Tax reform plan is pipe dream, stocks to plunge 40-70%

At the height of the 2007-2009 financial crisis, the S&P 500 Index plummeted as much as 58 percent. It happened in March 2009.

“This market at 24 times GAAP earnings, 21 times operating earnings, 100 months into a business expansion with the kind of troubles you have in Washington, central banks [are] going to the sidelines,” he said. “There’s very little reward, and there’s a heck of a lot of risk.”

Stockman argued that President Donald Trump’s business-friendly tax reform bill, which was unveiled Wednesday, won’t prevent a damaging sell-off. He previously said Wall Street is “delusional” for believing it will even be passed.

“This is a fiscal disaster that when they [Wall Street] begin to look at it, they’ll see it’s not even remotely paid for. This bill will go down for the count,” said Stockman.

He said White House economic advisor Gary Cohn and Treasury Secretary Steve Mnuchin “totally failed to provide any detail, any leadership, any plan. Both of them ought to be fired because they let down the president in a major, major way.”

And, it’s not just Washington dysfunction and Fed policy that could ultimately make Stockman’s long-held bearish prediction a reality. He says there will be a catalyst, but it’s unknown exactly what it will be.

“You get a black swan in the old days, or maybe you get an orange swan now, the one in the Oval Office who can’t seem to stop tweeting and distracting the whole process from accomplishing anything,” Stockman said of President Donald Trump.

The White House did not respond to CNBC’s request for comment.

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