Massive industry change can be triggered by macroeconomic events, by a specific product revolution, or by the death of a fad.
Wall St is much quicker to hype a new fad than to discard the old.
1980s Texas taught investors that when a region and its economy are built on growth, a slowing rate of change in the growth engine can pull the whole structure to the ground.
Banks are classic short candidates because the lending cycle is only as long as the credit experience of the current crop of bankers.
Betting on a real estate downturn means short the companies with big real estate exposure. Real estate always takes a while to work out because it is not marked to market every day.
How much damage can a wretched real estate environment do to a bank? The real estate pros knew that when it came, it lasted - three to four year minimum to clear out the overhang, with banks trading as low as 40% of book.
They knew that buying a bank stock or an S&L stock was like buying a blind pool. Buyers never knew what they had, so the macroenvironment had better be right.
When no one cares anymore, it is usually time to buy long or at least cover shorts.
Banks with their arcane and specialized terminology, are boring, to analyze, much like insurance companies. As a group, banks are perceived as sacred, inviolate, protected by the govt and the many insurance programs. They are in fact highly leveraged corporations. When equity is only 5% of assets, it does not take much to nibble through the base. So banks can be profitable and predictable on both sides, particularly if shareholders or stock sellers count cranes in their own backyards to determine how frenetic the pace of real estate expansion really is relative to the perceived economic growth in town.
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