Debt Ceiling Issue Come Next

Debt Ceiling Issue Come Next

Right now the Stock market anxieties will turn to debt ceiling issues.

That is the talk of the town right now, and the next major hurdle for these markets.

Political risk. Democrats and Republicans are fighting again about the nation's finances. What's the risk? If they fail to pass a funding bill before the new fiscal year starts Oct. 1, a government "shutdown" is possible. And if they don't raise the debt ceiling in coming weeks, the nation could run out of money to pay its bills and default on its debts. It might be just rumours again, like we had with the fed tapering stuff.

How Congress and President Barack Obama deal with the debt ceiling is likely to determine market volatility for the rest of the year I think.

Now that the expected tapering of $85 billion a month in asset purchases fizzled out at the Federal Reserve’s September policy meeting, investor attention has shifted to the brewing showdown over the budget and the debt ceiling.

The Congressional Budget Office sees U.S. debt at 100% of GDP by 2038 at current budget rates.
Adding to pressure is a Congressional Budget Office report in the past week showing that national debt is now 73% of GDP and that the federal budget “cannot be sustained indefinitely.” So when you look at the RUSSELL weekly chart below, things do not add up. But then again, when you do some heavy research, and the TRUTH comes out to how the real crisis in 2008 started, you would not believe your eyes.

RUSSEL 2000 WEEKLY CHART!

RUSSEL 2000 WEEKLY CHART!

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The T Bomb - Taper time

It’s a very busy week for economic data. Investors will get their first look at second-quarter gross domestic product on Wednesday. Economists surveyed by MarketWatch forecast the data to show the economy grew at an annualized rate of just 1% after a mediocre 1.8% expansion in the first three months of the year.

Investors are closely watching the Fed for any further clues as to when it may begin tapering its purchases of government bonds. Concerns over a slower pace of stimulus was tied to a pullback by stocks last month, though equities soon recovered to see the S&P and Dow head back to record territory.

May I take a moment and remind you want happened last month back in JUNE when we had the FOMC meeting.

So..... do you remember what happened???.....

THIS!....

fed announcement sell off

Since then the FED has done nothing, no tapering, no withdrawal of stimulus, no shouting, just more B.S.  We have skidded up higher, and I find it uncanny the market is acting the way it is right before this major announcement. This might be a bear trap in the making as traders are starting to think about what happened last time. It could be a situation of ROPE IN THE BEARS, Before sending us up higher. Sneaeky!, but I can see that happening. It would be a good way to take money off the novice traders out there.

My guess (and it is a guess) is that nothing changes, Somehow the charts do not look like they are about to drop like they did back in JUNE. So my guess is that the news is coming out in charts first here, yes, no taper has started and they will not drop the T Bomb word just yet. It may however come into their vocabulary later down the track, but for now the market is in a holding pattern.  We shall see.

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fed taper - fed taper and the markets

fed taper and the markets

fed taper

As you can see the above chart shows just how volatile the market has become since Ben Bernanke got up and talked about the fed taper plans later this year. We have to remember again, that nothing has actually been done yet, but still the market is defiantly becoming a volatile beast. One week it is down on the next week skyrocketing. Most investors do not know what to think.

If the Federal Reserve begins pulling its irons out of the stimulus fire in September, the resulting rocketing of the dollar and accompanying deflation will lead the Fed to reverse course by early 2014.

So says Jim Rickards, managing director of Tangent Capital.

September tapering could also spur a rally in the dollar as well. But it is obvious to me that the fed really does not have a good plan at all.

The central dilemma: The Fed is feeling heat to ratchet down its $85 billion-a-month bond-buying program, which pressures the dollar because it is tantamount to printing money. Hawks are worried about asset bubbles and systemic risks. Growing speculation that the Fed would taper in September sent the dollar index to three-year highs early this week.

I do not buy all these tapering talks about September being D DAY! YES! I really do not think it is gunna happen. The reason is that there is probably more negative economic data coming down the pipeline, and if that is the case, the fed will have no other option but to continue with his massive stimulus program. It is a sad reality I know, however it is what it is. Eventually its going to end up with the implosion of the markets and also the economy, but we will save that post for a later date.

"However, if the Fed does taper in September, they will find the economy sinks much faster than expected and ... they will have to increase asset purchases by early 2014," he said. But it's September or nothing for tapering I think right now.

It seems that right now the fed are trying to fine-tune everything in a complex system, and that's impossible, infact it is almost like they are setting us up for our own ultimate demise, and putting it on autopilot and even sending us a note in the mail!

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