David Stockman: The World Economy Is at An Epochal Pivot

The comments below are an edited and abridged synopsis of an article by Adam Taggart

David Stockman warns that the global economy has reached an epochal pivot, a moment when the false prosperity created from trillions in printed money by the world’s central banks goes into reverse.

There are few people who understand the global economy and its (mis)management better than David Stockman‑—former director of the OMB under President Reagan, former US Representative, best-selling author of The Great Deformation, and veteran financier. He knows intimately how political and financial systems work, as well as what their vulnerabilities are.

Stockman thinks the top for the current asset price bubble era is in; he thinks it hit its apex in January 2018. As this Everything Bubble prepares to burst, Stockman estimates the risk of economic crisis is as great, if not greater than, the 2008 Great Financial Crisis because of the radical and unsustainable monetary policy expansion the central banks have pursued over the past decade.

This has caused the prices of stocks, bonds, real estate and most other assets to appreciate at rates that have no basis in the ongoing income/cash flow of the global economy. In short, they are wildly overvalued.

A key condition that Stockman has been waiting for, one that serves as a signal the bubble is bursting, is the concentration of speculative capital into fewer and fewer stocks as the good options for investors shrink. We can see this in the FAANG complex.

Stockman says that there’s no bid underneath this market, that when perception shifts from greed to fear, the bottom is much farther down than most investors realize.

He predicts that a reset is imminent. One that, for those who see it coming and take prudent action today, will offer tremendous, perhaps once-in-a-lifetime, investment opportunity once the dust settles.