The Next Big Crash - Are You Prepared?

[freedom]

Since you are asking me to read a book and you read so many books, please educate me about my challenge.

where is US government spending its money and how much tax does US government collect?

Please don't dodge the questions.

There are 2 sides to a coin, but there are not 2 sides to a fact.

[ForeverAlone]

guys what happens if 2 weeks later the debt ceiling is not raised?

[AlphaQuant]

guys what happens if 2 weeks later the debt ceiling is not raised?

so far my conclusion is that noone knows.

on one hand, Jacob Lew (the Secretary of Treasury) says that all extraordinary measures will run out by then and so the G will not have enough cash to pay the coupons on the Treasuries due. So there's a default of UST.

on the other hand, there is a view that Obama can always invoke Section Four of the Fourteenth Amendment and assert authority to breach the debt ceiling to pay “the public debt of the United States, authorized by law”. (copied from http://www.theatlantic.com/politics/arch...aw/280176/)

Also, 2 days ago on Bloomberg, David Stockman (ex-OMB director under Reagan) says that there's always a way for the Treasury to rearrange the payment of stuff and so the coupons can always be paid if the G forces it.

so unless you are a member of the Treasury and knows the inside out of the pecking order of the Treasury payments, i doubt anyone really knows whether a default is on the cards.

However, what is clear is that IF a default occurs, there is going to be chaos. First, tons of hedgies/mutual funds/real monies will not get the cash into their books. That is going to be a disaster. Second a downgrade of the UST should happen and some funds might no longer be willing to hold the UST if they are mandated to take only AAA debt - so looks like sell UST, sell USD, buy other AAA sovereign. Then of cos if the UST yield curve shifts because of the selldown, risk premium will be repriced since everything is priced off the UST curve.

[sgd]

if the US defaults everybody in the world is screwed. A lot of people hold and trust this paper and use it as collateral for other things and people here means large finance companies, banks, governments. If they default these paper holdings will be worth lesser than toilet paper, there will be a very big run on banks and everything.

needless to say stock markets everywhere will also crash over night a lot of people who are leveraged are going to be bankrupt.

If governments provide subsidies like food and fuel become bankrupt - there's going to be another twitter revolution and a lot of social problems.

[safetyfirst]

IMO, there is a less than 1% chance that a default will occur. The involved parties are just putting up an act, they will always compromise at the final minute.

As mentioned the consequences of defaulting are serious. I think it is far worse than the recent global financial crisis should a default occur. All the politicians are aware of these, they probably also have a significant percentage of their wealth in the stock market, dont think they will drop stones on their own feet.

[AlphaQuant]

personally i think a default will not happen as well.

Not because the politicians are responsible etc, but simply because too many people are going to be affected - and a lot of these people are rich blokes who have enough lobbyists in the congress to make sure there's enough votes to protect their interests.

While the extreme right of the GOP (typically rich whites) is opposed to Obamacare and the welfare state, they are also the ones with a lot to lose if asset values start collapsing (since they own the most stocks, bonds, properties etc).

[Dividend Warrior]

IMO, there is a less than 1% chance that a default will occur. The involved parties are just putting up an act, they will always compromise at the final minute.

As mentioned the consequences of defaulting are serious. I think it is far worse than the recent global financial crisis should a default occur. All the politicians are aware of these, they probably also have a significant percentage of their wealth in the stock market, dont think they will drop stones on their own feet.

I agree.

Warren Buffett said that Washington "will go right to the point of extreme idiocy, but we won't cross it."

Link to the interview below.
http://www.businessinsider.com/warren-bu...bc-2013-10

[MOV]

Europe seems to be improving, Japanese rebooting gaining traction, Chinese shadow debt is more or less contained for now.. I personally think there is probably another leg to this bull after compromise is reached.

As usual, do your own homework, buy undervalued stocks and ignore the noise.

[ForeverAlone]

the STI is trading at 13 times earnings, is this over or undervalued?

[BlueKelah]

the STI is trading at 13 times earnings, is this over or undervalued?

sounds fairly valued to me.