David Stockman On The Anything President And The Everything Bubble

Tyler Durden's picture

Authored by David Stockman via The Daily Reckoning,

The lemmings are running hard towards the cliffs today. Despite a renewed burst of bombs and drones careening into the already rubble-strewn wastelands of Afghanistan, Yemen, Syria and Iraq.

Or the outbreak of cold war style nuclear brinksmanship on the Korean peninsula — what one commentator properly called a Cuban missile crisis in slow motion.

Likewise, forget that the vacationing Congress is set to return on April 25 to an endless sequence of shoutdowns, showdowns and shutdowns on continuing resolutions and debt ceiling increases.

That is, it will be struggling to keep the fiscal lights on in the Imperial City, not enacting the Donald’s DBA (dead before arrival) fantasy about making the American economy great again.

Indeed, while the Donald has been out huffing and puffing in his new role as global Spanker-in-Chief, the domestic front has turned from bad to worse. His economic policy machinery has now been seized entirely by the Vampire Squid’s latest chieftains in the White House — Gary Cohn, Steve Mnuchin and Jared Kushner.

I am quite confident that none of these three has ever voted Republican in their life or have even the foggiest idea of how to craft a fiscal plan and tax program that could coalesce the warring GOP factions from the hardline Freedom Caucus to the moderate Tuesday Group.

And if the Goldman trio should even attempt to go the old Boehner-Obama “bipartisan” route, as Wall Street devoutly wishes, Speaker Ryan will come to understand what it means to be drawn-and-quartered.

As I stated earlier, it should be crystal clear by now that there will be no great Trump Stimulus. And what lies ahead is an unprecedented outbreak of dysfunction, paralysis and unmitigated mayhem in the Imperial City.

Moreover, the fact that the Donald is now flipping, flopping, pivoting and whirling on issues in an almost random manner is surely compounding the dysfunction.

While the clucking commentariat at CNN may find the Donald’s betrayal of core campaign positions and constituencies to be evidence of a “refreshing” flexibility — or even as “presidential” — it is actually just the opposite.

It’s proof that the Donald didn’t mean a thing he said during the campaign.

And that for GOP politicians on Capitol Hill, lining-up behind a whirling dervish of impetuous unpredictability is fast becoming a career hazard with vanishing appeal.

After all, the Donald has now flip-flopped not on campaign brochure footnotes, but on five core issues:

China’s blatant currency manipulation over two decades, the Fed’s egregious bubble finance that left Flyover American behind, the Export-Import bank’s crony capitalist subsidies to Boeing and GE, NATO’s obsolescence and intervention on both sides of the Syrian civil war were all front and center to the Donald’s appeal.

Yet the fact that he jettisoned his clear positions on these issues in less than a week’s time indicates that he is truly flying by the seat of his ample britches, and that his attention span does indeed compress into 140 characters or less.

Yet, as the bell rings this afternoon, the S&P 500 index was still up an unjustified 13% since November 8. So I will say it again with renewed emphasis: This century’s third great bubble’s days are numbered and in just a few digits.

The remaining bullishness and buy-the-dips robo-trading that temporarily sustained the dotcom bubble through March 2000 and the housing bubble through September 2008 will soon give way.

That’s especially true because the Fed is out of dry powder, and is raising interest rates and preparing to shrink its massive balance sheet in order to prepare for the next recession.

Given that the global economy languishes under $225 trillion of debt and massive excess capacity, the stock market is surely in the midst of the “Everything Bubble.”

As I stated above, the median stock is now trading at the highest multiple of earnings in history — including 2000 and 1929.

To top it all off, the state of American retail is indeed perilous.

With the recent chapter 11 filing by Payless shoes, it now appears that upwards of 3,500 stores will close in early 2017 alone.

Even the Bureau of Labor Statistics’ fudge factory seems to be getting the word about the scorched earth condition of the malls.

During the last two months, it has reported a 60,000 decline in the seasonally maladjusted job count; and a 758,000 drop in the actual count since the December holiday peak. By the way, that compares to only a 644,000 drop over December-March during the prior year.

Retailers stores closing 2017

The fact is, other than easy credit-fueled auto sales, which are now also rolling over, and purchases through Amazon’s cut rate e-Commerce juggernaut, the American consumer has been quasi-comatose for nearly three years now.

