Investor’s first read – Daily edge before the open
DJIA: 20,894
S&P 500: 2,394
Nasdaq  Comp.:6,133
Russell 2000: 1,377
Tuesday, May 23, 2017    9:08 a.m.
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 Today, the Trump administration will introduce its  budget, which will propose the deepest cuts to government programs ever. This will stir a lot of controversy, as passage of a budget even remotely less stringent  would vastly widen the current gap between poor and the well off.
      Details of the Trump tax cuts have not been released and Congressional action is not likely near-term. Trump has promised a slash in corporate taxes to 15% – 20% from 35%.
      However, proposed tax cuts would not have as great an impact on bottom lines as expected, since the average effective tax rate for the S&P companies is only 24.1%, according to “The Earnings Scout,” a provider of corporate earnings trend analysis and macroeconomic research. What’s more, none of the S&P’s 11 sectors averaged  a tax rate greater than 31.08%.
      Earnings Scout’s CEO, Nick Raich, believes deregulation would have a greater positive  impact on companies than tax cuts, since compliance is so costly.  Raich believes small company stocks  would be the biggest beneficiaries  of both tax cuts and deregulation, hmmmm.
TODAY
       The Street is still marching to the stimulus drumbeat, even in face of the mounting legal and ethics woes of the Trump administration.
        Recently,  I questioned whether the Street’s analysts would adjust their buy/sell algorithms to discount the risk that investigations into alleged  collusion between Trump’s associates and  Russian operatives would hobble the administration’s pursuit of its agenda. That is a key question for which we will get answers later in the year.
       Expect unprecedented stonewalling and tricky lawyering by  Trump’s associates present and past, as investigators begin to close in.
       I expect this to get ugly, but so far the Street doesn’t give a damn, and it won’t unless the prospects for the   stimulus (tax cuts, dereg. and the big spend) begin to fade.
       Let me remind you that May has often marked a temporary top in the market.  Studies have shown market strength between November and June, and general weakness between May and October.*****
TODAY
      Buying in the stock-index futures suggest a positive open, as the market averages advance into overhead supply. The Street’s reaction to Trump’s proposed budget cuts will be key. As long as none of the cuts affect the Street’s upper echelon, new highs are possible.  We need to look at the details and analysis.
      So far, little rattles the market, however, as I have said before, Watch your back. Almost everyone is bullish. If that suddenly changes, the market heads south.
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SUPPORT “today”:DJIA:20,851;S&P 500:2,388; Nasdaq Comp.:6,128
RESISTANCE “today” DJIA:20,967;S&P 500:2,406;Nasdaq Comp.:6,156

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CORPORATE EARNINGS
(updated  May 19, 2017)
Factset
      Q1 earnings are projected to increase 13.9%. Q2 growth  is projected at +6.8%, Q3 at +7.5%, and Q4 at +12.4%. For 2017 as a whole growth is projected at a plus 9.9%.  Currently, the P/E on forward  earnings is 17.3 x. That compares with a 10-year average P/E of 14.0.
Note: These numbers change frequently.
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MY TECHNICAL ANALYSIS  of the 30 DJIA Companies
:  (UPDATED 5/15/17)
      On occasion, I technically analyze each of the 30 DJIA stocks  for a reasonable risk, a more extreme risk, and an upside potential over the near-term. I add the results of each, then divide by the new DJIA “divisor” (0.14602) to get the DJIA for those levels. This gives me an internal check on the DJIA itself, especially if certain higher priced stocks are distorting the averages.
      As of  April 25, 2017,  a reasonable risk is 20,856 a more extreme risk is 20,703.Near-term upside potential is 21,333
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POLITICAL/STOCK MARKET
 SPECIAL COUNSEL

