Probably over-worrying about DC dysfunctional business as usual but it really feels to me like incompetence is running high enough lately that it’s no longer a negligible risk.
I read Dimon mentioning they’re preparing Chase for such a scenario. What preparations they did are not specified though and certainly they would be different for a bank than for private investors. And obviously not all options are open depending on how your assets are invested.
But what would make some sense to avoid a meltdown due to default while not completely missing out in case it somehow does not happen?
Do you move into commodities like gold maybe, ETFs that short the total bond markets, ultra-short bond funds since these are not as affected by variation in longer term rates, or just go with put options on something like an S&P Index fund if the premium is not already too high so that you minimize losses.
The Senate is likely to vote on Wednesday on a spending bill that is needed to prevent defaults in government funding when the fiscal year ends on Thursday and includes emergency disaster assistance. Republicans were expected to support it when Democrats removed the debt-limit increase that the GOP refused to back.
This separation is what has been needed all along to circumvent default. So credit to Schumer for facing, and bowing to, reality.
What’s the worst that could happen with a default?
I’m guessing it would cause the credit rating agencies to downgrade our sovereign debt, which would trigger repricing, which could take some time and thus temporarily freeze the credit markets and overnight borrowing. Short term interest rates will spike so borrowing would be more expensive, stock prices will fall due to general panic and because cash-strapped businesses would fail. Hiring drops, unemployment rises. What then? World stops trusting in USD? Oil starts trading in ruble-yuan-dinar-whathaveyou?
I think nearly everyone agrees that this is a question that’s best left unanswered.
A default would destroy one of the primary foundations for our last century of economic development. Although as long as you don’t have a swastika tattooed on your forehead, people these days tend to be very forgive-and-forget, so who knows if anyone would really even care. Either way, I’d really rather not find out.
I don’t understand how this works. The new bill would prevent defaults in government funding but not raise the debt-limit? Where’s the money coming from for such funding if we’re already at our limit in borrowing ability due to being at our debt limit?
I think it’s because funding runs out Oct 1st, but the debt ceiling isnt reached until later in the month? So it only “works” for a couple weeks.
But the fact the Democrats can pass the debt ceiling on their own means the Republicans will be able to point fingers if it is done as a separate bill. While at the same time being able to support the continuing resolution to fund the government. You can call it a political manuver, but attaching the two together to begin with is just as much a politically motivated manuver. Everyone blames each other for being the problem, but it’s all a bunch of pots and kettles.
He may be suggesting to invest in Remington (vsto) and Winchester (olin). I did when Uncle Joe got elected. They’ve been decent investments, but lots of things have gone up.
As for insurance, I can only suggest TIPS and what I’ve done is purchase LEAP puts for indices or LEAP options for index short funds. Neither of these were done as insurance for government default, and may in fact, be the exact opposite of what should be done for that particular scenario.
ETA: I just want to reiterate that purchasing short funds, or their options, may be the exact opposite of what you should do if the dollar is devalued due to debt default.
Its probably more complicated than I think and so maybe I’m wrong but I think buying Treasuries might not be the best move to plan for a default on US debt.
Would moving your investments to international funds or currencies be an option? You’d benefit from favorable forex assuming devaluation of the dollar. You’d still feel ripple effect but hopefully less than on the US stock market and balanced by forex somewhat.
Assigning blame is easy. Ludicrous tax breaks that never pay for themselves or frivolous social spending of money we don’t have. They’re both responsible since they’ve all ran deficits for years. The goal is the same short term political gain and securing re-election at the expense of the country.
I’m not expecting those corrupt liars on both sides to change their ways. I’ve long given up on that. Just looking out for myself so I profit from the debacle, just like they do.
I did when Uncle Joe got elected. They’ve been decent investments, but lots of things have gone up.