People ask when to get out of the stock market - looks like soon

HartfordLlion

Well-Known Member
Sep 28, 2001
21,858
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Throughout this Covid rally, I've always said don't fight the Fed. BUT, having to finance all trillions of debt is going to drive interest rates up, effectively causing tightening in the credit markets. Eliminating capital gains for those earning over a million is going to cause big investors to pull money out of the market if other investments look attractive.

https://finance.yahoo.com/news/stock-market-news-live-updates-april-22-2021-221304988.html

Yahoo Finance

Stocks sink after report says Biden will propose higher capital gains tax on the wealth​


Stocks erased earlier gains to trade sharply lower after Bloomberg reported Thursday afternoon that President Joe Biden would propose increasing the corporate tax rate on wealthy individuals.
The Dow dropped more than 250 points, or 0.7%, immediately following the report, after trading just slightly lower earlier. The S&P 500 and Nasdaq erased gains to trade at session lows.
Biden's plan would involve increasing the capital gains tax rate on the wealthy to 39.6%, according to the report from Bloomberg citing people familiar with the matter. This would apply to those earning at least $1 million. The current base capital gains tax rate is 20%.
Earlier, in the session, stocks were little changed and struggled for direction. Stocks have churned in recent sessions as investors digested a bevy of corporate earnings results and awaited additional reports, more economic data and more commentary from Federal Reserve officials in the coming weeks.
Corporate earnings have so far exceeded Wall Street's even lofty expectations, as companies benefited from both a pick-up in revenue as demand recovered, and as cost-cutting measures implemented during the pandemic boosted their bottom lines. Chipotle (CMG) shares edged higher in early trading after the restaurant company posted first-quarter earnings that blew away expectations late Wednesday, with digital sales more than doubling.
With stocks hovering near all-time highs and the early stages of the post-pandemic recovery already under way, any additional moves higher will likely come with some difficulty, some analysts said.
"What we have is the absence of a catalyst. Everything that we’ve done over the last twelve months has been to build up to this point, to get this recovery, to get a very, very strong second-quarter GDP, which we think could be upwards of 10%," Jim Caron, Morgan Stanley investment management fixed income portfolio manager, told Yahoo Finance. "But after that, things start to slow down. It doesn’t mean that the data gets bad, it just means on a relative basis that the third quarter will be weaker will the second quarter and the fourth quarter may be weaker than the third quarter."
Looking forward, the contours of additional government spending and monetary policy support will likely serve as key drivers, Caron added.
"We have an infrastructure spending plan that’s also coming out ... And once we have that, we’ve already spent $5.8 trillion, we’re going to spend some more, we’re going to have a very large deficit, so then what comes next? The next 12 months of fiscal spending is probably going to be less than the last 12 months," Caron added. "So that seems like a net tightening. And then we have Fed tapering to throw into the whole thing as well. So the market’s realizing that it has some hard work to do."
Others offered a similar view.
"I do think that returns for equities are certainly going to be more subdued. I mean, we did have a very strong recovery from the bottom that we’ve seen. But now we are bumping up against price targets. We’re probably about 5% away from our year-end price target," Anastasia Amoroso, JPMorgan Private Bank head of cross asset thematic strategist, told Yahoo Finance. "It’s possible that as long as the earnings revisions come through and they’re higher, we’ll revise that. But I think there’s going to be not as big of a beta rally going forward. There’s going to be more discerning investments needed in the markets."
 

ForesterGump

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Jul 21, 2012
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I heard an interesting statistic that in the previous 12 yrs, there was a half trillion new dollars invested into the stock market. In the past 4 months, there has been more than that in new money put into the market.

Where did it come from? The stimulus money. People have excess cash and are investing seemingly with the theory that although stocks are high, they'll just sell when they are higher. What happens when the stimulus money runs out?
 
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NJPSU

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May 29, 2001
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We are certainly due for a pullback but people have predicting another big crash since the market started to recover in 2009.

The Fed will throw the kitchen sink at any type of major market decline.
 

HartfordLlion

Well-Known Member
Sep 28, 2001
21,858
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We are certainly due for a pullback but people have predicting another big crash since the market started to recover in 2009.

The Fed will throw the kitchen sink at any type of major market decline.

LOL. The Fed has never been able to stop a major decline that wasn't their own making. They best they can do is make liquidity available so banks and other investment don't fail in mass. And there has only been one or two instances where they were able to mute a decline if their own making. The market is way too big for the Fed to throw money at to stop anything.
 
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katchthis

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Sep 3, 2004
22,363
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We are certainly due for a pullback but people have predicting another big crash since the market started to recover in 2009.

