Skip to comments.Former Reagan Budget Director Despairs: ‘I Wouldn’t Touch the Stock Market With a 100-Foot Pole’
Posted on 03/03/2012 2:52:46 PM PST by Lazlo in PA
He was an architect of one of the biggest tax cuts in U.S. history. He spent much of his career after politics using borrowed money to take over companies. He targeted the riskiest ones that most investors shunned car-parts makers, textile mills.
That is one image of David Stockman, the former White House budget director who, after resigning in protest over deficit spending, made a fortune in corporate buyouts.
Former Reagan Budget Director Despairs: I Wouldnt Touch the Stock Market With a 100 Foot Pole
But spend time with him and you discover this former wunderkind of the Reagan revolution is something else a scared investor who doesnt own a single stock for fear of another financial crisis.
Stockman suggests youd be crazy to hold anything but cash now, and maybe a few bars of gold. He thinks the Federal Reserves efforts to ease the pain from the collapse of our national leveraged buyout his term for decades of reckless, debt-fueled spending by government, citizens, and companies is pumping stock and bond markets to dangerous heights.
(Excerpt) Read more at theblaze.com ...
Two responses to your question:
First: It was George Herbert Walker Bush who disparaged Reagan’s advocacy of supply-side economics by calling it “voodoo economics”.
Second: “Trickle down” was the term coined by Democrats to disparage supply side economics. I challenge anybody to find a quote where Reagan used the phrase “trickle down”.
If Obama loses, I'd bet that the smoke and mirrors gets exposed in an instant and the house of cards tumbles from a purposeful gust. They're taking great pains to keep it up so it hides the real weakness of the dollar from all the QEs and other games. I don't think anypone can keep it from taking a serious tumble, it's just a question of the timing. If Obama wins a second term, he'll have no compunction about letting it crash to unveil the mother of all crises and the blatant power grab to subjugate us all.
Listen. The dollar will not tumble simply for the fact that it is the best currency in the world.
It’s very simple.
Oh, look what time it is at the Tick Tock Diner...
Does that mean that when most countries charge three wheelbarrows of cash for a loaf of bread, we will only have to pay one wheelbarrow's worth? It's not as noticable as it could be, but the 13,000 stock market is worth what 8,000 was worth a few years ago. Yet they claim there's no inflation. You cantake the best scotch in the world and water it down so much that it's worthless. We've been doing that to the dollar.
I can’t fully remember but wasn’t his point in the book that we didn’t slash spending enough? I may be mistaking that book for one of the other Supply Side guys from the 80’s.
Was at a presentation a couple days ago...conclusion was with inflation, house value dropping, etc., we’d need to have the Dow at 16,000 to equate to what we’ve lost.
I vowed never to own stock the day i signed a labor agreement that contained health and welfare and pension almost 50 years ago!
The market became a ponzi scheme on that day!
I still consider it the stupidest place to put money!
Fifty years ago the DJIA was at less than 600. Today its at roughly 13000. And you STILL consider it the stupidest place to put money? Where exactly have you found a better investment during that time period?
Granted... now might not be the best time to own stock, but long term, I’d call the US stock market a pretty good bet.
Over the last decade the US Stock Market returned nothing. At least with bonds you could stay even with inflation.
Real Estate, purchased without a mortgage!
Very Big Bumpity Bump Bump Bump.
Bookmarked for posterity. An utterly sane viewpoint uttered in an insane media propaganda storm.
This should be required reading, no required STUDY for everyone over 18.
You should have to read this article 3 times and write a 30,000 word rebuttal before you are allowed to purchase stocks.
I keep hearing there is a lot of cash on the sidelines.
Now, would this be real cash that was saved and stored from genuine business profits and private incomes, or are you talking about all the cash that is based on credit at 0.25% borrowing rates that would never have been borrowed if we had a proper prime rate of 4% (which means you would be borrowing at 7% and home loans would be running around 9%).
