"No One Has Outlawed Recessions"

[danmand]

"No One Has Outlawed Recessions" Stockman Sees S&P Fair Value "Way Below 2000"

Tue, 11/06/2018 - 09:15

"If you're a rational investor, you need only two words in your vocabulary: Trump and sell," says David Stockman, former President Reagan's Office of Management and Budget director, warning that a 40% stock market plunge is closing in on Wall Street.



While not the first time Stockman has warned of a catastrophe waiting to happen in markets, he told CNBC's Futures Now that, after the worst monthly loss for global stocks since the financial crisis, that the early rumblings of that epic downturn are finally here.





"No one has outlawed recessions. We're within a year or two of one," adding that:

"fair value of the S&P going into the next recession is well below 2000, 1500 - way below where we are today."

According to Stockman, Trump's efforts to get the Fed to stop hiking rates from historical lows is misdirected...

"He's attacking the Fed for going too quick when it's been dithering for eight years. The funds rate at 2.13 percent is still below inflation,"

Specifically, Stockman notes the trade war is a major reason why investors should brace for a prolonged sell-off.

"The trade war is not remotely rational," he said.

If the dispute worsens, it "is going to hit the whole goods economy with inflation like you've never seen before because China supplies about 30 percent of the goods in the categories we import."

Stockman ends on an even more ominous note:

"We're going to be in a recession, and we're going to have another market correction which will be pretty brutal," Stockman said.

"[Trump]'s playing with fire at the very top of an aging expansion."

For now, all traders can think about is tomorrow - but we suspect Stockman will be right in the end.

 

[essguy_]

"No One Has Outlawed Recessions" Stockman Sees S&P Fair Value "Way Below 2000"

Tue, 11/06/2018 - 09:15

"If you're a rational investor, you need only two words in your vocabulary: Trump and sell," says David Stockman, former President Reagan's Office of Management and Budget director, warning that a 40% stock market plunge is closing in on Wall Street.



While not the first time Stockman has warned of a catastrophe waiting to happen in markets, he told CNBC's Futures Now that, after the worst monthly loss for global stocks since the financial crisis, that the early rumblings of that epic downturn are finally here.





"No one has outlawed recessions. We're within a year or two of one," adding that:

"fair value of the S&P going into the next recession is well below 2000, 1500 - way below where we are today."

According to Stockman, Trump's efforts to get the Fed to stop hiking rates from historical lows is misdirected...

"He's attacking the Fed for going too quick when it's been dithering for eight years. The funds rate at 2.13 percent is still below inflation,"

Specifically, Stockman notes the trade war is a major reason why investors should brace for a prolonged sell-off.

"The trade war is not remotely rational," he said.

If the dispute worsens, it "is going to hit the whole goods economy with inflation like you've never seen before because China supplies about 30 percent of the goods in the categories we import."

Stockman ends on an even more ominous note:

"We're going to be in a recession, and we're going to have another market correction which will be pretty brutal," Stockman said.

"[Trump]'s playing with fire at the very top of an aging expansion."

For now, all traders can think about is tomorrow - but we suspect Stockman will be right in the end.

I always get a kick out of Stockman because he never holds back. Doesn't mean he's right but he takes a view and isn't afraid to state it.

The biggest risk from Trump, in my opinion is that there is very little left in the tank in the case something unexpected happens. Eg: imagine a financial or industry crisis happening out of the blue that might require Govt intervention. OR as Stockman warns - a recession (or slowdown). Or some catastrophe, natural or man-made. Further - As Jamie Dimon has said - the probability of a recession is 100%. It's not a matter of IF but when. It might not happen for two year - but it WILL happen. It's inevitable. So what's left in the tank? Trump has already spent a lot of it at the TOP of an economic cycle. The Fed HAS raised rates but are still low by historical standards (2 - 2.2%) - so there's not a lot of room to cut. (By contrast, Fed Funds were over 5% in 2008.) So agree that there are more risks at play here because of Trumps idiotic trade/tariff wars AND because there's less in the tank to fight the unexpected (recession/crisis).

Have to say that it's been a great trading market since the summer and this will likely continue because there are still a lot of people wanting to buy pullbacks.