On Wednesday I was in Paris meeting with the CEO of an international software vendor serving global banks with solutions that automate trading processes and mitigate risk in the still largely manual trading process currently utilized by most of the industry. His companys solutions are implemented worldwide and its customer list includes a number of the most important banks in Europe.

In his opinion, and he should have fantastic insight, European banks are being hammered [on the stock markets] due to emotional and media driven irrationality. After being in the global banking industry for nearly three decades and serving it as a technology supplier for well over one of them, he is certain the large European banks have never been healthier. They have improved their equity ratios, reduced risk, written off significant parts of questionable debt, solidified their retail business and are making solid profits borrowing money virtually for free and lending it out with healthy spreads.

After I left that meeting, I thought I should buy some European banking stocks. However, its tough to jump over my shadow with all the negative commentary (i.e. news) in the media regarding the local sovereign debt crisis and its contagion effect on European banks as an example, take a look at the recent headlines concerning Dexia, the Franco-Belgian group. Financial Times: Sovereign debt crisis hits banks, Euro tumbles amid Greece tensions, Dexia holds emergency talks all headlines from Tuesday. I guess I am the perfect example of how a media driven frenzy effects behavior, and can lead to misguided pricing on the stock markets creating great opportunity for investors who understand the psychology of markets and take advantage of these kinds of anomalies.

George Soros should be having a field day these days.