xjo direction, page-48

One other issue is that somewhere in the region of 30-40% (depends on where the information comes from) of S&P500 profits is derived by the financial sector. These profits were very badly hit in 2008 and so the aggregate earnings of the S&P5000 fell to an extreme low.

According to a recent article by David Rosenberg (former Merrill Lynch Chief Economist) most of the growth in the S&P500 profits since the market lows has come from the financial sector.

Therefore any significant clampdown on the profitability of the financial sector will hit the aggregate earnings of the S&P500, thereby lowering the S&P500 index. If the UK also follows such a course of action then the UK index will also be badly affected due to the size of their financial sector.

There may be some longer term negative implications for global share markets if there is genuine government action against the banksters. Since we tend to follow overseas markets, our market will also be negatively affected.

This is an added factor to all those other negatives still out there (including the current insolvency of major US banks in the absence of mark-to-fantasy accounting rules). I thought the US govt was going to let their banks to continue to make exorbitant profits in order to enable banks to rebuild their balance sheets. This is how Paul Keating "saved" Westpac (and others?) after they went berserk in their lending practices during the late 1980s.

loki