From Tyler Durden: A prominent businessman and former heavy hitter in the U.S. government is out with a very bearish call for stocks, which he warns will likely fall for several months in the wake of tomorrow’s election.
“Under a Trump victory, all bets are off,” warns former Director of the Office of Management and Budget under President Ronald Reagan, David Stockman. “I like [Trump] because he’s against the establishment, but he has no economic program. Yes, he’s a disruptor, but has nothing to disrupt with,” Stockman told CNBC, “if elected, it will be partisan warfare and a total disaster.”
Stockman’s message is clear, as CNBC notes, sell everything…
“The markets are hideously inflated… If you don’t sell before the election, certainly do it afterwards. Government is going to be totally paralyzed regardless of who wins… There could be a 25 percent draw down on markets.”
As CNBC details, Stockman posits that, under a Clinton administration, official investigations and new hacked email disclosures from Wikileaks will be non-stop. Furthermore, he reasoned that the “house will become a killing field” for anything Clinton is trying to do. Ultimately, Stockman said the Democrat would enter the Oval Office bruised, bloody and all but lacking in legitimacy.
“For six months, or even longer, there will acrimony, there will be brinkmanship, there will be paralysis. There will be a swarm of house committees doing investigations from all of these wiki leaks!” Stockman said of Clinton’s hypothetical early days in the White House.
“Therefore, there will be no baton handed off from the Fed to fiscal policy as we slide into recession,” he added.
Stockman, who spent twenty years on Wall Street with Salomon Brothers and Blackstone and served as a Congressman for Michigan, said the IRS is the government agency that is the clearest indicator that a storm is brewing over financial markets.
“The IRS said that last year revenue was up 1 percent and, in the last quarter, it was down 4 percent,” explained Stockman. “And, in the five months since May, payroll withholding was barely keeping even with wage inflations. That means the work hours aren’t happening.”
From here, Stockman reasoned that with a paralyzed congress, a soon-to-expire debt ceiling, a powerless central bank and a market that’s been flat for 700 days, that the pieces are in place for a crisis.
“We’re in the same place today as we were in December of 2014,” explained Stockman.
“There’s massive risk. So what’s the possible reward?”
Stockman likened the future of Wall Street, after the election, to San Francisco after the 1906 earthquake, one of the most devastating ever. For this reason, Stockman has washed his hands of everything in his portfolio except cash and gold.
The SPDR S&P 500 ETF Trust (NYSE:SPY) rose $2.82 (+1.35%) to $211.37 per share in premarket trading Monday. Year-to-date, the largest fund tracking the S&P 500 has gained 2.3%.
This article is brought to you courtesy of ZeroHedge.