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August 18, 2011, 03:08:38 AM *
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Author Topic: What's going to happen in the stock market Monday?  (Read 16 times)
ag318pun
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« on: July 25, 2011, 09:40:49 PM »

What will happen if they can't come to an agreement
to raise the debt limit? I fear that the Dow Jones will
go down 1,000 points.
What's your opinion?
A big dip would do me great damage since I am well into my retirement years
and I fear that I will not have enough time to recover.
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jeff410
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« Reply #1 on: July 25, 2011, 10:19:20 PM »

I think thats what could happen too.  But I also think there will be an 11th hour agreement before August 2.
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SDeck
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« Reply #2 on: July 26, 2011, 03:34:51 PM »

We could get a few big down days but I see that as a buying opportunity.  I'm looking to add so I don't mind a selloff.
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Ben
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« Reply #3 on: July 26, 2011, 06:08:16 PM »

It's going to go down Monday but not by 1000 points.
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John_W
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« Reply #4 on: July 26, 2011, 06:13:27 PM »

Why don't you take a look at what happened the other 76 times that the debt ceiling had been raised throughout history, the most recent was February 2010.   Granted, they've never failed to come to an agreement before but whenever the government is split as it is now, there's been political posturing down to the wire.

There are examples where the game of chicken has been taken past the deadline, just not on the federal scale.   Remember California and the IOU's?   Many of those IOU's were sold at a discount on the secondary market by people who needed the cash flow and netted a very nice return for those who bought them as they simply became senior debt that got paid first when money did come in.   They were better investments than most municipal bonds.

It certainly won't be good if they don't reach an agreement but they will.   Even if they don't, it isn't the end of the world though the cost of the credit downgrade would effectively be shouldered by the general public by a far greater amount than the tax increases or rather the removal of tax loopholes  being discussed.   For those with assets in reserve, a debt default would present opportunities.   For everyone else, it represents a de facto tax of hundreds of billions for which they get nothing in return.

As long as your portfolio is divided between at risk and relatively not at risk, a failure to come to an agreement simply means an opportunity to you to take advantage of by rebalancing.   If you have fallen for the usual aggressive when young lines and have 100% growth portfolios then you might take a bit of a bath but in keeping with the aggressive while young philosophy, hey you're young.
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