Since then all the leading Chinese stocks have fallen. BABA is down 16%.<\/p>\n
Grow older. Figure what you understand and what you don’t.<\/strong><\/span><\/p>\n I long ago figured pharma and biotech are “too hard.” I’m not in the industry. I don’t devour the medical literature. Item:<\/p>\n Cramer and others have been pounding the table for a company call Emergent Biosolutions (EBS). It’s the picks and shovels of the pharma biz. And it tells a great story. But it screws up big-time. Search “Emergent” at the NYTimes web site and you get these horrible stories:<\/p>\n Never buy stocks on margin<\/strong><\/span><\/p>\n Every major post-war financial crisis has been caused by too much borrowing.<\/p>\n Borrowing money is designed to juice your investment returns. Borrow $80 on a $100 stock, which goes to $120. Bingo your return is not a miserable 20%, it’s a handsome 75% (assuming you paid $5 interest on the $80). If your $100 stock falls to say $70, you ‘ve lost your $100 and owe your bank $10. That’s a sure way to go broke.<\/p>\n Yesterday I wrote about the desperate, greedy morons in the banking industry who got taken big-time by a Archegos Capital Management, a\u00a0family office<\/a>\u00a0capital management firm run by\u00a0Bill Hwang<\/a>. This stuff fascinates me,\u00a0<\/sup>\u00a0Here’s the beginning of Wikipedia’s entry on Archegos:<\/p>\n On 26 March 2021, Archegos defaulted on\u00a0margin calls<\/a>\u00a0from several global\u00a0investment banks<\/a>, including\u00a0Credit Suisse<\/a>\u00a0and\u00a0Nomura Holdings<\/a>,<\/sup><\/sup>\u00a0as well as\u00a0Goldman Sachs<\/a>\u00a0and\u00a0Morgan Stanley<\/a>.[5]<\/a><\/sup>[6]<\/a><\/sup>\u00a0The fund had large, concentrated positions in\u00a0ViacomCBS<\/a>,\u00a0Baidu<\/a>, and other companies,[7]<\/a><\/sup>\u00a0and the firm’s use of\u00a0total return swaps<\/a>\u00a0had helped to hide its high exposure from lending banks. Its derivative contracts “exposed the firm to severe losses when the trades went bad.”<\/sup>\u00a0The\u00a0Wall Street Journal<\/i>\u00a0reported that Hwang lost $8\u00a0<\/span>billion in ten days.<\/sup><\/p>\n Here’s an earlier one on over-borrowing from 1998 (also from Wikipedia):<\/p>\n Long-Term Capital Management L.P.<\/b>\u00a0(LTCM<\/b>) was a\u00a0hedge fund<\/a>[1]<\/a><\/sup>\u00a0based in\u00a0Greenwich<\/a>,\u00a0Connecticut<\/a>\u00a0that used\u00a0absolute return<\/a>\u00a0trading strategies combined with high financial\u00a0leverage<\/a>. LTCM was founded in 1994 by\u00a0John Meriwether<\/a>, the former vice-chairman and head of\u00a0bond<\/a>\u00a0trading at\u00a0Salomon Brothers<\/a>. Members of LTCM’s board of directors included\u00a0Myron S. Scholes<\/a>\u00a0and\u00a0Robert C. Merton<\/a>, who shared the 1997\u00a0Nobel Memorial Prize in Economic Sciences<\/a>\u00a0for a “new method to determine the value of derivatives<\/a>“.[2]<\/a><\/sup><\/p>\n Initially successful with annualized return of over 21% (after fees) in its first year, 43% in the second year and 41% in the third year, in 1998 it lost $4.6 billion in less than four months due to a combination of high leverage and exposure to the\u00a01997 Asian financial crisis<\/a>\u00a0and\u00a01998 Russian financial crisis<\/a>.[3]<\/a><\/sup>\u00a0The\u00a0master<\/a>\u00a0hedge fund,\u00a0Long-Term Capital Portfolio L.P.<\/b>, collapsed in the late 1990s, leading to an agreement on September 23, 1998, among 14 financial institutions,[4]<\/a><\/sup>\u00a0which included;\u00a0Bankers Trust<\/a>,\u00a0Barclays<\/a>,\u00a0Chase Manhattan Bank<\/a>,\u00a0Cr\u00e9dit Agricole<\/a>,\u00a0Credit Suisse First Boston<\/a>,\u00a0Deutsche Bank<\/a>,\u00a0Goldman Sachs<\/a>,\u00a0JP Morgan<\/a>,\u00a0Merrill Lynch<\/a>,\u00a0Morgan Stanley<\/a>,\u00a0Paribas<\/a>,\u00a0Salomon Smith Barney<\/a>,\u00a0Soci\u00e9t\u00e9 G\u00e9n\u00e9rale<\/a>, and\u00a0UBS<\/a>, for a $3.6 billion\u00a0recapitalization<\/a>\u00a0under the supervision of the\u00a0Federal Reserve<\/a>. The fund liquidated and dissolved in early 2000.[5]<\/a><\/sup><\/p>\n Now go to Wikipedia’s entry for the Financial crisis of 2007\u20132008<\/em><\/p>\n The\u00a0financial crisis of 2007\u20132008<\/b>, also known as the\u00a0global financial crisis<\/b>\u00a0(GFC<\/b>), was a severe worldwide\u00a0financial crisis<\/a>. Excessive risk-taking by banks,[1]<\/a><\/sup>\u00a0combined with the bursting of the\u00a0United States housing bubble<\/a>, caused the values of\u00a0securities<\/a>\u00a0tied to U.S.\u00a0real estate<\/a>\u00a0to plummet and damaged financial institutions globally;[2]<\/a><\/sup>\u00a0this culminated with the\u00a0bankruptcy of Lehman Brothers<\/a>\u00a0on September 15, 2008, and an international\u00a0banking crisis<\/a>.[3]<\/a><\/sup><\/p>\n I don’t have a mortgage. I don’t buy stocks on margin. I don’t owe anyone anything. And that’s the way I like it.<\/p>\n Skills for entrepreneurs<\/strong><\/span><\/p>\n Tell your kids to learn:<\/p>\n + Selling. There are plenty of books. One I like is “Active Listening.<\/em>” Click here.<\/strong><\/a><\/p>\n + Marketing, including social media marketing. All the biggies — from Facebook to YouTube — have endless marketing materials on their web sites.<\/p>\n + Web site construction. You don’t need to be web whiz. But you need to know how sites and the web work. What’s a good site. And what’s a bad site. Learn HTML. It’s easy.<\/p>\n +\u00a0Excel. It’s still useful<\/p>\n![\"\"](\"https:\/\/www.technologyinvestor.com\/wp-content\/uploads\/2021\/04\/Emergent.jpg\")
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