thursday brainstorming

1. Today we have a vote on the Boehner bill which will shape the endgame and may spooke the markets as yesterdays sell off can easily trigger some follow through now down to 1260 again ( but less likely). Europes bailout 2.0 has been diluted and most PIIGS bonds are almost back to record levels and the contagion effect on Italy is clearly spreading deeper. We are set for a sharp sell off soon either way as USA will raise the debt ceiling but in a way that does not really serve any real purpose and force rating agencies to downgrade USA which is anyway overdue. European earnings are not doing well anyway with the strong Dollar and te US earnings are not realy that good even if 100 SPX earnings are reached we live in times where clearly a PE contraction is mandatory and 10 times would even mean SPX has to g0 25% lower but 8 times would be more appropriate that is real earnings and 25% of SPX earnings are not based on reality to say the least.

After 3 years zero interest and insane money printing plus all the tax incentives not a lot has been achieved USA is dropping back into depression mode even officially and the current gridlock ironically seals the deal as the ongoing  delay puts business on hold and will be a big drag down in Q3 GDP.

So far markets are acting as expected and once the deal sometime next week is done a minor rally will bring the opportunity to short the market or get out of longs at least. The sentiment has been leaning towards being bullish again slowly but not on an alarming level yet.

 

Republican debt plan faces close vote in Congress

Senate Democrats will vote against Boehner bill

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By Andy Sullivan

WASHINGTON | Thu Jul 28, 2011 7:30am EDT

(Reuters) – A bill to cut the deficit faced a nail-bitingly close vote in Congress on Thursday as the top Republican lawmaker sought to quell an internal revolt and push his plan to avoid a ruinous default.

Approval of a plan by House of Representatives Speaker John Boehner would break the inertia in Washington over a debt crisis that has spooked markets and raised the prospect that the government of the world’s largest economy will run out of money to pay its bills in less than a week.

President Barack Obama has threatened to veto the bill and a majority of the Democratic-controlled Senate has vowed to vote against it.

But a successful vote in the House would give the bill legitimacy and make it a crucial element of the legislative chess game that is likely to play out up to August 2.

That’s when the Obama administration says it will run out of funds to pay the country’s bills unless a $14.3 trillion borrowing limit is increased.

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~ by behindthematrix on July 28, 2011.

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