David Stockman, former Reagan budget director and bestselling author of the groundbreaking book “The Great Deformation,” has made damning statements on the United States economy, stock market and the Federal Reserve System before, but his latest comments could turn some heads.
Publishing a column on his Contra Corner blog Tuesday entitled “Why The Casino Is Dangerous: There Is Nothing Below,” Stockman opined that the Wall Street casino is immensely hazardous moving forward because safety nets for investors have all but vanished, especially when the bottom finally falls out.
Although professional traders have assisted in getting the S&P 500 to above the 2,000 mark and allowing stocks to reach record highs, Stockman warns that individual investors should be aware and watch out for their own assets.
“Honestly measured earnings have been growing only at a tepid rate, and have no prospects for acceleration given the sharp slowdown in both the global and domestic economy,” Stockman wrote. “And, please, how can we discount a distant stream of corporate earnings based on utterly artificial and unsustainably low interest rates that simply can’t be sustained over time without destroying the monetary system?”
Stockman cited the “thunderous collapse” in stock market volume since the 2008 financial collapse as exchange trading has fallen 60 percent on the New York Stock Exchange (NYSE) and another astounding 75 percent on the Nasdaq.
The absent liquid has headed into exchange-traded funds (ETFs) and options markets, which will experience a meltdown once the punch bowl is completely taken away. Also, the major stock repurchases of corporations, which have aided the roaring stock market, will come to a sudden halt and leave a lot of investors in disarray.
“In short, the Fed and other central banks have ruined the internals of all capital markets, but especially the stock markets,” averred Stockman. “The short interest has been destroyed; one-way trade based on zero carry costs rules the day on Wall Street; and corporate America is plundering its own balance sheets in order to feed the fast money and fuel artificial winnings in the stock options racket.”
In the end, there “will be no Bernanke style rescue” when the “con game” concludes. Even if the Fed were to initiate another QE program it would lead to another crisis in the market and “exacerbate the panic and compound the selling.”
Won”t HR 992 cover all losses. It passed the House and now sets in the Senate Banking committee. Won”t they just pull this bill out and pass it without reading it because of the panic that will be going on?