The Fed will throw the kitchen sink at any type of major market decline.
Bro their best punch is low interest rates, and they can't move the needle much with were they are now.
 
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rumble_lion

Well-Known Member
Aug 7, 2011
23,137
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Throughout this Covid rally, I've always said don't fight the Fed. BUT, having to finance all trillions of debt is going to drive interest rates up, effectively causing tightening in the credit markets. Eliminating capital gains for those earning over a million is going to cause big investors to pull money out of the market if other investments look attractive.

https://finance.yahoo.com/news/stock-market-news-live-updates-april-22-2021-221304988.html

Yahoo Finance

Stocks sink after report says Biden will propose higher capital gains tax on the wealth​


Stocks erased earlier gains to trade sharply lower after Bloomberg reported Thursday afternoon that President Joe Biden would propose increasing the corporate tax rate on wealthy individuals.
The Dow dropped more than 250 points, or 0.7%, immediately following the report, after trading just slightly lower earlier. The S&P 500 and Nasdaq erased gains to trade at session lows.
Biden's plan would involve increasing the capital gains tax rate on the wealthy to 39.6%, according to the report from Bloomberg citing people familiar with the matter. This would apply to those earning at least $1 million. The current base capital gains tax rate is 20%.
Earlier, in the session, stocks were little changed and struggled for direction. Stocks have churned in recent sessions as investors digested a bevy of corporate earnings results and awaited additional reports, more economic data and more commentary from Federal Reserve officials in the coming weeks.
Corporate earnings have so far exceeded Wall Street's even lofty expectations, as companies benefited from both a pick-up in revenue as demand recovered, and as cost-cutting measures implemented during the pandemic boosted their bottom lines. Chipotle (CMG) shares edged higher in early trading after the restaurant company posted first-quarter earnings that blew away expectations late Wednesday, with digital sales more than doubling.
With stocks hovering near all-time highs and the early stages of the post-pandemic recovery already under way, any additional moves higher will likely come with some difficulty, some analysts said.
"What we have is the absence of a catalyst. Everything that we’ve done over the last twelve months has been to build up to this point, to get this recovery, to get a very, very strong second-quarter GDP, which we think could be upwards of 10%," Jim Caron, Morgan Stanley investment management fixed income portfolio manager, told Yahoo Finance. "But after that, things start to slow down. It doesn’t mean that the data gets bad, it just means on a relative basis that the third quarter will be weaker will the second quarter and the fourth quarter may be weaker than the third quarter."
Looking forward, the contours of additional government spending and monetary policy support will likely serve as key drivers, Caron added.
"We have an infrastructure spending plan that’s also coming out ... And once we have that, we’ve already spent $5.8 trillion, we’re going to spend some more, we’re going to have a very large deficit, so then what comes next? The next 12 months of fiscal spending is probably going to be less than the last 12 months," Caron added. "So that seems like a net tightening. And then we have Fed tapering to throw into the whole thing as well. So the market’s realizing that it has some hard work to do."
Others offered a similar view.
"I do think that returns for equities are certainly going to be more subdued. I mean, we did have a very strong recovery from the bottom that we’ve seen. But now we are bumping up against price targets. We’re probably about 5% away from our year-end price target," Anastasia Amoroso, JPMorgan Private Bank head of cross asset thematic strategist, told Yahoo Finance. "It’s possible that as long as the earnings revisions come through and they’re higher, we’ll revise that. But I think there’s going to be not as big of a beta rally going forward. There’s going to be more discerning investments needed in the markets."

BUT, having to finance all trillions of debt is going to drive interest rates up, effectively causing tightening in the credit markets.

No, financing the debt does not drive up interest rates. That is not how our monetary system works.

The debt has risen from 900 billion in 1980 to 26 trillion dollars in 2020 and interest rates during that time period dropped to historical lows. The "crowding out" theory has no basis in our current banking system. It doesn't work that way.

fredgraph.png
 
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2lion70

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Gold Member
Jul 1, 2004
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Does a profit made in Capital Gains spend any differently than money earned in salary?
 

ForesterGump

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Jul 21, 2012
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The banks are actually in fairly decent shape compared to the last major market downturn. The Fed has been paying them interest in their overnight funds that they would normally pay out to other banks. Banks have stopped financing marginal borrowers and have plenty of cash on hand. Morgan Stanley has $1.88 trillion in deposits, and $1.01 in outstanding loans. Deposit to loan ratio of 2:1. Bank of America is the same. Bank deposits are at $3 trillion.

