Profiting from the Credit Crisis

Back in August, we mentioned two groups of entrepreneurs that were profiting from the credit crisis ("Profiting from the Credit Crunch/Real Estate Bust"). Yesterday, the Financial Times published an article about another such entrepreneur: Barry Silbert, the founder of SecondMarket. According to the article ("SecondMarket enters new territory"), Silbert started SecondMarket in 2004 to provide a marketplace for trading restricted securities; in the first quarter of 2009, Silbert plans to create an online marketplace for illiquid mortgage-backed securities and CDOs. From the article:

Inspired by books about Amazon.com, Ebay and Goldman Sachs, Mr Silbert says the SecondMarket platform will, for example, allow valuation experts, research providers and others to offer their services and get ranked by users.

"We are incorporating the best of current technology," says Mr Silbert. "We are inspired by the ideas behind the wisdom of crowds, and want to be inclusive rather than exclusive."

SecondMarket is a broker-dealer, getting paid a transaction fee on deals that get done, but not taking any positions itself. With many Wall Street players strapped for cash, no other serious venture aimed at targeting illiquid markets has emerged.

This story about SecondMarket reminds me about the old cliché (apparently untrue, according to this essay by U Penn Chinese professor Victor Mair) that the Chinese word for "opportunity" is comprised of characters meaning "danger" and "opportunity". The characters shown above, from Professor Mair's essay, are the ones that comprise the Chinese word for "crisis", "wēi" and "jī". For Professor Mair's explanation of why "wēi" can be translated as "danger" but "jī" shouldn't be translated as "opportunity", see his essay.