October
crashes
The U.S. economy is going to face a
forthcoming and hostile threat. The financial projections indicate that the
stock market will buckle -- I'm talking about a potential 10% loss in a single
day of trading. The market will bear the brunt of the attack. You could see the
major U.S. indexes lose half of their value -- or more. The U.S. government is
fully aware of the threat -- yet it chooses to do nothing about it.
On Oct. 1 US is going to
suffer an extremely destructive financial event, a disastrous one-day loss in
the economy this has happened only thrice in the history.
·
Great Depression: October
28 & 29, 1929 --
·
"Black Monday" : October 19, 1987,
Let me explain what i figured out...
Debt Ceiling:
In July and August US had an
earthquake & a storm in the same week. Congress tried its best to lead the
U.S. economy but US Faced government-spending limit earlier than expected, federal
debt ceiling were raised due to this crazy weather event. But it didn't matter
to investors at that time. The
market remained bullish, this whole thing ended in an awful announcement from
Standard & Poor's on Aug. 5, 2011:
“A
downgrade in the U.S Credit rating.”
The credit of the United
States was called into question for the first time. Although it was from AAA+
to AA+, it was a major announcement reflecting that the effectiveness,
stability and predictability of American policymaking and political institutions
have weakened.
As soon as the news spread Dow
dropped 650 points pertaining to a nearly 5.5%
loss in one day. The Dow lost 11.6%
of its value, over a 10-day period in the beginning of August, the largest loss
since October 2008's meltdown.
“History repeats itself, first as tragedy,
second as farce.”
Karl Max
History is going to repeat
itself, this time the results could be more devastating. The White House expected that on Sept. 30, 2012, U.S. government debt
will be $16.3339 trillion."
But Congress is well short, nearly by two months.
That means US is going to hit
the debt ceiling in early October... With a lot
of government funds going out on the first of the month, it's likely it’ll hit
the ceiling. Extended emergency unemployment
benefits and the Medicare doc fix
have already increased U.S. borrowing more than expected.
If we see the history the
stock market was drastically hurt by the debt ceiling provision. So, what do
you expect will happen this time????? -- in the last month of the election?
Last year, S&P dropped the
U.S rating because of the wobbly government. I doubt, its view will not be
different this year too.
According to CNNMoney:
"Ratings agencies have
made clear it would be a negative for the U.S. credit rating if lawmakers
simply canceled some of the cuts and didn't offset them with other budget
cuts."
The question here is that
ʡ
What will be the other
two ratings agencies, Moody's and Fitch, point of view?
ʡ
Could S&P downgrade
U.S. debt any further?
The market is just waiting for
a real time bad news to shift from a steady into full-scale bear market mode.
The stock market could see a
potential double-digit decline in Oct.,
after US reaches the debt ceiling, -- making it one of the largest losses in history.
U.S is on the verge of the
largest tax increase in history!!...
As a result of the financial
distress, a new tax rate will go into effect at the end of this year. It will
increase. SmartMoney and The New York Times have dubbed it "taxmageddon" for the negative
impact it will have on the economy.
Rise in taxes leads to slow
down in the economy --" These tax hikes will affect not only very rich,
Middle-class citizens will suffer, as well.
But this has nothing to do
with the stock market...There are a some
other provisions in these tax hikes that will punish investors and corporations
and sink down the stock market.
·
Long-term capital gains
taxes will go up to 60%...
·
Tax on dividends could
triple for some Americans.
These tax implications will obstruct
the stock market and shred it of its value. Money will pour out in multitudes.
We expect to see high trading volumes in the form of massive sell-off creating
a panic as everyone will be trying to get out of the door at the same time.
Blue-chip stocks -- especially
ones that pay steady dividends -- are the
targets of taxmageddon.
Everything coming for the
stock market is bad. In the near term, you will gain nothing by investing in
stocks.
“And
just like those infamous October crashes, this one-day loss will be just the
start.”
Iqbal. A et al. (2011) examined the interrelationship
between US stock market and emerging markets including Pakistan and India. By
employing Granger Causality Test,
studies showed that there is unidirectional
causality from US stock exchange to Pakistan and Indian stock
exchange.
With the reference of the study it illustrates that there
is short run impact of US stock exchange on Pakistan stock exchange. Which
shows that, any trend flowed in US market cause and effects the Pakistan stock
market as well.
