Classic Bull Market Excess

Investor’s first read – Daily edge before the open
DJIA: 22,841
S&P 500:2,550
Nasdaq  Comp.:6,591
Russell 2000: 1,505
Friday,  Oct. 13, 2017   9:09 a.m.
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      More of the same – money seeking a decent return that bonds don’t offer, and of course expectations for the rewards of tax cuts, deregulation and a big spend on the infrastructure. If all this happens there is room for more upside, perhaps a lot of upside. If it doesn’t, the market goes south – in a hurry.
       So far the Trump administration has made a mess out of everything.
       The Street is  locked in a buy mode even as the S&P 500 becomes more and more overvalued based on historical yardsticks.
       There is nothing unusual about this behavior, it has happened in every bull market in the past. 
       The reverse is true for bear markets, which become more and more undervalued as investors become depressed by lower prices.
        While experienced investors know this, but must be reminded, lest they get caught up in the euphoria of steadily rising prices.
        As the market plods upward, pressure mounts on institutions to put cash to work.  Any profits that are taken just adds to the pile of cash that must also put to work, creating  a self fulfilling bullish momentum.  All this, adds to a compulsion to get on board, even if it means borrowing to add to the portfolio.
Margin debt (borrowing to buy stocks) keeps hitting new highs.
        At some point the party will be over, but not the thirst for more stocks.  As the market declines, investors think they are getting a chance to buy more.
The trap is sprung        
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SUPPORT “today
”: DJIA:22,791  ;S&P 500:2,546; Nasdaq Comp.:6,580
RESISTANCE “today” DJIA:22,896; S&P 500:2,556;Nasdaq Comp.:6,606
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CORPORATE EARNINGS (updated October 6, 2017)  – Factset.com
      Q3 earnings growth is projected at +2.8%. The woes of the P&C insurance industry will hammer earnings in the quarter.  Excluding insurance, Q3 would be projected at +4.9%. Q4 earnings are projected to grow +11.2%. For 2017 as a whole growth is projected at a plus 9.2%.  Currently, the P/E on   earnings is 18.0 x forward earnings. That compares with a 10-year average P/E of 14.1.
Note: These numbers change frequently. Factset.com is well worth a visit, it breaks its projections down by industry.
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 POLITICAL/STOCK MARKET
THE GREAT AMERICAN EXPERIMENT UNDER SEIGENot since the Civil War has the spirit and future of our nation been at such great risk,  from within.  This  administration, Congress and U.S. Supreme Court is surgically dismembering  efforts over many years to ensure the safety  and well being of “all” Americans.
     The sooner, Americans recognize these are not genuine Republican conservatives, but extremists determined dismantle that which has been achieved over the years and replace it with “their” brand  of a  quasi-fascist state.  Ben Franklin was right when asked what kind of government  the Founding Fathers had given us.  “A Republic, if you can keep it,” was his response.
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1,318 FALSE or MISLEADING CLAIMS (LIES) by President Trump since being sworn in as President, January 20, 263 days ago. The tally is kept by the Washington Post’s Fact Checker, which breaks all lies down into 24 categories. Please, someone wake me up, tell me this is not happening….and reassure me Americans aren’t in denial.
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ADD ANOTHER LIE TO THE 1,318 referred to above.  Yesterday, Trump touted tax cuts for the middle class in Pennsylvania, saying the typical American household would get a $4,000 pay raise, and “it could be a lot more than that.”  Not mentioned is the savings would be over an eight year period, $500 a year.
