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Dear Mr. Berko:

Dear H.D.:

Right now sell your 200 Bank of America shares and your 200 Citigroup shares and sell them at the market. Take a tax loss and then read on.

For most of 2002 through late 2006, the banking industry was in high cotton. The future appeared bright, earnings looked promising, management had visions of sugarplums and cotton candy, and industry honchos thought they were holding the proverbial brass ring. What could go wrong? But last year, the banking industry got gut-punched.

They were blindsided by the subprime fiasco, a crashing housing market and record home foreclosures while earnings and bank share prices fell like acorns from a high oak tree. Good names like Comerica Bank, Synovus Bank, Colonial Bank, First Horizon, National City Corp., etc., are down 35 percent to 60 percent from their 12-month-high prices.

The sell-off didn’t discriminate, and share prices of the good banks as well as bad banks were bloodied.

The banking sector is the primary engine that powers our economy. And although Bank of America, Wachovia, Wells Fargo, etc. are sputtering on lean fuel, I believe the Federal Reserve, Congress and the administration (remember this is an election year) can fine-tune that engine and enrich the mixture.

I believe this sell-off has created compelling opportunities in the banking sector for those who are patient and willing to look ahead two to three years. I also believe that every long-term growth or growth and income portfolio should have between 3 percent and 6 percent of its portfolio in bank stocks.

There are umpteen bank stocks from which to choose. The following three scenarios are equal-opportunity portfolio selections.

First Trust Banking Opportunity Series One (go to www.ftportfolios.-com), which is an open-end unit trust that trades at $10.84 per unit. First Trust Banking owns a fixed portfolio of 30 bank issues; the market value of each represents 3.33 percent of its portfolio. The yearly dividend is expected to be 45 cents and yields 4.2 percent. You must purchase this unit trust through your broker, and the maximum sales charge is 3.95 percent. But if you have a managed account, your broker will buy it for you at net asset value – no commission costs. This trust, which recently went public, has a two-year life and self-liquidates in December 2009.

John Hancock Bank and Thrift Opportunity Fund (BTO-$6.50) is a closed-end fund that in the past dozen months has fallen 37 percent from its high market value of $10.26 a share. BTO has 160 banks and thrifts in its portfolio, its 19-cent dividend yields 2.9 percent and it trades at a 6.3 percent discount to NAV.

iShares Dow Jones US Regional Banks (IAT-$39.90) is an exchange-traded fund with a fixed portfolio of small and mid-sized banks. IAT is down 26 percent from its $54 high of 12 months ago and its dividend yield is 3.4 percent. This fixed portfolio contains 40 banks, which always trade at net asset value.

During the next few years, each of these three investments should perform equally. And during the next few years it’s not unreasonable to expect these investments to gain 40 percent to 60 percent in market value.Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.© Copley News Service