When George Met the Donald

By David Stockman  |  June 14, 2019

“He’s my pick, and I disagree with him entirely.”

There are two ways to interpret this statement. Perhaps its author is an open-minded decision-maker welcoming of fruitful discussion and dissent and the possibility of new solutions and experiences. Or, maybe the person who said it is a moron.

Of course, it’s the Donald. And – in addition to inflaming Russiagate paranoia all over again – he’s going after Federal Reserve Chair Jerome Powell in an extended interview with George Stephanopoulos of ABC News:

Stephanopoulos: Do you have any concern you’re putting him in a box – 

President Trump: Let – let me explain. Yes, I do. But I’m gonna do it anyway because, I’ve waited long enough. If he did the interest rate increases half as much, if he didn’t do tightening – tightening means taking money out of the, out of the till, so that people can’t use it for doing what they’re doing. We call it quantitative tightening. If he didn’t do tightening, if he did nothing or perhaps even loosened, we would be in my opinion, just an opinion, 10,000 points higher than already a very high number. You know, we’re – from the time I got elected, we’re about, we’re almost 50% up with the stock market. But if he didn’t do the tightening and if he didn’t do so much of an in – it’s okay to raise interest rates a little bit. But so much, it would have been – it would have been even better.

Let’s see. His election was confirmed the morning of November 9, 2016. Of course, equity futures cliff-dived at first, in sympathy with the epic Clinton Restoration failure. But they did come back up…

The Dow Jones Industrial Average – and that’s the index he’s quoting here with the “10,000 points higher” bit – closed at 18,332.74 on Tuesday, November 8, 2016. It closed at 26,106.77 yesterday. That’s a 42% run. That is “almost 50% up.” And it does compare favorably to the 26% gain for a similar period of Barack Obama’s run in the hot seat.

But all you need to do to win any stock market argument is change dates.

Thus, from January 16, 2009, the last close before Obama’s inauguration, the Dow closed at 8,281.22. By June 16, 2011, it was up 44% to 11,961.52.

From his swearing-in, the Dow’s run under the Donald is 32%, from a close of 19,732.40 on January 19, 2017, to where it stood at 4 p.m. yesterday in New York.

Those are just numbers. It’s important to consider the context. On one hand, Obama’s gains happened early in the recovery, as weak as it’s turned out to be.

“Peak Trump,” on the other hand, is happening at what with each passing day looks more and more like the end of the cycle.

And he has no earthly idea what he’s talking about.

I try to make some sense of it in a new presentation I’ve prepared; click here to learn more about “The Donald, the Deep State, and the Undrainable Swamp”…

They covered a lot of ground and created a lot of grist for Twitter, did the Donald and the “little wise guy” George…

But let’s focus on one critical matter: The bare essence of the Tweeter-in-Chief’s economic propensities are the very helpmates of Big Government.

Artificially ultra-low interest rates are exactly what borrow-and-spend politicians pine for. That’s because “easy money” inherently involves monetization of the public debt. That’s how illusions such as “carry-costs are always manageable and forever benign” take root.

If you believe debt just doesn’t matter – as the Donald apparently does – why not cut taxes by $2 trillion over a decade, as per the Christmas Eve Tax Cut of 2017? For that matter, why not $4 trillion? Or even $10 trillion?

Combine that with the Donald’s massive defense-spending increases. Throw in soaring budgets for border control and law enforcement. Take a hands-off posture on entitlements. Toss a $65 billion-per-year sop to pork barrelers on both sides of the aisle…

That’s how you get a budget that adds up to $20 trillion of new public debt over the decade ahead. That’s on top of the $22 trillion we already have.

Massive debt – and cheap money – are terrible and destructive ideas. And we’re doing all this right when the Baby Boom retirement wave is about to swamp the Welfare State.

How a $42 trillion public debt at 140% of forecast gross domestic product by 2030 amounts to a conservative way to MAGA is beyond my imagination.

The Donald’s debauchery is indeed a special form. But, as he’s said himself, by the time it all roosts, he’ll be long gone…

“What Could I Have Done?”

Don’t get caught asking yourself this question…

Desperate times call for… “common sense” measures.

And these are desperate times… Markets are corrupted by monetary central planning. They’re confused. And the road back is going to be treacherous.

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…

To common sense,

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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