The Last Joke of Bubble Finance

By David Stockman  |  February 13, 2019

I be dog if hit don’t look like sometimes that when a fellow sets out to play a joke, hit ain’t another fellow he’s playing that joke on; hit’s a kind of big power laying still somewhere in the dark that he sets out to prank with without knowing hit, and hit all depends on whether that ere power is in the notion to take a joke or not, whether or not hit blows up right in his face, like this one did in mine.

– William Faulkner, “A Bear Hunt” (1934)

This is a remarkable statement: “For much of the last decade, companies buying their own shares have accounted for all net purchases.”

There’s more: “The total amount of stock bought back by companies since the 2008 crisis even exceeds the Federal Reserve’s spending on buying bonds over the same period as part of quantitative easing.”

And there was a point to all of it: “Both pushed up asset prices.”

That’s John Authers, writing for Bloomberg.

Here’s another way to say it, courtesy of Jesse Elder: “There have been essentially no other buyers of equities over the past decade besides the companies themselves and they’ve spent over $4 trillion at it, even as liquidity has fallen to record lows.”

That’s why valuations are still so rich. And that’s why I’m not buying this or any other f***ing dip… Where’s the productivity?

The bottom line is companies are buying their own stock rather than investing in productive assets.

Wall Street prospers, Imperial Washington runs amok, and the Main Street economy withers.

These are all consequences of monetary central planning.

David Stockman’s Chilling Prediction…

The Father of Reaganomics has returned with a dire warning: “Trump may be the Great Disruptor, but he’s going to fail at one of his core campaign promises. And his failure could cost you your freedoms AND your wealth.” To learn more about Stockman’s prophecy and to find out what you can do to protect yourself, your family, and your assets, just go here.

There will be unintended consequences of this last gasp of Bubble Finance.

Take a look at the storm gathering around Alexandria Ocasio-Cortez, the Member of Congress representing New York’s 14th district. People are unhappy.

State and federal data show that the Empire State’s outstanding student loan debt is $90.6 billion, most of held by adults age 18 to 45.

Close to 50% of Empire State Millennials are tending bar or waiting tables while they seek “more gainful employment” to help them pay it off. That’s actually a big part of AOC’s bio.

It’s an albatross, and it has people looking for easy scalps and easier solutions…

We surely won’t find the latter through AOC-and-MMT-style socialism. Indeed, the recently presented “Green New Deal” resolution and fact sheet is best read as Pythonesque parody.

No way the folks running comms for the GOP these days are that clever. But they could never do a better job designing a proposal that makes Democrats look, almost literally, insane.

But how will voters react when the Everything Bubble finally bursts?

What happens after CEOs and CFOs liquidate millions of jobs and tens of billions of inventories and impaired assets… again?

Set aside Democrats and the renewed threat of socialism; even a recent Fox News poll should give the Duopoly pause.

Voters support tax increases on households with incomes above $10 million a year by 70% to 24%. And they support a hike on those making over $1 million by 65% to 29%.

One more crisis, one more recession, and Main Street will churn out tens of millions of left-behind populists to man the barricades.

That’s because the Federal Reserve’s cancerous regime of easy money turned Corporate American into options-obsessed stock-pumping boiler-rooms and financial engineering joints.

And people know it.

The Greening of the Empire…

AOC is drawing raves from the Mainstream Media. She’s more well-known than most of the Democrats’ burgeoning field of presidential candidates – and some liberals are saying she should be able to run for the Oval Office herself in 2020.

Even Duopoly Dems are lurching her way, however.

And they have new way to justify and finance their own massive expansion of state authority.

Modern monetary theory – or “MMT” – is a theory from the left that rationalizes government debt and deficits.

AOC-and-MMT-style socialism just might be the new elixir of empire.

It’s coming… And you can read all about it in the February issue of The Stockman Letter

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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