Friday Face Off

Investor’s first read – Daily edge before the open
DJIA: 21,478
S&P 500: 2,432
Nasdaq  Comp.:6,150
Russell 2000: 1,420
Thursday , July 6, 2017    9:08 a.m.
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  Softness in consumer spending, auto sales, inflation, pending homes sales, housing permits, aircraft orders and capital goods spending, suggest the eight-year Obama economic recovery is struggling. 
       While a recession is not expected at this time, it is worth noting that 9 out of the last 10 recessions occurred with a Republican in the White House.
       If this continues, expect the Fed to delay further rate increases, as well as beginning to work off its $4.5 trillion balance sheet.
      President Trump and Putin meet Friday for a lovefest or slugfest. Trump has an opportunity to boost his poll numbers (and stocks) by being a hard ass, unless Putin suckers him into one of his off subject rants.
        Remember, Trump had that disgustingly cozy meeting with Russia’s Foreign Minister Sergey Lavrov and Ambassador Sergey Kislyak in May,   where he ridiculed former FBI director James Comey after firing him. HOW AMERICAN WAS THAT ?
         So, how contentious can this meet be ?    
        The Street’s highfliers –  Facebook (FB), Amazon (AMZN), APPLE (AAPL), Microsoft (MSFT), and Alphabet (GOOG) had been under pressure for 6 days, closing at the low for the day on each occasion until yesterday when selling dried up and bargain hunters stepped in.
       These stocks and the Nasdaq Comp. should be able to bounce here, but pre-market trading suggests there is still some selling left.
      The S&P 500 was historically overpriced on Election Day, but the expectation of a huge corporate tax cut, deregulation of a zillion safeguards, and a big spend on the infrastructure juiced the S&P another 13.4% higher.
       The Street is uneasy, but not giving up. A Senate decision on its Better Care Reconciliation Act (BCRA) may come shortly, or they may settle on just repealing ACA.
        That would pave the way for a lot of Republican hoopla on tax cuts, possibly tariffs, and a big spend on the military and/or infrastructure. Right now it would be easier to  justify the military, even though people who have done their homework would argue our infrastructure woes make us more vulnerable in terms of security than a slump in military spend..
          Since mid-January, I have warned that Trump would put us on a war footing (see below) as a ploy to orchestrate patriotic support  for the mid-term elections. He may not have a choice in the timing as North Korea is forcing his hand.
        We have probably been preparing for a confrontation with North Korea for months.  The biggest risk of course is Seoul, South Korea, which is within the range of conventional artillery.
TODAY
         The market is looking for a comfort level prior to Trump’s meet with Putin. If the meet is a ho-hummer or is perceived as  positive for Trump, the market will rally sharply. Otherwise, look for it to search for support at lower levels.
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SUPPORT “today”:DJIA:21,419;S&P 500:2,424:Nasdaq Comp.:6,121
RESISTANCE “today” DJIA:21,541;S&P 500:2,441;Nasdaq Comp.:6,186

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CORPORATE EARNINGS
(updated June 30 , 2017)
Factset
      Q1 earnings increased  14.0%.      Q2 growth  is projected at +6.6 %, Q3 at +7.4%, and Q4 at +12.4%. For 2017 as a whole growth is projected at a plus 9.8%.  Currently, the P/E on forward  earnings is 17.6 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 6/13/17)
      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  June 15, 2017,  a reasonable risk is 21,951 a more extreme risk is 20,703.Near-term upside potential is 21,418.
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POLITICAL/STOCK MARKET
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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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TIME TO REVISIT  PSYCHO !
        In May, I headlined “Dumbing Down – American Tradition ?”
        The American voter, many politicians, our former friends abroad, and the press are trying to understand how “this” could happen in America.  With Trump, it’s simple, he’s a narcissist – vain, egotistic, selfish, manipulative, boastful, shameless, incapable of criticism and resistance, defensive, arrogant, entitled, abusive, vindictive, untruthful, and a denier of reality. An estimated 1% of all people have this disorder, unfortunately America has one for its president.
        He never would have been elected if  his only voter was the Republican of yore,  centrists or conservatives who stood on their principals, but  compromised on issues to get things done in the best interests of America,  unlike the Freedom Caucus office holder, (constitutional anarchists) determined to shred all progress of the past and replace it with their little narrow focused, privileged  fiefdom.
        Many Republicans vote Republican, trusting their party will pick competent candidates – same with Democrats.
         This time around was different.  A fairly large group of persons voted for Trump fully knowing what he is, and that’s not a person you want as a friend, neighbor, relative, employer, husband or family member. He made no bones about it, he is a bad influence on young people, young adults.
      SO WHY DID THEY VOTE FOR HIM ?
      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 and even voting against one’s own interest.  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 syndrome:  Essentially, this is the acceptance of poor behavior and performance as the norm, a dumbing down of expectations.
       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 on all subjects. Clearly, we don’t have to look far for one of these. It’s a failure to recognize their own shortcomings, so they conclude they have none.        Voters in this category don’t feel they need to do any  research on qualifications or policies, what comes to their mind is perceived as “fact.”
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TRUMP approval ratings also abysmal abroad.
      July 4th is a time Americans celebrate the birth of our nation, a time Americans take a minute to be proud of our constitutional representative republic and its many accomplishments, which unfortunately are systematically being gutted as I write.
       Unfortunately, our image has dropped sharply under Trump as president. His approval ratings wallow  in the 30s, as he has hastened to disengage the U.S. from our long-standing foreign alliances.
      A recent Pew Research Center survey covering 37 countries gives Trump a 22% confidence rating that he would do the right thing in international affairs. President Obama’s rating in the same category as he left office was 64%.
      Trump’s plunge is especially pronounced among our closest allies in Europe and Asia.
       American people as a group came out well in the poll with a median of 58% favorable.
     Trump sucks wind in comparison with other major world leaders in the do the right thing category, trailing Germany’s Angela Merkel (#1), China’s Xi Jinping, Russia’s Vladimir Putin.
        Disapproval of Trump’s signature policies was obvious with abysmal approval ratings for his: withdrawal of support from  the Iran nuclear weapons agreement (34%); restrictions on immigrants entering the U.S. (32%); withdrawal from the international climate change agreement (19%); withdrawal of support for major trade agreements (18%; building the “Wall” (16%).

