I have been closely monitoring the war of words in Washington on this potential crisis. I find the activities by both parties to be indefensible. Most Americans agree.

I have two observations: (1) the bond market does not believe the U.S. will default and the bond market has been a reliable forecaster in the past (this makes me optimistic), and (2) the Republicans in the House may have a “fix” that will avert a default – simply increasing the debt ceiling by $100 Billion and cutting the same amount from discretionary spending programs (how could the Senate or the President stand in the way of this last second tactic? This makes me optimistic short term but pessimistic long term because this tactic is simply kicking the can down the road).

Lots of uncertainties exist with both the debt limit and potential downgrade of the U.S. Government debt. But, there is plenty to be optimistic about especially with improved corporate profits plus the FED’s stance on keeping interest rates low. My current view is the positives will ultimately outweigh the uncertainties. For this reason, I recommend that: (1) you maintain your long term asset allocation, and (2) if you have idle cash, invest it in this period of uncertainty at lower prices.