U.S. stocks tumbled on Monday, with the Dow Jones Industrial Average (DJIA) dropping to an 18-month closing low that saw the blue-chip benchmark briefly plummet more than 1,000 points. It closed down 588 points, but not before it created a moment of panic when it went down as much as 1,114 points during the early trading hour.
The Dow was expected to get the beatings after Shanghai Index registered a 8.5% loss on Monday, but the quantum of losses seen in the U.S. stock markets have certainly raises the alarm bells. On Tuesday, Shanghai stock market continues with the sell-off, with the index fell 6.4% in the first minutes of trading, but has since recovered mildly.
While China’s “Black Monday” has spread and triggered America’s “Black Monday”, something funny has happened in China. The crash was so serious that Baidu, the country’s biggest search engine, is now censoring results about financial chaos in the country. Essentially, its own citizens would be clueless about what’s hitting them.
Now, when the people of China search for the Chinese characters that translate to stock disaster, the results say that “Due to related rules & policy, some search results won’t be shown”. Interestingly, all official news site run by the ruling Chinese Communist Party buries and hides the report on the financial meltdown.
Although the more than 1,000-point drops wasn’t the largest drop in terms of percentage point, it was the biggest one-day drops in the history of DJIA nonetheless. The Dow’s steepest percentage decline was a 23.5% fall on Dec. 12, 1914. In order to beat this record, the modern day Dow would take a decline of more than 7.87%, nearly double Monday’s decline, to break into the 10 worst.
Nevertheless, the “Black Monday” was good enough for Republican presidential candidate and real-estate magnate Donald Trump to capitalize on it and repeated how he had warned and is warning again that China could bring the U.S. economy down. He also warned about a “depression” and the needs to be careful of China (*grin*).
But the 1000-point drops wasn’t the best part that is haunting fund managers. Instead, it was what Trump will do to the fund managers if he gets to the White House. Now, the president wannabe has vowed to reform the country’s tax code to ensure they (fund managers) pay their fair share of taxes.
Depression- be careful of China! http://t.co/6BGk0ZjKwT
— Donald J. Trump (@realDonaldTrump) August 24, 2015
“The hedge fund guys are getting away with murder. They’re making a tremendous amount of money. They have to pay taxes. I want to lower the rates for the middle class. The middle class is the one, they’re getting absolutely destroyed. This country doesn’t have – won’t have a middle class very soon,” Trump told CBS News.
As I have long stated, we are so tied in with China and Asia that their markets are now taking the U.S. market down. Get smart U.S.A. — Donald J. Trump (@realDonaldTrump) August 24, 2015
Apparently, Mr Trump was referring to a tax code loophole known as the – “carried interest loophole” – a provision in the tax code that lets private equity and hedge fund managers pay taxes at the capital gains rate instead of the ordinary income rate. What this means is they pay only 20% of capital gains tax, instead of 39.6% of the top income bracket.
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August 25th, 2015 by financetwitter
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