There is opportunity in chaos. People with an appetite for risk can
still make money in the rocky financial markets and rest assured many
are trying.
So how do so-called smart people make money when everyone else
is sweating it? Simply stated, they buy things that no one else wants
and get a steep discount in the process.
Over the last two weeks, many hedge funds have announced losses on
holdings of bonds backed by subprime mortgages. These mortgages, which
were given to borrowers with weak credit histories, have lost value as
increasing numbers of subprime homeowners have defaulted on their home
loans.
Giant hedge funds and private equity firms with the ability to
raise capital are circling these assets, weighing the risk. According
to a number of people who've been in contact with top firms, some of
these top-tier hedge funds are likely to see opportunity in
mortgage-backed bonds that many others will not touch.
Many firms specialize in the purchase of distressed assets, a
category that includes debt with a low probability of repayment. These
firms can often purchase debt cheaply, and if borrowers pay back their
loans as scheduled, the hedge funds can reap significant windfalls.
"No question about it — distressed assets are probably
oversold, and people will look to buy them," said Stuart Greenbaum,
professor and former dean at the Olin School of Business, Washington
University in St. Louis. "Potential buyers are hedge funds, foreign
buyers, even the Chinese government."
Analysts are careful to highlight the risk inherent in buying these assets in such an uncertain environment.
"If things get a whole lot worse, then [buyers] will lose a lot
of money," said associate professor Richard Stanton of Berkeley Haas
School of Business. "No one knows where this crisis is going to end
up."
"You have to have the right frame of mind to buy [these assets.] No one knows where the bottom is exactly," Greenbaum said.
Mortgage Companies Suffer; Cheap Loans for Sale
Private equity firms may soon move in to buy out embattled
originators of home mortgages. These buyouts (often known as leveraged
buyouts because of the large sums of debt used in the purchases) are
often part of a plan to buy a company cheaply, improve its operations,
and then take it public for a big return. Currently, these firms are
eyeing mortgage lenders suffering large losses or going bankrupt, which
could prove to be profitable investments if operations can be improved.
"Private equity people are carefully looking at these
opportunities [in mortgage originator buyouts]," says Greenbaum.
"They're sitting on top of huge piles of money, and they'd be foolish
if they weren't looking at them. There are all kinds of buying
opportunities."
An example of this is the potential purchase of struggling
mortgage lender Accredited Home Lenders Holding Corp by Lone Star Fund
V LP, a private equity firm. However, Lone Star may have realized that
the timing is not yet ideal, and terminated the deal last Friday.
Accredited is now suing to force the deal through.
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Beside he is writing some others blogs fornotebook computer ,computer training ,computer software andpersonal computer,Cyber Forest,internet weapon,talk about business ,business is my blood ,hasan's blog ,cyber business
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