Tiptoeing Through a Minefield

Investor’s first read – Daily edge before the open
DJIA: 21,993
S&P 500:2,465
Nasdaq  Comp.:6,340
Russell 2000: 1,394
Tuesday,  Aug  15, 2017   9:08 a.m.
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    If the BIG money believes the administration can deliver, the market will move higher, even though it is historically overvalued now.
        If not, if all this bluster is a lie, a bear market is in the wings, a drop of 20% or more.  The “more” depends on what new negatives hit the market when it is on the ropes.
        So far, the Street is undeterred by “events,” confident it will be rewarded with the goodies promised by the Trump administration.
        If the Street’s unwavering bullish mindset suddenly changes, the market will plunge.
        Every time the market quickly bounces back after a minor correction, investors become more and more convinced it simply “cannot go down.”
        The same thing happens at bottoms when new lows day after day convince investors the market cannot go up.

        That’s how tops and bottoms are formed.
 

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SUPPORT “today”:DJIA:21,947;S&P 500:2,457; Nasdaq Comp.:6,323
RESISTANCE “today” DJIA:22,051;S&P 500:2,476;Nasdaq Comp.:6,361

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CORPORATE EARNINGS
(updated July 27 , 2017)
Factset
      Q2 earnings growth  is projected at +10.2%,up from 6.5% at June 30. Q3 is projected at +4.9%, and Q4 at +5.3%. For 2017 as a whole growth is projected at a plus 9.4%.  Currently, the P/E on forward  earnings is 17.4 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 21,876 extreme risk is 21,713. Near-term upside potential is 22,476.
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POLITICAL/STOCK MARKET
NOTE: Due to the seriousness of political developments, I find it necessary to retain the following issues here, even though it gets cumbersome, since past commentary  continues to be confirmed by unfolding events.  Prior to January, I have never injected my personal political feelings into a stock market blog.  What is happening has the potential to adversely impact stock prices.
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THE BIGEST RISK FACING AMERICA IS:
The inability of Americans to mentally and emotionally process information accurately, objectively and without bias to arrive at logical and well balanced conclusions.
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EVER WONDER WHY THE NRA AND RIGHT WING EXTREMISTS HAVE PRESSED SO HARD FOR GUNS WITHOUT LIMITS ?
      It’s called a revolution, a takeover via intimidation in the streets. 
Does anyone really want to confront them, and who are they anyhow ? – your neighbor ? The quiet one at the mall ?  Hey, why not just sit down and shut up ?
      These anarchists don’t have to use their gun, just knowing they have one does  the job.

       But the ones in the street are insignificant. What’s scary is the silent support President Trump gets with close to 80% of Republicans supporting his outlandish behavior and relentless lying.
       He has the Presidency and three of his top advisers come out of Brietbart News, a racist media organization. .  Real Republicans and genuine conservatives should reject this and insist that he distance the influence of these extremists from his decisions. Unfortunately, the extremists (constitutional anarchists), have control of the Republican Party, having gunned down all acceptable Republican candidates in the primaries.
      The path to a quasi fascist state is not impossible under these circumstances, so much depends on whether the American voter is capable of understanding the danger of  a gradual erosion of checks and balances and freedoms written into our republic.

       The United States is the gem of all gems, the biggest of all enchiladas, why wouldn’t an ideology want to gain control of it ?
        In my opinion, that is just what is happening, and it’s scary.
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     CLOSET BIGOTS

Back from a week in Maine without my computer. Charlottesville was not the bombshell I warned about before leaving, however investors must be aware one or more are hovering.
    If white supremacists, Nazis, KKK, anti-semites, and haters of people of color think their ideas have a chance of developing a meaningful  following, let them watch people at the Newark airport for two hours. 
    My rough count put two-thirds of the people as people of color.  The terminal was packed, but everyone got along. Maybe all the trouble makers were in Charlottesville.
    What concerns me more than those out demonstrating are the
closet bigots. They talk equality and profess tolerance, but inwardly condone the behavior we saw in Virginia.
     Why should anyone be surprised if President Trump was slow to take on the white nationalists ? 
      He craves conflict between others, the kind of mentality that watches cock fights, dog fights. Yet he was too cowardly to serve in the military, getting 5 deferments during the Vietnam War.

      White Nationalism is represented at the highest level in the White House. Steve Bannon, co-founder of Breitfart News, a supporter of Nazis, white supremacists, KKK, is Trump’s chief strategist. Stephen Miller, a nationalist playing deep in right field, is rumored to become the White House’s communications director.
     Add Sebastion Gorka, deputy assistant to Trump, since he worked for Bannon at Breitfart ,
( on Mar. 21, I headlined “Trump, Bannon Gone By 2019).
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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. 

        Through these means, elements of  the extremist Republican party (Alt-Right) is now capitalizing on President Trump’s out-of-control ego and  his preoccupation with legitimacy as President, to quietly lock up control.

      One of the keystones of  fascism is to discredit, intimidate  and ultimately eliminate the effectiveness of the press, excepting that which falls in behind it  like FOX News.

       Trump’s chief advisor, Stephen Bannon was quoted Thursday as accusing the media of not understanding this country, adding  it should keep its mouth shut. 

        What ? They want to eliminate the 1st Amendment of the U.S. Constitution ……freedom of speech, and the press….and go straight to the 2nd Amendment… right to bear arms…?

        Whoa !

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TAX REFORM

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.
     Right now, it is any one’s guess.
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GRAND JURY: Special Counsel, Robert Mueller’s, newly convened grand jury
has issued subpoenas  in connection with the June 2016, Donald Trump, Jr./Natalia Veselnitskaya. The grand jury expands Mueller’s ability to pursue evidence as it considers evidence of potential criminal wrongdoing  and decides whether charges should be brought.
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DEBT CEILING SHOWDOWN IN SEPTEMBER ? Expect brinkmanship – a real cliff hanger and lots of scary press about the risk of default. Actually the debt ceiling was reached in March, bills are being paid using accounting tricks (used many times in the past). The bills that would come due and at risk of not being paid if we defaulted are ones already incurred.

