And Nary a Tweet

Investor’s first read – Daily edge before the open
DJIA: 19,899
S&P 500: 2,269
Nasdaq Com.: 5,987
Russell 2000:1,372
Friday, January 6, 2017 8:48 a.m.
I have been beating up on Donald Trump all week and nary a tweet.
Until this week, I steered clear of politics in my posts. I strongly think President-elect Trump is a major “risk” factor and that has to be addressed.
He is both predictable and unpredictable. Predictable in the fact he cannot tolerate criticism or opposition without rejection and retaliation . Unpredictable in that no one (including himself) knows what he will do under the kind of serious situations that confront a president every day.
That’s not only a market risk, it is a risk to the well being of America. I am aware some readers will never read this blog again. What I care most is that I call it as I see it based on 54 years in this business.
Hmmmm. Second thoughts, or just a temporary standoff as sellers take profits in 2017 rather than 2016 where taxes may have been higher ?
Or has it dawned on the Street that 2017 will be as bizarre as it gets with divisiveness being the only thing to hit new highs.
If the BIG money walks, it’s over, we’re going south. I don’t see that yet.
Our economy is a smidge better than stable, and that can be a platform for a more accelerated growth rate, especially if corporate taxes are cut and a lot of money is allocated for the military and infrastructure. It will take two years before the latter will have a major impact.
As I have noted before, this is one of those situations where most investors can play hard but sit close to the exit.
Expect the Fed to waffle on two or three rate bumps this year, in an attempt micromanage the market.
SUPPORT “today”: DJIA:19,831:;S&P:2,263 ; Nasdaq Comp.:5,470
RESISTANCE “today”:DJIA:19,971;S&P 500:2,275 ; Nasdaq Comp.:5,531
Worth researching further: Viacom (VIA: 40.90) It’s a global entertainment company, multiplatform properties including Paramount Pictures and Paramount Home Entertainment, DreamWorks, MTV, BET networks. I creates programming and content , has hundreds of interactive global properties , online, broadband, wireless television services. It is down from a July 2014 high of $50.81 and IMO is an asset play selling at 11 x earnings vs 5-yr avg. of 13.1) , 1.3 x sales with a dividend yield of 2%. While not all operations are chugging along on all cylinders, its Paramount Pictures library (CONTENT) is a gem. Everyone needs content today.
That’s the boooring part. This is where it can get interesting. This is what is called a special situation – undervalued assets, i.e, the parts are worth more than the market values the whole and some day the “truth will out.” Problem with these gems is the market action is a lot of stop and go, lot of frustration. Just when you think one of these is going to run, it goes back down, taking its good old time doing so. Just when you get tired of seeing other people making money in stocks that don’t do that, you SELL it, (the “I can’t stand it anymore” stage of frustration), then, it EXPLODES.
Fair ? Course not !
Before computers, there were a lot of these companies, many had huge tracts of land that had appreciated over the years, but was still carried on the books at ridiculous prices. In time, an analyst out hiking, riding or flying low asked the question, “who owns this land – it’s great.” He followed up to find out, bought the stock and got himself a winner. Or maybe he bothered to listen to a grizzled old man in a bar about the days back “when” a family bought up all this land no one wanted, passed it down the line until it was made part of a start up company and it quietly grew in value.
Motion picture companies with huge libraries of what is now called content almost went out of business in the late 1960s, including Disney (DIS). No one wanted them.
In 1979 I wrote a BUY on 20th Century-Fox entitled “How to Take Over 20th Century-Fox for Practically Nothing.” I wrote that to do this you make a cash tender offer for twice its price at that time, sell off most of its assets to get your tender money back and you are left with its film production and distribution company and film library (incl. Star Wars ) all an estimated value of hundreds of millions of dollars and growing a warp speed as television networks started to scramble for content. FOX was acquired several years later then resold to Rupert Murdoch, Fox Broadcasting.
These are hard to find today, too many computer screens accessing huge data files.
I wrote the following in 2007 as I became increasingly aware of “risk.” I was not aware of how disastrous the subprime mortgage/housing bubble situation had gotten, just appalled how extreme the use of derivatives had become. As most of you know the bear market/recession that followed took us to the brink of a total meltdown. I am again concerned for the market, not so much about derivatives but the Trump presidency.

Perfect Storm Looms
The perfect storm in our financial markets is looming.
….It will take a heroic international effort to avert a meltdown of huge magnitude…
….Trading in everything may have to be stopped until some sort of sanity is restored
….This can get real ugly. No one has a handle on the leverage amassed in derivatives
….No one has a true handle on how precarious the situation out there is, and that uncertainty feeds on itself, prompting increased selling…With few buyers, stocks tank.
…Only when a cauldron of fear begins to boil, do you have a market that is reasonably safe to invest in.

George Brooks
August 19, 2007
Corporate earnings.
Factset now sees Q3 earnings for the S&P 500 up 3.0%. On Sept. 30, its projection was for a decline of 2.2%. Q4 is projected at a gain of 5.2%, the year projected to come in at plus 0.1%. Earnings for 2017 are expected to increase 11.4%. Currently, the P/E based on 12 months out is 17.1x, which compares with a 10-year average P/E of 14.3x.
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 December 14, a reasonable risk is 19,713 a more extreme risk is 19,657 Near-term upside potential is 20,123
 OPPORTUNITY: RISK: Selective opportunity ! Risk is reality at some point
 CASH RESERVE: 25% – 35%.
 KEY FACTORS: Speculative fever driven by expectations of tax cuts, lifting of regs., and lots of money dumped on economy.
Note: Source of weekly economic calendar and good recap of indicators:
*The Fiscal Times – 12/22/16 – Eric Pianin
George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
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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