Reported sales at general merchandise stores in February were no higher than they were 30 months ago in August 2014 — and I do mean “nominal” sales. Since the Consumer Price Index (CPI) is up 2.8% during the last year alone, inflation adjusted sales are actually already well into recession territory.

More importantly, the plunge in department store sales — which comprise the anchor and driver of 70% of mall traffic — have not abated in the slightest. As of the most recent reading, the monthly sales rate was down 30% from the pre-crisis peak.

Again, that’s in nominal dollars. In real terms, department store sales have fall by upwards of 50% since the early years of this century.

Moreover, debt-encumbered American consumers are dropping, not shopping, because this entire so-called recovery has been wasted. That is, consumers can’t spend energetically because there has been no significant deleveraging since the 2008 crisis.

Despite all the Fed’s madcap money-printing, they are impaled on Peak Debt.

In a word, the retail mall sector is facing insuperable headwinds and the worst of both worlds. That is, flagging demand and immense over-capacity.

It now appears, in fact, that nearly 150 million of retail square footage could close during 2017 — an all-time record.

Does the foregoing paint a picture of economic health? Hardly. Quite the contrary, in fact.

So contrary to what the Wall Street stimulus junkies would have you think, the U.S. and global economies are hardly “accelerating.”

Of course, they have been preaching the same gospel since 2013. But this time, reality will come breaking in and finally shatter the delusion.

The U.S. economy is sliding toward recession. And with the Imperial City impossibly gridlocked, the chances that the “stimulus” baton will be handed off to some ballyhooed Trump Reflation are lower than those of the proverbial snowball in the hot place.

Which leads me to my sincerest piece of advice: get out of the casino before it’s too late.

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NugginFuts's picture

Sure, sure. Let me start shorting stocks now so I can get ahead of this trade. And while I'm at it I'll pick up a 3x leveraged fund to prove how smart I am as it mathematically decays to $0.

Shitonya Serfs's picture

Just buy Amazon. Everything else is going to zero....except SpyBook and Google.

BennyBoy's picture


Stockman stating the obvious and adding FEAR and LOSS and LESS.

max2205's picture

The Fed is never out of dry powder. ... I mean printer ink....

HockeyFool's picture

David Stockman predicting the economy crash /market crash/end of the world? Gee, he hasn't done that for like 23 or 24 hours.

HRClinton's picture

"the Donald is now flipping, flopping, pivoting and whirling on issues in an almost random manner is surely compounding the dysfunction."

Flip, flop and fly. This is how we fry. From hero to zero in 2-3 months. Why? Because of his poor choice of Advisers, his nepotism, his lack of depth, his vanity, pride, impulsiveness and lack of resolve to stick to his Campaign Promises.

The Goldmanites and War Party will ruin the country. And you thought BHO was a disappointment?  How's the GOP working out for you in Congress and the WH?

You think the next election will fix anything?  Don't make me LMAO.

Ring_Of_Fire's picture

It's one of the dumbest times in market history.. I made my bets today with S&P 500, AAPL, and FB July puts. This horror show is about to get exposed..


Jason T's picture

I don't give much weight to this Stockman fellow.


brushhog's picture

I thumbed you up for your use of the word "fellow", a good word which isnt used enough these days.

Larry Dallas's picture

Stockman is being sold well past his sell-by date.

Technically he may be correct.

Pragmatically, he's only sees the world - and government in 2D.

BigFatUglyBubble's picture

seat of his ample britches

Meh, Trump's britches are nothing compared to my wife's (as pictured in iconograph) britches.

Jubal Early's picture

I find your avatar to be highly insulting and offensive.  Really.  You should not try to be a participant here while flipping everone else the finger.  IMO, anyone who upvotes you or replies to your comments is a sick mascochist.

HRH Feant's picture
HRH Feant (not verified) Apr 20, 2017 3:38 PM

I enjoy Stockman's cynisicm. The debt ceiling debate begins next week. NK is turning that part of Asia into a slow-motion shit show, no doubt about it. Will that shit show end in bombs and huge refugee flows into Russia, China, and South Korea? Probably.

Buckle up lads and lassies and hang on for the ride.

Rainman's picture

I bet this time next year the fed balance sheet will be even moar massiver.

affirmed_78's picture

You know what money supply won't be increasing to infinity?  Bitcoin.

