Former Reagan administration Office of Management and Budget Director David Stockman thinks today’s stock market has reached the point where greed has overtaken logic.
The stock markets have been very generous to investors recently, but seasoned experts are sounding the alarm. David Stockman, President Reagan’s Budget Director, doesn’t mince words: today’s stock market has reached the point of “complete insanity.”
According to Stockman,
“The market is pricing in a huge government stimulus. But if you just look at the real world out there, the only thing that’s going to happen is a fiscal bloodbath and a White House train wreck like never before in U.S. history.”
RETAIL INVESTORS: LAST TO THE PARTY
The numbers don’t lie. P/E ratios, which measure the value of companies compared to their actual earnings, are at nosebleed levels not seen since just before the 1987 and 2008 market collapses. The housing market is also riding a similar wave of temporary investor euphoria.
The most recent market inflation has been the arrival of the individual investors, who are once again greedily chasing market returns just when there is no more room for market expansion. Meanwhile, data shows that the pro hedge fund investors are quietly selling out of the paper markets and loading up on physical gold.
Make no mistake, America faces a considerable uphill economic climb, with crushing government debt, crumbling international relations, recession on the horizon and an electorate that clashes every day.
President Trump, despite his best intentions, is clearly in a hornet’s nest of difficulty. Stockman expects Congress to block Trump’s economic agenda, with a debt ceiling vote in 2017 that could quickly bring a financial shutdown to the U.S.
Stockman points out that we are already 92 months in our current economic expansion: long past where it should have seen a correction.
President Trump has inherited thirty years of fiscal disaster created by his predecessors and $10 trillion of debt is built in under current policy.
VOICES OF CAUTION
Three of the nation’s largest banks have recently issued reports that highlight the growing risks in 2017. Trump’s plans to drop out of trade deals and impose new restrictions on immigration have caused uncertainty to rise and cast doubts on whether his ambitious agenda will actually be enacted.
Goldman Sachs economists point out that President Trump’s ambitious plans for growth are likely to be overcome by the negative effects of restrictions on trade and immigration. Wells Fargo researchers say that the new President’s controversial policies, combined with geopolitical shifts, could impede the progress of global recovery.
A note from Bank of America suggests that the relatively low U.S. unemployment rate will make it difficult for the economy to kick into higher gear. The report also states that the president’s plans for spending on infrastructure may simply lead to higher wage inflation and a stronger dollar, which in turn could make it harder for U.S goods to compete overseas.
DON’T TRUST YOUR WEALTH TO A SINKING SHIP
Recent events prove that the risks to your paper-based assets are real and growing. A weak U.S. dollar, $20 trillion in national debt, a bitterly divided U.S. electorate and emboldened enemies abroad make the case for owning gold and silver more compelling than ever before.
At times like this, a critical choice for any retirement investor to consider is diversification with physical gold and silver. Whether in your safe or IRA account, gold can provide safe-haven asset value and help you sleep better at night when the next inevitable market crash comes.