"Tax Reform Is A Pipe-Dream" - Stockman Warns Market Is Heading For Massive Crash

Having raged against President Trump's '1500-word-airball' of a tax reform plan, the Reagan administration's director of the Office of Management and Budget, David Stockman told CNBC this week that Wall Street is "delusional" for believing it will even be passed.

"This is a fiscal disaster that when they [Wall Street] begin to look at it, they'll see it's not even remotely paid for. This bill will go down for the count," said Stockman.

He said White House economic advisor Gary Cohn and Treasury Secretary Steve Mnuchin "totally failed to provide any detail, any leadership, any plan. Both of them ought to be fired because they let down the president in a major, major way."

Stockman pulled no punches about President Donald Trump...

"You get a black swan in the old days, or maybe you get an orange swan now, the one in the Oval Office who can't seem to stop tweeting and distracting the whole process from accomplishing anything."

Reaffirming his thesis that the stock market rally is in serious trouble...

"There is a correction every seven to eight years, and they tend to be anywhere from 40 to 70 percent," Stockman said recently on CNBC's "Futures Now." "If you have to work for a living, get out of the casino because it's a dangerous place."

 

"This market at 24 times GAAP earnings, 21 times operating earnings, 100 months into a business expansion with the kind of troubles you have in Washington, central banks [are] going to the sidelines," he said.

 

"There's very little reward, and there's a heck of a lot of risk."

Stockman puts a big portion of the blame on the Federal Reserve, and its ultra-loose monetary policy.

"This is a bubble created by the Fed," he said.

 

"We're heading for higher yields. We are heading for a huge reset of pricing in the risk markets that's been based on ultra-cheap yields that the central banks of the world created that are now going to go away because they're telling you that they're done."

Full interview below:

Stockman: Stocks to plummet 40-70% from CNBC.

Comments

Escrava Isaura ghengiskhan Sun, 10/01/2017 - 17:14 Permalink

I beg to differ. And I just put this on some other post. Focusing on the crash of the stock market, inflation, and bubble miss the point. Isn’t about two percent of the population that own about 50 percent of the stocks? The reason that you haven’t see all these predictions coming through has mainly to do with that the general population is no longer participating, so the owners and managers of the nation can make this market high and higher. The problem will be when they lose control of the middleclass, because the middleclass became the poor class. When a nation has no middle class we’ll have a problem. The harmony is gone, because they will come after the rich. And that time will be when the oil goes to $100 dollars plus a barrel. Until then, the owners of this nation should be able to hold it together.   

In reply to by ghengiskhan

Escrava Isaura ByTheCross Sun, 10/01/2017 - 17:37 Permalink

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They will come after the rich. At the next president 2020/2024.  

In reply to by ByTheCross

Rubicon727 ByTheCross Sun, 10/01/2017 - 19:14 Permalink

"They'll never come after the rich."Isaura actually perceives America's dying middle class as an educated class of folks who understand the ins and outs of corporate oligarchs, the FED, and HOW the wealthy have become filthy rich. Probably about 80% of the middle-lower middle class folks have only the faintest understanding what these wealthy SOBS have purposely done to this economy and to millions of American citizens over the last 30 years!Add to that and a population that has ALWAYS turned inward and despises "intellectualism" - it's made for a perfect recipe in destroying this nation.You're correct, ByTheCross.  

In reply to by ByTheCross

Give Me Some Truth Escrava Isaura Sun, 10/01/2017 - 21:10 Permalink

You make a good point about 2 percent owning 50 percent of the stocks. And that doesn't count the central banks and the crony funds. There's not many people that have to be "controlled" to control the stock marketBTW, the stock market's going up.  For the Status Quo to remain the Status Quo- for the Establishment to remain the Establishment -  It HAS to. 

In reply to by Escrava Isaura

NYC_Rocks The Management Sun, 10/01/2017 - 16:29 Permalink

Unfortunately you are right.  The power of money printing is a lot of power and they have the upper hand.  Makes it impossible to tell when it all comes crashing down.  Maybe this time it won't and we will just have hyper inflation instead.  No one knows regarding timing.  But we do know the debt and current model is unsusttainable.  We either print/inflate/devalue or debt written off and/or services no delivered.  There is no other choice.  All they did was defer the pain.  David is right, it will happen but no one can predict when.

In reply to by The Management

striped-pad NYC_Rocks Mon, 10/02/2017 - 08:21 Permalink

The thing is that if you do allow a proper default, where the bad debts are all written off in bankruptcy, you resume from a clean slate, so that we can be confident that the debts circulating around the economy can all be settled. There's a lot of productive capacity around, and in that sort of environment, production can thrive.
I don't deny it will be a difficult process, because there are just too many people who have made too many promises they can't keep in order to have the things they wanted. The most difficult thing will probably be getting people to take responsibility for their decisions to get into debt, particularly because they were deceived in many cases. They need to be convinced to take it out on the people who conned them instead of on the people who refused to join in the Ponzi scheme. I hope that we can be sympathetic while firmly insisting that everyone must live within their means.

I'm sure some public services will be cut back, but only the ones which were being funded by running down the nation's saved capital.

Writing off debts is neutral to net worth. For each dollar which is removed from one person's assets, another dollar is removed from someone else's liabilities.

In reply to by NYC_Rocks

JohnGaltUk Giant Meteor Sun, 10/01/2017 - 16:28 Permalink

Dude you are dead right. The USA is the default currency and so when the dollar is so cheap to borrow it turns up everywhere. My broher wrote me an email a few years back, he lives in Singapore and he tells me how great things are because he could borrow at 2.5% in USD for his house in Singapore!!!!! I am thinking shit dude, you are nearly 60 and you need a mortgage? Hell I discharged my mortgage in my 40's.With the USD being a global currency it has turned up everywhere, like those CDO's in 2007. Our next collapse will be global and there will be no where to hide. When folks start losing their homes, pensions, cars and everything else there will be violence. It's kinda funny really because many politicians and pundits said about the 2007 crash that they never saw it coming. I was thinking, WHAT, it was painted red like a Fire Truck and had bells ringing all over it. WTF.

In reply to by Giant Meteor

ArthurDaley-Ol… yogibear Sun, 10/01/2017 - 16:52 Permalink

“How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually and then suddenly.” Ernest Hemingway’s 1926 novel, The Sun Also Rises.Nations go bankrupt in the same way. Banking collapses occur in the same way. Currency crises strike in the same way. They all happen gradually… and then suddenly. Sometimes overnight https://www.sovereignman.com/offshore/slowly-at-first-then-all-at-once-… FWIW We've been running on fumes for years.. Think about it.

In reply to by yogibear

TheLastTrump Sun, 10/01/2017 - 15:55 Permalink

He said this in June as well. He's getting closer to being right....along with the ZeroHope Doomer crowd...any day now...come on please CRASH and make me right!

JohnGaltUk curbjob Sun, 10/01/2017 - 16:34 Permalink

Stockman is right, corrections normally are every 8.5 years. What is different this time is that CB's are buying everything, bonds, equities and are naked shorting gold. They have stretched this economic spring so far that when it snaps back it will be devasting. This will be like the fall of the Roman Empire.If the ECB was not buying Italian soveriegn bonds there would be no market for them, the fix is in.

In reply to by curbjob