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HOW MANY HURRICANES does it take to convince Republicans our climate is changing for the worse ?  If you guessed 4, you were wrong.  Try 40.  Monday EPA Administrator Scott Pruitt announced the U.S. withdrawal from the President Obama’s clean power plan.  In another giant step backward, clearly not for the benefit of mankind, Pruitt wants incentives for the wind industry removed, saying he would “let them stand on their own and compete against coal natural gas and other sources.”    Hope I wake up from this bad dream – soon.
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Republicans, in lockstep with the nation’s most powerful lobby, the NRA, are prepared to vote on the bill to take gun silencers off the list of prohibited items.  The Sportsman’s Heritage and Recreational Enhancement Act (SHARE) would vastly reduce procedures needed to purchase devices that when attached to a hand gun would reduce the noise to a spfft.
       What’s next on the Republican agenda – legalized murder ?
       The Republican party will take a pass on any legislation to outlaw “bump stocks,” the device used to convert a semi-automatic assault rifle to an illegal fully automatic, enabling the Las Vegas gunman to max his murder of  persons attending the Harvest Festival.  Bump stock sales have exploded, prices doubled.  
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 AMERICANS ARE TOO SCARED to have the courage to do the right thing.   If not outwardly scared, Americans are subconsciously scared. Its origin is difficult to pinpoint, but I’d say the U.S. involvement in the Vietnam War in the late 1960s and early 1970’s was a start. That’s when confidence in our government began to crumble as protests against the War escalated. The horrors of war were brought into every living room, hundreds of thousands of protesters took to the street.  Families were divided by “for” and “against” the war.  “Like it, or leave it” was the pro-war patriot mantra.
     President Nixon’s Watergate woes and resignation ahead of impeachment proceedings loped off a little more trust in politicians. This, combined with the OPEC oil embargo resulted in a 16-month recession and 50% drop in the S&P 500. 
     Probably, the biggest jolt came on September 11, 2001 with the terrorist attack on the New York City Trade Towers and the Pentagon.  Lies about Iraq’s weapons of mass destruction got us into the Iraq War, another discredit for authority in our nation’s highest office. 
      The Great Recession (2007 – 2009) and stock market’s 50% crash was yet another jolt from which many never recovered.  Now you have President Trump, an unpredictable narcissist with 1,000 lies in eight months to his credit. Oh, and the legitimacy of his presidency challenged by investigations of collusion with Russia to bombard American voters with fake news about rival candidate Hillary Clinton and who knows what in key electoral college states Michigan, Wisconsin and Pennsylvania.
       White Americans are seeing too many people of color on TV, in sports, in schools in their neighborhoods, in their police force, military.  It’s fine if a black man scores a touchdown for their alma mater, just don’t run for office or beat out their child in school activities, or them for a job.
        Get used to it Republican bigot, you can deport a whole bunch of people of color, gerrymander their vote, disrespect them, but they are hungry for achievement and want to eat your lunch, like it or not.  Bigotry is un-American, and if you know what Christianity is really about bigotry is un-Christian. 

