Thursday, September 18, 2014
SUPER DEPRESSION COMING SOON
According to one of the top minds in the U.S. Intelligence Community, that is when the United...
Behind the madness
In an interview with Yahoo Finance, Stockman blamed Fed policy for creating that madness.
“We have been shoving zero-cost money into the financial markets for 6-years running,” he said. “That’s the kerosene that drives speculative trading – the carry trades. That’s what the gamblers use to fund their position as they move from one momentum play and trade to another.”
And that, he says, is not sustainable. While Stockman believes tech stocks are especially overvalued, he warns that it’s not just tech valuations that are inflated. “Everything’s massively overvalued, and it’s predicated on zero-cost overnight money that continues these carry trades; It can’t continue.”
And he still believes, as he has for some time – so far, incorrectly - that there will be a day of reckoning.
“When the trades begin to unwind because the carry cost has to normalize, you’re going to have a dramatic re-pricing dislocation in these financial markets.”
As Yahoo Finance’s Lauren Lyster points out in the associated video, investors who heeded Stockman’s advice last year would have missed out on a 28% run-up in stocks. But Stockman remains steadfast in his belief that the current Fed policy and the resultant market behavior can not continue. “I think what the Fed is doing is so unprecedented, what is happening in the markets is so unnatural,” he said. “This is dangerous, combustible stuff, and I don’t know when the explosion occurs - when the collapse suddenly is upon us - but when it happens, people will be happy that they got out of the way if they did."
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