Former Reagan economic adviser David Stockman is standing by his warning for investors to sell all their stocks despite the market seemingly setting record highs every day.
"This 5 percent eruption is meaningless. It's some robo machine trying to tag new highs," Stockman told CNBC.
"I see a recession coming down the pike in 2017. The stock market is going to go down and it's going to stay down long and hard because, for the first time in 25 years, there's nothing to bail it out," said Stockman, who was director of the Office of Management and Budget under President Ronald Reagan.
Stockman, days before Donald Trump’s defeat of Hillary Clinton, had warned investors in another CNBC appearance to dump stocks and bonds. "If you don't sell before the election, certainly do it afterwards. Government is going to be totally paralyzed regardless of who wins," he said then.
"My call stands. Sell the stocks, sell the bonds, get out of the casino," Stockman explained to CNBC in an off-camera interview. "Bonds have already cratered by nearly $2 trillion worldwide and have miles to go. This isn't a rotation into stocks, either. It's the greatest sucker's rally ever," he said.
He predicts "an unprecedented fiscal bloodbath" resulting from the $20 trillion worth of debt that the U.S. currently has on the books.
Stockman repeated his warning that Washington will be in chaos by June.
Stockman predicts:
- Ongoing disruptions from the Tea Party, which won’t allow additional deficit increases.
- Trump won’t be able to pass a bipartisan stimulus plan and fulfill his promise to repeal and replace Obamacare.
- Trump won’t be able to enact a meaningful tax cut or to develop a major infrastructure program.
- Eventual civil war within the GOP.
"So when the recession hits this summer, the Fed will be out of dry powder and fiscal policy will be paralyzed," concluded Stockman. "This time the market will crash and stay crashed."
Stockman once again advised savvy investors that gold and cash are your only safe investment options.
Days before the election, Stockman had told Bloomberg TV that he voted for Trump but was prepared for a Clinton victory.
“Trump has no policy at all," Stockman said before Trump's victory. "My argument is with the Fed, and the one thing that Trump has said is the Fed has created a massive bubble. It is artificial. It is one big, fat, ugly bubble, and it has got to change. We can't get interest rates at zero for 94 months,” he explained.
(Newsmax wire services contributed to this report).
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