[Debt ceiling discussion mega-thread]

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Geologist
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Re: What happens to treasuries if the debt ceiling is not raised?

Post by Geologist »

There is already a thread discussing this issue: viewtopic.php?t=395322
protagonist
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Re: [Debt ceiling discussion mega-thread]

Post by protagonist »

rockstar wrote: Thu Feb 23, 2023 12:41 pm

If this was really a threat, the bond market would have already crashed.
That argument reminds me of what people were saying about the subprime mortgage crisis around 2006- 2007. I imagine a similar argument may have been made by Chamberlain re: the Munich agreement. Nobody wants to imagine the worst, especially a civilization blinded by recency bias, having gone a monumental 78 years without a major crisis greater than 2008.

At this stage, I would think that nobody really has a clue regarding how badly (or not) this will turn out, and people are just guessing.

(I am not a harbinger of doom. Please do not wrongly interpret the above as a prediction of disaster. It is not. It is an admission that, when dealing with such a complex issue with so many unknown variables, everybody is just wild-guessing at this point. Whether enough politicians realize , and care, that the world has so much to lose if this is unresolved, to actually desperately work together with their "enemies" to find common ground, is currently a black box.)
technovelist
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Re: [Debt ceiling discussion mega-thread]

Post by technovelist »

protagonist wrote: Mon Mar 13, 2023 12:15 pm
rockstar wrote: Thu Feb 23, 2023 12:41 pm

If this was really a threat, the bond market would have already crashed.
That argument reminds me of what people were saying about the subprime mortgage crisis around 2006- 2007. I imagine a similar argument may have been made by Chamberlain re: the Munich agreement. Nobody wants to imagine the worst, especially a civilization blinded by recency bias, having gone a monumental 78 years without a major crisis greater than 2008.

At this stage, I would think that nobody really has a clue regarding how badly (or not) this will turn out, and people are just guessing.

(I am not a harbinger of doom. Please do not wrongly interpret the above as a prediction of disaster. It is not. It is an admission that, when dealing with such a complex issue with so many unknown variables, everybody is just wild-guessing at this point. Whether enough politicians realize , and care, that the world has so much to lose if this is unresolved, to actually desperately work together with their "enemies" to find common ground, is currently a black box.)
Isn't it interesting that "nobody knows nothing" about future investment prices but "everybody knows everything" about how an ongoing crisis will be settled with minor impacts?
In theory, theory and practice are identical. In practice, they often differ.
rockstar
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Re: [Debt ceiling discussion mega-thread]

Post by rockstar »

technovelist wrote: Mon Mar 13, 2023 4:17 pm
protagonist wrote: Mon Mar 13, 2023 12:15 pm
rockstar wrote: Thu Feb 23, 2023 12:41 pm

If this was really a threat, the bond market would have already crashed.
That argument reminds me of what people were saying about the subprime mortgage crisis around 2006- 2007. I imagine a similar argument may have been made by Chamberlain re: the Munich agreement. Nobody wants to imagine the worst, especially a civilization blinded by recency bias, having gone a monumental 78 years without a major crisis greater than 2008.

At this stage, I would think that nobody really has a clue regarding how badly (or not) this will turn out, and people are just guessing.

(I am not a harbinger of doom. Please do not wrongly interpret the above as a prediction of disaster. It is not. It is an admission that, when dealing with such a complex issue with so many unknown variables, everybody is just wild-guessing at this point. Whether enough politicians realize , and care, that the world has so much to lose if this is unresolved, to actually desperately work together with their "enemies" to find common ground, is currently a black box.)
Isn't it interesting that "nobody knows nothing" about future investment prices but "everybody knows everything" about how an ongoing crisis will be settled with minor impacts?
When the consequences of inaction are worse than action, then you can reasonably expect something to happen. It’s like nuclear war. Do you have a fallout shelter? If not, why not?
technovelist
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Re: [Debt ceiling discussion mega-thread]

Post by technovelist »

rockstar wrote: Mon Mar 13, 2023 4:25 pm
technovelist wrote: Mon Mar 13, 2023 4:17 pm
protagonist wrote: Mon Mar 13, 2023 12:15 pm
rockstar wrote: Thu Feb 23, 2023 12:41 pm

If this was really a threat, the bond market would have already crashed.
That argument reminds me of what people were saying about the subprime mortgage crisis around 2006- 2007. I imagine a similar argument may have been made by Chamberlain re: the Munich agreement. Nobody wants to imagine the worst, especially a civilization blinded by recency bias, having gone a monumental 78 years without a major crisis greater than 2008.

At this stage, I would think that nobody really has a clue regarding how badly (or not) this will turn out, and people are just guessing.

(I am not a harbinger of doom. Please do not wrongly interpret the above as a prediction of disaster. It is not. It is an admission that, when dealing with such a complex issue with so many unknown variables, everybody is just wild-guessing at this point. Whether enough politicians realize , and care, that the world has so much to lose if this is unresolved, to actually desperately work together with their "enemies" to find common ground, is currently a black box.)
Isn't it interesting that "nobody knows nothing" about future investment prices but "everybody knows everything" about how an ongoing crisis will be settled with minor impacts?
When the consequences of inaction are worse than action, then you can reasonably expect something to happen. It’s like nuclear war. Do you have a fallout shelter? If not, why not?
Since I'm out in the country I don't think I'd be in the immediate fallout zone.
But I do have plans in case there is a bomb dropped on the nearest big city 100 miles away.
But back to the original question: I'm pretty sure something will happen. I just don't know what, and I'm pretty sure no one else does either.
In theory, theory and practice are identical. In practice, they often differ.
VartAndelay
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Trying to analyze safety of T-Bills vs bank account vs money market fund

Post by VartAndelay »

I am thinking through how to hold money in the short term in the safest way possible. Between these 3 options:

1. T-Bills
2. FDIC-insured cash in bank account
3. Money market fund (such as the top money market funds used for settlement accounts at Vanguard or Fidelity)

I know it would be a horrible and unlikely event, but hypothetically, if the U.S. were to default on debt in the near term, what would be the impact on these specific options?

This thread has been merged into this ongoing thread. Moderator Pops1860
Geologist
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Re: Trying to analyze safety of T-Bills vs bank account vs money market fund

Post by Geologist »

There is a thread on the debt ceiling and you should read entries in that thread (viewtopic.php?p=7160031#p7160031) and this post should be merged there.
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ray.james
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Re: [Debt ceiling discussion mega-thread]

Post by ray.james »

It is just surprising, how quiet media and people are on debt ceiling limit. In 2011, I remember watching some news every week about some senators etc., discussing across party aisles to reach an agreement. Considering what is going on in news cycle right now, it is just crazy, there is no thought being wasted on debt ceiling!

I have read a recent report that there was a plan of action setup last time as last resort. It has phased order something like:
Stopping all federal pension funding.
Only essential staff & departments working
start sending only 70% of social security payments.
sequestration to all major departments etc.,
Medicare sequestration.

This is from fed notes:
https://www.federalreserve.gov/monetary ... nfcall.pdf (page 5 might be of interest for those who want to read it). Powell was in FOMC committee at that tome and coordinating on TARP and other items with treasury. I feel like this will lay the path for current one.
VartAndelay wrote: Wed Mar 15, 2023 10:40 am I am thinking through how to hold money in the short term in the safest way possible. Between these 3 options:

1. T-Bills
2. FDIC-insured cash in bank account
3. Money market fund (such as the top money market funds used for settlement accounts at Vanguard or Fidelity)

I know it would be a horrible and unlikely event, but hypothetically, if the U.S. were to default on debt in the near term, what would be the impact on these specific options?

This thread has been merged into this ongoing thread. Moderator Pops1860
To paraphrase from above, notes will be rolled and interest will be paid.
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rkhusky
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Re: [Debt ceiling discussion mega-thread]

Post by rkhusky »

ray.james wrote: Wed Mar 22, 2023 3:14 pm It is just surprising, how quiet media and people are on debt ceiling limit. In 2011, I remember watching some news every week about some senators etc., discussing across party aisles to reach an agreement. Considering what is going on in news cycle right now, it is just crazy, there is no thought being wasted on debt ceiling!
Because it is not going to get serious until June. Once national parks start closing, people will pay attention.
rockstar
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Re: [Debt ceiling discussion mega-thread]

Post by rockstar »

rkhusky wrote: Thu Mar 23, 2023 1:36 pm
ray.james wrote: Wed Mar 22, 2023 3:14 pm It is just surprising, how quiet media and people are on debt ceiling limit. In 2011, I remember watching some news every week about some senators etc., discussing across party aisles to reach an agreement. Considering what is going on in news cycle right now, it is just crazy, there is no thought being wasted on debt ceiling!
Because it is not going to get serious until June. Once national parks start closing, people will pay attention.
Yep. Then it will make the news again.
Klute
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What would you do?

Post by Klute »

Hi everybody,

I am debating whether to buy some 26 week tbills right now, or to wait until April 18th to buy 52 week tbills. I don't need the money right now.

The 26 week bills pay good interest, but what about the debt ceiling?
If I wait until mid-April to buy the 52 week ones, what if the rates go down until then? What would people on here do?

Any input appreciated - thanks!

Klute
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Kevin M
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Re: What would you do?

Post by Kevin M »

Klute wrote: Thu Mar 30, 2023 10:26 am Hi everybody,

I am debating whether to buy some 26 week tbills right now, or to wait until April 18th to buy 52 week tbills. I don't need the money right now.

The 26 week bills pay good interest, but what about the debt ceiling?
If I wait until mid-April to buy the 52 week ones, what if the rates go down until then? What would people on here do?

Any input appreciated - thanks!

Klute
No need to wait if you want 1 year maturity. Just buy it on the secondary market.
If I make a calculation error, #Cruncher probably will let me know.
Klute
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Re: [Debt ceiling discussion mega-thread]

Post by Klute »

I can only buy through treasury direct.
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Kevin M
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Re: [Debt ceiling discussion mega-thread]

Post by Kevin M »

Klute wrote: Thu Mar 30, 2023 12:43 pm I can only buy through treasury direct.
Why?
If I make a calculation error, #Cruncher probably will let me know.
kvdecide
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Debt Ceiling - risks?

Post by kvdecide »

Hello All:

https://edition.cnn.com/2023/01/13/poli ... index.html

Quite a few BHs own Treasuries, based on the threads on this forum. And there is always an underlying perception that the US Govt never defaults on its debt.

However, based on the above CNN article, what action do we need to take to protect the money we invested in a Tbill/Tbond, in case US defaults. Does it make any sense to move it into a brokered CD? Or do you say no action necessary, as no asset is safe, if US Govt defaults?

Best Regards
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oldcomputerguy
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Re: [Debt ceiling discussion mega-thread]

Post by oldcomputerguy »

kvdecide's question has been merged into the ongoing debt ceiling thread.
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zie
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Re: Debt Ceiling - risks?

Post by zie »

kvdecide wrote: Tue Apr 04, 2023 6:28 am Hello All:

https://edition.cnn.com/2023/01/13/poli ... index.html

Quite a few BHs own Treasuries, based on the threads on this forum. And there is always an underlying perception that the US Govt never defaults on its debt.

However, based on the above CNN article, what action do we need to take to protect the money we invested in a Tbill/Tbond, in case US defaults. Does it make any sense to move it into a brokered CD? Or do you say no action necessary, as no asset is safe, if US Govt defaults?

Best Regards
Nobody really knows. The US govt has defaulted on its debt obligations before, but for brief periods of time only. If like in the past, the US defaults, but only briefly, then it's likely not a big deal all things considered. The US has, historically, made everyone whole as promised.

If the US govt defaults for an extended period of time, then one might wonder if the US govt even continues to exist. If that's the case, then all bets are off. Will it be a nice smooth transition to whatever replaces it, will it be a giant mess or somewhere in between? Your guess is as good as mine. The smoother the transition, the more likely USD will still be worth something after the dust settles.

Personally, I'm of the opinion the US govt probably won't default, or if it does, it will be for a matter of days, not a matter of weeks or longer(though it might take the Treasury weeks to catch up and make everyone whole). So I'm happily holding US debt still.
Whether rich or poor, a young woman should know how a bank account works, understand the composition of mortgages and bonds, and know the value of interest and how it accumulates. -Hetty Green
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Kevin M
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Re: Debt Ceiling - risks?

Post by Kevin M »

kvdecide wrote: Tue Apr 04, 2023 6:28 am Hello All:

https://edition.cnn.com/2023/01/13/poli ... index.html

Quite a few BHs own Treasuries, based on the threads on this forum. And there is always an underlying perception that the US Govt never defaults on its debt.

