In his recent TV appearance, last week David Stockman suggested that President Trump would be better suited to spend some time actually addressing economic issues instead of the administration's travel ban for immigrants from Middle Eastern countries, which Stockman called "a giant misfire." Employing the 1992 Clinton Campaign motto of "it's the economy, stupid," Stockman noted "Trump was elected because flyover America is hurting economically. The voters of Racine, Wisconsin and Johnstown, Pennsylvania are imperiled not because of some refugees, they're imperiled because their jobs have all been disappearing for decades." He added, correctly, that "the problem is far more the Federal Reserve, Janet Yellen, the bubbles they're creating on Wall Street."
Stockman went on to suggest that the Trump Administration is showing decreased interest in "draining the swamp", having surrounded himself with, as he himself has now realized, the "Goldman Guys."
Then, in a follow up interview with CNBC, Stockman once again discussed the impact of Trump, this time on markets, and warned that while stocks are booming under Trump, with the S&P now up 12% since the election (with banks up 25% and Goldman 35% higher), traders are living in a "fantasy land" that can't last —and Trump's policies will derail the market for years to come.
Stockman reiterated his concern that Trump has lost his focus on the economy, and has become distracted by other issues which should be a particular point of worry for investors.
Most of Trump's actions "[have] nothing to do with the economic agenda" he's proposed, Stockman told CNBC. That, along with a debt ceiling debate that will take place on March 15 in Congress, and a market rally that has gone on for a while, has the bearish Stockman worrying about a big downturn, which however not only refuses not to come, but the S&P hasn't had a 1% drop in 85 days.
"What's going on today is complete insanity," said Stockman. "The market is apparently pricing in a huge Trump stimulus. But if you just look at the real world out there, the only thing that's going to happen is a fiscal bloodbath and a White House train wreck like never before in U.S. history."
He added that "there's going to be no tax action this year," said Stockman, echoing repeated concerns by Goldman who have said, mostly recently this morning, that Trump's plans for the economy are facing mounting political risks. Last week, the president vowed that tax reform could happen this year, and promised to unveil a "phenomenal" tax plan within the next few weeks, which however has drawn skepticism from Washington insiders.
"If there's any next year it will be deficit neutral, which means it's not going to add the $15 to earnings like these people expect," Stockman said. In fact, as reported earlier, with the Border Adjustment Tax becoming a virtual impossibility, the extent of corporate tax cuts will likely be far less than what the market is pricing in currently.
"My argument is there is not going to be any economic rebound, there is not going to be any profit surge," Stockman added. "Therefore the market will be repricing dramatically downward once it's clear that that's the case."
For now, the market blissfully refuses to listen. In a prior appearance on CNBC in November, Stockman argued that a recession was coming in 2017 thanks to Trump. For now it is Stockman's word of caution against that of Gartman, who earlier today predicted that because "Illogic reigns" the market “melt Up” has begun in earnest and it will stop when it stops and not a moment before."
Needless to say, everyone would like to know when that "moment" is.