Long or Short Capital

Read JD’s Lending No-No’s #1a and #1b and JD’s Lending No-No’s #3 through #4. The focus today is on what can be gleaned from people who have financed Norman Hsu.

Lending No-No #4: Do not lend for a tenor of less than 6 months, getting a 40% return over that time frame, unless you fully expect that one of three outcomes will or has occurred: 1) you lose all your money 2) you are killed or 3) you are a killer.

Example:

Normas Hsu suckered people into providing him short term “bridge loans” that would return 40% in less than 6 months. The mostly nonsensical rationale for the bridge loans, was that they were needed for “for seasonal high-ticket, high-quality retail goods made in China for exclusive brand names.” These firms couldn’t get better financing than an 80%+ annualized rate? I’m sure the Triads would have gone lower. Amazingly, real people with real money poured millions into financing these bridge loans, apparently doing no due diligence and trusting a man with a warrant for grand theft outstanding on his head.

Lending No-No #5: Never neglect to perform due diligence, if you plan on writing a big check for too good to be true returns.

Example:

Following on the above situation, maybe if you are an investment firm, providing sketchy bridge loans to Chinese intermediaries, maybe, just maybe it makes sense to do a background check on that man. You know, see if he has, I don’t, a criminal record of scamming people>

• Le Nature's Disaster
• JD's Lending No-No's #2 and #3
• Are Phantom Bonds Right for My Portfolio?
• About that $430mm Accounts Receivable owed from me...
• JD's Lending No-No's: #1a and #1b
• Lending No-No Update