This recession is more like a Hitchcock thriller than a modern day horror movie. You know what’s coming but you don’t know when, where, why or who. Blood and guts are replaced with innuendo and heavy plot lines.

Each week, I apologize to our editors for my obsession with banks – but I really think it all begins and ends with what happens within those walls.

This thriller moves slowly, taking baby steps to the next scene; first corporate layoffs, then missed mortgage payments, next foreclosures and then bankruptcies.

The corporate version goes like this: first slowing sales, then reduced profit forecasts and next stocks plummet.

Most will agree that the real estate mess is not over. Banks will continue to incur losses and take over more properties. Then the banking regulators will step in to close down failing institutions. The plot is already written in this story. It’s the players who remain unknown.

Dallas and Detroit will fall further than Seattle and San Francisco, they usually do. Those areas that have yet to fall will also see their day. Rural shopping centers will go bust while urban ones will simply change hands at lower prices. As they say, “the pond always dries up from the outside.”

I expect that the banks that fall will surprise us. Who knew until last weekend’s Seattle Times article that a bank in downtown Seattle could make an illustrious “bottom 10″ list of the most troubled institutions in our state? Years ago, the Seattle PI had a similar bottom 10; a list of the 10 worst college football teams in the nation. Without it, the Fighting Owls of Rice University would never have sold T-shirts emblazoned with the slogan “We’re Number One!”

Fine institutions like Evergreen Bank and Seattle Bank have to dig deeper to supplant the likes of WestSound Bank. But hey, anything is possible.

What is coming next, and when you ask?

Those two unknowns are selling a lot of coffee these days as investors both large and small burn the midnight oil trying to play this chess match to something more than a draw. Some sit at the infamous courthouse steps bidding on foreclosed properties hoping to hit singles and doubles through sweat equity. Others gather with a team of analysts to map out the carnage and plan the next trophy asset ready to fall.

I have lost count of the number of players who have walked through the grand Marlborough Condo Conversion only to realize that a 100-year-old apartment building foreclosed upon in the middle of construction may be too expensive at any price.

Similarly, drawing the attention of all is the big question of who is going to be the yenta who marries a landlord and tenant to the WaMu building now that JP Morgan Chase doesn’t see the logic of an East Coast and West Coast world headquarters. The rumors continue to build and for the sake of our Northwest economy let’s hope that one of our creative capitalists completes a deal.

Here is what we do know.

There is a lot of money out there and there is no money out there. The banks who have it can’t lend if it makes capital ratios drop below 10 percent. For those of you unfamiliar with a capital ratio the simple answer is that a bank can lend 10 times its equity – 10 percent capital ratio - before the regulators want the banks to pull its expansion. My apologies to the bank executives among our readers for the fourth grade version of the problem. The banks that don’t have money are told to clean up the books and sell off those problem loans to the highest bidder. In many cases, the highest bidder is the only bidder.

These days we have a particularly hard time seeing the value in stock investments as the best place to allocate your money. It seems like many of the market ‘pros’ face that same challenge.

Earlier this week on CNBC, a leading stock market asset manager shared some great advice -distressed assets outside the stock market are a better choice than investing in companies with more liabilities than assets.

We feel the same way.

The story goes something like this: A company has more debts than assets and needs to raise cash to stay in business. However, the only assets that can be sold include land and buildings and unfortunately, the market is currently home to particularly low bids. With no other choice, the land or building purchaser gets a great asset at a favorable price and the seller has to take what they can get.

Now let’s play that scenario out with banks as our example. The majority of all real estate in this world has a bank loan attached to it. When times are tough, there’s a higher likelihood that property will fall into the bank’s lap.

As an investor, there’s an opportunity, but is it worth the risk?

You can buy stock in the fallen bank or buy the assets they own. It’s possible the bank stock you’re looking at is down 90 percent and in our eyes, this is not something you want to pursue.

Today, most banks run the risk that their assets are less than the liabilities they owe. When that occurs, the bank has two viable options - either raise money or risk going under.

The current situation is banks cannot raise money. Many hold on to hope that the value of their real estate asset rises before they go under. Unfortunately, the odds are stacked against them.

On the other end of the spectrum, banks have taken back real estate after borrowers found themselves at a dead end, unable to make payments.

We believe these bankers are not well equipped to manage all the real estate they’ve acquired and can’t afford to sit and hold it for years. This provides a great opportunity for savvy, cash-in-hand investors.

The reality of the situation is bankers believe investors are offering too little for the real estate on their books and investors believe the bankers are unrealistic about the true value of their holdings. This has caused a stall for more than a year. What bankers fail to realize is that real estate values may never come back to the prices quoted on 2007 appraisals.

If bankers doubt this analysis, we encourage them to look at the stock market for examples. After more than 20 years of business, Microsoft has never lost money, yet in the past decade, company stock has seen a 75 percent decline.

What caused the decline? A fall in “multiple to earnings.”

Microsoft shares sold for 25 to 35 times earnings for most of its history. Today, Microsoft sells for eight times earnings. In real estate terms, that is similar to a “capitalization rate” - or cap rate for short - of 12 percent.

Now apply that logic to real estate and your local banker who loaned money on a four percent cap rate is going to have a hard time believing that you should buy his troubled loan for a fraction of what he lent against it.

The dilemma, we believe, is that his failure to understand his predicament will ultimately be the reason the bank fails and he is unemployed. A tragic conclusion, yes, but one he has the power to avoid.

We believe we’re years from resolving this mess. By the time it’s over and the economy is beginning to recover, more than 70 percent of all banks will be gone along with the jobs of the employees who once worked so hard for their customers.

In the meantime, the senior officers of those banks have an opportunity to survive if they take a proactive approach and ignore the staid unsuccessful strategies employed by the industry.