A close friend of mine manages a hedge fund in New York, and when we chat during heady stock market runs I’ll remark how well things must be going for him.
“Honesty, Brian, it really doesn’t matter whether stocks are going up or down – as long as they are moving.”
“Crunch” is traditionally not a word one likes to see associated with economic trends, and observing the current global credit squeeze and spiraling mortgage industry shakedown, it led me to wonder if there is a segment of the local business community that might experience any possible benefit – even unintended – from the volatility.
On the surface, there are few winners. Consumers – whether they are in the market to buy or sell property – come up on the short end with depressed real estate prices and higher mortgage rates. Businesses involved in or planning highly leveraged acquisitions based on cheap credit must now re-evaluate the financial viability of these transactions, not to mention companies that will simply find it harder to get the credit they need to grow or sustain the business.
The Washington Post Business Section has dedicated serious ink the past week to every facet of the story – from its impact on credit-worthy home buyers to whether or not the buyout craze will come unhinged. Throughout all of their coverage, not even the faintest of silver linings is offered.
Undaunted, I continued to search for contrarian perspectives and came across a post by frequent GigaOM blogger Kevin Kelleher. GigaOm is the well-read and respected technology industry blog run by Om Malik (who is a featured speaker at the upcoming ExecutiveBiz Web 2.0 for Business Conference that will take place in Washington, DC on November 1st).
Kelleher postulates that while the massive corporate buyouts that depend so heavily on cheap credit are not helped by the credit crunch, technology companies sitting on piles of cash could in fact be well positioned to buy highly leveraged targets in the coming months. While Kelleher spoke in national terms, there are a number of DC-area companies with strong cash positions that could be tempted to use some of this cash for strategic acquisitions.
It will be interesting to track how the tight credit markets impact the local acquisition climate through the remainder of the year and if, as Kelleher hypothesizes, we might see an uptick in cash-heavy transactions by technology companies with the capacity to do so. I’d also like to hear from readers if there are any other elements of the local economy that could somehow benefit from the current volatility and why.