US markets crash December 15th if no renewal of capital gains tax
Posted on 04 December 2010 with 2 comments from readers
US financial markets will drop sharply by December 15th for the simple reason that it is unlikely that capital gains tax reductions from the Bush era will be renewed in time to prevent a year-end sell off, the 5 Minute Forecast from Agora Financial reminds its readers today.
Investors will therefore want to sell out to realize profits at the old tax rate. And December 15th is the very latest they can sell and close their books.
Unemployment rate up
Meanwhile, the unexpected rise in unemployment to 9.8 per cent has come as a nasty reminder about the real economic outlook for 2011, a jobless recovery of no more than two per cent growth that will not be enough to sustain current share prices.
‘Capital gains tax rate will increase from 15% to 20% if the tax cuts are not extended,’ analyst Daniel Clifton of Strategas Research Partners told the 5 minute forecast. ‘The last time the capital gains tax rate increased – on January 1st 1987, from 20 to 28 per cent – investors realized their gains at the lower tax rate.’
So much then for Black Swans, Hindenburg Omens and financial astrologers, it may well be the humble tax code that finally breaks the long rally in US stocks.
Growth too low
However the jobs number last week was a shocker. US stocks have written in higher growth for next year and that just does not appear to be happening. Better confidence surveys are not the same thing, and upticks in housing or retail sales are problems flashes in the pan rather than proper green shoots.
Indeed, all that is still consistent with growth, just not enough of it to sustain share prices at present levels.
2 Comments posted by readers:
Hang on to your gold because Ben Bernanke basically told CBS News, late Friday, that he would print an infinite amount of money (QE3, 4, 5…?),until he drives asset prices up. This shows that he is desperate. He knows what will happen if the US Congress starts cutting the budget next year, another recession, with a possible spiral into a deflationary depression. The Dow went up immediately on the news, despite the increase in the unemployment rate. Alan Greenspan said on CNBC , Friday morning, that until the sense of fear ,now in the markets is gone, ‘THIS ECONOMY IS GOING NOWHERE.’
This bad US employment news will force the Congress to extend the unemployment benefits, renew the Bush tax cuts for everyone for 2 years, and possibly pass a law lowering business payroll taxes. Watch the Federal budget deficit for 2011! They just might get that stack of $100 bills of the National debt to 1,000 miles high.
All that should drive down the dollar. It normal times ,it might crash, but the debt crisis in Europe will keep it from decreasing too much. The USA is very lucky that the euro is in big trouble right now. Gold could hit $1,600 late next year. Oil will be about $120 a barrel, unless the ECB & IMF let Europe melt down, and that starts another worldwide banking crisis. The potential black swans are getting as thick as mosquitoes in the nearby Honey Island Swamp. I’m glad that I don’t trade stocks, or I would have to keep regular hours. Bob Pisani ,a CNBC reporter on the floor of the NY stock exchange said Friday morning, “The argument of the bears is, heads up, stocks win. Tails up, stocks win. This is a joke. How long are you going to keep this little game going here? And even the bulls are a little bit concerned about that. Everyone is arguing though, that it is definitely working, at least through the end of the year.” Money printing is like the Internet & housing bubbles. It works, until it doesn’t. Then, watch out. But that could be a couple of years down the road. Or it could be next month.
Don’t download Microsoft Internet Explorer 9 yet. It doesn’t work that well right now. At least ,not on a HP laptop with AT&T broadband service.
And if you want to get really depressed, read the monthly Bill Gross summary on the PIMCO USA website, http://www.pimco.com.us Allentown.
I said before that US stocks would be climbing and sure enough they did just that this last week. My other posts about the market climbing were edited and did not post. I called the gains before we gained last week when others were calling for a crash. Some how these vanishing posts remind me of Wiki lol.. Market manipulation these days is no different than censorship where we all know it is taking place but get all defensive about it lol.. Fact is we have a huge stimulus package with POMO buying taking place of which I posted a link for to show and prove (link was removed though) lat week to show that POMO purchases were planned for last week and sure enough I was eight about my calls.