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9:00 AM EST, Tuesday, September 2, 2008: The local real estate mavens visited on the weekend and opined that the present commercial real estate mess would last another two years, minimum.

The problem at heart is that the present owners had bought at too high prices and borrowed too much short-term money to finance their buys.

The short-term loans are coming due. Normally they would be replaced by long-term loans. But it's not normal today. Financial institutions (like banks) are not lending. Desperate owners are scrambling not to lose their properties. They're offering equity with creative ideas, like bulking up a $100 contribution to $114 and offering preferred interest and preferred capital return on the deal (i.e. before the older investors).

There are two problems: No one knows what the value of commercial real estate is today because there are no "comps," i.e. sales of like buildings to compare your building to. There are, of course, no sales, because no one can borrow money to buy a building.

Worse, no one knows when there will be a market. Or what the trigger event will be to cause there to be a market. The theory is that commercial real estate will, one day, get cheap. Really cheap. And those people with money -- remember my adage about Cash is King? -- will pounce and suddenly we'll know the "real" value.

My friends believe pouncing will come -- but only after the banks take the buildings back, have endless internal meetings about what to do with them and then ultimately sell them to their friends or on the market. This hasn't happened yet for commercial real estate. It's happening for residential real estate. You can buy homes cheaply already but you have to be real careful. Much of the cheap stuff tends to be in awful neighborhoods -- places squatters are moving in -- and many of the houses trashed.

Ten banks have failed this year, so far. On Friday, Integrity Bank of Alpharetta, Ga., with $1.1 billion in assets and $974 million in deposits, was closed by the Georgia Department of Banking and Finance and the Federal Deposit Insurance Corp. was named receiver. I love the name -- Integrity Bank. No one knows which one will fail next. The FDIC maintains a list of problem banks It watches. But the biggest bank failure this year -- IndyMac Bank -- was not on the FDIC's list. So the FDIC is tightening the rules for all the banks and scaring their managements into inaction. Thumbsitting is a new occupation.

Diversifying your portfolio into syndicated real estate five years made huge sense. I did. In hindsight, it might have made more sense to choose at least one of my syndicators more conservatively

There's a big lesson here: When your money manager gives you huge returns, take some of that money out. See if you can ultimately get what you invested in out. The human tendency is to give that manager, fund, syndicator, (whatever) more of your precious cash. After all they're doing so well. But they're only doing well by taking BIG risks. When the tide is rising, big risks pay off. But when the tide is falling, the risks come home to roost and you can easily wipe out several years of great gains with one lousy year -- like this year.

In favor of bank reconciliations: This piece came from Saturday's New York Times.

The Bank Account That Sprang a Leak
By DIANA B. HENRIQUES

They are a staple of consumer-complaint hotlines and Web sites: anguished tales about money stolen electronically from bank accounts, about unhelpful bank tellers and, finally, about unreimbursed losses.

But surely customers of the elite private banking operation at JPMorgan Chase, serving only the bank’s wealthiest clients, are safe from such problems, right?

Wrong, says Guy Wyser-Pratte, an activist investor on Wall Street for more than 40 years who uses his hedge fund’s war chest of roughly $500 million to wage takeover fights and proxy battles in the United States and Europe.

Guy Wyser-Pratte has been an activist investor on Wall Street for more than 40 years.

In May, Mr. Wyser-Pratte learned that someone had siphoned nearly $300,000 from his personal account at the private bank through many small electronic transfers over a 15-month period.

Then he was told by the bank that he could stop the theft only by closing his account and opening a new one — an enormous hassle, he said. And finally, JPMorgan Chase told him that the bank would cover only $50,000 of his losses.

“While this is an unfortunate situation, we believe our response has been entirely appropriate,” said Mary Sedarat, a spokeswoman for the private banking service at JPMorgan Chase.

Mr. Wyser-Pratte emphatically disagrees. “They never should have approved that first transfer,” he said.

The wealthy financier “is getting a taste of what the rest of us have to deal with all the time,” said Gail Hillebrand, the senior staff lawyer for Consumers Union in San Francisco.

That sour taste is called automated clearing house fraud, theft involving unauthorized electronic transfers through the automated networks of the circulatory systems that connect the world’s bank accounts.

When a consumer writes a check, the merchant that accepts it is entitled to have the specified amount taken from the customer’s bank account and sent electronically to the merchant’s account.

But once someone has certain routing numbers for a customer’s account, fraudulent transfers become possible unless the customer carefully scrutinizes all of the transactions on the monthly account statement.

If the consumer reports a clearly unauthorized transaction within 60 days, federal banking rules require the bank to cover the loss, Ms. Hillebrand said. If not, and if the bank informed the customer in advance about the 60-day deadline, the bank has no liability.

Consumer advocates agree that online purchases and automatic bill-paying arrangements have greatly complicated the task of catching fraudulent transfers — particularly small ones — from busy accounts.

And Mr. Wyser-Pratte’s personal account was as busy as his life. Louis Morin Jr., his chief operating officer, said his boss splits his time between Paris and New York and travels almost constantly. “He is not someone who writes 30 checks a month — more like thousands a month,” Mr. Morin said.

And a retail bank statement is kindergarten arithmetic compared with the monthly statement for a private banking client. Indeed, Mr. Wyser-Pratte said that the statements have become so complicated not even a Wall Street veteran like himself could detect the continuing theft.

“I kept complaining that the bank’s records showed I was overdrawn when I shouldn’t be,” he said. Each time, he was assured that the statement was accurate, even if he could not decipher it.

As for the 60-day deadline for reporting a theft, “I never knew about it,” he said. “I opened that account eons ago, it must be 20 or 25 years now. I don’t think I ever signed anything agreeing to that policy.”

It all sounds sadly familiar to Ms. Hillebrand, who said all bank customers — even wealthy private banking customers — must know their rights and watch their monthly statements. “It is easier than ever for people to steal money from your account,” she said.

Mr. Wyser-Pratte has filed a complaint with the New York City Police Department. A detective working on the case confirmed that an investigation is under way.

According to Mr. Morin, the money was sucked out of Mr. Wyser-Pratte’s personal account through dozens of unauthorized purchases of computer equipment from Dell. But so far, police investigators have been able to trace only a single $1,600 shipment of equipment, delivered to a nonexistent business in Brooklyn.

Mr. Wyser-Pratte, understandably eager to solve the mystery, complained that neither Dell nor his bankers were giving the police enough help.

“Dell is cooperating fully” with the police, said Jess Blackburn, a company spokesman. “We have been very responsive to all requests for information.”

JPMorgan Chase is also cooperating fully, said Ms. Sedarat, the bank spokeswoman. “This is an important reminder that clients are responsible for monitoring activity in their accounts.”

The bank’s private banking clients probably did not need another reminder so soon. On July 29, federal authorities in Manhattan announced the indictment and arrest of Hernán E. Arbizu, who was a vice president in the private bank’s Latin American unit and who is accused of embezzling more than $5 million from his private banking clients.

Ms. Sedarat said that case was completely unrelated to Mr. Wyser-Pratte’s loss.

My laptop locked up this morning: Right in the middle of writing this column. I could still read the column. But I didn't know how much I'd saved. Instead of typing everything onto another computer, I photographed the screen. It worked. How brilliant am I? Please no emails.

More good tennis to watch. Watch the tennis in high definition. My best setup is DirecTV and a 61 inch Samsung DLP (now down to an amazingly low $1640 on Amazon.)