1 Comment Written by Anthony Truong on September 26, 2008 – 1:53 pm

Question: Why would passing the historic bill in the US be ideal for a drop…? I disagree; this will reinforce positivity in the short term and not a big humongous drop as you declare.

Answer: You are still disillusioned with the fact that events apparently direct market movements. This is wrong, and scientific studies have proven this assumption wrong over and over again throughout market history.

IF the bill passes, it means the US government is taking on toxic debt, and lots of it, thus decreasing the value of its sovereign assets, thus decreasing its credit rating, because the US Treasury issues debt using its assets as collateral (or proof that they can make all their repayments). So if you are looking from a fundamental viewpoint, that’s reason enough for a collapse.

IF the bill doesn’t pass (which isn’t so hard to believe, given that the Republicans in the House of Representatives are now presenting a different solution, which will delay negotiations, because they won’t accept the other solution offered by both Democrats and Republicans in the Senate), how hard a hit to psychology would that be? Collapse.

But we’ll see. As we speak, the Dow is almost down 300 points from yesterday’s peak. And the ASX200 has completely reversed any gains it started with in the morning…