‘Global markets will implode.’
Marc Faber on Squawk Box this morning.
“We will all be lucky to have 50% of the asset values that we have today.”
Watch at least the first minute of this clip for the swipe at CNBC permabulls.
The S&P 500 has already closed below its 200 day moving average for several days in a row. Could the “sell off” that has already begun become a race for the exits?
Will The Wealthy Race To Dump Stocks And Other Financial Assets Before The Fiscal Cliff Kicks In?
A lot of Americans have heard about the looming “fiscal cliff”, but most don’t really understand the specifics.
For investors, there are several key changes which will happen unless Congress does something by January 1st.
First of all, the tax rate on capital gains will go from 15 percent to 20 percent. For those with high incomes, the rate will be even higher than that thanks to a tax increase that our politicians managed to sneak into Obamacare. So, some wealthy individuals will see their capitals gains taxed at nearly 24 percent in 2013 unless something is done.
For dividends, the outlook is even more frightening. The tax rate on dividends will increase from 15 percent right now to over 43 percent for the highest income earners.
We have already seen these tax increases play into business decisions that have been made in recent months. For example, it is being reported that George Lucas potentially saved hundreds of millions of dollars in taxes by selling Star Wars to Disney this year rather than next year.
Anyone out there that wants to take advantage of the current tax rates on capital gains and dividend income better do so now, because these tax rates look like they are going to go away and they probably will not be back for a very, very long time.
According to CNBC, this makes the next couple of months an ideal time to dump stocks and other financial assets…
For many of the wealthy, 2012 is becoming a good year to sell.
They’re worried about the “fiscal cliff,” which is when tax cuts expire and spending cuts are set to go into effect at the end of the year.
Fearing an increase in capital gains and dividend taxes, many of the rich are unloading stocks, businesses and homes before the end of the year.
And the truth is that stocks simply did not have much higher that they could possibly go anyway. Anyone that is trying to “get out while the getting is good” should take heed of what Marc Faber recently told CNBC…
“The market is going down because corporate profits will begin to disappoint, the global economy will hardly grow next year or even contract, and that is the reason why stocks, from the highs of September of 1,470 on the S&P, will drop at least 20 percent, in my view.”
In fact, Faber is absolutely convinced that a full-blown stock market crash is coming no matter what happens with the fiscal cliff…
“I think the whole global financial system will have to be reset and it won’t be reset by central bankers but by imploding markets — either the currency [markets, debt market or stock markets,” he said. “It will happen — it will happen one day and then we’ll be lucky if we still have 50 percent of the asset values that we have today.”
Asked on Bloomberg Televistion whether he thinks there’s a chance for grand bargain, the former GOP presidential candidate said: “Probably zero.”
Paul said Congress can delay fiscal decisions in January.
“They can postpone big decisions in January and yet that still does not remove the uncertainty,” Paul said. “Uncertainty is a major cause of the inability for the market to get moving again and they have to revamp it in a much more detailed fashion than they are even talking about right now.”
The fear of higher taxes has put a chill on dividend-paying stocks, in what some analysts say could be an overreaction to the “fiscal cliff.”
The Bush-era tax cuts on dividends and capital gains, to 15 percent, are in the cross hairs, as congressional leaders and President Barack Obama this week start work on reshaping the tax and spending components of the so-called fiscal cliff.
(Read More: Washington Confronts ‘Fiscal Cliff’)
The cliff is the $607 billion expiration of a bundle of tax cuts and other programs, and the onset of automatic spending cuts that take place starting Jan. 1 if Congress does not act.
For dividend investors, a worst-case scenario for the wealthiest Americans would be that the upper income tax rate is returned to 39.6 percent, and dividends could then be taxed at that much higher rate, if the Bush tax cuts are left to expire.
The irony of the coincident timing of the plunge and the pending fiscal cliff decision – which as we noted here, will not be solved until the market pushes the politicians to ‘compromise’ – should not be lost on those who poo-poo such silly chartist ramifications…