gallo146 wrote:we are very concerned about the goverment defaulting next week. are you all prepared? do you recommend moving assets into moneymarket funds? or Total Bond fund or GNMA? away from stocks? please answer before next THURSDAY (default day)
Goodness. Well, to begin with, I'm a fatalist about such things. I don't know what will happen but I'm doing nothing. I'm just as likely to dodge INTO a bullet as to DODGE a bullet. In general, I think it's a mistake to make investment changes based on news headlines. And in general I think it's a mistake to guess how an unfolding story will unfold.
Let me show you what I mean about "unfolding." A group of friends of mine was having a bull session via email just the other week, and one of us, who happens to be a civilian employee of the Department of Defense, had been furloughed and pressed us all for guesses on how long we thought it would last, because he wanted to think about possible vacation plans, etc. Here's the point. Every single one of the guesses was, simply, a guess on how long the government shutdown would last. NOT ONE OF US even considered the possibility that the furloughs would end WITHOUT the government shutdown ending, or how that would happen.
You just don't know what's going to happen, and even so you don't know how anything will affect the market. Remember when S&P downgraded the rating of Treasury bonds? How big an effect did you think that would have? I thought it would have a lot more effect than it did. Remember when Bernanke talked vaguely about eventually tapering down bond purchases? I thought that would have a lot LESS effect that it did.
What surprises me, though, is the idea that you would move out of stocks in order to protect against a bond collapse. I think, really, what you are saying is that you fear a general economic collapse of some kind. Well, so do I, but I don't think there is any easy, cheap, surefire protection to be had just by going online and placing a few orders for mutual fund exchanges.
I'm doing nothing whatsoever. Except worrying, of course.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.