Senate to Rescue - Short-Term Fix for Debt Ceiling to Pave Way for Long-Term Solutions

George Brooks  |

Right now, it’s all about raising the debt limit. If Congress opts for default, all Hell breaks loose, and that’s why odds favor it won’t happen.

The bipartisan “Gang of Six” senators has developed the foundation for meaningful solutions for the nation’s escalating national debt going forward.

Expect Congress to raise the debt ceiling long enough to accommodate its finalization which will take months, but it does take default off the table.

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

Thursday, July 21, 2011 9:22 am EDT

DJIA: 12,571.91
S&P500: 1325.84
Nasdaq Comp.: 2814.23
Russell 2000: 832.37

The stock market has been relatively upbeat in recent days, even in face of the dire warnings in the press about the consequences of default.

The Street is telling us NOT TO WORRY. The public opinion polls are telling us not to worry, that Americans are against default, ergo anyone who opts to enable it.

There is only one thing I feel a little uncomfortable with here. The Street better be right, because stock prices are not discounting default in the least, giving it a “zero” possibility – i.e., no room for error.

Don’t be surprised if at some point it looks like default CAN’T be avoided between now and August 2.

I’d feel more comfortable if the market was down sharply as fear mounts.

Other negatives/uncertainties:

What happened to the slump in the economy everyone was worrying about ?

Well, economic reports have been more upbeat than expected, which suggests fears of a slump may be unfounded.

But, what about European sovereign debt problems ?

While that picture changes directions every day, odds favor a solution of sorts.

Bottom line: These negatives can vanish quickly and lead to a huge surge in stock prices.

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DJIA 12,569
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“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 )
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George Brooks
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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