Former house majority leader Gephardt warns of a possible 2,000-point drop in market within the next few weeks with bad news coming out from congress
There is some risk that the public could hear some “histrionics” from Democrats and Republicans playing to their bases as Congress works on spending cuts and tax reform, all of which could severely unsettle the markets, the former House majority leader said Wednesday.
“If it looks like that is happening you could have a couple really bad days on Wall Street,” said Dick Gephardt, the top Democrat in the upper chamber between 1989 and 1995 at an event hosted by National Journal magazine. “You could have the markets drop by 1,000 or 2,000 points.” (The event was titled “The Day After: The 2012 Election Debrief.”)
He added that there was a risk that, in the next few weeks, the public could hear some Democrats saying they won’t agree to cut domestic programs while some Republicans insisting that the U.S. should go off the cliff, cut lots of programs and ”cut up the credit card.” All, this could unsettle the markets, he said.
However, he added that it will be really difficult to get lawmakers to work together in the short time after an election and Dec. 31.
“It is hard to get the effort you need from 535 people [members of the House and Senate] to come up with some big agreement,” Gephardt said. “People are either angry, elated or exhausted.”
Boehner Would Accept New Taxes Under ‘Right Conditions’…. ‘Shoring up entitlements and reforming the tax code — closing special interest loopholes and deductions’
U.S. House Speaker John Boehner said Republicans would be willing to accept new tax revenue to reduce the nation’s budget deficit if it’s accompanied by a tax overhaul and changes to entitlement programs.
Speaking in Washington a day after President Barack Obama’s re-election, Boehner of Ohio said all sides are “closer than many think” to being able to revise the tax code.
“Shoring up entitlements and reforming the tax code — closing special interest loopholes and deductions, and moving to a fairer, simpler system — will bring jobs home and result in a stronger, healthier economy,” the speaker said, according to a prepared text.
Speaking at a packed news conference on Capitol Hill, Reid laid out an ambitious agenda for 2013 after his party’s surprisingly decisive Senate victories and President Barack Obama’s reelection bid, saying the public gave Democrats a new mandate to raise taxes on wealthy families as part of a major year-end fiscal deal. While Reid said he’s not going to “draw lines in the sand” ahead of the year-end fiscal cliff, he insisted on higher revenues.
Reid has good reason to feel ambitious. After a year of gloomy predictions for Democratic Senate candidates, the party may increase it’s majority from 53 seats to 55 seats — a stunning accomplishment considering how many of Reid’s colleagues were considered vulnerable.
“Obama ran on a higher-tax agenda,” Gross said during a “Squawk Box” interview. “Marginal income taxes go from 35 to 40 (percent), capital gains from 15 to 20, dividends from 15 to who knows what…so they could go high, high and higher.” (Read More: Economy Faces Slow Growth No Matter Who Wins Election)
Consequently, Gross said, higher dividend taxes would make those companies less attractive and thus take the stock market down 5 to 10 percent.
That’s “the ultimate danger here for the stock market,” he said. “Dividends are sheltered in 401(k)s, they’re sheltered in pension funds. At the margins investors pay dividend tax rates. To the extent that you raise them from 15 to, say, 25 (percent), that implies in terms of equaling after tax rates another 5 to 10 percent down in terms of stock prices. We’ve been very spoiled for the last 10 years.”
Gross is not alone in his concerns over tax structure.
Ron Florance, managing director of investment strategy at Wells Fargo Private Bank, said he is positioning clients for the rougher tax road ahead.
“The stock market will suffer over the 12-month period, which always happens the year after an election,” said Len Tannanbaum, CEO of Fifth Street Finance in New York.
Tannanbaum said the effects of the Federal Reserve’s quantitative easingdebt-buying program will fade this year after helping boost equity performance throughout Obama’s first term.
“The market has been propped up by these sugar highs,” he said. “QE half-trillion a year is not sustainable in the long run. The sugar high is going to end because Barack Obama is going to raise revenue and cut entitlements. The combination of the two cannot be good for the economy.”
Indeed, economists have been busy cutting numbers for future growth in the wake of Hurricane Sandy as well as the drag effects from whatever solutions are devised to avoid the fiscal cliff.
Europe Is About To Implode: Debt Crisis Is Starting To Hurt Germany Economy, Spain September Adjusted Industrial Output – 7.0% And Greek Protests Turn Violent
It was shaping up like the perfect overnight ramp following yesterday’s Goldilocks election result… and then Mario Draghi opened his mouth.
- DRAGHI SAYS DEBT CRISIS STARTING TO HURT GERMAN ECONOMY
- DRAGHI SAYS GERMAN RATES LOWER THAN THEY WOULD BE OTHERWISE
- DRAGHI: CRISIS MAKING GERMAN INTEREST RATES VERY LOW
- DRAGHI SAYS ECB’S OMT IS NOT DISGUISED FINANCING OF GOVERNMENTS – correct: it is quiteovert
End result, after surging to nearly 1.29 last night, the EURUSD plunged in minutes, and just hit 1.275, the lowest in over two months…
Germany industrial production dived 1.8 percent month-over-month in September. This was much worse than the 0.5 percent decline expected, reports Dow Jones.
An anti-austerity demonstration by more than 80,000 people in Athens degenerated into violence on Wednesday as hundreds of protesters clashed with riot police ahead of a crucial parliamentary vote on new spending cuts.
The vote is the toughest test yet for the country’s fragile four month-old coalition government, which must pass the 13.5 billion euros ($17 billion) package of measures to ensure Greece continues receiving vital bailout funds from its international creditors to avoid bankruptcy.
Hundreds of protesters hurled rocks and gasoline bombs at lines of riot police guarding Parliament, who responded with volleys of tear gas and stun grenades, and the first use of water cannon in Greece in years.
Election over let the layoff start: