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Sino Forest Corp (TSX:TRE) is the hottest (or coldest, depending on which way you look at it) stock

trading in Canada right now. At the moment of this writing in sits in the $2.30's, down over 90% from its March highs, with much of that loss coming due to the infamous Muddy Waters report at the beginning of June. I won't go into details since if you are reading this you probably know the details already. But I will provide my own insight based on the players involved. Remember this is just my own opinion. There's a few questions you need to ask yourself before going on. Before you started to follow TRE, have you ever heard of Carson Block? Before you started to follow TRE, have you ever heard of John Paulson? Do you understand the business of TRE and all of its relationships in China? Once you ask yourself these questions you might realize you know very little about the people involved in orchestrating one of the biggest unfounded tanks of a stock in history. Is TRE a fraud? No one knows for sure but there are clues that point to it not being one: Sino-Forest Accepts China Development Bank Corporation Term Loan Offer of US$50 Million to Fund Planting Plan Something tells me that the China Development Bank Corporation wouldn't loan money to a complete scam of a company just a couple of months prior to the Muddy Waters report. I'm just throwing this out there but I somehow think that maybe, just maybe, a government organization for the country in which Sino does business might understand Sino's complex business relationships that conform to Chinese business practices a little bit better than Mr. Block. And they would likely be more apt at confirming Sino's forestry holdings and cash balances in China than the Globe & Mail. Sino has also been around since the mid-90's, much longer than the China RTOs that are under fire for fraud. Although there are Madoffs out there, it's a lot harder to fake a scam over 15 years that it is for 3 or 4. Sino managed to survive the crash of 2001 and 2008, both of which were prime eras for finding out frauds so that's saying something there. So who will you believe? A company that's survived through two market crashes and has E&Y as an auditor without being found as a fraud or some guy named Carson Block that you never heard of until a few weeks ago? I'll get to my conspiracy theory. With the rise of social media, it's easier than ever to pump a stock, see LEXG. It also seems even easier to tank one since people's fear is a lot greater than people's greed in stock market psychology. *Someone could* have paid Mr. Block to write a report about Sino. Sino's not a fraud but it is so complex that no one actually bothers to check up on the details of their business and they just throw support one on top of the other in some kind of group think reaction - Paulson, Dundee, RBC etc. As soon as they see Block's report, they can't confirm or deny it immediately. Anybody with an interest in getting those Chinese forestry holdings cheaply could easily take advantage of that. I know how the investment industry works. These analysts spend 12 hours a day on average at work, 8 hours a day drinking and have 4 hours a day of sleep. Do you think they have time or willingness to research every nook and cranny of Sino? No! They are just going to jump ship like rats and suspend coverage pending further review from PWC as soon as possible so they are the first in line to announce they are jumping ship and have the least amount of egg on their face. The analysts from BMO and RBC are dancing around, explaining to their bosses that "at least I'm not Richard Kelertas from Dundee", who sounds REALLY bad right about now. They could care less about what happens to Sino. This is part 2 of the Sino conspiracy theory, although I don't believe they are intentionally involved. Part 3 involves Mr. Paulson. *Someone* out there knew that he owned nearly 35 million shares and was licking their chops at the thought of where this stock will head if they could convince him to sell. Now if he is anything like the analysts, he too probably does not fully understand Sino's business and relies on the musings of Mr. Block (whose intentions we don't know at all) or the analysts (who are just busy trying to cover their own asses). Once he is convinced to sell, the whole house of cards on the stock price falls. Review the price and volume history of the stock here. Paulson likely didn't trade on the US pinksheets but some trades might have gone through the ATS systems which won't show up here. But assuming they all went through the TSX, the stock traded just over 250M shares from June 1st through 17th. 35M of those are Paulson's. The rest are a mix of scared retail investors selling and knife catching retail investors buying. The Muddy Waters report has been incredibly successful, taking the stock all the way down to $1.29. I'm sure most of that is retail investors who bought and sold for more than 50% losses in a matter of a few days. Now what do you think will happen? That *someone* who could have paid Block to write the report can now buy Sino for $1$2 billion instead of paying $6 billion. Because the shares have turned over so much, the majority of current shareholders like me have a very low average cost, likely well under $5. For instance, my average cost is $2.31 after starting my buying spree at $2.80 early this week. If $2 billion is offered that's around $8 a share and current shareholders will be ecstatic to approve the deal.

Because the company was complacent and management put up a very weak fight, that is enough to avoid the lawyers who are suing the company on behalf of the shareholders who bought north of $20. Who knows, maybe management was also paid off by this *someone* to keep their mouths shut as much as possible and let the stock tank. If this scenario is indeed true and the company is found to be on the up and up, there is no legal recourse against it since it was never in the wrong and did try to defend itself (very weakly) against Muddy Waters and the Globe and Mail. There's no recourse against Block because he puts disclaimers in his reports. There are no claims against Paulson since he was just acting in the best interest of his own funds. And there are no claims against the analysts because they all jumped ship like rats and suspended coverage pending the PWC report. I am fairly certain the company will not be around in time for the report from PWC. It will be bought out by then for something slightly north of $5. Your only recourse as a retail investor in my opinion is to buy now for an easy double or to average down below $5 to recover your losses. Like I said, this is just my opinion and I could be wrong. But if you read my argument carefully you can see how my conspiracy theory could actually be right.