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David Stockman, who had been budget director under President Ronald Reagan, created quite a stir when he predicted a stock market crash in an op-ed piece in The New York Times Sunday.
"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," Stockman, now an investment banker, wrote. "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."
Money Morning Chief Investment Strategist Keith Fitz-Gerald joined FOX Business Network's "Varney & Co." Monday to tell investors if Stockman's prediction is on point.
"If you look to Stockman's article ... to me that's a huge contrarian signal," Fitz-Gerald said.
Check out this video to hear Fitz-Gerald on what investors should do now, what to expect from markets, and why this situation is so different from March 2009.
I love to watch the Stuart Varney show!! The "Stockman" interview in the short term is just crazy talk. In the longer term he is just explaining what we are in for. I set the traling stops on my Scott trades at 10%, my 401k may crash and burn again. why can't you have trailing stops on the company 401k holdings? The system is rigged. I can trade all my winnings out when I am scared. But thats what the rest do, and then the market rebounds and I need to wait 60 days to be able to trade the funds back in without penelty. The rules are pitted against the middle class.
PREDICTIONS and TRENDS
Dr. Walter Williams ( Economist, George Mason University) wrote last year that if we continue on the path we have chosen, then a financial collapse is probably unavoidable sometime in the next 10-20 years. David Stockman says we only have about three more years until it all implodes, wiping out investors large and small. Keith is correct in that nobody can time the market accurately to benefit in the short term, so he uses a technique that includes trailing stocks and conservative stock selection.
I would say that the truly high net worth individuals have scaled-down their holdings in financials such as traditional stocks and bonds, particularly after the 2007-2009 stock market crash. Instead, most wealthy (rich folk) have a sizeable portion of their assets tied-up in non-liquid productive assets that produce income and appreciation such as various types of commercial real estate, oil and gas partnerships, agriculture, water, direct investment in small businesses (wineries), etc.
One trait that separates the average investor from the rest of the pack is the ability to determine if a particular investment is overpriced at any given time. The really smart ones don't overpay for any investment. It really makes it harder to make good returns, even if you make good selections and have a long time horizon.
Most investors just pile-in and often at the higher end of the price range ( along with the rest of the crowd). Most investors don't even know they are following a crowd in or out of a given sector or specific investment. Its very hard not to be sucked-in to manias and investment tends. We usually do what everyone else is doing at about the same time. Its innate to humans.
In the vernacular of the sage prophets of old "Watch your **** Here!" I highly respect the financial intelligence of David Stockman. I respect Jamie Dimon and his ability to have brought his firm through the 2007-2008 disaster practically whole while many pretenders, whose Banks went broke and are still in place and go on TV to tell people what to do in markets. I watch and listen carefully. I have conscientiously protected my currency for years because one only has to look at a long term chart of dollar value since the thirties to understand it's purchasing power to goods necessary to life never goes higher.
There has been and will be a further lowering of dollar value and living standards. It unfortunately be for the same reasons that has plagued America and others for centuries. Good Economies become Socialistic!
Go ask major Companies with American names like GE, GM, Honeywell, Goodrich and others why they recycled back from Asia to the America's recently, but, went to Mexico to set up manufacturing and other plants instead of here? GO ON! It's our Federal Government for years!
Privately away from cameras and notoriety they quietly say: 1. Its Federal Taxes highest in the world on business profit. 2. Federal Government Agencies like EPA, NLRB and many others. It takes years to get permission just to build then. attacks from there-on. We really already subliminally know this. Wages surprisingly is number six on their list. So when our kids in the inner cities, the ones not going to college, currently 50% unemployed who in the past would go to work in a factory can't find a factory to work in, look around!! They're gone!
That's why we're going to crash! When? Can't say, but we will because we're not internationally competitive for the bulk of our population and we're adding more!