7 ms·

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 proces

by parfe 12y ago

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.

mc32 12y ago
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.
- jordan0day 12y ago
  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.
  - fnordfnordfnord 12y ago
    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 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-hit-a-20-year-high.html 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. And to put it in perspective * 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=mm6322a4_w http://www.cdc.gov/mmwr/preview/mmwrhtml/mm6322a4.htm?s_cid=...
    - joezydeco 12y ago
      I prefer this graph: http://www.washingtonpost.com/wp-apps/imrs.php?src=http://img.washingtonpost.com/blogs/wonkblog/files/2015/01/measles.png&w=1484 http://www.washingtonpost.com/wp-apps/imrs.php?src=http://im...
- Rainymood 12y ago
  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 ...
- hga 12y ago
  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.
  - shiven 12y ago
    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?
    - erobbins 12y ago
      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_unintended_acceleration http://en.wikipedia.org/wiki/Audi_100#Reported_sudden_uninte...
      - hga 12y ago
        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 https://en.wikipedia.org/wiki/60_Minutes#Controversies Per that, it took 15 years for Audi sales to recover.
- burger_moon 12y ago
  Without fact finding you end up with results like this http://en.wikipedia.org/wiki/Jonathan_Lebed http://en.wikipedia.org/wiki/Jonathan_Lebed Kid used message boards to pump and dump stocks until the SEC intervened.
  - nosuchthing 12y ago
    Recent similar story of kid with penny stocks and internet hype: http://www.theverge.com/2014/12/3/7319277/whiz-kid-penny-stocks-smartphone-mobile-trader http://www.theverge.com/2014/12/3/7319277/whiz-kid-penny-sto...
- Potando 12y ago
  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.
rokhayakebe 12y ago
Investigative journalism? There is definitely an opportunity for a site that allows such reporting.
- jordan0day 12y ago
  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.
  - ansible 12y ago
    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.
    - vec 12y ago
      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.
      - bradleyjg 12y ago
        If you know the time frame you expect the market moving news to come out you can go short with limited downside by buying put options. You also get more leverage that way.
        eru 12y ago
        How do you get more leverage? Aren't the put options another expense?
Qworg 12y ago
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".
- mindslight 12y ago
  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.
  - Someone1234 12y ago
    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.
    - mindslight 12y ago
      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?
      - aros 12y ago
        Is there a reason you frame every argument as a hyperbole?
    - drzaiusapelord 12y ago
      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!"
koenigdavidmj 12y ago
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-selling-may-not-be-a-reason-to-celebrate 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.
- pavel_lishin 12y ago
  Odd, it doesn't appear to be on their podcast :/
  - DavidAdams 12y ago
    I heard the story on the podcast, so I'd think it's still available.
  - twoodfin 12y ago
    Pretty sure it's this one: http://www.npr.org/blogs/money/2015/01/21/378851598/episode-597-were-short-america http://www.npr.org/blogs/money/2015/01/21/378851598/episode-...
    - pavel_lishin 12y ago
      Thanks!
- jared314 12y ago
  > 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.
  - 12y ago
basseq 12y ago
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.
downandout 12y ago
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.
MicroBerto 12y ago
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 https://blog.priceplow.com/protein-scam-amino-acid-spiking
- marinabercea 12y ago
  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!
  - MicroBerto 12y ago
    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.
mathattack 12y ago
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.

by parfe 12y ago

mc32 12y ago

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.

jordan0day 12y ago
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.
- fnordfnordfnord 12y ago
  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 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-hit-a-20-year-high.html 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. And to put it in perspective * 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=mm6322a4_w http://www.cdc.gov/mmwr/preview/mmwrhtml/mm6322a4.htm?s_cid=...
  - joezydeco 12y ago
    I prefer this graph: http://www.washingtonpost.com/wp-apps/imrs.php?src=http://img.washingtonpost.com/blogs/wonkblog/files/2015/01/measles.png&w=1484 http://www.washingtonpost.com/wp-apps/imrs.php?src=http://im...
Rainymood 12y ago
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 ...
hga 12y ago
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.
- shiven 12y ago
  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?
  - erobbins 12y ago
    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_unintended_acceleration http://en.wikipedia.org/wiki/Audi_100#Reported_sudden_uninte...
    - hga 12y ago
      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 https://en.wikipedia.org/wiki/60_Minutes#Controversies Per that, it took 15 years for Audi sales to recover.
burger_moon 12y ago
Without fact finding you end up with results like this http://en.wikipedia.org/wiki/Jonathan_Lebed http://en.wikipedia.org/wiki/Jonathan_Lebed Kid used message boards to pump and dump stocks until the SEC intervened.
- nosuchthing 12y ago
  Recent similar story of kid with penny stocks and internet hype: http://www.theverge.com/2014/12/3/7319277/whiz-kid-penny-stocks-smartphone-mobile-trader http://www.theverge.com/2014/12/3/7319277/whiz-kid-penny-sto...
Potando 12y ago
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.

rokhayakebe 12y ago

Investigative journalism? There is definitely an opportunity for a site that allows such reporting.

jordan0day 12y ago
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.
- ansible 12y ago
  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.
  - vec 12y ago
    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.
    - bradleyjg 12y ago
      If you know the time frame you expect the market moving news to come out you can go short with limited downside by buying put options. You also get more leverage that way.
      - eru 12y ago
        How do you get more leverage? Aren't the put options another expense?

Qworg 12y ago

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".

mindslight 12y ago
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.
- Someone1234 12y ago
  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.
  - mindslight 12y ago
    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?
    - aros 12y ago
      Is there a reason you frame every argument as a hyperbole?
  - drzaiusapelord 12y ago
    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!"

koenigdavidmj 12y ago

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-selling-may-not-be-a-reason-to-celebrate 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.

pavel_lishin 12y ago
Odd, it doesn't appear to be on their podcast :/
- DavidAdams 12y ago
  I heard the story on the podcast, so I'd think it's still available.
- twoodfin 12y ago
  Pretty sure it's this one: http://www.npr.org/blogs/money/2015/01/21/378851598/episode-597-were-short-america http://www.npr.org/blogs/money/2015/01/21/378851598/episode-...
  - pavel_lishin 12y ago
    Thanks!
jared314 12y ago
> 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.
- 12y ago

basseq 12y ago

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.

downandout 12y ago

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.

MicroBerto 12y ago

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 https://blog.priceplow.com/protein-scam-amino-acid-spiking

marinabercea 12y ago
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!
- MicroBerto 12y ago
  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.

mathattack 12y ago

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.