July 7, 2011
In my last post I speculated on the possibility that the Federal Government might default on its obligations. The media drumbeat about possible dire consequences has been getting louder by day. Here are two predictions:
- There will not be a default.
- If there is a default, the consequences will be far more mild than the media consensus is suggesting.
There are other factors to consider. The US doesn't borrow in a vacuum. We compete for investor dollars in an open marketplace. After all, investors don't have to buy US Treasury securities - why not consider China, or Kazakhstan? The answer is obvious. To paraphrase Winston Churchill, US Treasury bonds may be the worst investment, except for all of the others.
In sum, the current default debate is a tempest in a teapot.
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).