David Stockman joined Fox Business network to discuss his latest analysis on the economy, the political
Stuart Varney started his segment noting that David Stockman is traditionally bearish toward the market and continues to miss out on the Dow rally as it hit an all-time high. Varney began his entry to the former Reagan economic official by stating that if he had listened to Stockman, he would've lost out on significant earnings. Stockman began by reverberating, ?If you had taken my advice in March 2000, you would've dodged a bullet. You could've taken my advice in November and dodged another bullet.?
?We have a Federal Reserve, the U.S central bank, that is responsible for creating repeated bubbles that last seven or eight years. This one we're in has gotten to the point of absurdity. The market is trading at 24 times reported earnings at the 100-month point in the business cycle. Nobody has outlawed a recession. It is going to happen. The market will crash.?
When asked how he can continue to make such remarks when there is a cycle of recession Stockman remained level. He noted, ?when the pullbacks come they remain at 20, 30 or 40%.?
Varney, in either negligent or confused tone, then asked what the point of warning of such a threat was if he could not get a specific time period. Stockman remained focused noting, ?I cannot predict what the Federal Reserve is going to do. I cannot predict a black swan. I can predict that there's an orange haired swan heading right the financial system right now. Washington is going to be in chaos within two or three months.?
Stockman went on to warn that Donald Trump was a threat to the market and a destabilizing factor.
The Fox Business host prompted the former Reagan official on what Trump could do to produce such a devastating crash. Stockman, in clear and sober fashion, leveled, ?He's done nothing right. He's wasted nine months. The top one, two and even three things wrong and hurting America today falls to the Federal Reserve. He was blowing kisses to Janet Yellen. She's a menace. She should've been asked to resign in January.?
?Second, he should've got the budget under control. He is now going to preside over the biggest increase in the national debt in the history of the United States.?
?Third, he should be trying to bring in the expansionist, imperialist foreign policy. He said he would do it during the campaign. Instead of working with Putin and greater relations, he's running away. Now he is focused on the North Koreans, the Iranians and everyone else. We don't need another war - we're bankrupt.?
After being pushed from Varney, who seemed to be in a perplexed mood by the sober speaking, Stockman looked directly into the camera to urge clear and collected thinking. ?Sell the bonds. Sell the stocks. Get out of this market. It is a dangerous casino. You have maybe 5% upside and a 40% downside.?
?The risk-reward ratio is terrible. We have a government that is out of control. We have a Federal Reserve that is making dead promises. Put it in cash or anywhere safe - but get it out of Wall Street.?
When asked by the Fox Business host how he could make such claims while others are still making considerable gains in the market, the former Reagan official continued the course. ?Good for you on the gains. On the other hand, just because ?the world did not end? at this moment today, it does not mean that there is not another drop to fall.?
?I hope you are ready for the crash when it drops because you're going to have to get out of the way of the thundering crash. Why won't there be, when you have a market that is so overvalued. Instances of this craziness can be seen in stocks like Netflix that is currently trading at 220 times earnings. It is nothing but a cash burning machine.?
Switching gears the host then went on to ask case specifically for the scenario that Stockman warns of. He began by asking whether Microsoft was in on the craziness. ?Microsoft is a little more reasonable. It is trading around the same level it was in 2000 despite the fact that trading is up four times and earnings are up five times. Good companies get massively overvalued during bubbles.?
When asked about his views toward the big tech companies, including Facebook, Apple, Amazon, Netflix and Google (FAANGS), the best-selling author did not turn away from his bearish position. ?While I don't have a big view on Apple, what I do know is that most of the FAANGS, including Facebook, are way overvalued.?
?This market is crazy. This is a classic mania. This is fantasy land. While you smile, you would've been doing the same thing at the top of the bubble in March 2009 when everyone was saying ?this time is different.' But this time it is worse.?
?The Federal Reserve has nowhere to go. It has already announced that it would be normalizing its books, shrinking the balance rate and raising rates. The European Central Bank (ECB) will follow. The Bank of Japan is now lost. We have a world economy that is in very rough shape. I don't understand why people don't see that.?
