logo
  Join        Login             Stock Quote

Why And How The US Could Default

 January 10, 2013 02:05 PM


Having gotten through the fiscal cliff debacle by the skin of its teeth (somehow passing a deal that both raises taxes AND the deficit), the US political class is now playing chicken with the debt ceiling.

The media, as it likes to do, continues to rave about social issues (gun control being the latest), ignoring the fact that the US would be in technical default already if Treasury Secretary Tim Geithner hadn't already raided various funds for some $200 billion.

We're not here to debate social issues, but it's telling that a US default, something that would affect every American, gets less airtime than assault rifles, which affect less than 5% of the population.

The market, is already giving us hints of what the likely outcome will be. Despite start of the year buying and a seasonal bias, the rallies of the last few days have been very weak, usually peaking out mid-day and then retreating.

[Related -3 US Updates Show Ongoing Growth]

More telling however is the big picture view of the S&P 500 where it is tracing out virtually the exact same pattern as it staged going into the failed debt ceiling talks of 2011.

Here's the S&P 500's recent action:

Here's the market action going into the 2011 debt ceiling debacle:

[Related -Moving Averages Don't Move Stocks]

Here's what followed:

History doesn't necessarily repeat, but it often rhymes. And the fiscal cliff situation has made it clear that when it comes to issues such as cutting the deficit and debt, US politicians are totally clueless. Remember, Congress hasn't passed a budget in four years, which incidentally goes a long ways towards explaining why we're about to breach the debt ceiling again. The notion that these folks are somehow going to "get religion" about the debt situation will very likely prove to be as misguided as the hope that the fiscal cliff deal would do anything to help the economy.

iOnTheMarket Premium
Advertisement

Advertisement


Post Comment -- Login is required to post message
Name:  
Alert for new comments:
Your email:
Your Website:
Title:
Comments:
 

rss feed

Latest Stories

article image3 US Updates Show Ongoing Growth

Three economic updates today provide more evidence that moderate growth endures for the US. The numbers du read on...

article imageBuy These Solar Stocks Before They Snapback

Sometimes the market hands you a gift. And it would be foolish not to take it. Thanks to general market read on...

article imageInvestors Are Even More Euphoric And Confident.

As noted on the blog last Thursday, even though the market had been down for three straight weeks, last read on...

article imageThe Butterfly Machine

There’s a phenomenon called the Butterfly Effect. One common quotation is “It has been said that something read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.