How to be an optimist

Implications: The news here is that the chickens are coming to roost in one of the largest misapplications of capital yet.  Commercial real estate is overdone in most every sector and market and the banks of this country are among the culprits.  Ratios of three and more times capital lead to predictions that scores of banks are set to fail.  I can’t see any flaws in this thinking.

Analysis: The opportunity here will be to selectively capitalize banks whose plans and prices are attractive for the next business cycle.  There will be opportunities to acquire loan portfolios and work out individual loans profitably – maybe with the same borrower at a significant discount.  Foreclosed commercial real estate at big, big, big discounts may meet tomorrow’s markets profitably.   If you want to become an optimist, late 2009 and 2010 may be great times for your mindset.