Washington DC

They’re All Naked

By David Stockman  |  December 17, 2018

I am also concerned not to come off as shrill or preachy when what I really am is more like confused.

– David Foster Wallace, Consider the Lobster and Other Essays (2005)

When the Donald promised to “drain the swamp” back on the trail during the 2016 campaign, it did sound, vaguely, like an attack on Big Government.

At the very least, it was a sign of his desire to shrink the state and let free market capitalism breathe.

After 22 months in office, however, the truth about the Tweeter-in-Chief is out there.

All he wants out of Imperial Washington are his political enemies and policy adversaries at any given moment.

Still, the Donald’s daily assaults on the Deep State are a wonder.

They surely do undermine public confidence in rogue institutions like the Federal Bureau of Investigation, the Central Intelligence Agency, and the National Security Agency.

Although they’re frequently unhinged, his tweets lather the Deep State’s Congressional sponsors and Inside the Beltway poo-bahs with well-deserved mud.

Their efforts to suborn the FBI’s, the CIA’s, and the NSA’s surveillance profoundly threaten America’s constitutional liberties – and its fiscal solvency.

And his increasingly acrimonious public feuds with operatives including James Comey and John Brennan are just what the doctor ordered.

The Deep State thrives because of folks like these. They pretend to perform God’s own work, and, together with fellow authoritarians on Capitol Hill, they milk the public treasury.

They preen to for adoring sycophants in the Mainstream Media, held above governance or sanction from the unwashed electorate.

These sanctimonious sophisticates simply can’t stand the Donald’s style.

Attacking this perversion of what was once a grand experiment in self-governance is indeed his real calling.

He certainly lacks both the temperament and the ideas to solve our metastasizing financial, economic, and social challenges. His only hope to MAGA is to strip it down and be the “Great Disruptor.”

That is, the existing political order must be discredited and dismantled.

On that score, actually, his primitive populism will more than do its part.

As we’ve previously explored, the prevailing combination of fiscal debauchery, protectionism, and easy money will, eventually, blow up our debt-driven, bubble-ridden economy.

His crude rendition of “America First” is not a blueprint for a rebooted national security policy. It is, however, an existential threat to American Empire and the Deep State that animates it.

So, even as he lurches on Russia, dithers around Korea, fiddles with the Middle East, aggravates NATO, and basically upends the entire post-World War II order, he’s getting the main job done.

That’s to walk back the Warfare State and relieve American taxpayers of this burden of self-appointed global policeman.

That the United States of America is the “Indispensable Nation” is a theory built on pure sanctimony.

And it’s getting thoroughly – and deservedly – discredited.

What to Do About Dysfunction and Debt

The S&P 500 Index was headed for its lowest close since November 2017. It was down 315.34 points shortly after today’s open…

And then it rallied to within a dozen points of breaking back into the green…

Now, we’re back down by nearly 400 points. If it keeps up, this’ll be the worst December since 1980.

Those were pretty heady times for me, personally, as I was making the transition from representing Michigan’s 4th district in the U.S. House of Representatives to running the Office of Management and Budget for President Ronald Reagan.

In fact, the day the stock market hit bottom after the election, I was making the rounds on Wall Street, getting an earful about the dangers of Jimmy Carter’s $45 billion deficit and the fear Reagan would make it worse.

That was before Alan Greenspan and the Federal Reserve hooked everyone on easy money. That’s also when I recruited Larry Kudlow to become chief economist at OMB. He was reluctant to take the job because he geared the Gipper wasn’t really committed to a balanced budget…

Times change!

Crises are unique for their own reasons; but there are common elements.

Government dysfunction and federal debt are two I see across the decades, connecting what we faced at the dawn of the Reagan Revolution with what’s on our horizon at Peak Trump.

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.

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.

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…

Tariffs are just the tip of the iceberg when it comes to the U.S. relationship with China. And the potential for escalation is just another factor the market is trying to digest…

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