The bears must be having a field day right now.
I mean, forget triple-dip recessions, Chinese hard landings, eurozone bailouts and property crashes…
…there is a FINANCIAL APOCALYPSE on the way.
And it is due to strike on Thursday next week.
It will devastate stock markets and blow up borrowing costs for billions of people
Now I don’t want to worry you unduly, but apparently the United States is running out of money.
To cut a long story short, American politicians can’t agree on their country’s spending and whether they should increase the level of their so-called debt ceiling…
…so the US Treasury may become unable to borrow any more cash and then have to default on its debts.
Default Day is in fact set for Thursday 17 October. Circle the date in your diary, just in case, as the market might be in for a rough time between now and then.
To give you a flavour of what could be in store, here is an extract from a recent Bloomberg article:
“Failure by the world’s largest borrower to pay its debt – unprecedented in modern history – will devastate stock markets… blow up borrowing costs for billions of people and companies, ravage the dollar and throw the US and world economies into a recession that probably would become a depression.”
Apparently the US debt is 23 times the liabilities owed by Lehman Brothers when the investment bank went under during 2008.
No wonder that Bloomberg article also claimed:
“Few view a US default as anything but a financial apocalypse.”
Sell everything right now and reinvest in a bunker, a shotgun and tins of baked beans
It all sounds very worrying, I know.
But I must admit, I am quite relaxed about the forthcoming market catastrophe.
I mean, financial Armageddon will not win anybody any votes, so I’m convinced those crazy American politicians will eventually see sense and work out a deal right on the brink.
Well, they always have done in the past with this sort of thing.
And if the States does default and a financial apocalypse does occur?
Well, if you believe some of the doomsters, all the bearish favourites…
…such as your Gold ETFs, your Personal Asset Trust shares and your cash under the mattress…
…might become worthless anyway as banks, businesses and brokers all go bust as the global economic system suffers a cataclysmic meltdown.
In fact, if you are betting on a US default, I’d have thought the best decision you could make today is to sell everything right now and reinvest in a bunker, a shotgun and tins of baked beans.
No wonder Warren Buffett was involved in the acquisition of Heinz earlier this year…
And there is no shortage of other gloomy news to add to the uncertainty
Talking of Warren Buffett… the guru has mixed feelings on the market right now. The other week he said:
“We’re having a hard time finding things to buy.”
While Buffett wasn’t exactly über-bearish, he does join Neil Woodford in the chorus of legendary investors now suggesting us mortals approach the current market with caution.
And there is no shortage of other gloomy news to add to the uncertainty ahead of the possible financial apocalypse.
For instance:
- Dependable dividend defensive Unilever has owned up to weak sales growth within emerging markets.
- Utilities such as SSE have become political footballs as Ed Miliband lays the boot in with proposed price freezes.
- George Osborne has warned we’re in for another six years of government austerity measures.
- House prices are being inflated artificially by government lending guarantees. (Just search for “7 Private Islands That Cost Less Than A Flat In London”).
- Even pawnbrokers have fallen on hard times, with Albermarle & Bond coming a cropper after the gold-price collapse.
I am still buying and have my fingers crossed for Royal Mail
You can call me brave, complacent, stupid or naïve. But I think this particular financial apocalypse will be averted…
…although I’m sure the markets may suffer sudden turbulence as Default Day approaches.
So basically I am still buying (I have my fingers crossed for Royal Mail)…
…I am still holding, and…
…I am certainly not selling to reinvest in a bunker, a shotgun or tins of baked beans.
I had to tone down his language for this email
To double-check my sanity, I asked ace Fool investor Nate Weisshaar to provide his thoughts on all this for Collective readers.
He’s from the States, so he’s more in tune with the antics of those crazy American politicians than me. He said:
“Right now our dysfunctional American politicians are barking at one another, but eventually they’ll come to an agreement – otherwise it will be career suicide for the lot of them.
The most likely outcome will be some sort of garbage compromise, where the can is once again kicked down the road and the country suffers another round of budget cuts that’ll probably hurt GDP.”
I should admit I had to tone down his language for this e-mail.
Anyway, I’m quite reassured by what Nate had to say, not least because he has helped oversee the growth of The Motley Fool’s Champion Shares PRO real-money portfolio…
…and there is a large overlap between that £50,000 Champion Shares PRO portfolio and my own portfolio.
You see, I have alighted on Champion Shares PRO small-caps such as Abbey Protection, FW Thorpe and Mountview Estates, as they boasted asset-flush accounts, tip-top managers and very reasonable valuations…
…and also because these companies have shown they can cope with economic problems much better than most.
I’m extremely keen to discover what this £50,000 portfolio buys next
So like Champion Shares PRO, I’m investing in conservatively run businesses and betting they survive any future turmoil relatively well.
And also like Champion Shares PRO, I have some cash held back, just in case the current worries throw up some bargain buys.
But unlike PRO, I don’t exactly have thousands sitting on the sidelines waiting to strike.
Nonetheless, I’m extremely keen to discover what the £50,000 PRO portfolio buys next – impending financial apocalypse or not. (Just click here if you are interested as well).
I just hope Nate doesn’t tell me to buy a shotgun.
