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Thread: Delaying Tax Vote Could Crash Stock Market

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    Delaying Tax Vote Could Crash Stock Market

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    By Paul Bedard
    Posted: December 2, 2010
    Failure by Congress to extend the Bush tax cuts, especially locking in the 15 percent capital gains tax rate, will spark a stock market sell off starting December 15 as investors move to lock in gains at a lower rate than the 20 percent it would jump to next year, warn analysts.
    While it is unclear how bad the sell off could be, it could wipe out the year's gains, they warn.
    "Capital gains tax rate will increase from 15 to 20 percent if the tax cuts are not extended. The last time the capital gains tax rate increased--on Jan. 1, 1987 from 20 to 28 percent--investors realized their gains at the lower tax rate," said Daniel Clifton at a Washington partner at Strategas Research Partners. "We would expect a similar effect this time around as investors see the tax rate going up and choose to realize their gains and incur the 15 percent tax."
    In a memo to clients, Clifton says that the date most clients are focused on is December 15th for a deal in Congress before beginning to sell. One reason: Many stock options expire that day and investors have to act.
    This should be a wake up call to every lover of American liberty that we need to put the Democrats out of business permanently. There is not doubt that their behavior for last two years, and especially after the latest election, they have no love for their country. The lying, the corruption and the disrespect for the vote; they need to go. They know that this can happen, and want everyone's retirement to get ****ed up, so they can hash more savior plans to make people dependent on government.
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    Re: Delaying Tax Vote Could Crash Stock Market

    Quote Originally Posted by American View Post
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    This should be a wake up call to every lover of American liberty that we need to put the Democrats out of business permanently. There is not doubt that their behavior for last two years, and especially after the latest election, they have no love for their country. The lying, the corruption and the disrespect for the vote; they need to go. They know that this can happen, and want everyone's retirement to get ****ed up, so they can hash more savior plans to make people dependent on government.
    Even if the scheduled increase in the capital gains tax rate does take place, a crash really isn't likely. There will be portfolio shifting (away from low-return stocks and those with speculative outlooks). High return stocks that would continue to produce net appreciation even after considering the tax rate change would not suffer much.

    Going back to the larger increase to which Mr. Clifton referred, the Dow rose 22.6% in 1986. In the weeks before the capital gains tax rate increase, the Dow sold off 3.0%. However within the first two days in January 1987, it more than made back those losses.

    Overall, some kind of sell-off would probably be more likely than not, but a crash is not likely. Given the weaker macroeconomic situation today than in 1987, it might take somewhat longer for the market to reverse the losses that occurred in any pre-captital gains tax rate hike sell-off.

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    Re: Delaying Tax Vote Could Crash Stock Market

    Quote Originally Posted by donsutherland1 View Post
    Even if the scheduled increase in the capital gains tax rate does take place, a crash really isn't likely. There will be portfolio shifting (away from low-return stocks and those with speculative outlooks). High return stocks that would continue to produce net appreciation even after considering the tax rate change would not suffer much.

    Going back to the larger increase to which Mr. Clifton referred, the Dow rose 22.6% in 1986. In the weeks before the capital gains tax rate increase, the Dow sold off 3.0%. However within the first two days in January 1987, it more than made back those losses.

    Overall, some kind of sell-off would probably be more likely than not, but a crash is not likely. Given the weaker macroeconomic situation today than in 1987, it might take somewhat longer for the market to reverse the losses that occurred in any pre-captital gains tax rate hike sell-off.
    the real slap is going to be on people who worked hard and invested and no longer are working and will see taxes on their dividends go up well over 100%



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    Re: Delaying Tax Vote Could Crash Stock Market

    Quote Originally Posted by TurtleDude View Post
    the real slap is going to be on people who worked hard and invested and no longer are working and will see taxes on their dividends go up well over 100%
    well then perhaps they should get off their lazy buts and get back to work. So they wont have to pay as much in taxes
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    Re: Delaying Tax Vote Could Crash Stock Market

    Quote Originally Posted by Lord Tammerlain View Post
    well then perhaps they should get off their lazy buts and get back to work. So they wont have to pay as much in taxes
    that is one of the most stupid things I have seen on this board.

    if they work that will be taxed at 40% thanks to your dem masters



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    Re: Delaying Tax Vote Could Crash Stock Market

    Quote Originally Posted by TurtleDude View Post
    the real slap is going to be on people who worked hard and invested and no longer are working and will see taxes on their dividends go up well over 100%
    I agree. But I was only commenting that a tax policy-driven stock market crash is not likely.

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    Re: Delaying Tax Vote Could Crash Stock Market

    Quote Originally Posted by American View Post
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    This should be a wake up call to every lover of American liberty that we need to put the Democrats out of business permanently. There is not doubt that their behavior for last two years, and especially after the latest election, they have no love for their country. The lying, the corruption and the disrespect for the vote; they need to go. They know that this can happen, and want everyone's retirement to get ****ed up, so they can hash more savior plans to make people dependent on government.
    So it would start declining in the last couple weeks in December, then bounce right back in January. I'm not seeing how that "****s up everyone's retirement," unless you were already planning on withdrawing your entire life savings from the stock market in the last two weeks of December and couldn't possibly wait a couple weeks longer.
    Last edited by Kandahar; 12-03-10 at 01:49 PM.
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    Re: Delaying Tax Vote Could Crash Stock Market

    Quote Originally Posted by Lord Tammerlain View Post
    well then perhaps they should get off their lazy buts and get back to work. So they wont have to pay as much in taxes
    yeah. darn retirees; thinking that they should enjoy what they have earned rather than greeting at walmart....

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    Re: Delaying Tax Vote Could Crash Stock Market

    Quote Originally Posted by donsutherland1 View Post
    I agree. But I was only commenting that a tax policy-driven stock market crash is not likely.
    i don't doubt we could see a sell-off of items that folks were looking to cash in on soon anyway; but a crash? i would doubt it.

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    Re: Delaying Tax Vote Could Crash Stock Market

    And the award for most ridiculously sensationalist, hyperbolic thread of the day goes to.....

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