Tags: david stockman | stock | market | speculators | robo-machines

David Stockman: Stock Market Run by Speculators, Robo-Machines

By    |   Monday, 12 February 2018 08:58 AM

Economic guru David Stockman warns that the recent market volatility is just the “tip of the iceberg.”

A higher Friday close for New York stocks following a week of “vol” induced selling, lifted markets in Asia and Europe, helping MSCI’s all-country index rise off four-month lows, while European shares firmed 1.4 percent after touching six-month troughs last week.

Wall Street’s equity volatility gauge, the VIX - the spike in which had kicked off the ructions - was at 26.5 percent, easing off Friday’s 29 percent close.

While the index had rocketed to 50 at the height of last week’s turmoil, current levels are well above the long-term average around 11 percent, in a sign that investors’ nerves are still jangling.

“You’ve just heard the beginning of this VIX thing that blew up. Six years it took it to go from $16 to $200 in one day it went back down 90% -- that’s just the tip of the iceberg,” Stockman said to Fox Business Network’s Neil Cavuto on “Cavuto: Coast to Coast.”

Since the 2008 financial crisis, the markets have been supported by the Federal Reserve’s infusion of liquidity, the former Reagan budget director said.

In January, during its first policy meeting of 2018, the Fed left its benchmark interest rate unchanged in a range of 1.25% to 1.5% but set the stage for a rate hike in March. In Stockman’s opinion, it’s contributing to the escalation of the sell off and it’s just a matter of time before the markets “easily” drop 20%, he said.

“They are out of dry powder,” Stockman said. “It’s going to go to 3% to 4% on the 10-year [Treasury note], which you may think is not much, but it’s a huge amount because it’s relative to where the market has been for several years,” he said.

"The market is basically run by speculators in Robo machines who trade hour to hour,' Stockman said.

Stockman also doesn't hold out much hope for the economy or current administration.

"The fundamentals are rotten. They're rotten," he said. He is worried about a "demographic time bomb" with up to 30 million people soon hitting the retirement age.

"I'm saying with that coming, the idea that you would run a deficit this big at the eleventh hour of this cycle is utterly crazy, irresponsible beyond belief. It's gonna sink us," he said.

"We could you blame the president on down. Donald Trump has no clue whatsoever but I would blame in the end Paul Ryan for betraying what was left of the fiscal conservative opposition," he said.

Meanwhile, the White House budget proposal projects U.S. economic growth of 3.2 percent next year, before declining to 3 percent in 2021 and 2.8 percent in 2026, the Wall Street Journal reported, citing a preview of the plan.

The budget, which is due to be released on Monday, assumes the 10-year Treasury yield will average 2.6 percent this year and 3.1 percent next year before rising to 3.7 percent by early next decade, the Journal said.

And many other experts are much more optimistic.

The nation's economy is very strong, and the tax cut bill is energizing business, so the stock markets will be "just fine," despite record drops this past week, economic analyst Larry Kudlow told Newsmax TV Friday, and he'd buy and hold stocks as they grow cheaper.

"Investment profits are very strong," Kudlow, the Reagan administration economist who also advised President Donald Trump's campaign, told "Newsmax Now" guest host Kirsten Haglund.

There is some interest rate turbulence as well, he continued, but "people shouldn't panic," said the radio host of "The Larry Kudlow Show."

"Stocks are gonna be cheaper and I'd buy them as they go down," said Kudlow, a Newsmax Finance Insider.

(Newsmax wire services contributed to this report).

© 2018 Newsmax Finance. All rights reserved.

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Economic guru David Stockman warns that the recent market volatility is just the “tip of the iceberg.”
david stockman, stock, market, speculators, robo-machines
Monday, 12 February 2018 08:58 AM
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