by David Stockman, International Man:

International Man: Decades of money printing have created enormous distortions in the market. It seems that the coronavirus popped the Everything Bubble. Where do you see the stock market going?

David Stockman: I’d say it’s going in a new direction, and it’s not up year after year, month after month, day after day.

It’s not going to be a world where buying the dip is a no-brainer thing to do.

I think the stock market was insanely valued when the S&P 500 peaked at 3,380 on February 19th.

It has got a long way yet to correct.

Who knows what earnings are going to be?

No one knows how long these lockdowns will last.

You look at the news flow every day, and it’s like a massive political arm-wrestling match between the White House and the Democratic governors and mayors.

I’m sure in their minds, these local and state politicians, think they’re serving the public good and protecting the safety and lives of their citizens. But, the fact is, back in the unstated regions of their brains, they’re focused on taking down the US economy, which was Trump’s only claim to reelection.

I think when push comes to shove in the great human struggle of things in our political system, this lockdown lunacy is going to be prolonged far longer than you can imagine, and the economic loss is going to be staggering.

Even the Wall Street brokers now—Goldman Sachs and the rest of them—are projecting a 25 to 30% GDP collapse on an annualized basis in Q2.

Just a few days ago, they were all expecting this to be one and done, and that in the next quarter it’ll level out—but that view is fading very fast.

We have a hand-to-mouth economy. By that, I mean no business could afford cashflow interruption because they had levered their balance sheet to the hilt or had spent most of their cashflow available to buy back their stock.

So, once you start these chain reactions, you have incredibly vulnerable business balance sheets in America that collectively have $16 trillion of debt.

I’m not talking about banks or financial institutions now—just operating businesses.

That’s not to mention American households—half them don’t even have $300 to last a week or two.

Overwhelmingly, 90% of the households in America have been told that they’re the Energizer spending bunny of American economics, and if you don’t have enough wages this week, borrow some money on your credit card and just keep on spending.

This has created a hand-to-mouth economy that has no immunities—if you want to use that metaphor in an economic sense. It cannot cope, and it has no antibodies to fight back against the interruption of paychecks and cash flow.

There is going to be broken furniture everywhere as it filters through an economy that is sitting with $74 trillion of public and private debt on its back. That’s how much we have today.

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