Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

if the U.S. defaults on its debt …

edited November 2023 in Off-Topic
Original Topic as posted in May: ”What will you buy if the U.S. defaults on its debt and equity markets fall 10% or more?” I’ve broadened the topic out to allow other thoughts on the subject not directly related to specific things you might invest in.
-

(Original Text from May)

With all the uncertainty about the debt limit and potential impact a default would have on equities I thought I’d toss this out for fun. U.S. stocks might get hammered hardest. But many global markets would probably also be sent reeling. U.S. bonds are owned by foreign governments and investors as well. Assuming there’s a silver lining somewhere in all this, what would you buy?

Not sure what I’d do.

- Commodities have been in a funk for awhile. If they fell further I’d sink some $$ there.

- Maybe just “cop-out” and spread a sum equally among the several different multi-asset / alternative funds I own. In effect, let the managers deal with it.

Comments

  • Think the defaulting will accelerate the pace of recession and things will get ugly. I will buy bonds of all types as the FED will cut rates quickly. Bond prices will go up while stocks and commodities will be in red.
  • With so much bearishness in the short-term outlook, not expecting it to happen.

    But if the market does pull back by double-digits, I would be buying a bit of everything. Keeping it simple....priorities in order:

    1) S&P Index ETF (setup Limit orders).
    2) Balanced/allocation funds to get some debt exposure (FBALX, FMSDX).
    3) Add to SCHD (again, via Limit orders).
    4) Maybe scoop up some beaten down sector ETFs.

  • Equities.

    For the taxable, looking at new positions in SPGP, RWJ, SYLD, and RWK. Might choose FMIMX over RWK. I'm still looking a midcaps. Then adding to SCHD, PEY, and CSB. In sectors, maybe new positions in PSCC, GRID, EVX, and FIW and adding to TDV and CSGZX. I have more cash in the taxable.

    Still thinking about the IRA. Would probably add equally to VWELX, VWINX, PRWCX, GLFOX, FSMEX, FSUTX, PSCC, IYK, PRBLX, VDIGX, RWJ, and SYLD. Nothing new there. And not a lot of room to maneuver until I get rid of a few things.

    Great question @hank.
  • Depending on the degree of market drop, I might increase equity ETFs like CGGO, CGDV and/or AVGE. @Sven may be on to another idea with bond funds that I didn't think about. I don't think I would go the commodity route because industrial demand would drop. Problem for me would be that most of my cash is tied up in treasuries and CDs over the next 1-12 months.
  • FXAIX (Fidelity S&P500 fund), FTEC (tech ETF), OMFL, FSELX and filling out my position in GOOGL. Amounts will vary with the degree damage
  • qqq, vong
  • I would add to CGGO (thanks to @MikeM) and MOAT.

    FWIIW, the Capital Group continues to roll out active ETFs, both equity and fixed income, that have a seeming chance of doing well. CGGO, CGDV and CGXU certainly have performed well during their short lives, although I can't judge the FI funds.

  • Thanks, @BenWP, but I surely can't take credit for finding the Capital Group ETFs. I first became aware earlier this year, maybe by rforno(?)
  • If the "scholars" on the Hill settle the US Debt issue within the next week, could we see a +10% equities market RALLY instead? Stocks have been holding the line, and volatility is still low.

    Not many folks out there are forecasting an early summer rally, but I would not be at all surprised.
  • @JD_co

    You could be absolutely right regarding a relief rally upon an agreement.

    Biden, McCarthy and McConnell all making comments directly or alluding to the fact that a default is off the table. Actually, it doesn't seem as though the stock markets have been all that concerned about a default possibility. Even after today the S&P 500 is still up over 8.5% YTD.
  • edited May 2023
    JD_co said:

    If the "scholars" on the Hill settle the US Debt issue within the next week, could we see a +10% equities market RALLY instead? Stocks have been holding the line, and volatility is still low. Not many folks out there are forecasting an early summer rally, but I would not be at all surprised.

    Let’s hope the “rally” doesn’t amount to a Wile E. Coyote moment. Could be a case of “sell the news”

  • What will I buy? Some more high-end single malt scotch.

    ... and equitiies on my shopping list that may plunge in value to fire-sale prices if/when/as the markets respond to the abject delusive insanity emanating from the idiots across the river from me.
  • hank said:


    Let’s hope the “rally” doesn’t amount to a Wile E. Coyote moment. Could be a case of “sell the news”

    GOOD POINT!

    Watch the markets pop higher on *any* news of a deal. If it's a short-term deal, 30-day delay, or other punting, I would expect a pop higher that's completely driven by the algos followed by a retracement down (or down hard) hours later once reality sets in and human traders get involved having had time to contemplate things. In which case, after things settle within 24-48 hours, expect more of the same chop until the next decision point is announced.

    If it's a permanent deal, I think the market goes higher in a straightforward but perhaps accellerated / maniacal fashion that might be good for a swing trade at least.

  • "Permanent" DC deal may be a debt-ceiling to some 2024 post-election day. And then, this fiasco will begin all over again.

    One of the sticking point in the current negotiations is that there seems agreement for extension to some pre-election date (longer than 30-days) but not to 2024 post-election date.

    A true permanent solution would be future balanced budgets, or making the debt-ceiling an integral part of the deficit budgets, i.e. , no pork-barrel/Christmas-tree deficit budgets without an appropriate increase in the debt-ceiling to keep all on the same page.
  • "
    A true permanent solution would be future balanced budgets, or making the debt-ceiling an integral part of the deficit budgets, i.e. , no pork-barrel/Christmas-tree deficit budgets without an appropriate increase in the debt-ceiling to keep all on the same page.

    And on that glorious day, cancer will be cured, world hunger/poverty will be eliminated, humanity will agree to start working for its own betterment instead of profit, and unicorns will prance freely around the National Mall....