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WAR on THE NEEDY:
After Congress failed to pass a healthcare reform bill, Red state governors in Arkansas, Kentucky, Maine, Wisconsin and Indiana plan to make it more difficult for people to go on Medicare with work requirement, drug testing and increased premiums. HHS Secy Tom Price will do nothing to stop them. Problem is, 60% of the adults in the program do have jobs about 15% part-time jobs and 78% have someone in the household who does work.
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Senior policy adviser to President Trump, Stephen Miller
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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WILL TRUMP MOVE SESSIONS to Dept. of Homeland Security *to appease conservatives, and open up the slot of Attorney General for him to pick his replacement who may be able to  and possibly impede Special Counsel Robert Mueller’s investigation, worse yet fire him ?  But Mueller, can only be fired for cause (dereliction of duty, incapacity, conflict of interest, good cause ?(?), violation of Department policy).
       If Trump fires Mueller, it may trigger  the revival of the US Office of the Independent Counsel, which reports to Congress.
       I THINK TRUMP WILL TRY AND WORRY ABOUT THE REPURCUSSIONS LATER.
       When Rosenstein appointed Mueller, he gave him plenty of leeway to investigate ”any links and/or coordination between the Russian government and individuals associated” with Trump’s campaign, but also to examine “any matters that arose or may arise directly from the investigation, including perjury, obstruction of justice, destruction of evidence, and intimidation of witnesses”
       Wall Street and Congress clearly cannot ignore that, since it really smacks of “consciousness of guilt,”  small wonder why Trump is exploring the possibility of  PARDONING HIMSELF AND FAMILY.  Holy smoke, is this really happening ?
       Portions of this were provided by Businessinsider.com.
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TRUMP SIGNS SANCTIONS BILL.   After a 5-day delay, President Trump signed the bill sanctioning Russia, Iran, and N. Korea. The bill passed the Senate by a vote of 98 to 2, and the House by 419 to 3. Trump called the bill seriously flawed and unconstitutional.  Is Congress that afraid of what Trump would untethered, or do many Republican members sense major collusion between the Trump team and Russia and want to demonstrate to their voting base when the truth  is revealed that they weren’t part of it, or supportive of the scheme.
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NOT IN MY BACKYARD, or anyone else’s:  President Trump and certain GOP senators introduced an immigration bill that not only slashes immigration by 50% but  bars low-level skilled individuals from qualifying for entry into the USA.
This is just  another obvious attempt to appeal to his base at the expense of a good, time-tested policy. It will die in Congress, but he will score points with bigots and people who actually feel threatened with the increase in people of color.

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GENERAL JOHN KELLY is Trump’s new chief of staff, replacing Reince Priebus, the goal being to establish some stability and discipline in the White House. 
      
I think, “someone” wanted a strong person between  our irrational and unpredictable President and the ability to initiate a nuclear attack on another nation. Reportedly, Trump would not press a red button on  desk (that’s for a diet coke) and it’s not the “football” that follows him everywhere, which a device used to confirm his identity via a “challenge code” with the National Military Command (Pentagon). Reportedly, the launch process involves more than pressing a button, takes several minutes, and  involves consultation with civilian and military officials, but the decision is the president’s. If under attack, the President can respond in seconds.  That’s the REAL REASON for Kelly – in my opinion.

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TRUMP A DRAFT DODGER ?  General Kelly
was emphatic with his feelings about duty to country recently telling NPR, “Back in my neighborhood in Boston, a working class neighborhood, when you got your draft notice, you went down, and got your draft physical,…if you passed it, you joined the Marine Corps.” 
      President Trump,
Kelly’s boss, responded to the “call” in the 1960’s as the Vietnam War heated up, with 5 deferments from military service.  Yikes !
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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, Bannon Gone By 2019  (my blog 3/21/2017)

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       In October 2016 it was reported that an email server inside the Trump Tower had communicated with  Alfa Group, a Russian bank. The Senate Judiciary Committee  has told Donald Trump, Jr. and Eric Trump, Executive Vice President of the Trump Organization, to turn over all communications with the bank
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MANAFORT GETTING IMMUNITY ? I have always believed Paul Manafort knew everything anyone wanted to know about collusion by the Trump team and Russians, as well as where to look for financial interactions with Russian oligarchs and direct/indirect representatives of President Putin.   As of July 25, Manafort is “negotiating with the Senate Judiciary Committee for immunity to spill the beans.
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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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TRUMP SETTING STAGE TO FIRE Attorney General Jeff Sessions, Deputy Attorney General Rod Rosenstein  and Special Counsel Robert Mueller.  Not so fast, Congress warns.
      In an interview with the New York Times, Trump expressed displeasure with Sessions and Rosenstein.  His beef with Sessions is that he recused himself from overseeing the Russia investigation, saying if he knew that in  advance, he wouldn’t have hired him

      He blames Rosenstein for appointing Mueller, who he indirectly warns not to extend his investigation into Trump finances. One source says only Rosenstein would have to be fired, or agree to fire Mueller, before Mueller would be fired.  Trump fired FBI’s Comey, then boasted about it in person in the White House to Russian Foreign Minister, Sergey Lavrov and Russian Ambassador Sergey Kislak, referring to Comey as “crazy and a real nut job.”  STOP AND THINK OF THAT STATEMENT if you have doubts about Trump firing Mueller.  IMHO, collusion here is one problem, but I suspect this mess goes deeper into Trump family dealings and Trump must stop it there.
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 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.

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