However, based on the above CNN article, what action do we need to take to protect the money we invested in a Tbill/Tbond, in case US defaults. Does it make any sense to move it into a brokered CD? Or do you say no action necessary, as no asset is safe, if US Govt defaults?

Best Regards
The article is from January, so kind of old. The main point seems to be that impact on the overall economy will be a much greater likelihood than defaults on Treasury payments.
Beyond markets, Goldman Sachs said a failure to raise the debt limit in time “would pose greater risk to government spending and ultimately to economic growth than it would to Treasury securities themselves.”

That’s because in order to avoid a default on US debt, the federal government would shift money around to keep paying interest on Treasuries. That would create a massive hole that would need to be filled by delaying a host of other payments — including ones that millions of Americans count on such as paychecks to federal employees, benefits to veterans and Social Security payments.
Kevin
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Re: Debt Ceiling - risks?

Post by billaster »

Kevin M wrote: Tue Apr 04, 2023 11:57 am The article is from January, so kind of old. The main point seems to be that impact on the overall economy will be a much greater likelihood than defaults on Treasury payments.
Beyond markets, Goldman Sachs said a failure to raise the debt limit in time “would pose greater risk to government spending and ultimately to economic growth than it would to Treasury securities themselves.”

That’s because in order to avoid a default on US debt, the federal government would shift money around to keep paying interest on Treasuries. That would create a massive hole that would need to be filled by delaying a host of other payments — including ones that millions of Americans count on such as paychecks to federal employees, benefits to veterans and Social Security payments.
Kevin
These posturing games are not costless. They cause real harm to the economy. The 2019 government shutdown was estimated by the CBO to subtract 0.2% from GDP. At a time when people are already speculating about a possible recession, these shenanigans would be the tipping point. People are hurt and people lose jobs and it increases the deficit, the opposite of improving it.

If you are vulnerable, you should think about job security and current spending, more immediate concerns than your investments.
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Re: Debt Ceiling - risks?

Post by rockstar »

billaster wrote: Tue Apr 04, 2023 12:28 pm
Kevin M wrote: Tue Apr 04, 2023 11:57 am The article is from January, so kind of old. The main point seems to be that impact on the overall economy will be a much greater likelihood than defaults on Treasury payments.
Beyond markets, Goldman Sachs said a failure to raise the debt limit in time “would pose greater risk to government spending and ultimately to economic growth than it would to Treasury securities themselves.”

That’s because in order to avoid a default on US debt, the federal government would shift money around to keep paying interest on Treasuries. That would create a massive hole that would need to be filled by delaying a host of other payments — including ones that millions of Americans count on such as paychecks to federal employees, benefits to veterans and Social Security payments.
Kevin
These posturing games are not costless. They cause real harm to the economy. The 2019 government shutdown was estimated by the CBO to subtract 0.2% from GDP. At a time when people are already speculating about a possible recession, these shenanigans would be the tipping point. People are hurt and people lose jobs and it increases the deficit, the opposite of improving it.

If you are vulnerable, you should think about job security and current spending, more immediate concerns than your investments.
I’m skipping a National Park trip in June because I don’t want to get there and find it closing part way through my trip. That’s what this mess is costing me.
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Re: Debt Ceiling - risks?

Post by billaster »

rockstar wrote: Tue Apr 04, 2023 5:23 pm I’m skipping a National Park trip in June because I don’t want to get there and find it closing part way through my trip. That’s what this mess is costing me.
It's not just costing you. It is costing all of those businesses you would have patronized on your trip. This stuff is damaging to the economy, employers and employees.
rockstar
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Re: Debt Ceiling - risks?

Post by rockstar »

billaster wrote: Tue Apr 04, 2023 5:26 pm
rockstar wrote: Tue Apr 04, 2023 5:23 pm I’m skipping a National Park trip in June because I don’t want to get there and find it closing part way through my trip. That’s what this mess is costing me.
It's not just costing you. It is costing all of those businesses you would have patronized on your trip. This stuff is damaging to the economy, employers and employees.
I’ve decided to go to the UK instead. I’ll still be spending. But not in the US.
OSUperu
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Govt default effect on...?

Post by OSUperu »

From a matter-of-fact standpoint as opposed to conjecture, if/when a govt default were to occur, how would that affect:

-the purchase of Tbills,notes, savings bonds, etc?
-already purchased and maturing single Tbills, notes, bonds, etc?
-Treasury ETFs/funds? (either with a portion or all of the investment % in Treasuries)
-interest rates
-and for the matter, other areas of the govt backed economy?


