Sunday, July 31, 2011

Place Your Bets

NEW YORK (Reuters) - If debate in Washington over raising the U.S. debt ceiling finally ends with a deal on Sunday, the last-minute reprieve could spark a relief rally when global markets open.

U.S. lawmakers were close to a last-gasp $3 trillion deal to raise the borrowing limit and assure financial markets that the United States will avoid a potentially catastrophic default. Markets have been tumultuous throughout the debate, with Wall Street finishing its worst week in a year on Friday.

"A deal of $2.8 trillion looks like the outcome and the mechanism is in place, and no default. That is enough to rally markets," said David Kotok, chief investment officer of Cumberland Advisors in Sarasota, Florida.

If you were smart, you were taking every nickle you had and were buying late Friday afternoon. There's no chance they let the federal government default. However, if Obama wins re-election (which I certainly hope he does not), then you can expect that this kabuki gets repeated. Just keep track of the dates.. sell before default is threatened, and buy just before the deal is done.. again.

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