On January 11, 2010 Dave Gentry, President of RedChip Companies, Inc. appeared on CNBC’s The Strategy Session, a daytime TV program whose stated goal is to “provide you with an insider’s look at how capital is allocated” and “figure out what the truth is.”
Hosts David Faber and Gary Kaminsky, aided by contributor Herb Greenberg, mobbed Dave Gentry in a 3-on-1 attack in a segment titled “Peddling Chinese Reverse Mergers.” During this interview, RedChip’s nearly 20-year history of publishing equity research was challenged as biased and hype. When Dave responded that our reports are written by CFA’s (Chartered Financial Analysts), Mr. Greenberg attempted to dismiss this fact by erroneously reporting that we had the business description of one of our clients wrong on our website. We in fact had the client’s business description correct, and Herb later corrected himself on a follow-up “bonus” segment titled “Faceoff: Heat Over Chinese Reverse Mergers,” which was taped later that day at CNBC studios and released on CNBC.com.
In response to the attack by Mr. Faber, Mr. Kaminsky, and Mr. Greenberg on RedChip Research, RedChip analyst and portfolio manager Bill Matson, CPA, CFA composed the following e-mail:
Dear Mr. Greenberg and Mr. Faber,
CPA firms get paid for their opinions by the companies on whom they report, so why shouldn’t investor relations firms who employ CFA charterholders to render opinions? Especially when all compensation arrangements are fully disclosed.
I can honestly say that nobody at RedChip has ever tried to get me to be anything but 100% objective in my research – nor would such attempts ever have a snowball’s chance in hell of meeting with success. To imply that the RedChip business model compromises my work or that of the other CFA charterholders who create RedChip Research is to denigrate the CFA qualification itself, as well as the rigid ethical code at its foundation. We all worked very hard for the right to put those three letters after our names.
Am I being hypersensitive about this? I don’t think so. If RedChip is guilty of publishing tainted reports, its analysts must also be tainted. My name is on those reports, as well as on the RedChip web site. In no way can this possibly be good for my reputation or my money management firm’s business.
I wonder if you people at CNBC have any appreciation of the harm you cause when you attempt to create the illusion of scandal where none exists – and fail to give your guests anything resembling a fair opportunity to respond to your innuendo. Aside from slinging unwarranted mud at RedChip and ignoring the existence of the CFA Code of Ethics, to which over 100,000 professionals are bound, you are discouraging small companies from making themselves known to investors, both retail and institutional.
This ultimately winds up being a grave disservice to CNBC’s viewers. I’ve been one of your most loyal viewers since 2000, when I became a full-time investor/portfolio manager. In fact, my book, Data Driven Investing, devotes several pages (starting on pg. 349) to techniques for acting upon the information to be gleaned from CNBC. Yet I can’t recall anything more than passing mention ever being made on CNBC of microcaps’ tremendous long-term performance advantage over large caps. Your party line is that this has been “a lost decade” for stocks, but one wouldn’t know it from looking at the Russell Microcap Index (up 81% since 6/30/00). While I respect CNBC’s reluctance to avoid mention of specific thinly traded stocks, I find it disturbing that you would not only ignore the outperformance of microcaps, but also take actions, such as your irresponsible treatment of RedChip, that are likely to steer would-be investors away from small companies.
Small companies are important sources of job creation and innovation, and many have been starved for capital due to troubles in the banking system. It is particularly irresponsible at this time to illegitimize without basis an effective means of channeling objective analysis of these companies to investors who are likely to benefit from this information.
Bill Matson, CFA, CPA
Analyst, RedChip Companies, Inc.