Thanks!

[I merged OSUperu’s post and the one reply into the ongoing discussion - moderator ClaycordJCA.]
sycamore
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Re: Govt default effect on...?

Post by sycamore »

OSUperu wrote: Mon Apr 17, 2023 11:56 am From a matter-of-fact standpoint as opposed to conjecture, if/when a govt default were to occur, how would that affect...
I think there's already a thread for this topic. Take a look at viewtopic.php?t=395322
MathWizard
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Re: [Debt ceiling discussion mega-thread]

Post by MathWizard »

If the US defaults, are FDIC guarantees and even dollars safe?
They are both backed by the full faith and credit of the US federal government.

I'm not sure what we can do financially. I do agree that the fallout would
be worse than just treasuries.
The only strategy is to prepare like you would for a recession. The
alternatives are ones I do not want to contemplate.
technovelist
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Re: [Debt ceiling discussion mega-thread]

Post by technovelist »

MathWizard wrote: Mon Apr 17, 2023 2:57 pm If the US defaults, are FDIC guarantees and even dollars safe?
They are both backed by the full faith and credit of the US federal government.

I'm not sure what we can do financially. I do agree that the fallout would
be worse than just treasuries.
The only strategy is to prepare like you would for a recession. The
alternatives are ones I do not want to contemplate.
There's another money that has value all around the world and can be bought in (relatively) small increments. It has a much longer track record than the US Dollar and is widely held by central banks.
In theory, theory and practice are identical. In practice, they often differ.
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Beensabu
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Re: [Debt ceiling discussion mega-thread]

Post by Beensabu »

technovelist wrote: Mon Apr 17, 2023 9:26 pm There's another money that has value all around the world and can be bought in (relatively) small increments. It has a much longer track record than the US Dollar and is widely held by central banks.
"Gold" is a family friendly word and discussion of it hasn't been banned here. You can say it.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
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CalPoppy
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Re: [Debt ceiling discussion mega-thread]

Post by CalPoppy »

Given this thread is so long…

For those that have followed this discussion, would you be kind enough to summarize any reasonable actions discussed that one might take to mitigate a possible short lived debt ceiling crisis?

Many thanks!
H-Town
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Re: [Debt ceiling discussion mega-thread]

Post by H-Town »

CalPoppy wrote: Tue Apr 18, 2023 3:17 pm Given this thread is so long…

For those that have followed this discussion, would you be kind enough to summarize any reasonable actions discussed that one might take to mitigate a possible short lived debt ceiling crisis?

Many thanks!
Ha. Sure.

Let's see... remember what did you do on Oct 1, 2022? Probably not, but you probably didn't know about debt ceiling crisis.

Then pretend you go on a year long vacation with no worry about anything in the world. You'll come back on Oct 1, 2023, and you will probably don't hear about the debt ceiling crisis anymore.

It's a big nothing burger if you don't really care about political brinksmanship.

Am I off base on the summary of this thread?
Time is the ultimate currency.
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CalPoppy
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Re: [Debt ceiling discussion mega-thread]

Post by CalPoppy »

H-Town wrote: Tue Apr 18, 2023 3:30 pm Ha. Sure.

Let's see... remember what did you do on Oct 1, 2022? Probably not, but you probably didn't know about debt ceiling crisis.

Then pretend you go on a year long vacation with no worry about anything in the world. You'll come back on Oct 1, 2023, and you will probably don't hear about the debt ceiling crisis anymore.

It's a big nothing burger if you don't really care about political brinksmanship.

Am I off base on the summary of this thread?
Haha. Nice answer.

Also, now asking ChatGPT for year-long vacation ideas.
billaster
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Re: [Debt ceiling discussion mega-thread]

Post by billaster »

zie wrote: Tue Apr 18, 2023 9:48 am
MathWizard wrote: Mon Apr 17, 2023 2:57 pm If the US defaults, are FDIC guarantees and even dollars safe?
They are both backed by the full faith and credit of the US federal government.

