It takes guts and self-confidence to buck a trend, especially to buck a boom. So most contrarians keep a low profile.
Meet Plano, Texas, banker Andy Beal. I read about him in the pages of Forbes magazine, which profiled this master contrarian in early April.
Beal has been buying toxic assets and broken-down banks in big huge gulps. And he’s been doing it without the help of government. Forbes says that he “has purchased $800 million of loans from failed banks, probably more than anyone else.”
How? Well, back in 2004 he stopped making loans. He almost stopped banking. He cut back his hours. He had to lay off a lot of employees.
Why? He didn’t trust the market. He thought the binge of borrowing and lending utterly foolish.
Forbes relates that his behavior puzzled regulators, who were worried that he was over-capitalized! How could he resist the huge profits?
Well, Beal sure showed the regulators. And his competition. Today he’s buying assets for pennies on the dollar.
Beal believes the current crisis was caused, in huge honking part, by government. Now that government is giving failed bankers huge hunks of money, his reaction is twofold:
1. He calls all the bailouts “crazy.”
2. He is taking the opportunity to make a fortune . . . without government help.
This is Common Sense. I’m Paul Jacob.