Borrow US, Borrow

No glass ceiling for the US, it seems. We will know on 02nd Aug, if the lawmakers in the US raise their debt ceiling so that they can continue to borrow more to pay off their servicing due pertaining to their extant debt obligations! The credit card issued to the US is massively revolving its credit with exporting countries providing angular momentum for these revolutions by lapping up US paper. The exporting countries (most of them on this side of the Prime Meridian) obviously want to hold down their currencies from appreciating, but considering inflation and its political impact, they may not be able to go the full way. Maybe the US will be able to cleave the rating agencies and have at least one of them desist from swinging the axe of ratings downgrade.

So the coming week is going to get very exciting. The S&P 500 is sitting on its 200DMA. Whatever you believe, or whether you believe in nothing at all – you have to brace yourself for some tight action around this point. People look at such chart positions and either line up for a bounce (from the 200 day DMA line) or short-sell and expect a cut through the line. Since a majority do it, it becomes a very important psychological level.

Meanwhile, the credit default swaps markets are certainly pricing for a US default. Actually, may not be for a default as much as for a marked decrease in the credit worthiness of the nation. Now who holds US debt in what proportion? These guys must sure be a worried lot. And so are we all since the whole thing is one giant messy spider’s web. In our desi markets there are quite a few companies whose stocks are either rising up to touch their 200 DMAs or  have dropped down to kiss that emotional line. With interest rates going up in India, and loads of shareholdings of promoters being pledged to banks for favourable short-term loan rates, I’d rather bet on the market drowsiness to continue. Let’s see. Like Jaspal Bhatti, who once in a television serial, made a comedy that won an award for being the best tragedy (or vice versa), I hope that my logic and thoughts continue to be contrarian indicators! 😉

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