I'm not sure what we can do financially. I do agree that the fallout would
be worse than just treasuries.
The only strategy is to prepare like you would for a recession. The
alternatives are ones I do not want to contemplate.
Well the FDIC has assets of their own: https://www.fdic.gov/about/financial-re ... ction5.pdf They don't need money from the US govt to do stuff, though a lot of their assets are in US treasuries which might prove annoying, if they have to sell. Luckily most of the time, they don't have to use their own money when fixing banks.
The FDIC Deposit Insurance Fund is 95% U.S. Treasuries, so if the Treasury is unable to redeem its bonds, the FDIC would be in trouble. And if the FDIC attempted to liquidate its bonds in the secondary market, it would undoubtedly lose a lot of money in a default situation.

The FDIC Deposit Insurance Fund reserve ratio is currently less than 1.3%. This means the FDIC has barely one dollar for every dollar insured. This is below their own target of 2.0% and due to the rapid inflow of insured deposits into banks.

If there were a real default, I would not expect the FDIC to be able to insure depositors.
technovelist
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Re: [Debt ceiling discussion mega-thread]

Post by technovelist »

Beensabu wrote: Mon Apr 17, 2023 11:05 pm
technovelist wrote: Mon Apr 17, 2023 9:26 pm There's another money that has value all around the world and can be bought in (relatively) small increments. It has a much longer track record than the US Dollar and is widely held by central banks.
"Gold" is a family friendly word and discussion of it hasn't been banned here. You can say it.
Yeah, I know. I'm just surprised at the notion that there's no feasible way to hedge against the loss of the dollar as reserve currency.
In theory, theory and practice are identical. In practice, they often differ.
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Beensabu
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Re: [Debt ceiling discussion mega-thread]

Post by Beensabu »

CalPoppy wrote: Tue Apr 18, 2023 3:17 pm Given this thread is so long…

For those that have followed this discussion, would you be kind enough to summarize any reasonable actions discussed that one might take to mitigate a possible short lived debt ceiling crisis?

Many thanks!
Some physical cash on hand in case there are liquidity issues with money market funds / T-bills and you temporarily lose access to bank accounts for some reason.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
billaster
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Re: [Debt ceiling discussion mega-thread]

Post by billaster »

Beensabu wrote: Tue Apr 18, 2023 6:16 pm
CalPoppy wrote: Tue Apr 18, 2023 3:17 pm Given this thread is so long…

For those that have followed this discussion, would you be kind enough to summarize any reasonable actions discussed that one might take to mitigate a possible short lived debt ceiling crisis?

Many thanks!
Some physical cash on hand in case there are liquidity issues with money market funds / T-bills and you temporarily lose access to bank accounts for some reason.
And that is how you start bank runs -- at a time when the FDIC may have its own liquidity problems.

These folks are playing a very dangerous game.
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CalPoppy
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Re: [Debt ceiling discussion mega-thread]

Post by CalPoppy »

Beensabu wrote: Tue Apr 18, 2023 6:16 pm
CalPoppy wrote: Tue Apr 18, 2023 3:17 pm Given this thread is so long…

For those that have followed this discussion, would you be kind enough to summarize any reasonable actions discussed that one might take to mitigate a possible short lived debt ceiling crisis?

Many thanks!
Some physical cash on hand in case there are liquidity issues with money market funds / T-bills and you temporarily lose access to bank accounts for some reason.
Thank you!
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Re: [Debt ceiling discussion mega-thread]

Post by LadyGeek »

I removed an off-topic post regarding US Government control of credit ratings. As a reminder, see: Non-actionable or Trolling Topics
If readers can't do anything with the content of a topic other than argue about it, it does not belong here. Examples include:
  • US or world economic, political, tax, health care and climate policies
  • conspiracy theories of any type
  • discussions of the crimes, shortcomings or stupidity of other people, whether they be political figures, celebrities, CEOs, Fed chairmen, subprime mortgage borrowers, lottery winners, federal "bailout" recipients, poor people, rich people, etc. Of course, you are welcome to talk about the stupid financial things you have done.
Please stay focused on the debt ceiling as it applies to your investments. Other perspectives, such as general economic policy, remain off-topic.
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Re: [Debt ceiling discussion mega-thread]

Post by LadyGeek »