  • edited May 2023
    If sp500 go to 3300 I will load all margins sell my house and put everything in spy Iwm eem Tsla tqqq

    They say maybe 10% drop next few wks/large corrections

    Get ready
  • johnN said:

    If sp500 go to 3300 I will load all margins sell my house and put everything in spy Iwm eem Tsla tqqq

    They say maybe 10% drop next few wks/large corrections

    Get ready

    My gameplan:

    10% down I will nibble as appropriate. (IMO such a move is hardly worth getting excited over.)

    20% down I will buy in larger quantities.

    30% down I will buy aggressively.

    nb: not buying indices, buying individual stocks for the long-term


  • Yogi said: "A true permanent solution would be future balanced budgets, or making the debt-ceiling an integral part of the deficit budgets, i.e. , no pork-barrel/Christmas-tree deficit budgets without an appropriate increase in the debt-ceiling to keep all on the same page."

    Absolutely right!
  • edited May 2023
    rforno said:

    And on that glorious day, cancer will be cured, world hunger/poverty will be eliminated, humanity will agree to start working for its own betterment instead of profit, and unicorns will prance freely around the National Mall....

    That’s called Rainbow Stew

  • as we approach default for real, it seems, here is a deficit reminder, a half-year later:

    https://www.bostonglobe.com/2023/10/30/opinion/budget-deficit-federal-debt-mark-blyth-brown-university/
  • edited November 2023
    I saw this thread and wondered what idiot had posted it ….. Than … :(

    To add on … it strikes me as curious that over the past 12 months there have been discussions both affirming the safety of U.S. government issuance as well as threads which seem to decry the safety of such securities because there might be a U.S. default. More of an amusing take-away than a serious point.

    I’m sure @Baseball_Fan, along with myself and others, will resist the temptation to drag this one into a political pile of dung. There’s been more than enough of that. Nobody wins. The board suffers when that happens. I really wish I hadn't posted the thread originally. Would not have done so in light of increased tensions today.

    What would I do in the event of a default or shutdown? Nothing. Maybe watch for bargains to pick up should bonds or (more likely) equities have a sharp sell off. I’ve gone essentially to a 10 - holding portfolio (10% each portion). To add risk or decrease risk would normally require selling off 10% (say a particular multi-asset fund) and buying something else with the proceeds. Two funds I’d use as a defensive posture of last resort would be TMSRX and BAMBX, I used to think GNMA funds constituted a defensive position. However, recent volatility in that once docile group has been substantial the past couple years.
  • edited November 2023
    @davidrmoran - I’m being blocked from reading whatever you linked today. Even the article title / caption is covered with a Facebook sign in page. So no idea what it is about. Don’t do Facebook. Don’t wish to subscribe. Is there another link to the story? Would sure like to view it seeing as how I started the thread (last May). Thanks!

    Facebook?

  • edited November 2023
    Yeah. A sign-in page for Facebook popped up and blocked most everything else. Some websites want you to reveal your identity by signing in through Google, Facebook, etc. There was also a link allowing you to gain access by entering your email.

    I was, however, able to read a bit of the article by pasting the URL to my Firefox browser, The author’s takeaway seems to be that federal deficits don’t really matter. Could be. Dunno. The article isn’t going to affect what investments I make in the very least. Sure to become a hot-button issue as the election nears. A better subject for the off topic board.
  • @hank- You might take a closer look there- a Facebook blurb does appear, but if you just close it, the article is perfectly readable.

    OJ
  • edited November 2023
    Thanks OJ -

    In my case I was unable to close it initially. But I use various web browsers & ad blockers, etc. But - . Yeah - after trying later with Firefox I can read it now. Maybe others will comment on the author’s argument. If it has a bearing on what they plan to sell or buy as investments please share those ideas. That was the crux of the OP.

    Personally, not going to make any changes in holdings. Back in May my portfolio had a “speculative” sleeve and I might have tried to “game” the situation more. Not the case today. As far as the political disfunction in D.C, it has escalated from a “3-alarm” situation back in May to a “5-alarm” today.
  • never know what is going at your end, but no Fb hooks or buried cookies in the link

    https://www.bostonglobe.com/2023/10/30/opinion/budget-deficit-federal-debt-mark-blyth-brown-university/

    open yet another browser and use its private / incognito session to read entire thing, if necessary

    then there is this:

    https://mythfighter.com/2023/11/07/ignorance-or-lies-the-single-worst-economic-scare-mongering-bullshit-ever-encountered/
  • edited November 2023
    Thanks @davidrmoran. Using the same browser both stories popped up w/o any issues. Don’t know what happened earlier. Perfectly readable.

    Appears to be a well laid out and articulate argument (re - the national budget deficit) put forth by Brown University’s political economist Mark Blyth. Certainly open to further discussion for those so inclined. Thanks for sharing.
  • "...Should we be concerned? One way of looking at it is, you’re going to be spending that money on interest payments and you could be spending on something else. The chances are, though, we don’t spend on something else. We just give it away in the next round of tax cuts, particularly if the Republicans get in. I mean, the hypocrisy on this is astonishing. They’re screaming about deficits, and the first thing they’ll do when they come in is have tax cuts. And those tax cuts lead to bigger deficits. That’s exactly what happened under Donald Trump..."

    TRUE, re: the M.O. and the strategic Repugnant hypocrisy. Nevertheless, the numbers do not lie. An alternative? RAISE taxes. But the very idea is conceived of as kissing the 3rd rail on the subway. The 11th Commandment: "Thou shalt be petty and unreasonably stingy. Care about yourself, only."

  • yes, revenue increase is key to all sorts of good things, and the opposite = the opposite
Sign In or Register to comment.