Look, I get the gold and silver thing.  Nothing wrong with that.  But people aren't going to be buying stuff with gold and silver anytime soon.  It's not easily portable or divisible.  We need to support Bitcoin, or an alternative to Bitcoin if something better comes along, to take money out of the hands of government.

pebblewriter's picture

The election night recovery and "Trump Rally" was a fraud, driven by currency and VIX manipulation. It was only after the algos were able to drive SPX through resistance that the momentum folks jumped on board and people started rationalizing it from a political standpoint.

Trump might or might not end up being good for the economy, but I wish people would stop attributing the rally to his policies -- which have by and large not even materialized.


BullyBearish's picture

for a clearer picture...in your mind, simply replace trump with goldman sux...he will only do what they have him do...and he will think he came up with it...abandon all HOPE for the DOPE...goldman is in gear...

romanmoment's picture

Aaron Hernandez read this article Tuesday afternoon....

assistedliving's picture

massiver.  luv it.  and i've got the Au/Ag to prove it

Vlad the Inhaler's picture

The market never crashes in summer, probably get sideways action until Sept/Oct then maybe.

buzzsaw99's picture

wall street is trying to keep the party going until after the aramco ipo but nine months is a long time bitchez.

Giant Meteor's picture

Sooo ummm , what's the good news !?

silverer's picture

Yes, yes, but it's not HIGH enough yet!

Osmium's picture

The remaining bullishness and buy-the-dips robo-trading that temporarily sustained the dotcom bubble through March 2000 and the housing bubble through September 2008 will soon give way.

Sure it will, any day now, yep going to happen soon, trust me this time I know what I'm talking about.

VangelV's picture

David is right.  Trump is turning out to be as big a disappointment as Obama was before him and Bush before that.  The problem is that Americans from all sides of the political spectrum still favor hierarchy and central planning over liberty.  With the debt ceiling deadline coming up and the Democrats firmly against any meaningful reforms in health care or taxes at a time when the GOP is firmly in favor of more wars and interventions, the future looks quite bleak.  Good luck boys and girls.  I think that you will need it.  

squid's picture

"The problem is that Americans from all sides of the political spectrum still favor hierarchy and central planning over liberty."


Yes, started with the 17th ammendment.


If you don't monitor everything and every vote your congressman makes, you're getting screwed. You need at least 20% of the district to be doing that for this system to work......but no one cares so the fuckers go to Washinton and just fleece you....because they can.


The president doen't matter much, you're all getting fucked by Congress.

And Congress has  90% re-election rate so......


Americas deserve what's coming, they've earned it.



August's picture

>>>The president doen't matter much, you're all getting fucked by Congress.

A President could matter - if he had a degree of integrity. 

Still, the collapse of the US Republic must chiefly be laid at the feet of Congress: they've given free rein to the Executive and Judicial branches, and are damn glad they can now simply concentrate their bipartisan energies on graft and re-election.

"Congress, 535 commoditized temple monkeys pawing through the ruins of America in search of bribes."

- Fred Reed

FinsterF's picture

"The problem is that Americans from all sides of the political spectrum still favor hierarchy and central planning over liberty."

Or rather, American elites from all sides ...

Salzburg1756's picture

His economic policy machinery has now been seized entirely by the Vampire Squid’s latest chieftains in the White House — Gary Cohn, Steve Mnuchin and Jared Kushner.

It might as well be Moe, Larry and Curly.

We are screwed, and nobody can fix it.

oooBooo's picture

From what I've read Moe Howard was a pretty decent investor. We'd likely be better off with Moe anyway.


August's picture

Moe was a piker compared to... Lawrence Welk.