       SMALL WONDER AMERICANS FEEL THE NEED FOR AN ARSENAL IN THEIR HOME, FOR THE RIGHT TO “CARRY” A PIECE EVERYWHERE, INCLUDING BARS, EATERIES, PLAYGROUNDS, PARKS.   Americans are so scared, even sensible measures designed to make people safer are rejected.
       If the wanton murder of 20 six-year olds in 2012 in Newtown, Connecticut didn’t spark an outrage, nothing will. Some whackos claim it didn’t happen, not to my surprise, some believed them.
       This was a defining incident in America.  Americans too freaking scared and intimidated by the NRA to be upset by the son of a gun-nut murdering  children. Shame !  The NRA exploited the situation for their own benefit, as Americans watched. Again, SHAME !
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According to THE HILL, Trump will shortly announce he will decertify the Iran Nuclear  agreement, offloading a final decision to Congress.
      The agreement, Joint Comprehensive Plan of Action (JCPOA) was signed by the U.S., China, France, Germany and Russia in mid-2015 and implemented in January 2016. The deal was not an official treaty, so Congress passed the Iran Nuclear Review Act (INRA) to allow Congress to vote on JCPOA which it did by an overwhelming margin. It requires the President to “certify” the deal as long as Iran is in compliance.  Until now, that has been done, even by Trump. But he needs to reassure his “base,” whoever they are. I am not sure how many people voted for him would do so again.
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WOULD ANYONE WANT their spouse to lie repeatedly ?, their child ?, mother ?, father ?, minister ?, child’s teacher ?,  coach ?, employer ?.  IF NOT, why would they support President Trump who is on record with telling4.5 lies per day, 1,000 lies since his inauguration on January 20 ?
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CRIMINAL CHARGES: The Palmer report.com reports on a Sept. 27 MSNBC Brian Williams interview with George W. Bush, former Asst. Atty. General, Jimmy Gurule, who lists criminal charges he expects will be levied on Trump team members, without mentioning names. Included are obstruction of justice, violations of Computer Fraud and Abuse Act, violations of Federal Campaign Act, IRS tax laws, and possibly money laundering. Only Congress can put President Trump on trial, but Muller can ask a grand jury to name Trump as an unindicted co-conspirator, which is what happened to President Nixon in the Watergate scandal.
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      HUGE MISTAKE ! In my opinion the Trump presidency is a HUGE mistake, and when you make huge mistakes, you pay a huge price. It’s coming and it isn’t going to be pretty.
      In time, I believe we will learn that the Trump team either colluded or enabled Russia’s meddling with our election. Ballot boxes are not fool proof, either.
       Evidence is mounting to indicate the biggest political/business scandal ever will become news, with a lot of Trump people taking a big hit.
       Expect Trump to attempt to pardon anyone he wants, including himself. It’s a way out of facing responsibility very much like dodging the draft. Like when he justified his numerous bankruptcies, saying he only used U.S. laws to his advantage.  Well, “pardons” are his prerogative, in many, not all cases. He would take advantage of whatever loophole to avoid consequences, sort of like dodging the draft, or did I already say that ?
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       TRUMP TO SABATAGE ACA:  Unable to pass a repeal and replace bill measures to destroy health coverage for millions of Americans have already been taken. THE HILL lists a few. Funding for advertising and outreach has been slashed 90%.The enrollment period has been cut in half. The administration plans to take down the Healthcare gov. website.   The requirement for employers  and insurance plans covering birth control have  been limited. Coverage for pre-existing conditions is now in jeopardy. Trump has now announced subsidies to assist lower-income people to buy insurance will STOP IMMEDIATELY. 
       More rape and pillage.  Have these Republicans no compassion, self respect, shame ? Americans are struggling for survival.
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TAX REFORM BENEFITTING WEALTHY AS WELL AS TRUMP ?  Depends on who you ask. Trump says  he wont’ benefit  – Add that to his 1,000 lies that have been documented since his inauguration.  Everything I read indicates the little guy gets screwed.  But isn’t it the little guy/girl who is responsible for his election to the Presidency.  Tough break guys, and girls – next time leave your confirmation bias at the door and vote your interest !
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IS PRESIDENT TRUMP BROKE ? Bill Palmer, Palmerreport.com thinks so.  Why else would he hide his tax return ?
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TAX REFORM  – “Potholes and sinkholes”*
      Trump campaigned in  Missouri recently for  tax reform, including middle-class tax cuts,  and a simpler tax code. Few specifics are mentioned. The border-adjusted tax is off the table. The mortgage, charity and retirement deductions are safe. The big question is whether the tax cuts would be temporary or permanent. If th latter, the cuts may not increase the deficit.
      An August 4 – 9  Bloomberg poll of economists reveals 28 of 39 polled expect Congress to pass tax cut legislation by November 2018. Unfortunately this action is not expected to add more than  0.2 percentage points to the GDP, and that growth is forecast  to only slightly exceed  that this year’s 2.1 percent, this forecast coming from 71 economists.  Worse yet, 2019 is projected to fall back to the 2 percent level. Referring to a corporate tax rate for developed nations of 24%, Trump says…”We have no choice….we must lower our taxes.
       Facts from mic.com: In 2016 the Government Accounting Office (GAO) found at least two-thirds of U.S. corporations did not pay federal income tax between 2006 and 2012.  One-fifth of America’s largest profitable corporations didn’t pay any income tax in 2012.
      Another study released earlier this year found the effective tax rate for consistently profitable Fortune 500 companies is 21.2%
      All told, U.S. corporations pay slightly less  in overall taxes than companies  in comparable countries.
      This begs the question of how much impact would  corporate tax cuts have on the S&P 500.       
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Trump, Bannon Gone By 2019  (Investor’s first read:  3/21/2017)
      Right winger and Breitbart grad, Sebastian Gorka is now gone,  Gorka’s  exit closely follows the departure of Steve Bannon, another  Breitfart grad,  hopefully leading to the firing  of Stephen Miller, a brash, caustic right wing extremist and Breitbart supporter  cuddler. 