I removed a political opinion of the intelligence of a political party along with an interchange on the budget reconciliation process. This thread has run its course and is locked (politics, economic policy). See: Politics and Religion
In order to avoid the inevitable frictions that arise from these topics, political or religious posts and comments are prohibited. The only exceptions to this rule are:
  • Common religious expressions such as sending your prayers to an ailing member.
  • Usage of factual and non-derogatory political labels when necessary to the discussion at hand.
  • Discussions about enacted laws or regulations that affect the individual investor. Note that discussions of proposed legislation are prohibited.
  • Proposed regulations that are directly related to investing may be discussed if and when they are published for public comments.
And: Non-actionable or Trolling Topics
If readers can't do anything with the content of a topic other than argue about it, it does not belong here. Examples include:
  • US or world economic, political, tax, health care and climate policies
  • conspiracy theories of any type
  • discussions of the crimes, shortcomings or stupidity of other people, whether they be political figures, celebrities, CEOs, Fed chairmen, subprime mortgage borrowers, lottery winners, federal "bailout" recipients, poor people, rich people, etc. Of course, you are welcome to talk about the stupid financial things you have done.
The thread will be reopened if the debt ceiling becomes a strong concern for investors.
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brian2013
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where should I keep "dry powder" for the debt ceiling breach

Post by brian2013 »

This may be a controversial question, but it's been on my mind, and I genuinely am curious what to do.

Media reports suggest that Congress may not come to an agreement to raise the debt ceiling before Treasury exhausts the "extraordinary measures" it's currently deploying to pay the government's bills, and this may happen some time in June.

My cash/emergency/flexible funds are currently mostly in VUSXX, with a little bit in my BOA savings account.

My personal best guess is that a moderate to significant amount of damage will occur to the economy, and the markets will drop substantially, before they come to an agreement.

I'm aware of the Boglehead principles not to "time the market", so I'm not altering my general retirement savings plan.

With that said, assuming I would want to invest some extra funds in the market in the event of a substantial drop in the market resulting from the debt ceiling breach/potential government default scenario, where is the best place to put those funds? If the government defaults, I'm not sure VUSXX is the best place? Is there any other option that would be safer in this scenario?

[Moderator ClaycordJCA: I moved Brian2013’s post and the replies into this thread. As LadyGeek posted above, the Debt Ceiling Mega Thread is currently locked but will be reopened if the debt ceiling becomes a strong concern for investors.]
motorider
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Debt ceiling and my T-bill ladder

Post by motorider »

Late last year I built my 4-rung T-bill ladder consisting of 17-week bills and mature roughly every month. The next 4 rungs mature in early May, late may, early July and early August.

The recent talk of debt ceiling politics and possible default have me rethinking this approach, especially in the short term (through the end of the summer).

I imagine no one really knows the practical effects of a default as it's never happened. Would I lose all my money tied up in T-bills? Would I lose 1%, 2%, etc?

My question is simply this: if the money tied up in T-bills is not needed right away (not for at least 1 year), would you "keep the course" and continue buying 17-week bills or would you abandon renewing purchases until the storm blows over? Short of selling on the secondary market I can't do anything about the bills maturing in July/August so this question is about what you would do with bills maturing before then.

Thanks
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Re: Debt ceiling and my T-bill ladder

Post by jebmke »

I believe there is a mega-thread on the debt ceiling as it relates to investments. I have no plans to make any changes.

I am now 45% equity/55% fixed; most of the fixed is in fairly low duration US Treasury index or Investment Grade bond funds. Very little cash other than what sits in my HYSA waiting to get pulled by the UST for estimated taxes.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
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Re: where should I keep "dry powder" for the debt ceiling breach

Post by toddthebod »

brian2013 wrote: Sat Apr 22, 2023 10:52 am This may be a controversial question, but it's been on my mind, and I genuinely am curious what to do.

Media reports suggest that Congress may not come to an agreement to raise the debt ceiling before Treasury exhausts the "extraordinary measures" it's currently deploying to pay the government's bills, and this may happen some time in June.

My cash/emergency/flexible funds are currently mostly in VUSXX, with a little bit in my BOA savings account.

My personal best guess is that a moderate to significant amount of damage will occur to the economy, and the markets will drop substantially, before they come to an agreement.

I'm aware of the Boglehead principles not to "time the market", so I'm not altering my general retirement savings plan.

With that said, assuming I would want to invest some extra funds in the market in the event of a substantial drop in the market resulting from the debt ceiling breach/potential government default scenario, where is the best place to put those funds? If the government defaults, I'm not sure VUSXX is the best place? Is there any other option that would be safer in this scenario?
Well, since you aren't trying to time the market, the answer is to invest according to your current asset allocation as specified by your IPS. Your IPS doesn't have anything in it regarding default by the US Treasury, does it?
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Re: Debt ceiling and my T-bill ladder

Post by Wiggums »

Ignore the noise.

