Shocking: Find Out How Trump’s Stimulus Can Turn Into A Fiscal Bloodbath
It can be argued that today's market rally was at least partially due to a $1 Trillion infrastructure plan unveiled by the Democrats.
The Democrats’ plan, by contrast, allocates federal money directly to specific areas over 10 years. “The plan dedicates $180 billion to rail and bus systems, $65 billion to ports, airports and waterways, $110 billion for water and sewer systems, $100 billion for energy infrastructure, and $20 billion for public and tribal lands,” the Times reports.
Yet, despite the enthusiasm, not everyone is a believer.
“The point I am making is, we don’t have an open runway. We don’t have a clean balance sheet to try some huge experiment along with an unfunded tax increase that will drive us deeper. Why? There is $800 billion in new borrowing this year alone. That is built in before one dime of Trump reform, infrastructure, etc takes place. It is $10 or $12 trillion over the next decade.”
Here is my view on all of this.
Do we need infrastructure spending? - Absolutely.
Will it have a meaningful positive impact on the overall economic growth, corporate earnings and the stock market? - Probably not.
I hate to drag heroin users into this, but there is no better analogy. Today's massive imbalances (including $20 Trillion in debt) are synonymous with a drug addict who just injected a deadly cocktail into his blood stream. Might feel good for a moment, but the high is temporary.
Any more drugs at this point (proposed stimulus) can only prolong the agony. The final outcome will be the same. That is exactly what David Stockman is talking about and I tend to agree.
It can be argued that whatever earnings or GDP or economic growth the stock market is trying to get out of this, has already been priced in. To say the least. As Shiller's Adjusted S&P of 28.25 clearly suggests.
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