existing laws and test their incoming and outgoing product have been way on top of this and those crappy suppliers.
FYI - About to post a blog article in an hour or two that you'll enjoy. It's about the ongoing NY Attorney General supplement testing fiasco.
Investigative journalism? There is definitely an opportunity for a site that allows such reporting.
Who would pay for it? We've already seen that people aren't willing to pay for quality journalism, so we're left with advertisers? Who obviously don't want their own products being investigated.
Perhaps though if somehow you could get companies to pay for investigations into their competitors? Like an anti-advertising model? I presume this would end up a zero-sum game though, and companies would opt to not play at all.
Perhaps though if somehow you could get companies to pay for investigations into their competitors? Like an anti-advertising model? I presume this would end up a zero-sum game though, and companies would opt to not play at all.
Or just fund it like Xuhua Zhou did, with short-selling. Maybe some combination of these, banding together with the Consumer's Union and other interest groups.
Short selling is necessary and good as a stopgap measure, but there's at least one good reason we shouldn't want it to be a go-to reward strategy. Most investments have a bounded worst-case loss. You can only lose as much money as you put into it. Short selling, however, is backwards; you have a strictly bounded best-case profit and the theoretical maximum loss is infinite.
Who would pay for it?
That's the whole point: No one. I care enough about some subjects that I would work on it for an entire year if it meant enough people would read it.
That's the whole point: No one. I care enough about some subjects that I would work on it for an entire year if it meant enough people would read it.
In a perfect world, this would be as positive as you make it sound. However, short sellers as a group are a particularly vicious breed of cutthroat trader looking to inflict as much damage to their chosen stocks as possible as quickly as possible. Many of their targets aren't nearly as deserving of these attacks as Lumber Liquidators was here.
It's a big risk though. You can be right, but there may be other reasons why the stock moves. If you don't get on 60 minutes and the company gets acquired, you could face a big loss of capital.
This is basically describing a much smaller scale version, with much lower stakes, of what Bill Ackman has been trying to do to Herbalife for the past couple years. He even placed a bet against Carl Icahn (https://www.youtube.com/watch?v=hCZRk1lL90Q), and they've traded "winnings" and "losings" in the hundreds of millions over the past two years.
This is what a lot of activist hedge funds do in general.
The original article that Zhou published on Seeking Alpha outlining reasons for going short against LL is available here:
http://seekingalpha.com/article/1513142-illegal-products-cou...
The lab report of the analysis carried out:
https://app.box.com/s/mhzih9apu2q2gdeuty8i
http://seekingalpha.com/article/1513142-illegal-products-cou...
The lab report of the analysis carried out:
https://app.box.com/s/mhzih9apu2q2gdeuty8i
Some background on the CA law: http://greensource.construction.com/news/080107CARB.asp
"The new CARB rule sets thresholds for emissions of formaldehyde from various panel products that take effect in two phases between 2009 and 2012 (see chart). It is difficult to compare these limits with their counterparts in Europe and Japan due to the differences in testing protocols. The phase-one targets are designed to establish a reasonable baseline based on today’s common practice, while curtailing low-cost, high-emitting, imported products. Phase two, on the other hand, is intended to force manufacturers to shift to advanced and emerging technologies. CARB officials tout the fact that, once fully implemented, its formaldehyde emission limits will be the tightest in the world. Products sold for use in manufactured homes are exempted from these new requirements because state law cannot supersede federal rules in this area."
"The new CARB rule sets thresholds for emissions of formaldehyde from various panel products that take effect in two phases between 2009 and 2012 (see chart). It is difficult to compare these limits with their counterparts in Europe and Japan due to the differences in testing protocols. The phase-one targets are designed to establish a reasonable baseline based on today’s common practice, while curtailing low-cost, high-emitting, imported products. Phase two, on the other hand, is intended to force manufacturers to shift to advanced and emerging technologies. CARB officials tout the fact that, once fully implemented, its formaldehyde emission limits will be the tightest in the world. Products sold for use in manufactured homes are exempted from these new requirements because state law cannot supersede federal rules in this area."
