The Rise and Fall of the “Orange King”

By David Stockman  |  December 11, 2018

When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.

– Frédéric Bastiat, Economic Sophisms(1845-1848)

Donald Trump can’t MAGA.

That’s not merely because he’s a loose cannon. And that he has no coherent policy agenda is not really a surprise.

The real barrier is that the Donald is a statist through and through.

And “statism” is what’s led to the huge excesses that burden Main Street.

Indeed, the suffocation of middle class jobs, wages, and savings is all down to the choices of the federal government’s central banking branch.

“The Great Disruptor” used to make fun of the “big, fat ugly bubble” on Wall Street. He had it right. But that was back in 2015 and 2016, when he was on the campaign trail.

Sixty-three million Americans put Trump in the Oval Office to fix our trade fiasco and reverse the offshoring of our productive assets.

But the Tweeter-in-Chief embraced that “big, fat ugly bubble” – and the inherently good jobs numbers that always print at the end of a long business expansion, too!

Here’s the folly of fools: “This is the greatest economy that we’ve had in our history, the best.”

Alas, this is the 114th month of uninterrupted growth. That means there’s one foot already in the grave. The suddenly credible official jobs numbers do look “great” today. But, in the past, an unemployment rate of 3.9% has been followed, almost literally a month or two later, by a downturn. Look at what happened with General Motors (NYSE: GM). Others will follow.

Indeed, recession is no longer just “inevitable,” as it always is; now, it’s imminent.

As Wall Street falters, Corporate America buckles, and Bubblevision’s plots thicken, here he is, tweet-bullying a Federal Reserve chair he chose into backing off “normalization” and letting flow the easy money…

It’s not difficult to find historical comparisons

When you combine the Donald’s towering ego, overweening self-preoccupation, and unvarnished statism, you get a modern version of France’s fabled Sun King.

Louis XIV famously proclaimed, “L’etat c’est moi,” or “I am the state.”

That’s essentially what the Donald told GM’s CEO: “You’re playing around with the wrong person.”

Set aside the policy issues. It implicates a far greater matter.

Namely, the Donald’s entire Trade War with China is not grounded in any normal semblance of economics or trade mechanics.

It’s an exercise in the will-to-power of a gargantuan ego who mistakenly views himself as the greatest deal-maker to ever come down the pike.

But there is no conceivable “deal” that can do anything material about our freakish, $375 billion trade deficit with China.

It’s grounded deeply in history, expedience, and bad money.

And these structural realities won’t be negotiated away by a “low interest man” who demands a doubling-down on the very excesses of monetary central planning that put us here in the first place.

“The Stockman Model” Is Made for This

The Mother of All Yield Shocks is underway.

Wall Street is trying to get a grip on higher market interest rates and the “price” and “value” implications of rising debt-service costs for businesses and consumers.

At the same time, the Donald’s Trade War is metastasizing into something else; note the Chinese have detained a Canadian citizen now working for a private company who formerly represented Ottawa in Beijing.

And there’s no telling how it turns out.

It was always going to be complicated, the end of what still could turn out to be the longest economic expansion in U.S. history.

We’re looking at a major re-pricing for all financial assets. And thousand-point intraday or day-to-day swings are part of that equation. Those can be frightening… for “buy and hold” investors.

I have a different approach, one that combines strategy and tactics into a plan flexible enough for you to survive and thrive amid the coming chaos. It’s called “The Stockman Model.”

All we’re after is a little stability, perhaps a chance to pocket a windfall when opportunity presents…

Folks, the truth of “Trumponomics” is landing on Wall Street. “Normalization” is entirely its own thing. It’s happening, and its outcomes are perilous enough.

By “Trumponomics,” we’re talking an unpaid-for tax cut… and a $1.2 trillion debt-and-deficit busting budget… and a treacherous confrontation with China.

Tariffs are just the tip of the iceberg here. The Donald’s “Art of the Deal” approach to Xi Jinping is not working to MAGA. And he may have given away critical long-term negotiating leverage in the process.

That’s just another factor the market is trying to digest… and we could be talking about more than just a trade war…

We explore some of the “second-order” issues regarding U.S.-China relations in the December issue of The Stockman Letterwhich you can download here.

It’s an important “Mother of All Yield Shocks” story – especially if you want to protect and grow your portfolio.


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David Stockman

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David Stockman

David Stockman is the ultimate Washington insider turned iconoclast. He began his career in Washington as a young man and quickly rose through the ranks of the Republican Party to become the Director of the Office of Management and Budget under President Ronald Reagan. After leaving the White House, Stockman had a 20-year career on Wall Street.MORE FROM AUTHOR