polo007's picture

Trump says he sees ‘good chance’ of health-bill vote next week or soon after
Published: Apr 20, 2017 4:45 p.m. ET
Senior Republican aide says there’s no text yet
President Donald Trump said Thursday he sees a good chance of a vote on a new Obamacare repeal-and-replace measure next week or soon after, telling reporters a plan is getting “better and better.”
Earlier, a report said the White House was eyeing Wednesday as a target date for a vote, but a Republican aide on Capitol Hill didn’t commit to that date.
“This is a great bill,” Trump said at a news conference with Italian Prime Minister Paolo Gentiloni. “This is a great plan. It’s evolving. We have a good chance of getting it soon, whether it’s next week or shortly thereafter.”
The Washington Post’s Robert Costa tweeted that a top White House official said aides to Trump and congressional Republicans will circulate revised language on a health-care bill Thursday evening. The Wednesday target date could change, the official told Costa.
Trump and Republicans are eager to take another crack at replacing President Barack Obama’s health-care law, following the implosion of an earlier attempt, in March.
Politico reported Thursday morning that an emerging deal proposes giving states more flexibility to opt out of major Obamacare provisions while preserving protections like the ban on discriminating against people with preexisting conditions.
A senior Republican aide told MarketWatch the question is whether a bill can get 216 votes in the House, “and the answer isn’t clear at this time.” The aide said there is no legislative text and no agreement to see how many members would vote for it.
A White House spokesperson declined to comment.
Lawmakers return to Washington next week from a spring recess, and taking a vote on health care would be just one item on an already crowded schedule. The government is funded through April 28, and Congress must pass a bill before then or bring on a partial shutdown.
Trump also said he wanted to avoid a shutdown. “I think we want to keep the government open, don’t you agree?” he said in response to a reporter’s question.

cougar_w's picture

"a few digits of days" is still years.

Bammers's picture

Zerohedge? needs to stay away from stockman

Years later still a bull rally. 


One analyst only calling markets whi has been on ZH




Thanks Zerohedge

hedgesofnight's picture

Stockman is always a dollar short and 5 years too early. He has broken most of the traders who were on ZH.  Now we have a bunch of scammers on here. 

gdpetti's picture

Stockman doesn't seem to understand what's going on, nor why... perhaps a little inside look at the system behind the closed doors would help? https://www.youtube.com/watch?v=nEpcY5JU120

Ronald Bernard High Finance Shocking Revelations (Dutch with Subtitles)

Giant Meteor's picture

A few minutes in, and wanted to say thank you.

Will get back to ya after watching in it's entirety ;)


Well if he were a fake, he would be the most convincing fake I'd ever seen.

I would like to learn much more about him, his story, as well as the Dutch media company, producing the video. I have no doubt of the many things he speaks of, and would certainly jibe seamlesslly for anyone seriously looking at the rapidity, of events, as these events now reveal themselves. THe "light" is being shone, much is revealed,.and many are awake. Sadly, not yet enough,

Power is again attempting to consolidate, as it always has, but the script, the "narrative" of these dark and evil forces, has been messed with by many good people of conscience. Some of whom, have already been silenced by various means. The relative ease, and abundance of information however. once, not long ago possible, even on a "local" level, much less on a global scale, has made a tremendous problem for them. Obviously that would mean, extremely dangerous times, and again, no shock to those awake and paying attention through the noise, which is incessant, relentless.

That is where the next major attack comes from in spades, communications, although it is obviously , and will continue to be, a multi pronged attack, taking all shapes and in all forms, not the least of which are bloody hot wars and global conflict.



There's picture

America is going to turn useless Branch Banks and Mall space retailers into much needed homeles shelters.

It will constitute proper use of welfare, needy people instead of Banks and Corps.

gregga777's picture

"America is going to turn useless Branch Banks and Mall space retailers into much needed homeles shelters."


The proper name for them now are OBAMAVILLES.  Soon, they will also be known as TRUMPVILLES.


Deep Snorkeler's picture

Stockman says the recession is coming

and this time it will be a big one

1. Vast hordes searching for protein.

2. Immense masses roaming Earth for jobs.

3. Human waste on every shoreline.

4. Two oceans filled with plastic soup.

5. Phosphate depletion.

Stockman a scullion at Restaurant Soylent Vert

ZeroLounger's picture

Stockman is Quinn!!! Quinn is Stockman!!!

gregga777's picture

The Goldman Sachs Feral Reserve System is keeping all asset values highly levitated so that their owners can finish selling them to the suckers, that is, the investing public.  Then the criminals at the Goldman Sachs Feral Reserve will crash them so that their owners can buy them back from the suckers at pennies on the dollar.  


The motto of the Goldman Sachs Feral Reserve is:


"We steal from those least able to afford it and give to those who least deserve it."


Senor Science's picture

The problem with calling the market top, and this is alluded to in Stockman's contribution, is that the forces that have pushed the markets to extremes continue mostly unabated. We need a large pension fund to begin liquidation, or something like that.