Engines like this one can help uncover these hidden relationships: http://cymetica.com
> AAPL - hidden connections to AAPL: mac, ipod, digital, store, ios, apple, itune, music, ipad, iphone, video, icloud, acquired, touch, third-party, portable, photo, os, download, app, mobile, file, pro, consumer-oriented, peripheral, windows-based, player, iwork, online, compatible, display
Yeah, really hidden relationships.
Yeah, really hidden relationships.
Now look around you at the 1000 products that construct and are in your home that are made in China.
We even import some food from China.
Your car tires are probably made in China.
Think all those things meet US regulations? Who is going to inspect them, the handful of people that are responsible for tens of thousands of freight containers per day?
We even import some food from China.
Your car tires are probably made in China.
Think all those things meet US regulations? Who is going to inspect them, the handful of people that are responsible for tens of thousands of freight containers per day?
Yes, most of those things do meet US regulations. The company inspecting them is the large US company that puts its brand on it. The same company that would be on the receiving end of a huge lawsuit if the products are dangerous.
Is it legal and ethical to deeply research a firm until you find very serious problems, then short their stock, then announce your findings?
It feels... OK to me. For some reason this strikes me as a surprising way to make money. Never heard of this before now.
It feels... OK to me. For some reason this strikes me as a surprising way to make money. Never heard of this before now.
Its definitely not insider trading. It's a reasonable expectation of research conducted in the public scope.
It's also good investment work. You can get by with a prospectus and a Morningstar rating and call it a day, but if you're going to invest in anything in the immediate term you damn well better be ready to do your homework. One day its a blue chip. The next, its on 60 Minutes and your future is in jeopardy.
It's also good investment work. You can get by with a prospectus and a Morningstar rating and call it a day, but if you're going to invest in anything in the immediate term you damn well better be ready to do your homework. One day its a blue chip. The next, its on 60 Minutes and your future is in jeopardy.
The amount of products that use formaldehyde somewhere in the process is staggering. From glues used for wood (floors) to fabric softening (carpets, baby clothes), inks, building materials.
This is a much bigger deal if you live in a "energy efficient" home that has very little heat/cold leakage. Modern insulation, fancy windows, HVACs that recycle indoor air contribute to this problem. Some of these products like floors will be off gassing for years while you live in the hermetic bubble of your home.
Source: my wife worked for a niche material company that was a big importer of bamboo wood. They sold everything from bamboo floors to plywood.
They generally tried to not use formaldehyde glues and bonding agents but it's hard to to police it. Their suppliers from China would cut corners or try to boost their profits. When caught they would stop for a while and then resume later on.
This is a much bigger deal if you live in a "energy efficient" home that has very little heat/cold leakage. Modern insulation, fancy windows, HVACs that recycle indoor air contribute to this problem. Some of these products like floors will be off gassing for years while you live in the hermetic bubble of your home.
Source: my wife worked for a niche material company that was a big importer of bamboo wood. They sold everything from bamboo floors to plywood.
They generally tried to not use formaldehyde glues and bonding agents but it's hard to to police it. Their suppliers from China would cut corners or try to boost their profits. When caught they would stop for a while and then resume later on.
I had neighbors who wanted to make sure when the hallway was being painted they only used low VOC paint. They were somewhat offended when I told them the carpet they put uses a bonding agent that will off gas for years or they their children clothes were softened with formaldehyde.
My whole family has been struggling with health issues that coincide with when I put these floors down. I have a Chihuahua that has developed terrible sinus problems, my 6 year old son is having sinus and cough issues and my wife has breathing problem in our home.
I'm not 100% sure it's from these floors and/or the glue I bought from them, but it's a fact our health tanked a few months after the floors went down. We've been struggling to find a cause that makes sense and this seem to be the only plausible thing.
I guess in a couple months I'll know for sure assuming our health improves. If it turns out to be the case, I will be extremely grateful to this blogger. I don't care if he made money, this information could be helping my family's health.