hr: Money

Just a short while back, when the US economy was on an upswing, there were huge stories about private equity doing very well. People were funneling cash into companies, and were earning huge returns, as they took the brunt of the risk.

Photo Credit: Jan the manson {condemns stealing pictures}

All this was very nice when the days were good. But now, with the credit crisis, no one wants to advance money anymore, since no one is sure that assets are going to be liquid. So what does this mean for companies that have raised huge amounts of capital, and don’t really know what to do with it? It’s difficult to do business that rely on credit, when there is no credit to be had in the first place.

One possible strategy that has been taking root among smart guys, is that they are starting to buy back the loans that they took at a discounted rate, taking advantage of the fact that the market is really bad at the time.

This is like a second harvest, where you have the benefit of the first loan, and now, when you have the ability to do so, get a profit from the second discounted loan as well!

It makes your head spin, but then, this is probably why some people are simply richer than others…they’re smarter.