By Craig Wilson
This post Stockman: Horrendous Storm to Hit Stocks appeared first on Daily Reckoning.
[Urgent Note: David Stockman warns that the nation’s future and a massive debt ceiling hangs in the balance as Wall Street stocks carry on. The economist is on a mission to send his new book TRUMPED! A Nation on the Brink of Ruin… and How to Bring It Back out to every American who responds, absolutely free. Click here for more details.]
David Stockman joined Boom Bust to discuss the massive storm that is building and about to slam into Wall Street. During the discussion Stockman reveals what he believes is ahead for the stocks in the market and the economy.
The interview began with the Boom Bust host asking the acclaimed author about his concern surrounding a government shutdown. David Stockman began “we’re in the midst of the biggest political train wreck in modern history… There will be no governance in Washington. There will be no tax bill, stimulus or infrastructure.”
“We’re heading for an expiration of the debt ceiling and running out of cash that will create an enormous crisis by August or September. They’re not going to be able to cope with it.”
“I think the odds by the day are increasing that we’re going to have a government shutdown. Expect the mother of all debt ceiling crisis. The market is utterly unprepared and it really is the orange swan that is about ready to take Wall Street by surprise.”
David Stockman is a two-term U.S Congressman who served as part of President Reagan’s cabinet where he was the director of the Office of Management and Budget. He is now an author and economist where he recently authored the best-seller Trumped! The book explores the direction the country is headed and how to correct course.
When prompted about the potential shocks to the S&P 500 and the threats stocks face in a severe decline Stockman continued to offer his sobering analysis. The former Reagan cabinet member noted, “The market today is trading at 25 times S&P 500 earnings which were $100 a share in the period ending in March. That represents a tiny growth from $85 a share back in June 2007 – ten years ago. We’re about 1.2% over the last decade.”
“Why would you pay 25 times earnings for one percent growth after a tepid expansion of 100 months that’s near the end of its “sell by date?”
“We’re going to have a recession, likely sooner than later, and the market is dramatically overpriced. I would say sixteen times earnings given all the headwinds in the world and chaos in Washington.”
“The Fed is now finally going to begin to shrink its balance sheet and not just a little bit but by $2 trillion over the next two or three years. With all of that staring us in the face, the market is barely worth 1,600… There is a huge air pocket between the huge fantasy that prevails on Wall Street and the …read more
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