Stock Market

The Time of Duopoly Is Over

By David Stockman  |  October 31, 2018

On Monday, there were more sellers than buyers. But it took a 900-point-plus intraday swing in the Dow Jones Industrial Average to get that sorted.

On Tuesday, there were more buyers than sellers. And, still, it took another 500-point intraday swing to get to that simple point.

Today, it’s been all up from the start – “buyers in control,” no manic-depression day, this.

Indeed, the “fear gauge” – the Chicago Board Options Exchange Volatility Index, also known as “the VIX” – is down more than 6%. And the yield on the 10-year U.S. Treasury note is climbing again.

It’s that last data point where a lot of roads meet, so to speak, as we anticipate the Mother of All Yield Shocks.

Cool Hand Luke couldn’t shuck and jive his way through today’s treacherous terrain.

One wonders what our rookie Tweeter-in-Chief makes of the impending fiscal/financial/economic/social/political crisis on the immediate horizon…

I label it the “GOP’s Fiscal Debauch” because it’s another budget-busting, deficit exploding tax cut.

But here’s the mechanics: Republicans get Warfare State stuff, Democrats get Welfare State stuff… and they’re all pigs in shit.

Likewise, the Donald’s Trade War and the new tariffs he’s deploying will only add to inflationary pressures and further ensure “normalization” (whatever that really means…)

It reflects, primarily his blithering crackpottery on all economic matters.

At the same time, his “Accidental Great Disruptor” tendency exposes the damage of decades of globally coordinated monetary central planning.

This economic recovery is already the second-longest on record; and it’s been notoriously weak.

Have you heard, amid all the noise, some of the folks talking about recent data rollovers and what they mean for where will be 12 or so months from now?

That whisper you hear is “recession.”

We should be so lucky.

Republicans and Democrats both ignore Baby Boom retirement tsunami rolling over the Welfare State.

Republicans and Democrats both ignore a bloated Warfare State rolling over the entire globe.

Republicans and Democrats both ignore soaring interest costs on the federal debt.

Republicans and Democrats both ignore the crippled growth capacity of our economy after decades of malinvestment.

Republicans and Democrats both ignore cowardice and complacency because to do so locks them hard in place with both Wall Street and Imperial Washington.

Look, I’m not here to bowl you over with “where the bodies are buried” bullshit.

That’s not to say I couldn’t. You can’t help but learn things when you’re a Member of the U.S. House of Representatives; at least the minimally sentient ones.

People who run the Office of Management and Budget and then spend 20 years on Wall Street are also privy to a lot of… titillating trivia.

But, right now, what we need is a rational way to preserve capital.

Sure, at my age I am a “perma-bull.” But I’m not perma-stupid. And I – the “Father of Reaganomics” (or so some say) – do know how to spot “opportunity.”

Our starting points, then, are “safety,” “preservation of capital,” and “opportunism.”

I understand the difference, in other words, between “the map” and “the terrain.”

Most importantly, I have a pretty good clue about the disaster coming down the pike.

Let’s all stop drinking the duopoly’s Kool-Aid.

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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