Greenstick Fracture Trump’s Agenda ?

Investor’s first read – Daily edge before the open

DJIA:20,550

S&P 500: 2,341

Nasdaq  Comp.: 5,840

Russell 2000:1,358

Tuesday,  March 28, 2017    8:54 a.m.

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        There is big risk the Trump administration will implode. I believe there is the potential for Russiagate to trump Watergate for the worst political scandal in the office of the Presidency.

         If true, it can trigger a major bear market and recession. If not, the market will have to track the administration’s progress on its massive stimulus.

         Watergate was a big contributor to a 50% drop in the S&P 500 between January 1973 and October 1974. The relentless barrage of daily disclosures of improprieties, subterfuge, lies and cover up took a huge toll on stock prices and the economy along with high interest rates and the Arab Oil Embargo. The recession that accompanied all this lasted 16 months (November 1973 – March 1975).

        But Watergate was in the news for five months before President Nixon was reelected for a second term in November 1973, when a Gallup poll indicated only 48%  of Americans ever heard of Watergate.

        So, while a lot has been  happening with Russiagate, don’t expect a lot of public reaction yet.

        The Trump administration wants to move on the Tax Reform.  That stands to be tricky and time consuming. Who gets the big breaks, what deductions are eliminated, and how is the shortfall in revenues that results offset with cuts in government programs, and/or taxes on imports.

        That sounds like a dozen good reasons for a street fight between Republicans and Republicans and Democrats and Republicans.

        The real problem is the Republican Freedom Caucus, which has comprised the Republican “party of no,” an effective block to progress during Obama’s eight years and now in the new administration.

       In my opinion, these are constitutional anarchists and have no business blocking progress.  A couple here and there to add a little insight on other ideas is fine, but otherwise “outta our way,”

       As Representative Ted Poe, a former caucus member,  told News Day Monday, some members of the caucus would “vote against the Ten Commandments.”

       Our system of government works, but was not designed to function well if its representatives are determined to obstruct all ideas and solutions that do not meet their rigid disciplines.  Unfortunately, they are elected by voters who are equally as unwilling to compromise.

       Soooo, what’s my rant here all about ?

       There is risk here, not just from the Trump administration’s inability to get its agenda passed, but from the potential for a huge scandal  relating to Russia and deals that were not disclosed or collusion with Russia operatives to skew the election in Trump’s favor in exchange for something that has already taken place, or which is expected to take place in the future.

       I well remember Watergate and the disbelief that the Nixon administration would engage in the silly break in, but worse yet, the boneheaded cover up.

       Confirmation bias will stand in the way of Trump supporters here to accept a scandal if one in fact occurs, but to their own peril.

TODAY

      Lower at the open.  The market rebounded yesterday as investors jumped on stocks that slipped over the last four days.  That may have been premature, as  questions are surfacing about tax cuts and  Russian connections with the Trump administration.

      If the Street pounces on stocks again, those concerns are unfounded at this time.      >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

SUPPORT “today”:DJIA:20,461;S&P 500:2,333;Nasdaq Comp.:5,811

RESISTANCE:”today”:DJIA:20,611;S&P500:2,347; NASDAQ Comp.:5,863

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CORPORATE EARNINGS (updated  March 3, 2014)

      Factset

Q1 earnings are projected to increase 9.0%.  2017 as a whole are projected at a plus 9.8% down from Dec. 31 estimates of 11.6%.  Currently, the P/E on trailing 12-month earnings is 19.8 x, and based on earnings 12 months out is 17.7 x. That compares with a 10-year average P/E of 13.9. 

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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  March 2, 2017,  a reasonable risk is 21,040 a more extreme risk is 20,938 Near-term upside potential is 21,367 .

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POLITICAL/STOCK MARKET

       Humpty Trumpty sat on a wall…………….

      The “Russia situation” seems to worsen daily for President Trump and his chief strategist, Stephen Bannon. Reportedly, the FBI has expanded its investigation of collaboration to Alt-Right Breitbart News, which Bannon used to head up.

      According to Business Insider.com, Jared Kushner failed to disclose meeting with the CEO, Sergey N. Gorkov, of Vnesheconoombank in December 2016. The bank is Russia’sbank for “Development and Foreign Economic Affairs.  Reportedly, the bank was struggling in face of Russia’s economic woes.  Kushner was seeking investors for a Fifth Avenue office building that is reportedly set to be financed through Anbang Insurance Group, a company with ties to the Chinese governmentA White House spokesman denied the New York office project was discussed.

      What then was discussed ?

      What’s worse, CNN’s national security analyst, Juliett Kayyem,  speculates that the FBI has been talking with Mike Flynn, formerly close advisor to Trump.  Flynn was forced to resign when it became apparent he was lying about dealings with Russia.

      The FBI wants to know if Breitbart and INFO Wars, another far right wing site, had a role in  Russian cyber attacks and the spread of fake news, where automated computer commands called “bots” distributed stories to the social media that were pro-Trump and anti-Clinton.

      Generally, a “bot” is designed to automate tasks, bypassing the need to do them manually.    

     The stench of the prospects of a Trump/Russia collusion increases with each disclosure and attempt to change the focus and cover the trail. 

    I still believe Paul Manafort  and Roger Stone hold the key to the puzzle, though Flynn is now in the running.  I think they know whether there was collusion or whether Trump has financial ties to Russia or Russian billionaires, direct or indirect.  Properties somewhere ?  Indirect ownership in oil properties ?  Access to money ? 

      I don’t think this gang expected to win, and as a result got careless and made some bad decisions when Russia came on the scene.

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ODDS FAVOR

1-Trump’s presidency will implode within three years, Bannon will be gone, along with Breitbart News and Alt-Right’ influence.

2-Trump will put the United States on a war footing with North Korea in coming months with or without China’s cooperation.

3-Expect major domestic violence this summer as alt-Right groups confront protestors against tax reform and Congress’ gutting of a host of popular government programs.

4-Seeds of a recession will be planted as Congress guts programs needed and used by millions.  Stock market has its final run.

3-Social Security and Medicare will be targeted for drastic changes if the Republicans hold control of both houses in 2018 and Congress is successful in gutting most of social service programs and the EPA per Trump’s wish list.     

 WHY TRUMP WOULD PUT US  ON  A WAR FOOTING !

      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.                                                                

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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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