Sundown in America - David Stockman warns of the next big crash

[TexasBushwhacker]

http://www.nytimes.com/2013/03/31/opinion/sunday/sundown-in-america.html?emc=rss&partner=rss&ref=opinion

" Over the last 13 years, the stock market has twice crashed and touched off a recession: American households lost $5 trillion in the 2000 dot-com bust and more than $7 trillion in the 2007 housing crash. Sooner or later — within a few years, I predict — this latest Wall Street bubble, inflated by an egregious flood of phony money from the Federal Reserve rather than real economic gains, will explode, too."

[elleng]

1. He may be correct.

Should be in Good Reads, imo.

Thx

[riverbendviewgal]

2. i think he is right

I got out of stocks before the last crash. It is tempting with the continuous rise but I don't trust stocks or the banks.

[Blue_In_AK]

4. Same here.

We're not making much money with our bonds or whatever it is our IRAs are in now, but we're not losing any either.

[davidwparker]

18. I have about 40% stock. The rest is in bonds or money market. I'm slowly

moving it back to bonds/cash and waiting for the next time the bubble bursts.

Like you, I am making money in what I'm doing and my 401K is the highest its ever been.

[kardonb]

8. banks and stock markets

It took real " whizz " to predict that . Since when have stock markets NOT gone up and then down again , huh ?

[pnwmom]

3. I don't think Paul Krugman will agree with the "phony money from the Federal Reserve" theory.

He thinks we should be stimulating the economy even more.

[caseymoz]

12. Yes, but his prescription is fiscal spending not monetary support.

It looks to me like Bernanke has done his best to keep this economy from sinking, but meanwhile, Congress and state legislatures have been doing the complete opposite of what they should be doing. They're working against him by cutting spending and protecting the wealthy class who got us into this mess to begin with. Monetary injection can't do it alone, and not forever. Wall Street has taken Bernanke's dollars and inflated a bubble, and if something isn't done, we're going to be hit with a bigger crash.

[cherokeeprogressive]

5. Everyone knows who Stockman is, right?

[grantcart]

6. Yep he is the Congressman who bacame Reagan's OMB Director

And then became very disillusioned in the process, particularly about how Casper used an idiotic turn of the phrase to trick Reagan into adding tens of billions to the defense budget (backloading versus frontloading)

He was also shocked at the level of special interest to business that accompanied the budget changes.

If one actually reads what Stockman has written since he left politics, rather than dismiss him out of hand, you actually can find more hard core facts to use for our side than almost anybody on the other side. While he still is a small government and lower tax guy he is also, and I am aware that this is so rare as to be unbelievable, a truthful conservative and has laid out the terrible actions of the Reagan administration in quite specific detail.

edited to add: I haven't read this latest article and wouldn't give him much weight when it came to an opinion on the future of the stock market one way or anther.

[cliffordu]

7. GO, gc

Good work.

[CTyankee]

21. He goes just so far and then he turns into a deficit hawk, if I read him correctly on

another thread here...so I'm a abit confused about him...

[Jim Lane]

23. I strongly recommend his book.

Last edited Mon Apr 1, 2013, 03:18 AM - Edit history (1)

I was one of those who, while Stockman was at OMB, considered him the point person for all that was wrong about the Reagan Administration. I started reading The Triumph of Politics: Why the Reagan Revolution Failed expecting to find an apologia for right-wing dogma, and planning to abandon it once I'd confirmed my suspicions.

Instead, I found one of the best books on American politics and government that I've ever read. He describes, in detail and with candor, his dealings with other Reagan Administration officials and with Republican leaders in Congress. As grantcart states, he exposes the influence of special interests. He also recounts several examples of simple, nonideological mendacity and stupidity. It's very enlightening as to the nuts and bolts of how things actually get done (or get blocked) in Washington.

ETA: I'm recommending the book mentioned above, The Triumph of Politics: Why the Reagan Revolution Failed, from 1986. He has a new book coming out that, from what little I've heard about it, doesn't seem particularly promising.

[grantcart]

37. I agree 100%. I was in Bangkok and didn't have a lot of access to different books but read his

I was stunned.

