The Administration and Congress continue to use the crucial issue of our debt ceiling as a chance to politically grandstand and to position their parties for the 2012 election. It has become much larger than the issue of raising the debt ceiling but rather lines in the sand have been drawn with bravado talks of not crossing to the other side's position. What does this mean to the investor? Below are some of my thoughts as we go into the final days of the standoff.

The August 2 deadline for raising the debt ceiling is quickly approaching. Raising the debt ceiling has become a very contentious issue this year, and investors have become increasingly concerned that the U.S. might default on its debt. These concerns have created a great deal of market volatility as the deadline approaches.

The Republicans are saying that the governement can't afford to keep spending more than it receives in revenue, and that tax increases would hurt small businesses and discourage job creation when the economy is struggling to recover from the financial crisis.

The Democrats are saying that any compromise on the debt and the deficit needs to include tax increases on wealthy taxpayers not just spending cuts that would hurt low and middle-income Americans. They believe the economy needs government spending to support vital programs, including social security, Medicare, Medicaid and defense during these difficult times.

Although anything is possible at this time, will our President and Congress allow their legacies to include being the first administration to default on the U.S. debt?

The market is showing clear signs that it does not believe a default will occur. For example, the narrow spread of U.S. 10-year government security yields over other high quality sovereign debt such as German 10-year government debt indicates investors believe that the U.S. government will pay its outstanding debt and is unlikely to default on government securities.

If no compromise is reached, another complicated option involves Congress giving the President the authority to propose three debt ceiling increases without pre-conditions during the next 16 months. This would avoid default but could lead to more problems down the road.

Another scenario would be for the government to make payments on its debt after August 2 but delay entitlement payments and shut down non-essential government services until Congress eventually passes a debt ceiling increase.

Considering all of the above and the fact that both the congress and administration know how defaulting would be perceived by investors, I believe a defautl on government debt is a low probability. What I am watching even more closely is the Fed's actions,specifically if they are going to continue to pour money into our economy, and corporate profits. Let's keep our focus.