Where’s The BIG Spend ?

Investor’s first read – Daily edge before the open
DJIA: 20,937
S&P 500: 2,398
Nasdaq  Comp.6,143:
Russell 2000: 1,380
Wednesday, May 24, 2017    9:08 a.m.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
.
      Where is the BIG spend on the military as promised in January ? What happened to infrastructure spending ?
      While the Trump budget released Tuesday, increases military spending by 10%, that is only 3% greater than President Obama’s projections for the coming fiscal year.
      Isn’t the Street betting on the BIG spend ?  Isn’t this one of the reasons for the post-election surge in the market ?

      What other disappointments await ?
      How about tax cuts ?
      Trump has promised to slash the corporate tax rate  to 15% – 20%  from 35%, but according to “The Earnings Scout,” corporate earnings trend analysts,  the average effective tax rate for the S&P 500 is 24.1%, suggesting the windfall in earnings expected by the Street won’t be dramatic.
      Corporate earnings are now increasing after a stall, but the S&P 500 trades at 17.4 x “forward” earnings, which is pricey given the fact the average P/E over ten years is 14.0 times.      
      So what’s left for the Street to hang its hat on ? 
      Deregulation ?  Even if Congress can deregulate key portions of Dodd-Frank and some energy regs., it will take time for the savings to trickle down to bottom lines.
       All this on top of serious allegations regarding collusion between members of the Trump campaign team and Russia  to skew the 2016 elections in favor of Trump. That stands to be a huge distraction for the administration and can delay  implementing its programs.
       Trump’s budget is a joke, DOA. Not even a Republican Congress, which for years has relished slashing social programs, will buy it, especially with the mid-term elections looming in 2018.
        A couple months ago, Trump’s massive stimulus looked like a sure thing, not so now.
       Does the Street stop buying ?  Sell ?
       So far, it is hanging tough. So far, just about all money under management has been in a buy mode based on expectations for a massive stimulus. If that mindset changes, it will change in unison, triggering a major correction of 9% – 14%.
       There is a chance, not great, that we will get one more spike to new highs in the DJIA and S&P 500 before a correction, one that gives the impression this eight-year bull market simply will never end !!!!
 >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
SUPPORT “today”:DJIA:20,915;S&P 500:2,395; Nasdaq Comp.:6,147
RESISTANCE “today” DJIA:21,003;S&P 500:2,405;Nasdaq Comp.:6,157

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
CORPORATE EARNINGS
(updated  May 19, 2017)
Factset
      Q1 earnings are projected to increase 13.9%. Q2 growth  is projected at +6.8%, Q3 at +7.5%, and Q4 at +12.4%. For 2017 as a whole growth is projected at a plus 9.9%.  Currently, the P/E on forward  earnings is 17.3 x. That compares with a 10-year average P/E of 14.0.
Note: These numbers change frequently.
 >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
MY TECHNICAL ANALYSIS  of the 30 DJIA Companies
:  (UPDATED 5/15/17)
      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  April 25, 2017,  a reasonable risk is 20,856 a more extreme risk is 20,703.Near-term upside potential is 21,333
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
 
POLITICAL/STOCK MARKET
 SPECIAL COUNSEL

      WHAT IS THIS MAN HIDING ?
       Days after FBI director James Comey publicly confirmed the FBI was investigating collusion between Trump and associates and Russian operatives regarding the November election, Trump contacted two intelligence officials, Daniel Coats, director of National Intelligence and Adm. Michael Rogers, director of the National Security Agency, urging them to deny there was any such collusion. Both declined to comply.
      The issue here is not so much that Trump asked them to issue statements, but that he asked them to issue false statements.
      Why, unless there is something to hide regarding collusion, or a door that investigation may open to something else ?
………………………………………………………………………………..
       If President Trump fired FBI chief Comey, he can fire Mueller, and anyone who replaces him. He can sabotage the investigation in a number of ways, one of which comes out of the Code of Federal Regulations which restricts newly hired government lawyers from investigating prior law firm’s clients for one year after hiring. Mueller’s former law firm, Reportedly, Paul Manafort, Jared Kushner and his wife (Trump’s daughter) are all clients of Mueller’s former law firm, WilmerHale.****
       Reportedly, Kushner is the “person of interest”  in the investigation of ties between the Trump campaign and Russian operatives.
       This has to get very, very ugly, and that could seriously impact the Trump administration’s ability to deliver the massive stimulus (tax cuts, deregulation, and a big spend on the military and maybe the infrastructure.
…………………………………………………………………………………
IMPEACHMENT

      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.***
………………………………………………………………………………
PSYCHOLOGY 101 ?
     
The Trump presidency, has issued in a whole new set of psychological terms, none flattering to President Trump or the voters who put him in office.