Bill has over 30 years experience as a financial professional, including positions as a portfolio manager, author, analyst, and consultant. Bill was Series 7-licensed in 1980 with H.J. Tessier & Co., a small regional firm, before becoming a financial consultant with Dean Witter and Merrill Lynch. He provided independent equity research services from 1993 to 1997, then transitioned to IT consulting with Myers Holum, Inc., where he managed accounting and reporting systems projects for Fortune 100 clients. Later in Bill’s career, he co-authored Data Driven Investing, a book that analyzes 52 years of returns for 19 different strategies. Mr. Matson is currently the portfolio manager at Cognition Capital Management, LLC, where he has focused on small and micro cap value equities since 2005. Bill has earned a Chartered Financial Analyst (CFA) designation and is a Certified Public Accountant (CPA). He holds an MBA from Harvard Business School.
Somebody has to point out that L and L Energy not only has saved jobs in the U.S. by providing the Bowie Mine with a bridge loan but also helped to create more jobs per the attached article from the Cedaredge, CO local paper:
http://www.mountainvalleynews.net/home/17-front-page/1310-bowie-mine-on-track-for-increased-production-121510.html
CNBC appears to be a destoyer of U.S. jobs in small towns by their inaccurate reporting.
How in the world did you stay so cool during the blatant 3 on 1 attack. I feel Faber and Herb was speaking for the big brokerage houses. JP Morgan and MS are in a joint venture and just got the green light to underwrite China stocks. We all understand the money involved in IPOs and advising companies. JPM and MS have to wait 5 years according to HU Jintao before they can start brokerage services. The door is open for you and they know it. MS and GS do something like 400 mergers a year in the billions. The market cap of China stocks could soon take over that of the US with Indias help. The Emerging MKT is the battleground for growth . Good luck as I see value in your research and companies. I feel they have not been diluted like other IPO offerings (period). Its about value to the investers.
JP Morgans DIMON was on the show right after the strategy session with Gentry HMmmm. There was no strategy or fact finding. The venom from Herb was real. Not hardly a good interview for Faber to be proud of. Reverse mergers are not bad, deals are not bad, China stocks are not bad, only a few bad apples. The interview went bad from the start. 27% of the IPOs are Chinese. This number is growing and the US accountants and firms best understand and get a grip on the rest of the world. Reverse mergers is another way to list. Wallstreet is moving money to those who perform. Sometimes this means asset allocation funds and institutions are loading non US firms. Small China stocks provide risk and reward. CNBC does not have to disclose like MS or GS would by attacking (including short positions). I would like to know how much advertising money the big brokerage houses give CNBC?
I thought journalists were supposed to contact the company for comment, before they published (Live TV) articles? Why did they not contact LLEN instead of Redchip? With LLEN HQ located in Seattle there was no excuse.
Instead CNBC conducted a personal attack on Mr. Gentry.
They dismissed the Starbucks research report, because that was before he was at Redchip. That made it about him.
The banks that bring to market China IPO’s just happen to have a research report from their own firm available after the IPO. I guess that’s acceptable.
I find it fascinating that CNBC accuses RedChip of misleading information. I have read the RedChip reports and find them more informative to investing than what CNBC brings to the table. In fact, I would go as far as to say that CNBC was the culprit of misleading information. Where are their disclosures?
Maybe one day we will see Faber, Greenberg and Kaminsky on CNBC’s show “American Greed”. It would be a beautiful twist of irony.
Intelligent investors watch Bloomberg, not CNBC. CNBC is extremely biased and unprofessional. Also, Bloomberg has better worldwide coverage. Bloomberg is not perfect, of course; but it is much better.
Ideally, there would be no need for company-paid-for analysis like RedChip often provides. The reality is, though, that this is the only way that many companies can get any coverage at all, or important additional coverage when they have very little.
Please simply continue to clearly disclose when your coverage is company-paid-for, and strive to do your jobs with energy and integrity.
Also, thank you for your efforts in combating the massive number of lies, and the like, that have been told about Chinese reverse merger companies in general and specific companies within the space. In general, the companies in this space may have previously been, and/or may now be, significantly riskier investments than like companies from the United States and/or other countries. We don’t know this though; and, if it was and/or is true, it is clearly not true nearly to the extent that is now generally believed to be so. Instead of having unbiased, fact-based inquiries, including inquiries into and comparison to like companies from the United States and other countries, we have had a smear campaign against the space and many of the companies in it.
