I remember reading an advertisement a few years back that said, "And it’s backed by real estate, so you know it’s safe!" The world has changed since then, as demonstrated by this article forwarded to me by our admin:
Richard W. Fields says he has come up with a win-win financial strategy for the downturn. He is investing in lawsuits.
….
“It’s always a good time to invest in litigation,” Mr. Fields said, though he added that the weak economy helped. “When the recession started to bite, the phones started ringing off the hook. Last year, we looked at 122 cases and we made 17 investments.” A small but growing number of investors are exploring this idea, helping companies avoid some of the risks and costs of litigation in exchange for part of any money paid out when the case is settled or resolved by a court. After all, it can be costly to hire lawyers, who may charge close to $1,000 an hour at the most elite firms.
I’d ask what this means the world is coming to, but I’m not sure I want to know.
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Be wary of AAA rated “my neck hurts” securities.
“unneeded” [sic]is my anti-spam password… the system knows.
Reminds me of The Simpson’s dot-com episode. After the bubble burst.. “It’s a golden age for the Repo man, one that shall never end”, or something like that. The cynical part of me can see 10 years from now thousands of lawyers getting laid off, and the government tried to give bailouts to them..
Me? Alcohol seems like a better investment. The cheap stuff, of course, people don’t have cash to spend on $10 drinks.
I know a number of people who invest in these types of lawsuits. Most of them are ho-hum copyright infringement and pretty much guaranteed outcomes… financing is just the vehicle so companies can continue to operate with off-balance sheet loans on awards that are not recognized as assets. Basically, it’s an accounting issue, very important for small to midsized companies. Rates for these are decent returns. Some are not contingent.
Where the outcome is uncertain and contingent, those rates can be ridiculous. And I mean ridiculous.
I’m only pointing out that these have been around for a long time.
Chuck
so how does it work??? do you lend someone cash who is waiting on a pending lawsuit and then he pays you back with a cut of his award??
I wouldn’t invest in these either. I agree with Chuck- the outcome is always uncertain.
I couldn’t help but think though of a listing I went to view. The house was being used by a guy who was running his process serving business out of the house. Business was booming.
My feeling is that in these times, it’s a safe bet to assume that there will be more litigation as more people find it difficult to meet their contractual obligations.
The outcome of this litigation however, is not as certain. In fact, no more certain than investing in RE.