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.  Having a closed mind to one’s own peril would be another way of putting it. Is it sheer stupidity to vote against one’s best interests ?  Yes, but 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:  A term originally used by the late Senator Patrick Moynihan to warn voters against accepting bad behavior, stupidity, demagoguery, lying, ignorance as the “norm.”
      Bloomberg’s Albert Hunt, wrote about it on May 14, referring to Trump critics being in awe when Trump gives a speech that is reasonably coherent or takes sensible action on something.  Suddenly  critics treat it as a momentous occasion, when in fact, it is what presidents are expected to do.
      Essentially, it is the dumbing down of a person’s behavior. This is partly responsible for Trump supporters and Republicans in Congress  accepting Trumps obnoxious behavior, uncharacteristic of past presidents.  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 but in fact don’t know what it is to know something. It’s a failure to recognize their own shortcomings, so they conclude they have none.  Unfortunately, in addition to being a narcissist, Trump falls into this category. Just because he has been successful in real estate and show business, he concludes he can be successful at anything.
      Voters in this category don’t feel they need to do any  research on qualifications or policies, they simply know how to vote, because they can’t make the wrong decision – too smart !
…………………………………………………………..

HEALTHCARE:  NOW THE HOUSE REPUBLICANS OWN IT !
NOTE:
This is just the beginning and information is still sketchy. One excellent source is the Henry J. Kaiser Foundation (www.kff.org)
      The House narrowly passed the American Health Care Act (AHCA) last week by a vote of 217 to 213. 
      The House failed twice to pass a similar version. The bill was rushed through without pursuing standard practices – discussions and cost and consequence scoring, by the CBO.

      It now goes to the Senate where it will encounter changes and possibly rejection. Senator Susan Collins, Maine, says there is no timeline for Senate consideration, only that she expects the Senate to take its time and do it right.
      AHCA is not the law of the land yet. All this negativity and uncertainty must make it next to impossible for Insurance companies to project risk and coverage.  That in itself stands to press ACA to the edge.      

       Republicans will now move on to tax deform where it will tip the scales further in favor of corporations and upper income persons.

THE RISK !     

      If successful, this administration’s late-stage stimulus will set the stage for a huge shortfall in US government receipts, resulting in the need to gut  dozens of government programs that address need and quality of life.
        For the most part Republicans, greedy bankers and financial institutions gave us the “Great Recession/Bear Market” 2007-2009.  The next one will be worse, because the government will lack the fiscal stimuli to pull the country out of its depressed state. 
       Can’t happen ?   Weren’t safeguards imposed through Dodd-Frank to prevent another meltdown ?
       Yes, however the House voted Thursday to roll back many of those measures, which they claim have slowed down economic growth. This is the same pattern of corporate “permissiveness” that set the stage for the 2007 – 2009 crash. ”Read “Too Big To Fail” by Sorkin, just don’t make it bedtime reading. 

………………………………………………………………………
PREUTERS WORLD NEWS APRIL 19, 4:20 PM
“A Russian government think tank controlled by Vladimir Putin developed a plan to swing the 2016 U.S. presidential election to Donald Trump and undermine voters’ faith in the American electoral system, three current and four former U.S. officials told Reuters.
      Russian documents appear to confirm what U.S. intelligence agencies have believed  all along that Russia influenced the outcome of our presidential election. 
      Yesterday, Reuters released documents, which were prepared by the Russian Institute for Strategic Studies[https://en.riss/], after the election that confirm this conclusion.
      It recommended that a, “propaganda campaign on social media and Russian backed global news outlets to encourage U.S. voters to elect a president who would take a softer line toward Russia than the administration of then-President Barach Obama, the seven officials said.”
     Additionally, a second institute document recommended Russia end its pro-Trump propaganda and intensify messaging about voter fraud to undermine the U.S. electoral system’s legitimacy and damage Clinton’s reputation.
      So far, investigations by U.S. institutions and Congress have not concluded collusion between Trump’s team and Russian operatives occurred.
     But U.S. investigations are still being conducted.
     I personally believe collusion DID take place, and odds are GOOD that it reaches far beyond collusion, that based on what I see and how people in the administration are acting.
……………………………………………………………….

TRUMP  – TOAST ?
      Just a hunch, but I think collusion regarding influencing the election is only part of something much bigger, like major league money transfers for options on oil investments, real estate holdings, and land deals. That’s why it is taking so much time.
      If we begin to see more and more of VP Pence, it may suggest the end for Trump is getting closer. Clearly, the inside knows something is about to break.  Trump is “toast,” IMVHO.
      There are so many people who know so much, and they are going to be watching out for number ONE, and that is not Donald Trump.

……………………………………………………………………………………………………………….
WHY TRUMP WOULD PUT US  ON  A WAR FOOTING !
       THE STAGE IS BEING SET NOW !
      
Expect the Trump administration to put the United States on a war footing within one year, probably regarding North Korea.  For one, it would justify its big military spend. For another, it would facilitate a mid-term election victory, since voters are reluctant to change  Congress significantly when the nation is gearing up for war.. It worked for George Bush in 2003.  Finally, it would deflect attention away from the Trump/Russia issue, that could sink the administration.
ALL OF THE ABOVE HAS THE POTENTIAL TO ADVERSELY IMPACT THE STOCK MARKET  AND   MERITS CONSIDERATION.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>                                                       Note:
Source of weekly economic calendar and good recap of indicators: mam.econoday.com.
…………………………………………………………………….
*CBS News
**Bloomberg: Noah Feldman (May 17, 2017)
*** New York Times: Charles Savage, (May 18, 2017)
**** Reuters
*****Stock Trader’s Almanac
……………………………………………………………………

George Brooks
Investor’s first read
A Game-On Analysis, LLC publication
Brooks007read@aol.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> 
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.

 

 

 

 

 

 

 

 

 

 

 

 

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.