Easy Does It ! Cash Reserve 30%

Investor’s first read – Daily edge before the open
DJIA: 19,827
S&P 500: 2,271
Nasdaq Comp.: 5,555
Russell 2000:1,351
Monday January 23, 2017 9:09 a.m.
If the Trump administration focuses on tax cuts, deregulation and the “big spend,” stocks will go higher. Unfortunately, no one knows what this gang will do. Their first order of business was to repeal ACA without a replacement.
Next is the prospect of a trade war with China along with major adjustments to NAFTA.
What does that mean ?
I have no idea except it spells UNCERTAINTY, which based on what we have seen from Donald Trump, will be the trademark of his administration. This will be a one-way street, a private party and the angry middle American is not invited. A trade war can only mean he/she stand to pay more for the basics as tariffs are slapped on imported goods.
Will these goods then be manufactured here ? Will ease-of-entry jobs suddenly become available ? Will Trump create 25 million new jobs ?
“No” to all the above.
Will a Trump recession become the 10th recession under a Republican president out of the last 11 recessions ? The lone Democrat recession came under Carter (6 mos.)
“YES !”
The question is, when ?
Most likely not this year.
Why then raise cash ?
This depends on how nimble an investor is and their tolerance for risk. Based on all the corporate perks promised, the market can go higher. Obviously lower corporate taxes would positively increase valuations. Deregulation would help some industries, as would a big spend on the military and infrastructure.
There will be a lot of uncertainty in the interim, and that spells “risk.”
It also spells “opportunity” for investors with cash to invest on pullbacks.
– the prospect of big corporate tax cuts, deregulation, a big spend on the military and the infrastructure and the restructuring of long-standing trade agreements.
-the uncertainties of the repeal of Obamacare this computer sucks wind so
-talk of privatization of Medicare and Social Security
-possible undermining of NATO and the European Union
-a trade war of sorts.
-lifting of sanctions on Russia for its incursion in the Crimea and actions in Syria, adding to questions already breached.
-continued internal polarization of America and the possible extension of such to other countries.
-intense economic stimulation by the Trump/Republican Congress stands to trigger a rebound of inflationary pressures forcing the Fed to bump interest rates sooner than expected.
As long as the Street perceives the possibility of major corporate tax cuts and the big spend,” it will expect higher prices. It is possible we will see a speculative blow-off at much higher levels. It is the sizzle, not the steak, that is driving stock prices.
If the Street sees the folly of this administration and risk of extreme overreach, it will hit the exits.
SUPPORT “today”: DJIA: 19,742;S&P:2,262; Nasdaq Comp.:5,535
RESISTANCE “today”:DJIA:19,878;S&P 500:2,276; Nasdaq Comp.:5,573
From all I have read, heard and seen about President Trump, I can only conclude that he will destabilize (not unite) America and in so doing ultimately undermine the soundness of our economy, resulting in a devastating bear market.
President Trump was a mistake for which we will pay dearly as a nation that needs uniting, but won’t get it from this administration which thrives on divisiveness.
This is not about helping the middle class and people who are victims of technological change, automation and corporate decisions to grease the bottom line, it is about amassing untethered power by a political element, whose policies put it well onto the warning track in right field.
I don’t think Trump is emotionally capable of handling the job, and clearly, he does not have the experience needed to cope with the pressure, criticism and crises that go with it. That spells “HIGH RISK” for investors and that must be taken seriously regardless of party affiliation.
I am every bit as concerned for our future as American, its economy and stock market as I was on August 19, 2007 when I wrote:

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
This time we are faced with a president who is unpredictable, with zero tolerance for criticism, who is divisive and by his own behavior bigoted, intolerant, and unstable.
Congress is not conservative, it is radically extreme. It is determined to “Starve the Beast,” a term used to define the goals of neoconservatives for years. They are now in position to have their way. Essentially they seek to slash taxes to the point that it forces huge cuts in government expenditures, namely education, Social Security, Medicare, social services.
Why would anyone want to do this to fellow Americans ?
Simple, they want it all for themselves.

Corporate earnings (update)
Factset now sees Q4 earnings for the S&P 500 up 3.4% vs. a Dec.31 est. of 3.0%.. Earnings for 2017 are expected to increase 11.4%. Currently, the P/E based on earnings 12 months out is 16.9 x, which compares with a 10-year average P/E of 14.4 and a 5-year P/E of 15.1.
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 January 6, 2017, a reasonable risk is 19,926 a more extreme risk is 19,879 Near-term upside potential is 20,288.
 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: mam.econoday.com.
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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