Fraud School: Muddy Waters Research

In a boom fortunes are made; individuals wax greedy and swindlers come forward to exploit that greed–Charles Kindleberger in Manias, Panics, and Crashes

Case Study of Chinese Swindles

I once went to a Yale University Graduate Business Seminar on Investing in Cuba.  After four hours of hearing all the amazing “opportunities” available in Cuba that the students uncovered, I asked, “What return would you require to invest in Cuba?”  A commotion ensued as the calculators whirred and then students cried out, “12%, 15% even 20%.”  “OK” I replied, “If your deal is estimating a 20% annual return, what is your cost of capital now-as I tore up the imaginary contract into tiny pieces and then threw the confetti in the air?”  SILENCE.

By the way, to this day Cuba has defaulted on ALL their TRADE DEBT! What good is a cost of capital calculation with no rule of law? Don’t be a lamb lead to slaughter.

Muddy Waters Fraud School

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