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Wouldn't a debt default cause stocks to rally?
- Thread starter TulsaTrader
- Start date
Stocks would fall hard. It should show that Washington as out of touch. It might also spark fear that the situation was out of control on a fundamental basis. People are just thinking it is politics but if not resolved then real fear will manifest.
The Republicons have did it again.
Also, with a weak economy and all of these debt talks, it raises questions if there is any plan to get restore the economy. So that goes into the mix, as well.
All together.. then we could see an extensive prolonged pullback.. probably not to prior lows but maybe to the 1100 region
The Republicons have did it again.
Also, with a weak economy and all of these debt talks, it raises questions if there is any plan to get restore the economy. So that goes into the mix, as well.
All together.. then we could see an extensive prolonged pullback.. probably not to prior lows but maybe to the 1100 region
Quote from TulsaTrader:
From what I've been reading a debt default would cause interest rates to jump thus bond prices would fall. I've also read that the dollar would fall as well.
Wouldn't this cause stocks to rise?
Traditionally stocks rise when bonds fall. Lately the stock market has risen when the dollar falls.
Would a default cause people to sell stocks, bonds, and the dollar?
TT
Have done what? Taken responsibility to have a budget plan?
Demorats have spent us into this mess, they had plenty of time to raise the ceiling last year and pass a budget which they failed to do.
Demorats have spent us into this mess, they had plenty of time to raise the ceiling last year and pass a budget which they failed to do.
Quote from Lucias:
Stocks would fall hard. It should show that Washington as out of touch. It might also spark fear that the situation was out of control on a fundamental basis. People are just thinking it is politics but if not resolved then real fear will manifest.
The Republicons have did it again.
Also, with a weak economy and all of these debt talks, it raises questions if there is any plan to get restore the economy. So that goes into the mix, as well.
All together.. then we could see an extensive prolonged pullback.. probably not to prior lows but maybe to the 1100 region
I am surprised that anyone would bother to analyze a debt default in terms of interest rate/exchange rate mechanics. It is like analyzing a car crash by noting that the resulting non-motion relieves the need to apply pressure to the brakes. Perhaps if the driver has flown through the windshield, it is a minor relief that his being unable to apply pressure to the brakes shouldn't overly concern him as he is heading for the telephone pole.
We have huge operating deficits which can only be sustained by continued new debt purchases. Investors only tolerate their existing holdings due to the relative safety of US debt. Even if we only miss one payment with promises of non-repetition and if everyone believed it, debt will not smoothly reprice to make risky debt relatively more attractive. Instead everyone would get out of the pool. They would try to pull their money/deleverage to see how things will play out. Most of the liquid money would turn-out to be not so liquid.
If you thought that 2008 was bad in the markets, imagine an evaporate of credit at every level: consumer, business, municipality, federal, and international, for years!
If there were a debt default, it is not going to result in a stock rally.
We have huge operating deficits which can only be sustained by continued new debt purchases. Investors only tolerate their existing holdings due to the relative safety of US debt. Even if we only miss one payment with promises of non-repetition and if everyone believed it, debt will not smoothly reprice to make risky debt relatively more attractive. Instead everyone would get out of the pool. They would try to pull their money/deleverage to see how things will play out. Most of the liquid money would turn-out to be not so liquid.
If you thought that 2008 was bad in the markets, imagine an evaporate of credit at every level: consumer, business, municipality, federal, and international, for years!
If there were a debt default, it is not going to result in a stock rally.
No
There will be a plunge of biblical proportions shaking the financial markets to it's core.
See surf report for guidance thru the turmoil.
Surfhttp://www.elitetrader.com/vb/showthread.php?s=&postid=3237378#post3237378
http://www.elitetrader.com/vb/showthread.php?s=&postid=3237378#post3237378
There will be a plunge of biblical proportions shaking the financial markets to it's core.
See surf report for guidance thru the turmoil.
Surfhttp://www.elitetrader.com/vb/showthread.php?s=&postid=3237378#post3237378
http://www.elitetrader.com/vb/showthread.php?s=&postid=3237378#post3237378
Quote from macroman:
if russians were allowed to do it, why not us ?!? Look how russia progressed since. Moscow most billionaires ! true, us claimed cold war wictory. Words & glory are cheap. But had to swallow large losses.
I think it will happen.
We are not Russia. The US treasury is the defacto bond market for the world, nothing else comes close. If even 10% leaves it, you will see mortgage rates triple within a few days. And that would be just a start.
That new congress that came in in 2010 is by far the most illiterate group we have ever seen.
Quote from marceck:
We are not Russia. The US treasury is the defacto bond market for the world, nothing else comes close. If even 10% leaves it, you will see mortgage rates triple within a few days. And that would be just a start.
That new congress that came in in 2010 is by far the most illiterate group we have ever seen.
I agree, if they cause a default they will cause more harm on America than our enemies could ever hope to. Treason by the tea party, they should be shot if they are successful in making America default on our debts.
Quote from bigarrow:
The first rule of fiscal responsibility is to PAY YOUR BILLS.
And does one apply that rule when there is no money for paying the bills?
Does one go apply for another American Express?
At what point does a person look in the mirror and admit they have "screwed the pooch"