      WHAT IS THIS MAN HIDING ?
       Days after FBI director James Comey publicly confirmed the FBI was investigating collusion between Trump and associates and Russian operatives regarding the November election, Trump contacted two intelligence officials, Daniel Coats, director of National Intelligence and Adm. Michael Rogers, director of the National Security Agency, urging them to deny there was any such collusion. Both declined to comply.
      The issue here is not so much that Trump asked them to issue statements, but that he asked them to issue false statements.
      Why, unless there is something to hide regarding collusion, or a door that investigation may open to something else ?
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      “Special counsel” is the formal name for “special prosecutor,” one in the same. Its mission is to gather all relevant information  and determine if a crime was committed. There is no guarantee its findings would be made public.*
         Special counselor, Robert Mueller is authorized to examine and prosecute any matters that arise or may arise directly from its investigation, the words, :any: and “all” are key in that they give Mueller very broad authority to take his investigation wherever he deems necessary. This would include collusion with  Russian operatives, as well as any attempt to cover it up.**
       If President Trump fired FBI chief Comey, he can fire Mueller, and anyone who replaces him. He can sabotage the investigation in a number of ways, one of which comes out of the Code of Federal Regulations which restricts newly hired government lawyers from investigating prior law firm’s clients for one year after hiring. Mueller’s former law firm, Reportedly, Paul Manafort, Jared Kushner and his wife (Trump’s daughter) are all clients of Mueller’s former law firm, WilmerHale.****
       Reportedly, Kushner is the “person of interest”  in the investigation of ties between the Trump campaign and Russian operatives.
       This has to get very, very ugly, and that could seriously impact the Trump administration’s ability to deliver the massive stimulus (tax cuts, deregulation, and a big spend on the military and maybe the infrastructure.
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IMPEACHMENT

      The U.S. Constitution  enables Congress to remove a president for “treason, bribery, or other high crimes and misdemeanors.” Intitially, the House votes on one or more articles of impeachment- if a majority vote is reached, he is impeached.  BUT, impeachment only means indictment. The Senate holds a trial overseen by the chief justice and Supreme Court. A group of House members serve as prosecutors and the Senate as jurors. If two-thirds of the senators find the president guilty, he is removed from office and the vice president takes over.***
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SMOKING GUN ?
      Reportedly, President Trump asked FBI director, James Comey,  to drop the ongoing investigation
of former national security adviser Michael Flynn. According to the New York Times,  Comey wrote a two-page memo covering that conversation with Trump at the White House in February. Trump’s urging falls under “improper efforts to influence an ongoing investigation.”
      This news comes a week after Trump fired Comey, and days after Trump indiscreetly shared classified information at the White House with Russia’s Foreign Minister Sergei Lavrov and Ambassador Sergey Kislyak who were visiting at Trump’s request.  While not illegal, Trump’s action was widely criticized as potentially creating a hesitancy on the part of foreign countries to share intelligence of the United States.
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Monday, May 15,  Joe Scarborough (Morning Joe –  MSNBC) said he believes President Trump fired FBI director James Comey,  because Comey was getting close to exposing whatever criminal actions Trump has been trying to hide.
       That’s a strong allegation by Joe. What is new here is the word “criminal.” We have heard the word “collusion” a zillion times, but criminal takes this to a higher level, much higher.
       The whole issue of collusion would be hard to prove unless one of Trump’s  present or former team members (Manafort, Flynn, Sessions, Page, Stone) squeals.  Lower the boom on any of them, and anything is possible, including the end of the Trump fake presidency.
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       On January 24, 2017, President Trump signed an executive order withdrawing the United States from the Trans-Pacific Partnership (TPP) negotiations and opting out a  trade with countries which generated $27 trillion in trade in 2015.  On January 25, I questioned whether we were opening the door for China.
      Tuesday, May 16, thirty countries, including Russia, ended a meeting to promote Asian and European cooperation in a broad range of issues, including China’s “Belt and Road” project, designed to expand China’s global stature and trade in Asia, Africa and Europe by investing in ports, railways, and infrastructure  facilities, with the expenditure by China of $7 trillion over ten years.
       Indeed, Trump’s decision to focus on domestic issues and opt out of foreign affairs, one of which was TPP, has let China fill a huge void in trade and influence in the Pacific and Africa.
        This is the downside of having a blowhard, bumbling, narcissistic president.  Hopefully, we can survive him, as well as our extremist Congress, which is more dangerous now doing something, than it was doing nothing during President Obama’s eight years in office.  Pity !
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PSYCHOLOGY 101 ?
     
The Trump presidency, has issued in a whole new set of psychological terms, none flattering to President Trump or the voters who put him in office.

