THERE WILL BE NO WEEKLY UPDATES THIS WEEK. BUY LISTS WILL GO UP TODAY AND READING LISTS ON SATURDAY BUT I AM TAKING THE DAY TOMMOROW.

We are now fast coming up on one of my favorite Holidays. The glorious spectacle of over indulgence of Thanksgiving is pretty high on my list but 4^th of July is right up there on the list. It is usually hit. There is sweaty glasses of sangria and the effervescence of a cold gin and tonic. BBQ smoke wafts across the backyards and parks all over the United States. We celebrate the founding of a nation that at the time was unlike anything the world had ever seen. We have lost a few steps over the centuries and at time I suspect our forefathers would be manning the barricades today in outrage over where we have drifted as a nation but for this one today a year we pause to celebrate the vision of liberty they embraced.

Lest this drift into one of my Fourth of July episodes let me just say that I enjoy this day so much I am taking the Holiday tomorrow and there will be no weekly updates. The family and I will be at a nearby spring on Friday doing a little swimming hole frolicking and Saturday the neighborhood has a blow out with BBQ and Fireworks. Should you find yourself in the area we will be easy to find as ours will be the tents with the pitchers of Sangria, Bourbon Slushies and loud laughing people.

The big question of the day right now is Greece. In Barrons last night Byron Wiens again posted his discussion with the Smartest Man in Europe and the guy nails it as far as I am concerned. Wiens tells us that this wise successful investor said ““Looking around the world, trouble is everywhere. That is why you have to narrow your investment focus. In Europe, the Greek situation seems intractable. The Syriza party was elected by making promises that are difficult to keep. The economy is doing poorly, so it is hard to create a budget surplus that will enable the country to pay back some of its debts, even if the creditors were to discount the obligations. The new government promised relief from austerity, but its creditors want work rule changes, increases in the value added tax, reform of the generous pension system and greater flexibility in terminating employees. The Greek people want to stay in the European Union and maintain the euro as the country’s currency, but they do not seem willing to endure the sacrifices to make that happen. From the point of view of creditors, Greece’s unwillingness to compromise is unnerving, but that stance will change. I still think a deal of some sort is likely. Europe is fearful of the unintended consequences of a default and exit from the Union. Angela Merkel worries that the euro might appreciate if Greece leaves, making German exports less competitive. The situation looks dim now, but I think some temporary solution will be found. In the long term, however, I am not optimistic about Greece staying in the Union. “ That sounds about right. Kick the can further down the road to ensure it blows up on the next guys watch.

Looking at the broader market I still see a level of complacency that is worrying. According the CNBC derivatives specialist Jim Strugger wrote last Thursday that "options market positioning and our general anecdotal sense of activity suggest that equity risk is at its most asymmetric point in a long while." The article also cites Boris Schlossberg, a macro trader and strategist with BK Asset Management. He said "You know the old saying, 'A bull market climbs a wall of worry'? We're not seeing any worry at all in almost any of the indices, and that is itself the most worrying thing there is right now to take a look at. "At this point, it's not that the sentiment itself is going to create any kind of downdraft. Schlossberg But if we have any sort of negative news catalyst, that could be the reason for why we have a pretty severe correction." Valuation levels are high no matter how you look at it. The only justification for sustained PE levels of 20 that we currently see in the S&P 500 is low interest rates that have been artificially maintained. You cannot make the case of strong growth because that just not the case at this moment in time. Everyone is very happily buying the dip in the belief this can go on forever. It cannot and at some point we are going to get some event, be it geopolitical or economic, that shatters the curtain of complacency. The bull market is getting old and there simply are not many cheap stocks. Those two combined would suggest a need for a high level of caution for investors. If traders want to play the burning match game that’s their choice but as investors our job is to get our money in on the best possible terms and right now the terms, to quote the sages, suck.

Poker legend Doyle Brunson once said “Try to decide how good your hand is at a given moment. Nothing else matters. Nothing.” Right now when I look at the broader market our hand is just not very good. Valuations are high, growth is slow and geopolitical risks are off the charts. I like keeping our chips in our stack so in most of the portfolios cash levels are still very high.

There is one sector where we are still getting dealt Aces every hand. As everyone else is worried about Greece, Puerto, China, complacency nd other potential macro trouble spots we are sitting back enjoying the tailwinds that are pushing small bank stock higher. We had our fifth takeover of the year this week and those 5 have given us profits that on average have easily exceeded 50%. In addition to the M&A activity we have seen earnings growth that came in at 16% for the first quarter. That is a lot more than the broader market and more than double what the larger regional and money center did in the same time frame. We are seeing dividend increases and continued buybacks below book value for our little banks. We have entered the sweet spot and I do not think we are leaving it any time soon. The question you have to ask yourself is why you are not participating. Help find your independence from short term trading and market volatility here:

http://vip.marketfy.com/bankingonprofit/

Have a great week everyone !

Tim

Don’t forget US markets are closed tomorrow. We will all be out celebrating

https://www.youtube.com/watch?v=2yrT0DpvfVI