It has been an interesting week and it looks like it will get even more interesting. Later today I have to run to the airport to drop my son and his steady girl off for their flight to- you guessed it- Baltimore. He is going to a wedding up in Charm City. He will be staying with his sister just a few blocks from Camden Yards and we will be now have to doubly concerned with both adult children in the heart of the danger zone. As if I am not grey enough already!

Of course my son in law had to get into the national press this weekend. As reported by the Baltimore Sun “Garrett Baldwin, who lives nearby in the Ridgely's Delight neighborhood, booked a room at the Hilton Baltimore across the street and watched the game from the hotel's fourth-floor deck. He shouted loudly, cheering on Orioles starter Ubaldo Jimenez, who looked not much larger than an ant from this distance. Still, it was baseball, and that's what Baldwin said Baltimore needed. "Just to be able to look in and see this, it's tragic, but it's historic," he said. "Baseball's always been a constant in this town. It's a great reminder of everything that is possible. This city really was united around the Orioles in October. It was kind of a glimmer of hope and I think this city will continuously unite around this team again as we continue to move past this very difficult and volatile social and political process.”

He was roundly criticized on the interwebs for what many called an extravagant 1% move. His response reminds that my girl married the right guy. He said “It was worth every penny. I was the only fan among a sea of 60 journalists. And, as a journalist myself, I reminded them that I was only there for the game. Some people drink excessively. Others do heroin. Some take a lot of Motrin. When I'm pained, I watch baseball. It calms me. Reminds me of better days, and makes me optimistic about what's ahead. It's a perfect drug. Usually it's the cost of cable, but with scarcity, I'm tapping the bank account. “

I did find time this week to read the new white paper from FJ capital on 1^st quarter bank M&A activity. They found that deal pace and volume continues to rise and expect to rise further as the year progresses. They found that target banks are usually those with less than $1 billion in total assets, have below average ROEs and ROAs with excess capital and reasonable levels of nonperforming assets. I know where you can get a list of those quickly and easily. As a bonus this list has activist and smart money involvement in most of its stocks to increase the odds of a takeover and higher returns. Just click here to join Banking on Profits.

When it comes to the broader market it pays t listen to and emulate what the private equity guys are doing. This is the patient and smart money that has earned the highest returns over time. Most of us should use dump our trader imitations and adopt the far more profitable Private Equity mindset.

With that in mind listen ot what leading PE investors are saying now. Scott Nuttal the head of capital and asset management for Kohlberg, Kravis and Roberts (KKR)said on a recent conference call “We talked about monetization, so we’ve been selling into the strength. But in the U.S. if you look at where we’ve been investing, it’s been pockets of opportunities and really more in the undertaking advantage of what’s been a good environment which to liquidate our portfolio. So, we’re taking companies public; we’ve done secondaries; we sold a lot of companies to strategic and that’s been turn in the U.S. and Europe outside of some selective opportunities where we have a real angle. So, it’s not really as much of a strategic shift for us as it is just a focus on being careful in a very lofty valuation environment.

Bill Conway the co-CEO of Carlisle Group (CG) pit it this way on his conference call. He told nvestors “ In terms of the main drivers of the investment environment, asset prices continue to appreciate, interest rates remain historically low, the U.S. dollar continues to strengthen, energy prices have fallen dramatically, and credit remains abundant. Our activity for the quarter reflects these trends. We have been a very active seller, but a selective buyer.”

Wilbur Ross, head of WL Ross, said this in an interview with my friends at The Street.Com “Valuations are stretched in general. The overall market is trading about 18.5 times earnings. That's a pretty high multiple driven by very low interest rates and a lack of alternatives. We've sold a little bit more than 2.5 times as much as we've bought in the last 12 months."

The smart ridiculously smart and successful money is telling you it is time to be very cautious right now. Outside of small banks and a very carefully selected opportunities there is not a lot to do at the moment. There will be in the future but for now caution and patience should dominate your approach to the market.

That’s all for this week.

Cheers!

Tim

The small bank merger wave is telling you https://www.youtube.com/watch?v=o3Z8NU5ImK0