A banker, they say, is someone who wants to give you an umbrella when the sun is shining... and then takes it back when it rains.

The banks have gotten themselves into a heck of a bind, as we have seen, and Taipan readers have made good money going short. (Just yesterday, in-house options guru Adam Lass reminded us of his not-too-shabby 652% gains.)

Today, though, Andrew Mickey of Fear & Greed offers another angle on the story. Because the bankers went wild with foolish loans at the height of the housing frenzy, they are now left with empty pockets just when the getting is good.

That's bad news for anyone who needs a bank loan... but potentially good news for investors like you and me. Read on to find out how Andrew plans to make a mint following the "profiteers" of the banking crisis -- and how you can, too.

Have a great weekend,

JL

 

I can tell you right now, I might get into trouble for telling this to you. But you know what, it's the truth.

Over the past few months, the banking crisis has ebbed and flowed. Some months we're told the banking crisis will send us back to the economic dark ages (a.k.a. the Carter administration). Other months we're told in soothing tones that it won't be so bad.

Now, I'm not going to tell you the banking crisis is over. I'm also not going to tell you there is another shoe to drop.

Frankly, I don't know.

As far as I can tell, expectations are already pretty low for the economy and banking stocks, and most of the easy money has been made.

More importantly, I know that as we speak, a small group of investors will be able to turn the banking crisis into more wealth than most of us can imagine... all with a surprisingly little amount of risk.

How are they doing it? Well, they're doing what the banks won't. And they are set to make an absolute killing in the process. Let me explain how they're turning the banks' mistakes into their own profits... and how you can join them.

"Easy Money" Spigot Shut Off

The current situation in the banking sector is a bad one.

Years of aggressive lending, overleveraging and shouldering undue risk have created a situation that is going to take a long time and quite a few big cash infusions from our oil-rich friends to fix. But everyone has realized that. It's "priced in," as they say.

We''ve got to find the opportunities that everyone hasn't quite figured out yet. That's how you win as an investor, and that's why I'm writing you today.

You see, in response to the current crisis, banks have tightened their purse strings. They're not lending any money to anyone that can't already afford it.

Picture this: Someone wants a loan to buy a house. He goes into his bank and applies for a mortgage. The banker is not asking about his current salary or credit rating; instead, the banker is concerned primarily with the potential borrower's assets.

If they have enough to pay for the loan -- in other words, if they don't really need the loan -- then the banker can say "done." The deal is closed and loan is issued. If the borrower isn't flush with cash and assets, on the other hand... no loan. The bank can't afford to take on any risk right now. The easy money spigot has been shut off.

And that is what's creating an investment opportunity that only comes along every couple of decades. One that is surprisingly low-risk... yet offers huge rewards.

The Smart Money's Smart Move

While the banks are battening down the hatches, the smart money is making its move. If a bank is unwilling to make loans with a 20% down payment and a house as collateral, it's certainly not going to make loans to small businesses.

Banks don't consider track record of growth or future growth prospects when they consider funding the growth of a proven medium-sized business. They look at the worst-case scenario and the value of the businesses assets in the event of liquidation.

That's where the smart money comes in. They don't make loans in hopes of getting paid with a ho-hum interest rate. They take an equity stake in the company. And if the investment pans out, the financial rewards can be absolutely massive.

Right now, the smart money is funding everything worth funding. The banks aren't about to take on the risk.

The smart money -- those willing to take on the risk of funding a growing business -- has the cash, and they are making investments with a time horizon from six months to five years. It's a buyers' market for the venture capitalists (VC), and they're not passing up on too many opportunities.

Banks' Pain, Venture Capitalists' Gain

The lack of bank financing is creating a big opportunity for VCs.

You see, there are a lot of small- and medium-sized businesses that have already proven successful and are now looking for capital to expand. Because of the banking crisis, these businesses can no longer turn to the banks for the growth capital they need.

The economy is tough, and the risks (or the perceived risks, at least) are pretty big. Banks won't touch these small, aggressively growing businesses. They're often too busy borrowing money themselves just to stay afloat. But the entrepreneurial VCs of the world are happy to step in.

The VCs are in a great position. They know that many companies worth investing in have no place to turn. The VCs get to lay out the conditions of the investment and take a larger equity stake than they normally would.

They're the only game in town; it's a buyers' market for them. And they know it.

But, of course, I realize that most of us just don't have $5 million or $10 million available to put in a single investment like a VC fund does.

The great news is, I've found a way to put in as little as $500 and come along for the ride.

When Billionaires Bet, the Rich Get Richer

Don't sit around trying to figure out how bad it's going to be. It's much more fun (and profitable) to see what the smart money is up to.

The latest opportunity I've come across has two billionaires, who recently cut seven-figure checks to get one start-up off the ground. I like the industry, have been covering it for years, and see plenty of growth ahead.

But in this case, what does it really matter what I think? There is a reason why these guys are billionaires: They choose their investments very carefully.

Learn more about my latest pick here and, more importantly, how you can go along for the ride without having to lay out what the average person would consider a fortune.

Andrew Mickey
Editor, Fear & Greed