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David Stockman: Trump Administration Is 'Complete Insanity,' Markets in Fantasy Land

 (AP/Kathy Willens)

By    |   Monday, 13 February 2017 10:05 AM

Former Reagan economic adviser David Stockman warns savvy investors not to be swept away by the jubilation of a stock market seemingly hitting new record highs every day.

The former Reagan Budget Director told CNBC that traders are living in a "fantasy land" that can't last — and Trump's policies will derail the market for years to come.

"What's going on today is complete insanity," said Stockman, who served as a Republican U.S. Representative from the state of Michigan (1977–1981) and as the Director of the Office of Management and Budget (1981–1985) under President Ronald Reagan.

"The market is apparently pricing in a huge Trump 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," he said.

Since the election, the S&P 500 Index has rallied more than 8 percent, the Nasdaq about 6 percent and the Dow Jones Industrial Average a whopping 10 percent. Last week, all three benchmarks rallied to new record highs.

Stockman predicts that those gains may be lost for these three reasons:

  • Most of Trump's actions "[have] nothing to do with the economic agenda" he's proposed;
  • A debt ceiling debate looms for March 15 in Congress;
  • The current rally that has gone on for way too long, and a correction is far overdue.

"There's going to be no tax action this year," said Stockman, echoing the concerns of Goldman Sachs and a few other Wall Street economists who say Trump's plans for the economy are facing mounting political risks. CNBC reported.

Last week, the president vowed that tax reform could happen this year, and promised an announcement within the next few weeks.

"If there's any next year it will be deficit neutral, which means it's not going to add the $15 to earnings like these people expect," Stockman said.

"My argument is there is not going to be any economic rebound, there is not going to be any profit surge," Stockman added. "Therefore the market will be repricing dramatically downward once it's clear that that's the case," said Stockman.

To be sure, Trump will be a demanding leader who applies the best of his negotiating skills to push for U.S. growth, bestselling author David Horowitz told TheStreet.com.

Trump won’t be an ideological purist like Republicans who support free trade but don't fight for fair trade, Horowitz said. “If you just say, ‘well we're for free trade and we're not going to look at the deals that we make’ -- that's not a good idea,” he said. “We've had an anti-business president now for eight years who doesn't take a hard-nosed attitude towards these deals. Trump is going to get better deals for us, which is still free trade.”

Horowitz's new book "The Big Agenda: President Trump's Plan to Save America"  reveals Trump's "first 100 days strategy" to roll back Obama's legislative and executive record.

"Big Agenda: President Trump's Plan to Save America" is available at bookstores everywhere – or get your copy on Amazon – Click Here Now

(Newsmax wire services contributed to this report).

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InvestingAnalysis
Stocks are booming under President Donald Trump, but long-time critic David Stockman warns traders are living in a "fantasy land" that can't last —and Trump's policies will derail the market for years to come.
david stockman, trump, stock, markets
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2017-05-13
Monday, 13 February 2017 10:05 AM
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