Instead of loaning money to make the economy cook, consumers will use their existing funds. Big ticket items would probably require financing. The Fed will try to keep the interest rates down to keep their interest payments down.
 

junior1

Well-Known Member
May 29, 2001
6,720
7,399
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BUT, having to finance all trillions of debt is going to drive interest rates up, effectively causing tightening in the credit markets.

No, financing the debt does not drive up interest rates. That is not how our monetary system works.

The debt has risen from 900 billion in 1980 to 26 trillion dollars in 2020 and interest rates during that time period dropped to historical lows. The "crowding out" theory has no basis in our current banking system. It doesn't work that way.

fredgraph.png
different question...when inflation rises above the 2% target....the fed will then raise interest rates in order to tamp down the excesses, right?
 

NJPSU

Well-Known Member
May 29, 2001
44,638
15,790
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LOL. The Fed has never been able to stop a major decline that wasn't their own making. They best they can do is make liquidity available so banks and other investment don't fail in mass. And there has only been one or two instances where they were able to mute a decline if their own making. The market is way too big for the Fed to throw money at to stop anything.
They just did it last March. Do you really think the market would have had that unbelievable snapback if the Fed hadn’t intervened in the bond market? They were buying corporate debt.

I’m not saying the Fed will always be effective but they sure as hell are going to try. Now more than ever.
 

NJPSU

Well-Known Member
May 29, 2001
44,638
15,790
1
Bro their best punch is low interest rates, and they can't move the needle much with were they are now.
They can and will buy equities if the situation gets dire enough. The genie is out of the bottle the government and the Fed will do anything and everything to prop up markets now. And yes technically they aren’t allowed to buy equities but that didn’t stop them from buying corporate debt or at least indicating they were willing to if needed.
 

83wuzme

Well-Known Member
Apr 27, 2005
13,276
12,457
1
I heard an interesting statistic that in the previous 12 yrs, there was a half trillion new dollars invested into the stock market. In the past 4 months, there has been more than that in new money put into the market.

Where did it come from? The stimulus money. People have excess cash and are investing seemingly with the theory that although stocks are high, they'll just sell when they are higher. What happens when the stimulus money runs out?
“ What happens when the stimulus money runs out “ ?
Another stimulus until we can’t service our debt interest.
Don’t worry, the Leftists running our country are not only Woke, but also financial geniuses.
 
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NJPSU

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May 29, 2001
44,638
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“ What happens when the stimulus money runs out “ ?
Another stimulus until we can’t service out debt interest.
Don’t worry, the Leftists running our country are not only Woke, but also financial geniuses.
They will just print money to service the debt interest. The end result could be runaway inflation but there is zero percent chance they “can’t service our debt interest”.
 
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rumble_lion

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Aug 7, 2011
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“ What happens when the stimulus money runs out “ ?
Another stimulus until we can’t service our debt interest.
Don’t worry, the Leftists running our country are not only Woke, but also financial geniuses.

Another stimulus until we can’t service our debt interest.

The federal government can always service it's debt interest. Or it can just have the fed buy back all the treasuries. Or it could just swap out all the treasuries for cash.
 
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rumble_lion

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Aug 7, 2011
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different question...when inflation rises above the 2% target....the fed will then raise interest rates in order to tamp down the excesses, right?

It will do what is thinks it has to do to fulfill it's Congressional mandate:

statutory mandate from the Congress of promoting maximum employment, stable prices, and moderate long-term interest rates.​
 

rumble_lion

Well-Known Member
Aug 7, 2011
23,137
5,648
1
I heard an interesting statistic that in the previous 12 yrs, there was a half trillion new dollars invested into the stock market. In the past 4 months, there has been more than that in new money put into the market.

Where did it come from? The stimulus money. People have excess cash and are investing seemingly with the theory that although stocks are high, they'll just sell when they are higher. What happens when the stimulus money runs out?


that although stocks are high, they'll just sell when they are higher.

People have been saying that about stocks for over a hundred years. If they didn't why would anyone ever buy them? No one buys a stock with the strategy of selling it for less.......
 

m.knox

Well-Known Member
Gold Member
Aug 20, 2003
107,967
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We are certainly due for a pullback but people have predicting another big crash since the market started to recover in 2009.

The Fed will throw the kitchen sink at any type of major market decline.

It certainly didn't pull back under Trump's pro employment agenda.
 

katchthis

Well-Known Member
Sep 3, 2004
22,363
7,414
1
Does a profit made in Capital Gains spend any differently than money earned in salary?
Well you have already paid earned income on your initial investment egg . IDK how old you are, but the bar keep changing on how much you have to save to have a self-funded retirement. 20% Capital Gains is a manageable amount for a retiree to pay off your annual withdrawals. 40% really increases the amount you would need to retire. If that increase in taxes causes the individual to work for more years, that clogs the rungs of the ladder of success for the next generation to move up.
 

