SUMMARY

The debt fight in Congress may be resolved tonight or tomorrow or before the August 2 deadline. A relief rally in the stock markets is probable, although disappointment with the long-term implications could also cause a sell-off. Nobody really knows for sure.

Greece, Ireland and Portugal, and now Spain, are not actually resolved. Greece is already in effective default (they call it voluntary private participation), and will need EU and IMF bailout and more voluntary participation as time passes.

China instituted more bank controls late last week to limit insolvency issues there, but forbidding further off balance sheet funding vehicles for municipal projects.

Not being at all sure on Friday of the weekend's events, we did lighten up a bit more on equities that day as a precaution. If there is a rally, we will have lost some relative return in exchange for added downside protection should the weekend or the Monday reaction not be adverse.

The fundamentals for the US stock market are good. Governments are in bad fiscal and solvency shape, but major corporations are generally in good condition. Nearly 80% of public companies beat expectations for Q2 earnings. Sales are rising. Earnings are rising. Dividends are rising, yet payout ratios are still moderate. Valuation multiples are not excessive.

The US stock market is doing better than foreign markets.

US bonds are doing well, in spite of recurring expectations of rising interest rates. Treasuries, which are reference rates, keep going down as general fears keep money flowing into Treasuries. When that flow reverses, rates will rise and bonds will decline.

This report presents key data about the positive fundamentals for US stocks, data and arguments for dividend income, chart evidence that a long-term up trend is still in place, and comparisons of the S&P 500 to its sectors and other countries, types of sovereign bonds, and commodities.

We prefer the bird in hand of cash dividends to two birds in the bush of capital gains-only in treacherous times such as these, particularly for portfolios in the withdrawals stage of life.

We don't know what will happen tomorrow, but we do have our fingers crossed.

Saved By the Bell - Maybe - For a While