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ALT-RIGHT (Investor’s first read Jan. 27, 2017)       

     The Alt-Right has been associated with nationalism, racism, xenophobia, which may well be true for some of its followers, but basically they are  well to the right of  neocons, and America does not want to go there, it isn’t who most of us are. 

        Some will call the current trend in our government fascist or totalitarianism, autocracy, even corporatocracy, kratocracy, or plutocracy, however, I see it simply as a rush to secure total control through rigging voting districts (gerrymandering) and voter suppression, repeatedly disseminating lies and misinformation often enough so people accept it as the truth, the manipulation of people’s priorities and simply taking advantage of their lack of information and inability to understand what is best for them. 

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WAR – North Korea
      Sen. Lindsey Graham says a U.S. military strike of N. Korea is possible,* that we cannot allow “this madman [Kim Jong-un] to have a missile to hit America.” His Tuesday, Aug 1, interview on the Today Show, follows N. Korea’s ICBM test days ago. Graham also said the Chinese  can stop such an attack. While such a war would take place on North Korean soil, South Korea  would incur huge casualties from N. Korean artillery.
OBSERVATION: Since January, I have warned Trump would put the U.S. on a war footing (see below) for political reasons, namely the mid-terms. Now I am convinced it is front burner because the Meuller investigations are  closing in.  
      Nuclear deterrence has been effective since the 1950s, for the obvious reasons.  The countries with the largest nuclear arsenals  and estimated warheads include United States (7,500), Russia (7,200), France (300), China (250), UK (215), Pakistan (110), India (100),Israel (80).
       The uncertainty of war would JOLT the market, especially if it disrupted  trade alliances. Reportedly, it would only take 33 minutes for a ballistic missile to reach the U.S.. If detonated high over the center of the U.S., it would cause an electromagnetic pulse (EMP) which would shut down “everything”  A-to-Z indefinitely.
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TRUMP – EARLY STAGE DEMENTIA ?  
Don’t know. Clearly he has personality disorder (Narcissism), but the question is being asked more and more with references to speech, use of words, disorientation, irritability, memory loss, late night tweets, confusion, paranoia.

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TRUMP looking for a “Get Out Of Jail Free Card if the Feds close in?”
    Why not, he dodged military service with 5 deferments  during the Vietnam era (1964 – 1970).
     Reportedly, he has asked advisers about his power to pardon family members and himself  relating to Mueller’s investigation.
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W HAT HAPPENS WHEN THE INVESTIGATION IS COMPLETED ? If the Special Counselor  concludes it is “necessary and appropriate” he is authorized to prosecute federal crimes arising out of the investigation, which he does after submitting a report to the attorney general explaining his reasons.

REASONS NEEDED TO FIRE MUELLER:  Misconduct,  dereliction of duty, incapacity, conflict of interest, good cause (??), violation of Department policies.
WOULD MUELLER BE REPLACED ? Unclear. If the Democrats controlled Congress they could appoint another Special Counselor
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  “Connect the Dots.” This investigation is open-ended
       Nigel Farage – President Trump- Jeffrey Sessions – Robert Mercer – Cambridge Analytics – Bannon- Carter Page – Kushner (Jared and Ivanka) – Eric Prince – Donald, Jr.  and Eric Trump – Wilbur Ross –  Michael Cohen – Ezra Cohen Watnick – Michael Flynn – JD Gordon  –  Christopher Steele – Michael Caputo -Breitbart News – Roger Stone – Julian Assange – Paul Manafort – Rick Gates – Jill Stein – Sam Clovis –  Kellyanne and George Conway –Dana Rohrabacher – Bill Browder – Peter W. Smith (deceased: suicide), Paul Behrends – Boris Epshteyn, Ike Kaveladze, and  Russia’s alfa Group – Felix Sater – Rob Goldstone – alfa Group – Emin Agalarov – Sergey Gorkov –  Sergey Kislyak, ambassador to the U.S., Natalia Veselnitskaya, Oleg Deripaska all connect directly or indirectly to the Trump/Russia investigation and some have a connection to Brexit, as well.
      According to the “Observer,” Mercer’s Cambridge Analytica was connected with Canada’s AggregateIQ through an intellectual property agreement and worked together on the Brexit referendum. Aggregate is also a data mining company. While Mercer was a big supporter of Trump, there is no known connection between AggregateIQ and Trump’s campaign staff.

