Will Government Halt Stock Trading, Cut Capital Gains Tax To Try To Stem Stocks Decline?

Just as we predicted last month in our September 15th post entitled “Equity Market Being Used As Source Of Funds By Financial Institutions,” equity prices have fallen dramatically over the past several weeks as the largest financial institutions from across the globe rushed to liquidate their largest positions to meet margin calls, satisfy redemptions, and stave off ultimate failure. Next stage of the meltdown?

Watch for a global halt of all equity markets (including all US markets) as all markets now trading on absolute fear, and watch for the government to propose a MAJOR cut in capital gains taxes in an attempt to stem the slide in equities. This tax cut proposal will likely be THE rally-inducing event the market has been waiting for as the potential return on equities now becomes perceived as significantly higher than that of treasury bonds now producing yields near all time lows.

Remember this is an election year and there is a confluence of very strong forces battling it out within the financial system right now. Republicans have wanted to slash capital gains taxes for a very long time now, and with a meltdown in financial markets, they now have the excuse they’ve been looking for and the ability to sell the idea to the opposing Democrats.

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