If the behavior in the financial markets have not scared off all of the average, normal investors, it’s only because some of them have not been paying close enough attention or have failed to appreciate what they were seeing.
These are markets without a clue, forced into unnatural positions by too much thin-air money for so long that all sense of equilibrium has been lost. Tottering about, seeking the occasional nearby lamp-post, the stock markets are close to setting records for consecutive high-percentage whipsaws.
Even with Thursday’s 400+ point gain in the Dow, allegedly on the basis of improving initial claims statistics (yeah, right), we saw poor market internals such as only five new highs in the NYSE along with 121 new lows. Reverse those numbers and we’re in business for a rally, but instead, with the data we’re seeing, it’s not terribly likely that we’re ready to trot off into a new future of rising markets and economic growth.
The Debt Ceiling
Lost in all the market action is the fact that the US still has a major debt predicament on its hands. Rather than having been put on the back burner for a while, now that we have a (painfully) negotiated agreement, the debt ceiling issues are very much still on the field of play.
The old debt ceiling was $14,294 billion, which was immediately raised by $400 billion to $14,694 billion with the agreement made on August 2, 2011. Of course, the agreement also calls for $912 billion in spending cuts to accompany the $400 billion increase, but the dimensions of those cuts have yet to be determined.
The next debt ceiling lift that the act provides is for another $500 billion on December 31, 2011, which the President can certify.
Note that as of August 8th, the current federal debt (subject to the limit) is already $14,539 billion, or just $155 billion away from the ceiling. Given the state of the economy (resulting in increasingly poor government receipts) and the nature of government spending (still clipping along uninterrupted), I project that the US will have to once again engage in a debt-ceiling debate before December 31. My projection is for the new debt ceiling of $14,694 to be hit somewhere around mid-October, although the Treasury can once again shuffle the deck of bills and debt to avoid a technical breach.
by changingman 
