Risk of Correction Increase – Raise Cash

Investor’s first read – Daily edge before the open
DJIA: 21,629
S&P 500: 2,459
Nasdaq  Comp.; 6,314
Russell 2000: 1,431
Tuesday, July 18, 2017   9:03 a.m.
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      Last week, Fed Chief, Janet Yellen, did an about face on policy indicating it won’t be using the unwinding of its $4.5 trillion balance sheet  as a “tool,”and to expect a limited number of gradual rate increases extended over the next several years. The Fed ranks the  U.S. economy’s growth as  “slight to moderate down from “modest to moderate.”

      The Fed is concerned with a slump in retail  sales since May and auto sales since January. Of even greater  concern is the  slippage in the rate of increase in the CPI. Econoday.com reports the CPI has declined on only a handful of occasions over 60 years, the last being during the Great Recession. It notes the decline started in March with the first decline in core CPI (ex food and energy) since 2010 and only 8th on record.
       Some 70 percent of our economy is contributed by consumer spending, so its trend bears watching. As for a recession, the stock market leads major turns in the economy, turning down several months ahead of the onset of a recession and up well ahead of a recovery.
       With a goose from the Fed last week, the market has new buyers. Then too, Q2 earnings are projected to increase 6.8%, though odds favor they will come in higher.
TODAY

       One takeaway on this would be, WHY has the Fed reversed fields ? This economic recovery is eight years old (96 months) vs. an average length of 59 months going back to 1945. Perhaps they are seeing fatigue in an economy that never got red hot.
       The Senate’s failure to pass a healthcare bill to replace ACA will likely lead to an attempt to repeal ACA without a replacement, which may fail, as well.  Efforts are afoot by Democrats to pursue a bipartisan healthcare bill, but it  all is a jumble at press time here.
      As far as the stock market is concerned is, does the Republican Senate’s failure here suggest failures on tax reform, deregulation and the big spend on the military and/or infrastructure ?

      If so, this market is headed south in a hurry.
      If a Republican Congress can still pass bills on its promised stimulus, the market has room to run, however, this looks like a train wreck.
      Risks of a correction are increasing – CAREFUL !

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SUPPORT “today”:DJIA:21,567;S&P 500:2,451;Nasdaq Comp.:6,285
RESISTANCE “today” DJIA:21,658;S&P 500:2,462;Nasdaq Comp.:6,323

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CORPORATE EARNINGS
(updated June 14 , 2017)
Factset
      Q1 earnings increased  14.0%.  Q2 growth  is projected at +6.8%, Q3 at +7.1%, and Q4 at +12.2%. For 2017 as a whole growth is projected at a plus 9.6%.  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. Factset.com is well worth a visit, it breaks its projections down by industry
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MY TECHNICAL ANALYSIS  of the 30 DJIA Companies
:  (UPDATED 7/14/17)
      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 21,207extreme risk is 20,026.Near-term upside potential is 21,701.
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POLITICAL/STOCK MARKET
      I am adding Boris Epshteyn to my “Connect the Dots” list (see below).  Boris left the Trump administration after his role as senior adviser to the Trump’s campaign, and later Assistant Communications Director  of Surrogate Operations for the Executive Office of the President.  Clearly he was in a position to know what was going on. Additionally Boris worked with the Russian government in 2013 to promote investment in Russia and reportedly has financial ties to the former Soviet Union. (more later).  
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I don’t consider Donald Trump a Republican, or let’s say the kind that was able to go toe-to-toe with Democrats on issues but find middle ground then move on to the next issue deserving  attention. If he is a Christian, he clearly does not act like it – Let’s start with favoring the rich over the poor. How Christian is that ?  I doubt you’ll find reference to his  Narcissistic  personality (lies, ego, vanity, shamelessness, arrogance, abusive, vindictiveness, unyielding, boastful, feeling of superiority ) mentioned in the Sermon on the Mount.  So why do so many Christian leaders and followers support him ?  WHY ?   The question must be asked, would a person  like their husband,  father, uncle, brother, son, grandson to behave like Donald Trump, so why in the world would anyone other than an extremist Republican want him to be their president ?      …………………………………………………………………..

LAWYERING UP !  Everyone except the White House minions is lawyering up including to mention a few, V.P. Pence, Kushner, Stone, Manafort, Junior, and of course the big kahuna.
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GET THIS  ! Friday is wrote that the Senate’s revised healthcare bill won’t be scored by the CBO, instead it will be scored by Secretary of Health and Human Services, Tom Price, and declared in compliance with reconciliation rules by Republican Senate Budget Committee chair, Mike Enzi.    Correction: According to NBC News (7/14), this was “under consideration,” not decided on by Republicans and it is unclear  whether they would proceed, or whether Senator Enzi would go for it, since we have a CBO and budget process explicitly for the scoring process.
     
With Sen. John McCain’s surgery this weekend, the CBO is not expected  to release its score today, and may not have anyway since it now has to consider the  amendment by Sen. Ted Cruz, R.-Texas.      

      The CBO score could be the swing factor in whether the Senate got its 50 votes for approval, a tie with Vice President casting the 51st vote.
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Trump, Jr.’s blunder is looking more and more like a “somethingburger” than “nothingburger”  as facts surface !
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More evidence of Trump’s “war” against women:  Business Insider reports that the Trump administration has gutted $214 million from teen pregnancy programs nationwide. More than 80 organizations will lose Obama-era grants  that helped teens avoid unwanted pregnancies and sexually transmitted diseases. One in 19 girls gets pregnant before age 20, but the teen pregnancy rates has been declining for 30 years due to use of contraceptives.
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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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      Sunday’s breaking news about Donald Trump Jr.’s meeting at Trump Tower with a Russian lawyer, Natalia Veselnitskaya,  who rep[ortedly was offering disparaging news about Hillary Clinton shortly after Trump’s nomination. The story has changed several times in the interim, each time getting significantly worse for Junior. This could get ugly, since it involves the son of a person running for president seeking hurtful information on the prime opponent from a country considered our adversary.  Also attending was Jared Kushner, Trump’s son-in-law and Paul Manafort, Nataliaa translator, Anatoli Samochornov, and Rinat Akhmetshin, a U.S. citizen formerly a Russian and  now a Russian/American lobbyist.. Regardless of what version of the story Trump Jr. tells next, Paul Manaford knows the truth about this issue and many others. Squeeze him past the ouch point, and he’ll tell all.
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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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TRUMP TO PUT US  ON  A WAR FOOTING !
       I retained this one 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.
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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 – Peter W. Smith (suicide), Boris Epshteyn, and  Russia’s Felix Sater – Rob Goldstone – Emin Agalarov – Sergey Gorkov –  Sergey Kislyak, ambassador to the U.S., Natalia Veselnitskaya 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 (suicide) sought to collude with Russian hackers stealing emails from Trump’s opposition while claiming to be working with Michael Flynn.

      The Wall Street Journal  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. 
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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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