What is definitely true is that many supposedly reputable resources such as CNBC and Barron’s cannot be trusted, and that short selling has failed miserably as a mechanism for policing companies whose stocks are publically traded. If the short selling mechanism was working reasonably well, short attacks on Chinese reverse merger companies wouldn’t always or almost always consist of lie, lie, lie, lie, lie, lie , lie…, wherein, occasionally, a legitimate issue is accidentally hit upon.
Chinese microcaps and many smallcaps are going to eat comparable American companies lunch for the next 3 to 5 decades minimum as investment opportunities for the global market. The Big Boys see the writing on the wall. Any company from China that THEY are not able to Joint-venture in on is going to receive this type of attack and possibly more. China has a Quality & Assurance problem but they are learning FAST. I felt like the CNBC boys were fronting for someone/something else in their demeanor. I could be wrong but it felt that way to me. Many of Redchip’s clients don’t need the USA to make a significant profit. They are CHINA bound economic entities. The countries potential economic power doesn’t have to leave it’s borders for at least 20 years to be extremely profitable. Of course there will be LARGER multi-national entites formed with USA and European etc. JV attibutes. But just like USA small-cap corporations with USA national distributors in the past 30-40 years, China has the same scenario in it’s immediate future. Redchip help them maximize their capital to realize those aspirations. “Wall Street” isn’t happy about being left out of the VC side of the equation!!!EOM
Dave Gentry is good in my book. He’s always been truthful to me on RedChip stocks and tells me the good and the bad. The CECX is actually up 70% since his specialist told me about it. By the way You can now by it on Ameritrade. They fixed the DTC issue.
Respectfully Yours,
Mr.Valco
Bill,
Bravo to you for being so cool in light of the aggressive, false and misleading CNBC attack by Greenberg and company on RedChip. Where were they when the mighty US banking system lowered their lending standards to criminal levels, rebound all those underleveraged mortages so that the bad ones were mostly invisible and brought the world financial community to its knees. If they want something to complain about, they ought to look at something right before their eyes rather then point their fingers, with so much prejudice, at China.
It seems that CNBC lost sight of the issue. Were they quibbling over (a) the risks of investing in “penny stocks”, (b) issuer-paid research, (c) Chinese companies listing in the U.S. or (d) disclosure made in reverse mergers vs. full IPOs? In their rush to paint RedChip as the villain in the piece, they ended up sending a very garbled message.
After watching the CNBC interview with Dave Gentry I now know why I have RedChip in my favorites and not CNBC or Cramer. Those guys are just show boaters. Its like they have no first hand experience in the equities market at all. Keep up the good work Dave.
I have on cnbc all day, from 5am-7pm.I missed the live interview…but after I was told about it and watched it…What was Greenburg thinking in his attack interview w Mr. Gentry… I was lost! Greenburg out of line and wrong… blatantly
The way he attacked Mr. Gentry was unreal. And then the other two must have caught the crowd effect as they lashed one after the other. I had never heard of Red Chip and am not a subscriber nor was I paid for this comment in full discloser, but had owned L&L(LLEN). I must agree with Peter Tesche comments. What ever they were talking about was lost in the attacks that were aimless. A GOOD reporter knows 99% of the answers to his questions before he asks them, so he knows what he is talking about…Greenburg had nothing,
way unprofessional. If he still has a job then I know better what the real story was about. And now I know why the stock was removed from margin temporarily with my broker…lost money but he lost any credibility as a reporter …S.E.C. should look into why he attacked and lied about L&L (LLEN) …Mr. Gentry way to hang…its easy when you know what your talking about…as D.T. would say “YOUR FIRED GREENBURG”