Go With the Pros and Grab Blackstone

Corporate buyback activity and mergers show the same, as the market's capitalization was reduced by $567 billion in the first seven months of 2007, according to TrimTabs data, and you can add another staggering $81 billion in announced buybacks so far in August.

That includes the massive $15 billion reported by Procter & Gamble(PG Quote) last week. In other words, companies are much more enthusiastic about U.S. stocks than the public, and they are buying at a record pace that could total $1 trillion by the time the year is out.

Ready to Pounce

Companies are taking a long-term view at a time when they can still borrow money relatively cheaply.

To be sure, there is more pain to come in the shares of bombed-out homebuilders and banks, as a constriction of lending to even the best credits in the market will crimp home sales and the vast constellation of retail that revolves around them.

But bottom-fishers are taking the view that these risks are mostly discounted by now, and that their investors pay them to make these kinds of tough decisions.

So what should you buy in these conditions? Strangely enough, I am very attracted to the companies that started it all: the private-equity firms.

Organizations such as Blackstone Group(BX Quote), Fortress Group(FIG Quote), Leucadia National(LUK Quote) and Brookfield Asset Management(BAM Quote) live for these kinds of moments, so that they can sweep in like vultures and buy assets for dimes on the dollar. These are the cream of the crop in U.S. finance, and they will beat the amateurs at their game every day of the week.