investor Nirvana, or Hell

Investor’s first read – Daily edge before the open
DJIA: 19,963
S&P 500: 2,276
Nasdaq Com.: 5,521
Russell 2000:1,367
Monday, January 9, 2017 9:09 a.m.
This year will be a wild one, bizarre at times, fraught with global unrest, wide swings in currencies, but hope on Wall Street for a feast on the corporate benefits of tax cuts, fewer regulations and the big spend on bolstering the military and infrastructure. Reminds me of the playbook for old Project for a New American Century – economic and military domination of the world.
Confirmation hearings on President-elect Trump’s Cabinet will begin this week. They won’t be pretty, but there is little to prevent passage.
The Street wants to play, investors want a big score. A 241% rise in the S&P 500 didn’t sate appetites, it came in dribs and drabs. Only a prescient BIG money looking out to a surge in inflation, possibly stagflation, and a “catch up” response by the fickle Federal Reserve can stand in the way of a sizzling bull market.
A boom looks like a 100% guarantee. The Trump government plans an unprecedented goose to an economy that has grown slowly out of a near meltdown in 2008-2009. This is a prescription for investor nirvana.
It all seems so “sure,” I am uneasy about this on.
The market will open a smidge to the downside. The key to the near-term trend is how quickly will investors jump on lower prices.
A two-day shakeout is likely, but the Street is driven to BUY. Only the BIG money can stop it.
SUPPORT “today”: DJIA:19,903:;S&P:2,271; Nasdaq Comp.:5,496
RESISTANCE “today”:DJIA:19,986;S&P 500:2,279 ; Nasdaq Comp.:5,527
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.
It is not good business to inject politics into stock market blogs, but silence is worse.
Corporate earnings (update)
Factset now sees Q4 earnings for the S&P 500 up 3.0%. On Sept. 30, its projection was for a decline of 5.2%. Growth rates in 10 of 11 sectors have been reduced since Sept. 30. The growth rate for all of 2016 is est. at +2.2%. Earnings for 2017 are expected to increase 11.5%. Currently, the P/E based on 12 months out is 17.1x, which compares with a 10-year average P/E of 14.4 and a 5-year P/E of 15.1.
FYI: There was some missed estimates in 2016, Q3 in particular where earnings growth surprised the Street. Along with a firming economy, this was a contributor to the year year-end rally in addition to promises of tax cuts, dereg., and a big spend..
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.
These companies possess something unique, that is not reflected in the price of the stock, until it is discovered ! There are fewer today than 20-30 years ago, reporting requirements and the ability of computers to uncover hidden values has culled the landscape.
Today’s opportunities usually develop after a brand name stock gets pummeled beyond reason. I noted Viacom Friday at $40.90 as one possibility.
Not all VIACOM subsidiaries are at max (MTV, Paramount, Home Entertainment, DreamWorks, BET networks) but a base is there for development. Then there’s Paramount Pictures (content).
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 accomplish this you had to make a cash tender offer for twice its price at that time, sell off most of its assets,(TV stations, Aspen Skiing, Coca-Cola Midwest, foreign theaters, L.A. real estate to become Century City, $76 million in cash) 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 at warp speed as television networks started to scramble for content.
What, which triggered my recommendation was the irregular trading in the stock, which I detected watching the trades pass on the screen in a broker’s boardroom. The stock would trade up on heavy volume, then trickle all the way back down on light trading. This could only be detected by watching the trades on the tape
The irregular trading in Fox kept happening, leading me to the conclusion the Specialist on the NYSE floor (who is supposed to maintain a fair and orderly market) was letting a big investor accumulate the stock.
I visited management in L.A. and later addressed the Fox annual meeting, recommending they change their Specialist. Herbert Jay Siegel (Chris-Craft Inds.) had filed a disclosure of acquiring 5.3% of Fox a month prior, but assured Fox it was for investment purposes only.
But someone was still buying. Variety gave me nice ink on the matter that week, but nothing was done by Fox about the Specialist on the floor.
In 1981 Fox was acquired by Marc Rich and Marvin Davis then sold to Rupert Murdoch who had to become a U.S. citizen in order to control the television holdings gained in the acquisition.
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
 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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