       The Palmer Report.com  recently reported that Peter W. Smith (recent suicide) sought to collude with Russian hackers stealing emails from Trump’s opposition while claiming to be working with Michael Flynn.

       Additionally, IMHO, Vice President Mike Pence simply had to be aware of what was happening in the campaign, but is being shielded because he is the second in command if  President Trump is impeached and convicted  or forced to resign. Stephen Miller, Joseph E. Schmitz may be of interest to the FBI for information they possess relating to the FBI investigation.
      According to CNN Politics,  Marc Kasowitz  represented Trump for personal and business matters for years. Worth noting, Kasowitz is defending Russian bank, OJSC Sberbank in U.S. court, as well as a Russian billionaire, Oleg Deripaska, who has close ties with the Kremlin.
       As of July 21, Kasowitz’s is no longer Trump’s personal attorney   
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ROSENSTEIN and MUELLER OUT ?      Who Takes Over ?
       Will President Trump  fire special counsel Robert Mueller Donald Trump, Jr. to impede criminal charges against his son Donald Jr. and stall the investigation of he and his team ?
       As I understand it, he would first have to fire  Rod Rosenstein, Deputy Attorney General –
      
Obviously,  firing Mueller would smack of  “consciousness of guilt,” and could lead to impeachment proceedings by the House, and/or increase pressure for Trump to resign..

      With Rosenstein out of the way,  associate attorney general, Rachel Brand, would take over.  If she resigns, or is fired, Dana Boente, U.S. attorney general for the Eastern District of Virginia would take over.
       I believe this scandal reaches far beyond collusion with Russia to get Trump elected.
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     REMOVING TRUMP FROM  OFFICE

Can Section 4 of the 25th Amendment, U.S. Constitution – Remove Trump ?
      It’s a stretch. 
The key for his removal is ”that he is unable to discharge the powers and duties of his office.”  Section 4 mentions nothing  that he is unfit, delusional, unbalanced, crazy,  impulsive, irrational, impaired, sociopathic, psychopathic, narcissistic.
      That would be the threshold that would have to be crossed if Trump is removed from office via Section 4 of the 25th Amendment of the U.S. Constitution. There is no precedent

      It isn’t just Democrats, liberals, moderates and reasonable people who find Trump caustic, and dangerous, conservatives like George Will, David Brooks and Ross Douthart are also urging his removal.
      First, there are four ways to get rid of Trump – death, resignation, impeachment and Section 4 of the 25th Amendment.
      The procedure employing the 25th Amendment requires the Vice President and the majority of the cabinet of 15 (8) to vote to remove the president. They would submit their declaration in writing to the President pro tempore ( Sen. Orrin Hatch) and Speaker of the House (Paul Ryan) that the president is unable to discharge the powers and duties of his office, and the Vice President will immediately assume to office as acting president.
      However, the president may contend the move by submitting his own letter to the President pro tempore and Speaker of the House, that he believes he is capable of performing his duties, in which case he will resume the office of presidency.
       The Vice President and Cabinet members may then resubmit their declaration at which point Congress would vote within 48 hours if in session. If not, Congress  will act within 21 days where a two-thirds vote would be required to remove  him.  
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IMPEACHMENT
      A  Consult/Politico poll shows 43% of Americans want Congress to begin procedures for the impeachment of President Trump.

      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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Note: Source of weekly economic calendar and good recap of indicators: mam.econoday.com.

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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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