I am very skeptical about this huge bounty of cash on the sidelines being real savings rather than easy credit. Can you demonstrated that his horde of cash is real savings?
Your post triggered something I wanted to say, but this is not specifically aimed at you, as you do understand that the market does tend to go up over very long time periods and you agree that this may not be the best time to own stocks.
That said, and for general consumption:
The US stock market has been a very bad bet for the bulk of all buy-and-hold investors since 2000. The US stock market has been a terrible investment for 12 years. We are in a secular bear market.
Stock market investing was “no lose” from 1985 to 2000” when we were in a secular bull market that floated all boats. The world’s stupidest buy-and-hold investor couldn’t lose money. It was just a matter of how well you did during that very long secular bull market.
We are in a secular bear market that looks to last until at least 2020 and maybe longer if it takes longer to de-leverage from the massive debt Stockman refered to in the posted article.
Most people are clueless, and I mean that in the most basic sense. I do not mean to say this as an insult.
Just yesterday a co-worker grilled me as to why I am in all cash and not in the stock market. I told him that I got out in December 2006 and I was certain I had done much better than him being all in from then until present.
He opened up his 401k account and stated that he had made some 25% during that time, and I was wrong.
Here is why I say that even most intelligent people are “clueless” and make no mistake that my coworker is at least as intelligent as me, and we are both licensed California Registered Professional Engineers.
He said he had made 25% but he forgot to deduct his annual contribution made to his 401k all during the past 6 years. When he deducted his contribution, he LEARNED that he had lost $6,000 in his 401k, this despite the recent run-up from the March 2009 lows, and dollar cost averaging in all his gains from that time.
I had gotten out in December 2006 into all cash and I was only making 1.24% on my cash investment over the 6 years, but I still saved all my money and came out ahead, while he took a $6,000 haircut on his $85,000 account.
That is why I say people are clueless. In his case, a very bright college-educated, professionally licensed engineer just didn’t think through the steps needed to track if he had made or lost money in the stock market.
Millions upon millions of people think just like him. They are clueless. They may not even realize their losses since the 2008 market crash. Most certainly don’t have any clue that the markets have stayed absolutely flat overall since 2000.
This is why I fear for such people. If they put no thought into their gains or losses, or into the markets overall performance, how are these people qualified to assess future risk?
They aren’t. They are nice and they are smart, but they are clueless. They are not reading and studying with the appropriate skeptical critical thought needed to overcome their preconceived biases that the market is always good over the long term.
No, the market is good in secular bull markets. It is not good in secular bear markets and that is what we have today and what we will continue to have for many years to come. When we have de-leveraged from our debt, then the market will be poised for its next runup.
Of course, I could be somewhat wrong as I ALWAYS underestimate the ability of the US central government to create financial bubbles and push the market up, but each time the market collapses back down, so I tend to be right, but just too early on my ca
Can you imagine the run on the stock market (and probably the banks, too) if most people were NOT clueless?
Yes, the DOW would be under 6000.
I read something a few months back that mutual funds had pulled $690 billion out of stock market as money was pulled out.
opinions were that certain banks were putting in money to
elevate the stock market.
I met a bond trader, institutional dealer,& friend of my son.
He sold off nearly 90% stock holdings and put about 30 something % in property.
“I cant fully remember but wasnt his point in the book that we didnt slash spending enough?”
It was worse than that. People forget just how “off the reservation” he was. In his book, he claimed that Reagan was largely responsible for the massive deficits accumulated during his administration, because he didn’t push hard enough for the spending cuts.
“He was an architect of one of the biggest tax cuts in U.S. history. architect being the operative word. IIRC he was relatively unknown until recanted
Exactly. These days stockman is the liberal media’s most favorite Reagan administration employee. Thanks to his recantation of everything that is conservative economics. They can always count on him to help them trash republicans, all the while holding him up as the standard bearer of the Reagan administration. Otherwise the news media would have no use for him.