A Trump/Russian Scandal

Investor’s first read – Daily edge before the open
DJIA: 20,624
S&P 500: 2,351
Nasdaq Comp5.838.:
Russell 2000:1,399
Tuesday, February 21, 2017 9:12 a.m.
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Reports of a Russian connection with people associated with the Trump organization and President Trump himself just won’t go away.
Like the Watergate scandal involving President Nixon and his staff, new developments seem to continue to surface leading to suspicions that this is but the tip of the iceberg.
Regardless of party affiliation, investors must accept the possibility of an open-ended scandal, an administration and a Republican Congress running for cover and ultimately, Trump’s replacement by Vice President Mike Pence.
An open-ended scandal drawn out over months can put a lid on the current surge in stock prices, even trigger a correction, since the Street would begin to worry about the timing of a tax cut, deregulation and the big spend on the infrastructure and military.
The Watergate break-in occurred in mid-June 1972 with a cover up beginning immediately along with daily disclosures of impropriety at the highest levels.
A bear market began six months later with the S&P 500 plunging 50% over a 21 month span.
A 16 month recession started in November 1973.
Could something similar happen again ?
YES, it’s possible, especially since the stock market is at all-time highs and overvalued as the Street expects a huge Trump stimulus.
Be forewarned.
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SUPPORT “today”: DJIA:20,586;S&P 500:2,346;Nasdaq Comp.:5,825
RESISTANCE “today”:DJIA:20,66;S&P 500:2,355;Nasdaq Comp.:5,848
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ISSUES TO CONSIDER
– the prospect of big corporate tax cuts, deregulation, a big spend on the military and the infrastructure and the restructuring of long-standing trade agreements.
-the possibility they will take longer than expected, worst case be disappointing.
-the uncertainties of the repeal of Obamacare
-talk of privatization of Medicare and Social Security
-possible undermining of NATO and the European Union
-a trade war of sorts.
-lifting of sanctions on Russia for its incursion in the Crimea and actions in Syria, adding to questions already breached.
-continued internal polarization of America and the possible extension of such to other countries.
-intense economic stimulation by the Trump/Republican Congress stands to trigger a rebound of inflationary pressures forcing the Fed to bump interest rates sooner than expected.
-an increasing erosion of investor confidence in President Trump.
-the real possibility of Trump putting the country on a war footing to ensure patriotic support for the mid-term elections, or a pre-emptive attack on North Korea or Iran.
-the possibility, though remote at this time, that the Trump/Russia connection may blow up.
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POLITICAL/STOCK MARKET – THIS IS SCARY !
“To be honest, I inherited a mess,” Trump said at his press conference yesterday, adding, It’s a mess… at home and abroad.”
Really ! If he thinks a growing economy, stabile financial and fiscal conditions here and abroad, limited warfare in the mid-east, he should have been President in 2009 when Barack Obama took over in face of a global meltdown, the worst stock market and economic collapse since the 1930s, war on two fronts, bankruptcies at the highest level on Wall Street, the potential extinction of the U.S. auto industry.
Is this man delusional ? Is he of sound mind ? Who could whine about what he has inherited in his first year as president ?
This is scary. President Trump heads up the most powerful position in the world, and he is acting like a psychotic.
Even Trump-friendly Fox news anchor, Shepard Smith, is stunned saying, “It’s crazy what we’re watching every day, it’s absolutely crazy. He keeps repeating ridiculous throw away lines that are not true at all….”
Wall Street isn’t concerned, if Trump gets kicked out or bails out in disgrace, they got V.P. Pence, who I think they really prefer anyhow.
I started in this business in 1962, and have been writing about the stock market and companies since 1968.
That covers just about everything that can happen … up until now.
President Nixon was paranoid, but he was a master politician with an understanding of domestic and international needs. His paranoia, ego and defensive demeanor brought him down. It took a long time as improprieties surfaced again and again over time to force him out of office on the threshold of impeachment.
damaging information JUST KEPT SURFACING, and I have a strong feeling that is what will happen with Trump.
The longer he refuses to release his tax returns, bash the press and skewer those who criticize him, the more people will suspect he is hiding something.
The Issue of a deep Trump/Russia connection just won’t go away, suggesting something big (und ugly) lurks. The House blocked the Democrat’s attempt to force Trump to release his tax returns. WHY is this such an issue ? What is being hidden ? If there is nothing to hide, why not release the returns and put the issue to bed ? The more he resists, the greater the suspicion.
The Trump administration detests checks and balances, and that is precisely why they are in place. Odds favor one or more constitutional crises this year as Trump’s marauders endeavor to impose their far right agenda.
Obviously, the Republican Party has been radicalized. No more reasonable debate leading to a compromise.
This is (so far) a bloodless coup, a rape and pillage of anything that smacks of social services, equal opportunity and compensation for people of color and of other than the male gender.
Conservatives no longer exist. I miss them, at least they were consistent and reasonable within reason. This mob is extreme, and in my opinion un-American based on what our Founding Fathers gave us, all the progress made improving on that since and the hundreds of thousands of lives that were given to preserve all that.
At some point, this disruption will adversely impact the stock market with the potential for a 35% – 45% bear market.
NOTE: Talk of privatizing a portion of Social Security for people under 55 years of age is making the rounds. The program has worked very well with funds invested in special issue bonds yielding 1.375% to 5%. Why screw with it. Human nature dictates investors tend to buy stocks at highs and sell at lows. What’s more, this idea is being floated with the stock market at all-time highs. What’s even more, Congress will be tempted in future years to increase the portion of Social Security funds allocated to stocks to satisfy projections into the future and justify its tapping the Social Security funds for other expenditures. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Corporate earnings (updated Feb. 11, 2014)
Factset now sees Q4 earnings for the S&P 500 up close to 5.0% vs. a Dec. 31 projection of plus 3.0%.
Earnings for all of 2016 is now projected to be plus 0.5%.
Q1 earnings are projected to increase 9.9% on revenue growth of 7.5%. Q2 is projected at ao plus 9.1% and 2017 as a whole are projected at a plus10.3% down from earlier estimates of 11.4. Currently, the P/E based on earnings 12 months out is 16.9 x, which compares with a 10-year average P/E of 14.4 and a 5-year P/E of 17.3% well above the 10-year average of 14.4%..
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MY TECHNICAL ANALYSIS of the 30 DJIA Companies: (UPDATED 2/13/17)
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 January 27, 2017, a reasonable risk is 20,361 a more extreme risk is 20,286 Near-term upside potential is 20,967 .
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 STATUS OF MARKET: bullish
 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.
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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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