         Trump’s personality assessment is disturbing with 75% of the 37 countries saying he is arrogant, 65% saying he is intolerant, 62% dangerous, 55% a strong leader, 39% charismatic, 26% qualified to be president, 23% caring about people.
          So my headline on January 3, “TRUMP – A Human Wrecking Ball” is confirmed globally, as well.
          
There is a chance, a big one, that Trump and the Freedom Caucus (Constitutional anarchists) will do irreparable damage to our nation domestically and internationally in coming years, when Fourth of July celebrations will be for a nation “that was.” 
            This combination wants to shred everything accomplished in the last 241 years, then remake it to reflect their hard right ideology.

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Better Care Reconciliation ACT (BCRA) aka, Trumpcare       
     
It looks like a final vote on the Senate healthcare vote will be delayed until after the July 4th recess.  It also looks like serious concessions will have to be made to pass it.
       But who gets the concessions – conservatives or moderates ?
       Ideology absolutely has no place  in this bill – NONE ! Have they no SHAME !

     This bill has been developed in secret by a handful of Republicans, and no Democrats, yet it will affect all Americans.   It should be crafted to serve the best interests of Americans who need affordable health insurance coverage.  Anything short of that is not in the best interests of our country, i.e., hostile, un-American.
        Ironically, most of Congress is covered by ACA, which was implemented in place of the Federal Employees Health Benefit Plan, when ACA became the law of the land.  So, Congress has some skin in the game……well, kind of.
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FLIPPING VOTES: 
      It doesn’t matter
if Russia was not able to hack into voting machines and flip Clinton votes  to Trump, if  Russia’s intrusion into Facebook and Twitter with  “fake” news was  able to convince voters before they voted that Clinton was seriously flawed and Trump the preferred choice.

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TRUMP TO PUT US  ON  A WAR FOOTING !
       I moved this one up in the queue, due to a recent Trump tweet that help from China “has not worked.”
       On January 12, I noted:
       “I am sure of one thing, the United States will be on a war footing in the spring of 2018. Two things, it will juice the economy….may push war hawks to act on military expenditures; two, ensure support for the mid-term elections.
(Investor’s first read.com.)
       In April, Trump told the Financial Times, “If China is not going to solve North Korea, we will.” In June, he said, “While I greatly appreciate the efforts of President Xi & China to help with North Korea, it has not worked out.”
       This looks like a countdown to military action, or brinkmanship so dire that North Korea comes to the table. 
        Strategically, Trump would want to put the country on a war footing  with North Korea closer to the election in 2018, but if the Russia investigation gets too hot, he may want to begin the process earlier as a distraction.
WHAT ABOUT SYRIA AND CHEMICAL WEAPONS ?
      Another diversion to deflect attention away from yet another healthcare setback and the Russia/Trump investigation.
      The only thing I am certain of is that this administration is the most untruthful administration in the 57 years I have been following politics.  What an utter disgrace.  We will be lucky to get out of this without an enormous amount of damage across the board.

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ROSENSTEIN OUT ?      Who Takes Over ?
     Expect Rod Rosenstein, Deputy Attorney General – DOJ will  likely be fired or have to recuse himself possibly as soon as this week, odds favor the latter. The real target here would be special counsel, Robert Mueller, who would be fired as a desperation stalling tactic by President Trump ‘if’” Trump can find an attorney general who would fire Mueller.  Trump cannot fire Mueller directly.
      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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 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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“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 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 – Peter W. Smith (deceased) Russia’s Felix Sater – Sergey Gorkov –  Sergey Kislak, ambassador to the U.S., 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 (deceased) sought to collude with Russian hackers stealing emails from Trump’s opposition while claiming to be working with Michael Flynn.

      The Wall Street Journal just released two articles, one documenting Smith had some kind of recruiting connection with Steve Bannon and Kellyanne Conway. Unfortunately, Smith cannot be contacted to further confirm the story as he died of unknown causes shortly after his disclosure to the Journal.
            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 has 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. 
       WHY SO MANY RUSSIANS ? WHY ALL THESE RUSSIAN CONNECTIONS ?  THIS IS GETTING BIGGER – IMHO THIS WILL BE THE BIGGEST SCANDAL “EVER” AND MAY TAKE YEARS TO FULLY UNWIND.
          Was there a GLOBAL POWER PLAY here ?  Britain, United States, France, Netherlands, Sweden, Italy ?   Who was the puppeteer who were the puppets ?
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  President Trump’s budget is obviously DOA, with lots of blowback by Republicans looking to their prospects of re-election in 2018. The budget is a disgrace to who we are as Americans, as it skewers a portion of our society with little ability to defend itself, much less survive.
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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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