Ski

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May 29, 2001
9,781
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different question...when inflation rises above the 2% target....the fed will then raise interest rates in order to tamp down the excesses, right?

Not until right after the next election. They would rather the economy burn hot than risk tanking it right before an election where it would harm the Democrats on their team running for election.
 

Cosmos

Well-Known Member
May 29, 2001
25,446
17,959
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I heard an interesting statistic that in the previous 12 yrs, there was a half trillion new dollars invested into the stock market. In the past 4 months, there has been more than that in new money put into the market.

Where did it come from? The stimulus money. People have excess cash and are investing seemingly with the theory that although stocks are high, they'll just sell when they are higher. What happens when the stimulus money runs out?

I relate this story again only because it's apropos. JFK's dad, Joe Kennedy Sr., made his fortune in stocks. Just before the 1929 crash he stopped to get his shoe shined. The shoe shiner was bragging up stocks, saying he was going to get in. Joe Kennedy promptly went to his office, called his broker and unloaded his shares. He surmised if the common man was getting in then the market was overbought. He was right. It preserved the family fortune.

That's all I got to say about that.
 
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HartfordLlion

Well-Known Member
Sep 28, 2001
21,858
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BUT, having to finance all trillions of debt is going to drive interest rates up, effectively causing tightening in the credit markets.

No, financing the debt does not drive up interest rates. That is not how our monetary system works.

The debt has risen from 900 billion in 1980 to 26 trillion dollars in 2020 and interest rates during that time period dropped to historical lows. The "crowding out" theory has no basis in our current banking system. It doesn't work that way.

fredgraph.png

Currently we are in a deflationary cycle with the boomer retiring, that is the only thing currently saving us from a return to high inflation and interest rates. Boomer redoing their asset allocations to more fix income is keeping interest rates low. That influence is tapering off. The fed can buy all the debt they want. That only injects more money into the financial system and will eventually drive the dollar down and stokes inflation. The fed buying debt at this rate is only a recent occurrence. The absolute value of the federal debt is not necessarily the best measure, the % of GDP is significantly better. We are at 100% currently, an almost 25% increase due to the pandemic. The Biden admin wants to drive that significantly higher than that which will cause issues. All we need is for the dollar to go into the shitter and inflation taking off and we are in big trouble. The other issue is the % of tax receipts going toward servicing the debt. Sooner than later it's going to bite us.
 
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83wuzme

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Apr 27, 2005
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Currently we are in a deflationary cycle with the boomer retiring, that is the only thing currently saving us from a return to high inflation and interest rates. Boomer redoing their asset allocations to more fix income is keeping interest rates low. That influence is tapering off. The fed can buy all the debt they want. That only injects more money into the financial system and will eventually drive the dollar down and stokes inflation. The fed buying debt at this rate is only a recent occurrence. The absolute value of the federal debt is not necessarily the best measure, the % of GDP is significantly better. We are at 100% currently, an almost 25% increase due to the pandemic. The Biden admin wants to drive that significantly higher than that which will cause issues. All we need is for the dollar to go into the shitter and inflation taking off and we are in big trouble. The other issue is the % of tax receipts going toward servicing the debt. Sooner than later it's going to bite us.
Don’t worry, Marx has this.
 

ao5884

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Oct 1, 2019
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Bubble is going to burst u can feel it. Biden going after potential gains doesn't help.
 

HartfordLlion

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Sep 28, 2001
21,858
14,756
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Up 227 today.

I'm happy it's going up. Reallocated some $$$ to cash yesterday to keep my portfolio balanced at the % I want. If Biden does get this capital gains pushed through, it may be a great time to pick up some high flyers that are doing well in this economy as the rich take their capital gains before the end of the year.
 

NJPSU

Well-Known Member
May 29, 2001
44,638
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I'm happy it's going up. Reallocated some $$$ to cash yesterday to keep my portfolio balanced at the % I want. If Biden does get this capital gains pushed through, it may be a great time to pick up some high flyers that are doing well in this economy as the rich take their capital gains before the end of the year.
Glad to see you enjoying the Biden prosperity. All are welcome.
 

HartfordLlion

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Sep 28, 2001
21,858
14,756
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Glad to see you enjoying the Biden prosperity. All are welcome.

You are such an idiot. the only thing Biden has done so far is not screw up what Trump did with the economy. Obviously that is changing. Check in a year or two from now and really find out how Biden is really doing.
 
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