CONFIRMATION BIAS:  the tendency to interpret, perceive, or recall information in a way that confirms one’s pre-existing  beliefs even when faced with irrefutable proof to the contrary.  Having a closed mind to one’s own peril would be another way of putting it. Is it sheer stupidity to vote against one’s best interests ?  Yes, but they do it all the time. Credit lack of information, or simply the inability to mentally and emotionally process information accurately and without bias.  
DEVIANCY DOWN:  A term originally used by the late Senator Patrick Moynihan to warn voters against accepting bad behavior, stupidity, demagoguery, lying, ignorance as the “norm.”
      Bloomberg’s Albert Hunt, wrote about it on May 14, referring to Trump critics being in awe when Trump gives a speech that is reasonably coherent or takes sensible action on something.  Suddenly  critics treat it as a momentous occasion, when in fact, it is what presidents are expected to do.
      Essentially, it is the dumbing down of a person’s behavior. This is partly responsible for Trump supporters and Republicans in Congress  accepting Trumps obnoxious behavior, uncharacteristic of past presidents.  In spite of all of Trump’s nonsensical bluster and tweets, even his critics are relieved when he has a moment of sanity, hopeful that a new Trump has emerged, one who acts presidential. Why is inferior behavior acceptable ? Don’t know, but my guess is people feel less inferior when a high level official like Trump acts inferior too.

DUNNING-KRUGER EFFECT: A cognitive bias whereby people of low mental or physical ability actually perceive themselves as excelling in those areas.  Columnist, George Will recently touched on this, concluding Trump suffers from a dangerous disability, not only because he’s ignorant, and ignorant of his ignorance, but because  he does not know what it is to know something.”  
      WOW !  You said that, George ?
  Another way to say it would be, a person who thinks they know everything but in fact don’t know what it is to know something. It’s a failure to recognize their own shortcomings, so they conclude they have none.  Unfortunately, in addition to being a narcissist, Trump falls into this category. Just because he has been successful in real estate and show business, he concludes he can be successful at anything.
      Voters in this category don’t feel they need to do any  research on qualifications or policies, they simply know how to vote, because they can’t make the wrong decision – too smart !
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HEALTHCARE:  NOW THE HOUSE REPUBLICANS OWN IT !
NOTE:
This is just the beginning and information is still sketchy. One excellent source is the Henry J. Kaiser Foundation (www.kff.org)
      The House narrowly passed the American Health Care Act (AHCA) last week by a vote of 217 to 213. 
      The House failed twice to pass a similar version. The bill was rushed through without pursuing standard practices – discussions and cost and consequence scoring, by the CBO.

      It now goes to the Senate where it will encounter changes and possibly rejection. Senator Susan Collins, Maine, says there is no timeline for Senate consideration, only that she expects the Senate to take its time and do it right.
      AHCA is not the law of the land yet. All this negativity and uncertainty must make it next to impossible for Insurance companies to project risk and coverage.  That in itself stands to press ACA to the edge.      

       Republicans will now move on to tax deform where it will tip the scales further in favor of corporations and upper income persons.

THE RISK !     

      If successful, this administration’s late-stage stimulus will set the stage for a huge shortfall in US government receipts, resulting in the need to gut  dozens of government programs that address need and quality of life.
        For the most part Republicans, greedy bankers and financial institutions gave us the “Great Recession/Bear Market” 2007-2009.  The next one will be worse, because the government will lack the fiscal stimuli to pull the country out of its depressed state. 
       Can’t happen ?   Weren’t safeguards imposed through Dodd-Frank to prevent another meltdown ?
       Yes, however the House voted Thursday to roll back many of those measures, which they claim have slowed down economic growth. This is the same pattern of corporate “permissiveness” that set the stage for the 2007 – 2009 crash. ”Read “Too Big To Fail” by Sorkin, just don’t make it bedtime reading. 

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STARVE the BEAST  !
     Trump’s plan to cut the corporate tax rate to 15% from 35% would trigger a $2.4 trillion shortfall in government revenues, forcing massive cuts to government programs, as well as increased taxes in other areas to offset the loss.   

     This is an opportunity of a lifetime for Republicans to fulfill their dream to devastate social programs across the board, i.e. slash government income and there is no alternative but to gut government programs. 
      It’s called “Starve The Beast,” and will result in a vast reduction in the quality of life of most Americans, especially those who put Trump in office.
      Congress will waste little time seizing an opportunity of their lifetime – to ruthlessly, senselessly and wantonly dismember a system that works well without the intrusion of Republicans.

