Thursday, July 28, 2011

Ironically, Time to Buy Bonds?

I am thinking what to do about the ridiculous debt limit impasse, with the imbecile Tea Party members of Congress imposing a US sovereign debt default, by choice, in the name of... fiscal responsibility?!?!  Basically they're saying: "I think we're borrowing too much, so we should stop paying our creditors...". Insane.

Anyway, I have come to the realization that it may be time to defensively buy bonds. What is it, you say? Buy bonds in the face of a government default? Well - here is my dilemma. I have complete faith that the government will pay every last dime it owes to its creditors. It may pay a few days late while the political theatrics play out in Washington, but pay it shall.

Meanwhile, if the government defaults even for a few days, the stock market could be severely hit as economic confidence is shaken (and stirred). If the treasury defaults, money market accounts could be hit. Government contracts may be delayed. Folks fearing a massive recession (a very real possibility in the event of default), may run screaming away from the stock market. Where will they run? Ironically, I think they may run in the direction of... short term treasury bills. The default will pass in short order, but an ensuing recession, with its accompanying decline in corporate profits may seriously hit the stock market.

So, logical conclusion... does it make to buy bonds in the face of a US sovereign debt default?

Man, what an idiotic situation these Tea Partiers are pushing us into. Are you sure it's only tea they're drinking? Is there some crack smoking going on as well?

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