Debt Ceiling Increase - Q2 Earnings - a Catalyst

George Brooks |

George Brooks Stock Market, Greece austerity voteWith the stock market tumbling, I headlined my June 15 blog, “Poof ! Negatives Could Vanish in a Heartbeat…. If…

I was referring to a sudden change from negative to positive in the U.S. economic outlook and a vote by Congress to raise the nation’s debt limit, currently being held hostage to an agreement on spending cuts designed to arrest future increases in the nation’s debt. Failure of the latter would result in a U.S. default on certain obligations.

Brooksie’s Daily Stock Market blog: An edge before the market opens.

Friday, June 30, 2011 9:24 am EDT

DJIA: 12,261.42
S&P 500: 1307.41
Nasdaq Comp.: 2740.49
Russell 2000: 819.92

My point was, don’t get too discouraged by these concerns, they can swing from negative to positive quickly.

The flow of economic indicators in coming weeks will tell the story about the economy, as will Q2 corporate earnings reports. Too early to tell on this one.

Congress has raised the debt limit 74 times since 1962 without these theatrics. These are obligations that have already been agreed upon, they do not comprise new spending.

Not doing so now would have disastrous consequences, especially in light of global paranoia (justified) about sovereign debt defaults.

To even threaten not to accommodate the coverage of certain U.S. obligations is an irresponsible outrage.

Both S&P and Moody’s indicate they would slash the U.S. credit rating sharply if an increase is not approved, S&P to “D” from AAA, Moody’s to Aa. I take Moody seriously, S&P must be kidding.

Even so, to play this game of brinkmanship is so injurious to our nation’s best interests, a sane person has to assume it will be approved.

Originally, I projected a risk of the DJIA dropping to the 10,700 – 10,830 area (S&P500: 1150), as the press* orchestrated fears that Congress won’t raise it.

That still may happen, but odds (common sense) suggest otherwise – tantamount to Congress shooting itself in the foot with a 155 howitzer.

Congress is starting to feel the heat for this tactic, publicly from the president, on talk shows, and I assume privately from the BIG money, which stands to get hurt along with the rest of us.

It is time scrap ideological tenets and unite in middle ground and capitalize on the many strengths we have and solidify our position nationally and internationally. What in Hell are you guys thinking ?
This is no way to run a country.

This country DOES NOT BELONG TO ANY POLITICAL PARTY. God hasn’t dispatched anyone in particular to run it. Once elected, office holders are responsible to pursue goals that benefit all the people not just those who sate the narrow interests of their supporters.

Today: This is one of those wrenching teasers that the stock market confronts investors with at times.
Should investors defer purchase in hopes of a further decline and risk having over-riding negatives vanish, resulting in a surge in stock prices ?

Or should they step in now and risk another leg down, resulting in paper losses for months to come ?

I suspect institutions have been nibbling at stocks they find attractive, not loading up, but taking partial positions. That way, they have options in the event the market goes up or down – well worth considering for individual investors.

Negative Reporting by Financial Press:

Competition between news media is intense. Print media is struggling for ads while competing with the Internet, which is struggling for “hits” to its sites. Magazines get thinner and thinner, television media is pressed to fill “air time” and garner market share.

The result – attract readers and viewers at any cost.

Part of the consumer negativity IMHO is the persistent emphasis on the negative by the press. It has become depressing to read, watch or listen to the news because so much is reported with a bad spin.

You guys want “bad” ?

Try a full scale Depression, which is what we came within a hair of getting in 2008 and early 2009.

Confidence is the cornerstone of an economic recovery, and most of the media is doing little to bolster it. There are people with solutions, good things happening.

We have survived a crippling meltdown, let’s not forget that, or we will sink into that cesspool again, and that time will be for keeps.

Time to “report” the news, tell it like it really is, without injecting personal opinions and political spin.

George Brooks

*I exclude Bloomberg from my criticism; I am very impressed with the absence of political spin in its reporting.
The writer of Brooksie’s Daily Stock Market blog, George Brooks, is not registered as an investment advisor. Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. Readers are expected to assume full responsibility for conducting their own research pursuant to investment decisions in keeping with their tolerance for risk

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