I used it many times in conversations with conservatives and quoted key passages from it.

Should be required reading in every high school civics course.

There is one particularly stunning revelation where he had been arguing with Casper on defense spending increases. There was a major impasse. As I recall Stockman was in with Reagan and Casper stopped by and said that he would agree to Stockman's lower percent increase but only if it was 'front loaded' rather than 'back loaded'. This meant that the percentages would be figured on a larger base. Stockman got back to the OMB and told his staff that he had an agreement. When he told them the only catch was that it would be 'front loaded'. The staff realized, although Stockman hadn't, that it was a numbers trick and that Casper had purposely caught Stockman when his mind was elsewhere in the meeting. Stockman went back to try and explain to Reagan that Casper had tricked him.

Reagan smiled and said "a deal is a deal, you shook hands on it" as if they had made a $ 5 bet on who would win the World Series.

That was the basis for hundreds of billions of extra dollars for the defense department.

Absolutely startling revelation of the infantile games played by the Reagan Presidency.

[Major Nikon]

25. He's the guy yelling fiat money will cause our economy to collapse

Even though it hasn't for the past 80 years or so.

[TexasBushwhacker]

38. Not too mention that just about every country has fiat money n/t

[airplaneman]

9. I was butchered in the 2007/2008 crash.

I got out in June of last year but I am 60 and retiring before too long and cant afford another crash. What little I have now would turn into nothing in another crash.
-Airplane.

[Ron Obvious]

10. I stayed in through 2007

Lost 40% of my value, but stayed in. Everything has recovered now with some extra. Selling good stocks during a crash is to sell low. Likewise, buying hyped stocks is buying high.

Stock wealth is a temperature gauge, not a sack of doubloons.

[Major Nikon]

27. I'm still in

Stocks still are and always have been a great long term investment. For short term it's a crap shoot.

[Ron Obvious]

29. Exactly.

Short term investing and 'playing the market' used to be known as 'speculating', which had a very negative connotation. Anybody who engaged in speculating was a gambler and not to be trusted. Day traders and real estate flippers aren't investors; they're just gamblers who add instability to the market.

I think the general rule of thumb was that you keep roughly (100 - your age) percent of your money in stock which you should just leave there and don't worry about price fluctuations. If you plan to retire at 65, you should therefore have 35% of your money left in stock at age 65.

I still think it makes the most sense.

[Major Nikon]

31. I think it depends on how much investment capital you have

...and how much investment income you need.

If you have other means like SS and a pension to pay your bills, you can keep all your investment income in stocks without too many worries. On the other hand if you need pretty much all of your investment income to pay your bills, stocks are probably not the way to go.

[bhikkhu]

11. Crashes are inevitable, So are recoveries.

It makes it pretty easy to be a financial guru, I suppose.

[xtraxritical]

13. A stock market dump is nothing to what's really coming.

We've long passed peak oil and are destroying the environment and our water supplies with fracking. All the easy oil is just about gone and we're going after the dirtiest of all, tar sands. As the oil gets harder to get we will burn more and more of the dirtiest fuel of all, coal. All these factors come together in global warming which is already starting to melt the arctic permafrost releasing the worst Co2 gas of all, methane, which will just accelerate the warming. Climate change is destroying agriculture already with years of drought in the Midwest, tremendous forest fires in the west, expanding deserts in the southwest and beetle infestation killing the pine trees all over the west coast. These things are well on their way and probably have already passed the "tipping point". I'm glad I wont be around to see it all.

[Newest Reality]

26. +1

[ohheckyeah]

14. We didn't get hurt too badly when the market crashed

because I had moved all of our investments to the World Fund with most of the investments in South America. We lost some but I stayed in until we recouped everything we lost. When I cashed out we had a 26% return on our investments.

[on point]

15. The stock market is equivalent to frivolous gambling the wealthy does whenever they have too much

Same as lead up to French revolution
Same as Victorian age

They have too much capital and gambling is a sport - except they have now have everything stacked in their favor

[Major Nikon]

28. Not really

Over the past 30 years the S&P 500 has averaged an 8% return. So a $1000 investment made in 1983 would be worth almost 10 times that much today.

