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The Debt Burden

Last weeks trend continued today as concerns over debt questions a global recovery.  Put/Call ratio's ended at 1.00, a bearish (fearful) indicator that follows Friday's ratio of 1.26, suggesting the underlying sentiment is certainly concerned about the direction global debt will have on the markets.

Additional support levels will be broken if confidence is broken and all the positive work in the market trend will disappear as values will move back toward 2009 low's.  For the Bulls sake, hopefully, Governments will be able to reign in spending and realize that fiscal responsibility requires spending cuts and living within ones means.

That sad truth is that most Governments will not reduce spending as spending has become a "right" and "entitlement" for many where citizens will pass revolutionary judgment if those entitlements are removed, i.e, you only have to look at Greece in Europe and California in the USA.

In context of spending entitlements, California leads the USA in spending programs that the State Government refuses to cut or even end putting the State in jeopardy of having to, once again, issue IOU's to pay bills and may even default as they continue to find themselves in ten's of billions of dollars of deficit and debt.  The State Government is unwilling to make the necessary decision to bring fiscal sanity and responsibility in the system.  Unfortunately, California is a leader of US policies and many of the Federal Governments spending agenda mirrors California.

The US debt is 25% of GDP.  Never in history have we seen debt consume this much of GDP.  Be worried. Be very worried.

This last earnings season brings little comfort to the markets even though 76% of companies reporting have beaten earnings projections.  The problem is that most have not projected confidence in their numbers to warrant hiring, and even thought the unemployment rate was 9.7% the number is deceiving as job creation continues to be non-existent.  Based on the number of US Business going bankrupt and increased taxes on Small Businesses current and impending, it's no wonder that the private sector is not creating jobs.  Congress wants to continue to spend and justifies the spending as a Job's stimulus.

In addition to deficit spending, Government will raise revenue by raising taxes.   At some point, citizens will realize the absurdity (hopefully before it's to late) and make changes.

Summary:  The Bears continue to rule the trend and unless the investment community finds confidence in policy, selling pressure will continue.  Look for support levels to hold at least hopefully, otherwise tighten your seat belts.  Stay protective of principal and profits.



Disclosure: No Positions