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I AM KEEPING THE FOLLOWING ALIVE BECAUSE IT HAS BEEN UPSTAGED BY TRUMP’S 100-DAY STAMPEDE TO  SAVE FACE.
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PREUTERS WORLD NEWS APRIL 19, 4:20 PM
“A Russian government think tank controlled by Vladimir Putin developed a plan to swing the 2016 U.S. presidential election to Donald Trump and undermine voters’ faith in the American electoral system, three current and four former U.S. officials told Reuters.
      Russian documents appear to confirm what U.S. intelligence agencies have believed  all along that Russia influenced the outcome of our presidential election. 
      Yesterday, Reuters released documents, which were prepared by the Russian Institute for Strategic Studies[https://en.riss/], after the election that confirm this conclusion.
      It recommended that a, “propaganda campaign on social media and Russian backed global news outlets to encourage U.S. voters to elect a president who would take a softer line toward Russia than the administration of then-President Barach Obama, the seven officials said.”
     Additionally, a second institute document recommended Russia end its pro-Trump propaganda and intensify messaging about voter fraud to undermine the U.S. electoral system’s legitimacy and damage Clinton’s reputation.
      So far, investigations by U.S. institutions and Congress have not concluded collusion between Trump’s team and Russian operatives occurred.
     But U.S. investigations are still being conducted.
     I personally believe collusion DID take place, and odds are GOOD that it reaches far beyond collusion, that based on what I see and how people in the administration are acting.
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TRUMP  – TOAST ?
      Just a hunch, but I think collusion regarding influencing the election is only part of something much bigger, like major league money transfers for options on oil investments, real estate holdings, and land deals. That’s why it is taking so much time.
      If we begin to see more and more of VP Pence, it may suggest the end for Trump is getting closer. Clearly, the inside knows something is about to break.  Trump is “toast,” IMVHO.
      There are so many people who know so much, and they are going to be watching out for number ONE, and that is not Donald Trump.

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WHY TRUMP WOULD PUT US  ON  A WAR FOOTING !
       THE STAGE IS BEING SET NOW !
      
Expect the Trump administration to put the United States on a war footing within one year, probably regarding North Korea.  For one, it would justify its big military spend. For another, it would facilitate a mid-term election victory, since voters are reluctant to change  Congress significantly when the nation is gearing up for war.. It worked for George Bush in 2003.  Finally, it would deflect attention away from the Trump/Russia issue, that could sink the administration.
ALL OF THE ABOVE HAS THE POTENTIAL TO ADVERSELY IMPACT THE STOCK MARKET  AND   MERITS CONSIDERATION.
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CORPORATE EARNINGS (updated  April 14, 2017)
Factset
      Q1 earnings are projected to increase 13.5%. Q2 growth  is projected at +7.2%, Q3 at +7.7%, and Q4 at +12.5%. For 2017 as a whole growth is projected at a plus 10.0%.  Currently, the P/E on forward  earnings is 17.5 x. That compares with a 10-year average P/E of 14.0. Energy is the big contributor to Q1, S&P 500 growth.  While its percentage growth rate cannot be calculated since the sector was losing money a year ago it is in the black to the tune of $8.5 billion vs. a loss of $1.5 billion in Q1 2016. Materials:
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MY TECHNICAL ANALYSIS  of the 30 DJIA Companies
:  (UPDATED 4/28/17)
      On occasion, I technically analyze each of the 30 DJIA stocks  for a reasonable risk, a more extreme risk, and an upside potential over the near-term. I add the results of each, then divide by the new DJIA “divisor” (0.14602) to get the DJIA for those levels. This gives me an internal check on the DJIA itself, especially if certain higher priced stocks are distorting the averages.
      As of  April 25, 2017,  a reasonable risk is 20,763 a more extreme risk is 20,571.Near-term upside potential is 21,333
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ODDS FAVOR
1-Trump’s presidency will implode within three years, Bannon will be gone, along with Breitbart News and Alt-Right’ influence.
2-Trump will put the United States on a war footing with North Korea in coming months with or without China’s cooperation.

Conclusion: It is happening now
3-Expect major domestic violence this summer as alt-Right groups confront protestors against tax reform and Congress’ gutting of a host of popular government programs.

Conclusion: It started on Easter weekend in Berkeley.
4-Seeds of a recession will be planted as Congress guts programs needed and used by millions.  Stock market has its final run.
5-Social Security and Medicare will be targeted for drastic changes if the Republicans hold control of both houses in 2018 and Congress is successful in gutting most of social service programs and the EPA per Trump’s wish list.     
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>                                                       Note: Source of weekly economic calendar and good recap of indicators: mam.econoday.com.
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*CBS News
**Bloomberg: Noah Feldman (May 17, 2017)
*** New York Times: Charles Savage, (May 18, 2017)
**** Reuters
*****Stock Trader’s Almanac
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George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
Brooks007read@aol.com
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Investor’s first read, is a Game-On Analysis, LLC publication for which George Brooks is sole owner, manager and writer.  Neither Game-On Analysis, LLC, nor George  Brooks  is  registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed  as particularized or as investment advice as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

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