The Secret Behind Upcoming Stock Market Collapse
The stock market is up significantly post election on HOPES of more stimulus, tax cuts, deregulation and infrastructure spending. As the thinking goes, if President Trump is able to get corporate taxes "phenomenally" lower that will increase earnings and corporations will be able to re-invest those earnings into growing companies, creating jobs, etc... Boosting the economy in the process.
Strangely enough, this environment has existed for close to 8 years now. Corporations can borrow at zero interest rates today and do the same. Instead, they have used that capital to repurchase their stocks at dizzying valuation levels. But, let's save this CAPEX discussion for another time.
So, as the theory goes, if President Trump fails to deliver on his "Phenomenal" tax cut promises, the market should at the very least retrace all of Trump's rally.
Luckily we have David Stockman to tell us why that is about to happen. Why the Trump's tax plan is dead on arrival.
“It won’t be long until the impending collapse of the post-election Trump-O-Mania frenzy in the stock market,” says our David Stockman.
David’s been saying since early December that the Trump agenda is doomed and Wall Street’s expectations will be dashed. He says so with the authority that comes from being “present at the creation” of the Reagan tax cut in 1981 — when he was White House budget director.
It’s striking to watch now… because it reminds us we’ve seen nothing approaching those specifics coming from Team Trump. Heck, it wasn’t till seven days ago that the Senate confirmed the current budget director, Mick Mulvaney.
“There is not a snowball’s chance in the hot place that the frail GOP majorities on Capitol Hill will pass a giant Reaganesque tax cut financed with red ink,” says David now.
“Washington is at a fiscal dead end with a $20 trillion public debt already in place and $30 trillion baked into the cake by the middle of the next decade. And that’s under existing policy, before even a single dime of the Trump tax cuts or infrastructure stimulus is added to the equation.
“The ranks of tea party Republicans and Freedom Caucus fiscal conservatives simply will not walk the plank for a 10-year budget resolution that would result in a Greek-style public debt at 140% of projected GDP…
“Without a FY 2018 budget resolution, there will be no ‘reconciliation instructions’ on tax reform. Without the latter, the Senate will become a 60-vote, filibuster-driven killing field for tax reform.”
That’s serious enough… but in addition, “the Trump White House is already on the verge of a terminal political crisis,” David declares.
“After the travel ban fiasco, the Flynn resignation imbroglio, the massive anti-Trump leaks coming from the bowels of a hostile national security establishment and the renewed media campaign to re-litigate the 2016 elections over the Russian meddling canard, the incipient Trump administration is already mortally wounded.
“The ruling elites are determined to take The Donald down, and whether they succeed or not, it is extremely probable that Washington will grind to a halt — Watergate-era style — by early spring. There will be no giant tax cut, but there will be a news flash at some point soon crystalizing that very fact.
“Then the meltdown will begin, and the stock market will be bidless because all the robo-machines will be selling the news of breakdown, dysfunction, fracture and crisis in the Imperial City, not Donald Trump’s ‘hopium’ tweets.”