[ErikJ]

16. In THE CRASH OF 2015, Thom Hartmann describes a country not on the road to collapse, but in the mids

In THE CRASH OF 2015, Thom Hartmann describes a country not on the road to collapse, but in the midst of an economic implosion that could make the Great Depression seem like child's play. Our once-enlightened American political and economic systems have been manipulated to ensure the success of only a fraction of the population at the expense of the rest of us, a "for the rich, by the rich" system that is turning our Democracy into an ancient feudal kingdom and leading to policies that only benefit the highest bidder.
A backlash is now palpable-against the banksters, oligarchs, and economic royalists like Milton Friedman, Lewis F. Powell, Alan Greenspan, Ronald Reagan, Jude Wannitsky, Roger Ailes, the Koch brothers, and others who have plunged our nation into economic chaos and social instability. But like the previous crashes of 1770, 1856, and 1929, the Crash of 2015 will give us the chance to once again embrace the moral motive over the profit motive, and to rebuild an economic model that has always yielded great success. Thoroughly researched and passionately argued, in THE CRASH OF 2015 Hartmann assures us that if the right reforms are enacted we can avert disaster and make our nation whole again.

[davidwparker]

17. +1

The DOW is just smoke and mirrors. It is at 14,500+ due to manipulation.

[OutNow]

19. Stock market up/down ??

I'm hoping that DUers are not looking for investing advice in this thread, but............

Yes, the bubble will burst (again) and people will lose a lot of money (again).

I've reduced my AA to 25% stocks, down from 40% in 2007. I'm 62 and can't afford another crash. The "professional" financial advisers, retirement calculators, etc. all show that I should keep 40 - 50% in stock. It's funny that my investment approach is called "too conservative". That's the first time I've ever been labelled a conservative of any kind.

[Starry Messenger]

20. This all started a lot earlier than that.

The time between crashes is getting shorter.

[socialist_n_TN]

22. Yep. End stage capitalism......

When the crashes come too quickly to be recovered from even for the wealthy and NOTHING during those "recoveries" trickles down to the working class, the ones who ACTUALLY produce goods.

It's all on paper. The only place there has been something of a return to a standard rate of profit on an individual corporate basis, is in paper products, like financials. Which is why all that excess profit that businesses are hoarding is going into financial instruments and stocks and NOT into productions of goods that leads to hiring. Thus, a stock bubble.

[Ruby the Liberal]

24. ...AND he has a book coming out in 2 days

*yawn*

[TexasBushwhacker]

33. Fair enough, but that doesn't make him wrong

He wrote a book 20 years ago about why Reaganomics failed. He's definitely a supply-sider, but the whole trickle down theory included "painful" spending cuts. He didn't realize how powerful the special interests and their lobbyists were. It's not like he just now saw the light about Reaganomics failure.

[chknltl]

30. As does Dr. Ravi Batra in his interview with Thom Hartmann

http://www.democraticunderground.com/1017107129

[Nye Bevan]

32. Smart guy. If he's right, he will be a hero. If not, everyone will forget this prediction.

Plenty of upside and very little downside.

[tech3149]

34. Take heed of this warning

Back in like 2006 I advised my baby sis to put some of her assets into gold. The gain has been great but now is about the time to cash out.
I just recently moved my retirement assets to an annuity that has a guaranteed yearly payout. It may not be a big earner but I won't trust my money to institutions that profit just from handling my assets. My IRA's and 401K's lost too much over the last decade(even with some informed management) to ever let me rely in the honesty and intelligence of the "financial" industry to serve my interests.

[A HERETIC I AM]

35. ummmmmm.....

My IRA's and 401K's lost too much over the last decade(even with some informed management) to ever let me rely in the honesty and intelligence of the "financial" industry to serve my interests.

Out of curiosity, who issued your annuity and what industry do you think they are in?

I would encourage you to read the prospectus VERY carefully. In it you will find language relating to the "guaranteed yearly payout" having to do with the ongoing ability of that financial institution to do just that.

In other words, your guarantee is only as good as their ability to guarantee it.

[tech3149]

36. It's a christian based non profit

I got involved with them when my mother died.