Massive Stimulus Now is Risky

Massive Stimulus Now is Risky

Investor’s first read – Daily edge before the open

DJIA: 20,902

S&P 500: 2,372

Nasdaq  Comp.:5,861

Russell 2000:1,365

Monday,  March 13, 2017    8:56 a.m.


      The FOMC meets this week, and a bump in interest rates is almost a guarantee.  Additionally, we get a bunch of economic reports to accompany the Fed report Wednesday with a Fed Chief Janet Yellen press conference to boot.

      Inflation is ticking up driven by higher hourly earnings and the PCE price index now at 1.9 percent a smidge below the Fed target of 2.0 percent.

      (For details on the economic reports, go to

      Exports of capital goods are lagging, contributing to the nation’s balance of trade deficit.  These include exports of machinery, electronics, fabrications and aircraft.

      A bump in the Fed’s benchmark interest rate this week would strengthen the U.S. dollar making U.S. goods even more expensive for foreign buyers.

      There is no reason for the Street to doubt the administration’s intent to lower corporate taxes, gut regulations, and spend a ton of dough on the military and eventually the nation’s infrastructure, so buyers should outnumber sellers UNLESS, Trump’s promised stimulus isn’t going to happen near-to-intermediate term, then the market will have to adjust downward to reflect.

      If the Fed does not raise rates Wednesday, the initial response would be a brief rally. Yellen’s comments at 2:30 a.m. Wednesday will have a bearing on the market’s behavior this week. Currently, the Street expects three bumps this year, any hint that the Fed may be accelerating its rate increase policy would put a lid on the market, even hammer it down.

     The Trump stimulus, massive in scope if pulled off, stands to kick up inflationary pressures.  It comes on top of a gradual economic expansion under President Obama following the worst economic calamity since the 1930s (2007 -2009) when world economies were in meltdown.

      My concern is that a massive stimulus at this time risks a blow off followed by a severe recession for which there are no tools left to trigger a recovery, ergo an extended recession – 3 – 5 years.     >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

SUPPORT “today”: DJIA:20,861 ;S&P 500:2,367;Nasdaq Comp.:5,847

RESISTANCE “today”:DJIA:20,974;S&P 500:2,383;Nasdaq Comp.:5,877


CORPORATE EARNINGS (updated  March 3, 2014)

      Factset now sees Q4 earnings for the S&P 500 up close to 4.9% vs. a Dec. 31 projection of plus 3.1%.

     Earnings growth for all of 2016 are now projected to be plus 0.4%.

     Q1 earnings are projected to increase 8.9%. 

     2017 as a whole are projected at a plus 9.8% down from earlier estimates of 11.6%.  Currently, the P/E based on earnings 12 months out is 17.7 x, which compares with a 10-year average P/E of 13.9. 


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 .




        We now have Trumpcare, a highly controversial healthcare deform bill, that replaces Obamacare and is certain to stir a lot of ugly Congressional and national debate and slow down progress on the other programs Congress wants to ram through.

      More importantly, it skewers Americans desperately in need of affordable healthcare – so characteristically  Republican !


       During the campaign, Trump promised he wouldn’t touch Social Security and Medicare.  Just another Trump LIE ?

       .OMB director Mick Mulvaney told conservative radio host, Hugh Hewitt Wednesday, he is trying to get Trump to look at entitlement reform.

        He believes he can get around Trump’s promise by crafting  it as saving Social Security.  Beg pardon, but Social Security  is one of the most efficient systems of our social programs. The real problem is Congress spends its excess receipts over outflow on other programs.

 SMOKESCREEN !        


        It is pretty obvious, Trump’s rant about Obama tapping his phones is a stunt to deflect attention from the real  bear in the room, collusion with Russia directly or indirectly to help him win the election.

        I am not alone in feeling there is a lot to hide on this issue, that if it is not effectively covered up by Trump et al, it will be the most un-American  political scandal of all time, bordering on treason.

        Imagine if President Obama cozied up with the Kremlin ?  The paranoid right would be screaming – “pinko !”   “commie !,” just like they vilified anyone they didn’t like in the 1950s – 1970s.

         On a brighter side, a recent survey indicates 65% of people polled want a special prosecutor to investigate the Trump/Russia connection.         

        Reportedly, Trump got his lead from Brietfart News, a highly questionable source, owing to its support of racist positions, non the least of which is white supremacy.

      I think we have only seen tidbits of what will eventually play out as the worst political scandal ever


      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:


George Brooks
Investor’s first read
A Game-On Analysis, LLC publication


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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