If our elected officials decide not to pay US debt, T-bills will be the least of our worries. Personally, we are buying one in two years out. We are retired and not making any changes to our investments.
Last edited by Wiggums on Sat Apr 22, 2023 11:38 am, edited 1 time in total.
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Re: where should I keep "dry powder" for the debt ceiling breach

Post by jebmke »

"flexible funds" sounds like a stash to try to time the market to me. So I have to admit, I am confused by your post.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
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Re: Debt ceiling and my T-bill ladder

Post by motorider »

jebmke wrote: Sat Apr 22, 2023 10:59 am I believe there is a mega-thread on the debt ceiling as it relates to investments.
I did run a search before the post but didn't see a recent mega-thread. If someone can post the link then maybe we can retire this discussion.
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Re: where should I keep "dry powder" for the debt ceiling breach

Post by JoMoney »

https://www.fidelity.com/learning-cente ... bt-ceiling

Personally, I'm in the camp of not believing the "debt ceiling" debacle represents anything more than something intentionally manufactured for political effect, that will not impact deposit accounts, T-Bills, and Government money market funds, which will continue to represent the same close as you can get to 'risk free' and liquid place to hold dollars as ever.
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Re: Debt ceiling and my T-bill ladder

Post by Svensk Anga »

motorider wrote: Sat Apr 22, 2023 11:03 am
jebmke wrote: Sat Apr 22, 2023 10:59 am I believe there is a mega-thread on the debt ceiling as it relates to investments.
I did run a search before the post but didn't see a recent mega-thread. If someone can post the link then maybe we can retire this discussion.
viewtopic.php?t=395322
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Re: where should I keep "dry powder" for the debt ceiling breach

Post by steadyosmosis »

brian2013 wrote: Sat Apr 22, 2023 10:52 am This may be a controversial question, but it's been on my mind, and I genuinely am curious what to do.

Media reports suggest that Congress may not come to an agreement to raise the debt ceiling before Treasury exhausts the "extraordinary measures" it's currently deploying to pay the government's bills, and this may happen some time in June.

My cash/emergency/flexible funds are currently mostly in VUSXX, with a little bit in my BOA savings account.

My personal best guess is that a moderate to significant amount of damage will occur to the economy, and the markets will drop substantially, before they come to an agreement.

I'm aware of the Boglehead principles not to "time the market", so I'm not altering my general retirement savings plan.

With that said, assuming I would want to invest some extra funds in the market in the event of a substantial drop in the market resulting from the debt ceiling breach/potential government default scenario, where is the best place to put those funds? If the government defaults, I'm not sure VUSXX is the best place? Is there any other option that would be safer in this scenario?
I prefer to call my market timing by another name, re-balancing.
If your 'personal best guess' actually happens in a significant fashion, I plan to re-balance to my long-held AA.
Age<59.5. Early-retired. AA ~55/45. Taxable account, Roth IRA, HSA...all are 100% equities. 100% of fixed income is in tIRA. I spend from taxable and re-balance in tIRA.
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Re: where should I keep "dry powder" for the debt ceiling breach

Post by rob »

brian2013 wrote: Sat Apr 22, 2023 10:52 am I'm aware of the Boglehead principles not to "time the market", so I'm not altering my general retirement savings plan.
Are you sure? Seems like market timing to me... You are changing your savings plan; It's best to be honest....

To the question - I expect a full out default will leave nowhere to hide.
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien
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Re: where should I keep "dry powder" for the debt ceiling breach

Post by tibbitts »

steadyosmosis wrote: Sat Apr 22, 2023 11:10 am I prefer to call my market timing by another name, re-balancing.
If your 'personal best guess' actually happens in a significant fashion, I plan to re-balance to my long-held AA.
Without passing judgement on the probabilities, we're getting off-topic to the OP's point, which is that redemptions of any MM, Treasury MM, Treasury bonds or bond funds may be impossible for an extended period, regardless of for rebalancing or other purposes. The OP seems to be assuming that equity markets would remain open which seems unlikely but I guess anything is possible.
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Re: where should I keep "dry powder" for the debt ceiling breach

Post by Outer Marker »

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