No One is Worried about Default - Is That Reason to be Worried?

George Brooks |

Wall Street NYSESo far, no one here or abroad, is concerned about a U.S. default.

That makes sense, a U.S. default would do irreparable harm to our economy, individual Americans, young and old and have a huge global impact where sovereign debt issues are precarious. The President and Congress can be expected to find a way to avoid default – a no-brainer.

I agree, but am alarmed by the indifference in the financial community about the possibility, remote perhaps, that it will suddenly and unexpectedly appear that default IS GOING TO HAPPEN.

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

Tuesday, July 26, 2011 9:24 am EDT

DJIA: 12,679.94
S&P500: 1337.43
Nasdaq Comp.: 2842.83
Russell 2000: 831.40

Then what ?

Investors have been told again and again by a wide variety of experts how devastating default would be, so the consequences are KNOWN.

The SHOCK EFFECT of suddenly discovering default appears imminent will send far too many investors for an exit that is far too small to let everyone out without a drop of at least 800 – 1,000 Dow points. Without “news,” odds favor a test of DJIA 12,000 ( S&P500: 1275) by Thursday.

My experience is that the stock market is a leading indicator, moving up or down ahead of good or bad news, and I think a great majority of investors agree.

Over the last two months, I have wrongly expected the market to be in a tailspin going into the August 2 deadline, providing an outstanding buying opportunity at lower prices.

While I am impressed (and heartened) it hasn’t happened, I am leery that the Street is assuming a default is so unthinkable, that it won’t happen.

All that is needed for a break in prices is for it to suddenly appear that default IS unavoidable late this week or on Monday.

If everyone was petrified and dumping stock indiscriminately and investors despair were crossing the threshold of, “I can’t stand it any more, I’m outta here,” I would be screaming “Buy,” as I did at the three market bottoms in the last bear market (Oct. 10, Nov. 21, 2008, and Mar. 10, 2009). *

This crisis can vanish with a word or two from Washington, but based on the mentalities and ideologies involved, I think it can get very scary before it is resolved, or let’s say – partially resolved.

Unfortunately, this brinkmanship to-date and that which will follow, is debilitating to the economy, but as I have noted – this is all about 2012 and America be damned.

Recent Headlines :
“Ugly ! Nevertheless, the Outlook Can Change Quickly” (June 20 – DJIA 12,004)
“No Time For Napping” – (June 21 DJIA: 12,080)
“No Hope in Sight ? Don’t Bet on IT ! Prepare for Opportunity” - (June 22, DJIA: 12,190)
“Countdown to Opportunity – Start Preparing !” - (June 23 DJIA 12,109)
“ BIG Money Nibbling – Stocks Beginning to Look Attractive – Negatives can Vanish” (June 24 DJIA:
12.050)
“Institutions Showing Interest – Not Reaching Yet” (June 27 DJIA: 11,934)
“Will Q2 Earnings Reports and Congressional Action on Debt Ceiling” (June 28 DJIA 12,043)
“ Don’t Buy News on Greek Vote – Spike to Be Short-Lived” (June 29 DJIA: 12,188)
“Again: Debt Ceiling Approval and Q2 Earnings Catalysts” (June 30 DJIA: 12,261)
“Enjoy the Fourth ! Prepare for Fireworks in Weeks Following” (July 1 DJIA: 12,414)
“Did Someone Blink ?” (July 5 DJIA 12,582)
“A Pause is Needed Here to Digest Recent Gains, Q2 Earnings Ready to Take Center Stage” (July 6
DJIA 12,569
“Whoa !” (July 8, DJIA: 12,719.49)
“July Could Be a Pivotal Month” (July 11, 2011, DJIA: 12,657
“Watch This One Closely – Very Closely” (July 12, 2011 – DJIA: 12,505)
“Default is Un-American” ( July 14, 2011 – DJIA: 12,491.11 )
“Breakthrough This Weekend ? – a Risky Bet ( July 15 – DJIA:12,479)
“Has the Stock Market Discounted Default ? (July 18, 2011- DJIA: 12,479 )
“Alert – Decision on Debt Ceiling May Come Before August 2” (July 19 – DJIA:12,385)
“3:35pm BULLETIN – Breakthrough on Debt Ceiling Imminent” (July 19, DJIA 12,586)
“Showdown ! American Public Says ‘NO’ to Default” (July 20 – DJIA: 12,587)
“Senate to Rescue – Short-Term Fix fro Debt Ceiling to Pave way for Long-Term Solutions
(July 21 – DJIA 12,571)
“All Eyes Now on Congress to Find a Way to Avoid a Catastrophic Devault” (July 22 DJIA: 12,724 )
“The Street Still Doesn’t Believe Default Will Happen” (July 25 – DJIA: 12,681.16 )

George Brooks
sensiblesleuth@gmail.com
*Sorry for self-promo, but damn it, I feel good about those calls, which new readers are unfamiliar with.
…………………………………………………………………………………………………………
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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Symbol Name Price Change % Volume
FCR.DB.E:CA First Capital Realty Inc. 5.40% Convertible Unsecu 100.77 0.02 0.02 5,000

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