Last week, the Dow Jones Industrial Average (DJI) and S & P 500 (^ GSPC) beat their all-time closing high as early as 2007. In the Sunday New York Times OP-ED, President Reagan's budget director and a former Republican Congressman David Stockman, wrote: "cheers, instead we should be very afraid."
Stockman laid his prediction: "the latest Wall Street bubble, exaggerated a shocking flood of fake money from the Fed, rather than a real economic benefits will explode in the coming years.
(He was concerned that the Fed fuel bubbles from his new book, large deformation is a theme: the corruption of capitalism in the United States.)
Blackman told the "the daily Beijing bond market, stock market, risk assets - they are completely driven by the Federal Reserve."
He believes that the Fed is responsible for market trajectory. This in the context of measures to overestimate, such as Robert Shiller CAPE ratio, which indicates that the the stock valuation similarities, in 2007, but far from the level in the late 1990s. In addition, the intention of Warren Buffett's favorite valuation indicators have not yet reached at the end of 1999 or 2007 level.
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With the Federal Reserve leading the charge, he mispricing risk.
"I think that the the undiscounted market risk, the real economy, we upwind from the world," he said. These adverse factors include: the ending of the construction boom in China, Japan fall into the "old age bankruptcy," the euro zone crisis, retiring baby boom generation in the United States
"When the Fed in the market, I think, this will be the beginning of the end lose confidence," he pointed out that "in the bond market, it will start."
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However, when it comes to the bond market, it has been very resilient, in the face of the public debt of $ 16 trillion. 10-year Treasury note yield has been hovering near historic lows. Stockman think this is a market run in front of the Fed's results. "
Stockman suggested that people in cash hidden in his op-ed "in the market," However, this is not the first time he had to issue such a warning. For example, in March last year, he said in an interview to talk about the stock market's risk, he says, he has his money in cash offer. However, if you follow his advice, you may have missed some solid stock market gains. The total return of the S & P 500 index of nearly 14% in the past year.
In this case, the stock market seems to be a nice place.
"This is what they told me in late 2007 and early 2008," said Stockman's response. "About seven months later, people have lost 45-70% of their net worth. If you are in the Russell 2000, Bernanke wants you, you crushed down by 60% - 15 trading days . "
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As for hidden cash, he said his opinion, "I would rather preserve capital, is safe and I do not think another two, four, lost 50, 60, 70% of the crash, 10% is worth it."
 



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