The Trump/Nixon Parallel

Investor’s first read – Daily edge before the open
DJIA: 20,659
S&P 500: 2,361
Nasdaq  Comp.:5,897
Russell 2000:1,371
Wednesday,  March 29, 2017    9:06 a.m.

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      Politics has an impact on stock prices. Clearly, a 148% surge in the S&P 500 coming out of the worst recession/bear market since the 1930s attests to leadership projected by President Obama over 8 years in spite of unrelenting Congressional obstruction.

      And the 9% jump in the S&P 500 following Donald Trump’s November victory driven by expectations of a massive stimulus (tax cuts, deregulation and a big spend on the military/infrastructure).

      There were never doubts about Obama’s election or his character going forward like there are Trump’s.

       Trump’s rhetoric closely parallel that of Richard Nixon, though Nixon was a master politician and intellectually superior. But Nixon was plagued by the Watergate scandal, which eventually resulted in a 50% drop in the stock market and a 16-month recession, mostly owing to the scandal.

       It is possible the Trump administration will suffer from an equally debilitating scandal with comparable consequences.

       While Republican investors’ confirmation bias can enable them to ignore the failings of Trump, they would be wise to be more objective about the potential for a market/economic crunch.

       The House Intelligence Committee appears to be ineffective, the Senate Committee gives the impression of being more effective and less biased.  We’ll see. 

         If the Trump administration implodes in face of a scandal arising from collusion with Russia to influence the results of the 2016 election or undisclosed investments by Trump and associates, the impact on stock prices could be severe, BUT the reaction may not be immediate.

          I think there is enough evidence of wrong doing to raise some cash just in case. The Street’s computers may not see it that way; they may not be programmed to even consider the possibility. Your call.
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SUPPORT “today”:DJIA:20,581;S&P :2,355; Nasdaq Comp.:5,873
RESISTANCE:”today”:DJIA:20,723 ;S&P500:2,377;NASDAQ Comp.:5,909

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CORPORATE EARNINGS (updated  March 14, 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 3/29/17 and )

 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 29, 2017,  a reasonable risk is 20,413 a more extreme risk is 20,196.Near-term upside potential is 21,113

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POLITICAL/STOCK MARKET

     Trumpcare may get another vote before the House goes home for a two week recess April 7, when they will have to face constituents.

        No telling what a compromise will look like. My guess is the public will get the short end of it.

        Not only will the representatives have to answer to Trumpcare’s failure, but tax reform may take longer than expected and the big earners stand to get a big tax break if Trumpcare is passed.

        Trump is saying he wants to bring the Democrats in on a Trumpcare compromise.  Based on everything I have been hearing since Trump entered the race, I don’t believe a word of it. I think Trump wants to be able to blame the Dems for the failure to bring it to another vote to pacify  supporters when Republican voters  go on a two week recess.

       While his base won’t concede, Trump may be brought down by his own ego, as the “Russia situation” seems to worsen daily for President Trump and his chief strategist, Stephen Bannon.

         Look for a “Make America Great Again” advertising blitz in coming weeks, funded by the Mercers.  I am not sure it is a good idea to attract attention at this time, since the Mercers funded Breitbart News and Stephen Bannon, former head of Breitbart and currently strategic advisor to Trump. Reportedly, the FBI has expanded its investigation of collaboration to Alt-Right Breitbart News.

      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 government. A 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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