If US Bonds are downgraded significantly...

[TBV]

Gumby:

Strictly speaking, there is no need to default.  Approval by the Senate and WH of the House Cut, Cap and Balance bill would make the issue go away.  It is their collective insistence on unrestrained spending that makes this an issue at all.

Even failing that, sequestration of unspent stimulus funds and Obamacare expenses, plus prioritization of other expenditures would provide for a substantial cushion with which to deal with our obligations.  Even w/o this, there is zero likelihood that interest payments or Medicare/SS obligations would not be met.  Zero.  The markets know this, which is why yields are falling.

I've read many posts here that suggest debt is nothing to be concerned about.  Just look at Japan they say.  Well, there's one other thing about Japan. It's had its credit rating downgraded and the world didn't come to an end.

Let the bluff be called.

[moda0306]

TBV,

Yeah we can pass that republican wet-dream and everything will be fine... until the next debt ceiling vote and they vote to repeal all entitlements. 

Gumby,

I never realized that LTT's might actually benefit from the combination of deflation that would result and not having a redemption date in the near future.  Interesting way of looking at it.  I guess i would hope gold is a safe bet... I'm surprised it's not jumping a bit more... and to be honest I'm also surprised that the bond market's been so timid... stocks, of course, in their usual "who knows what the eff is going on" mode.

I'd say gold is the safest bet by far.  I don't see any industrial commodities benefitting from a default or close-to.

[Gumby]

I never realized that LTT's might actually benefit from the combination of deflation that would result and not having a redemption date in the near future.

Even though TBV is technically correct in that the government should be able to make its payments, I think investors are starting to flee short term Treasuries — even if they are technically safe.

I think the redemption date is pretty key. LTTs are actually doing better than Gold today!

[Lone Wolf]

I think the redemption date is pretty key. LTTs are actually doing better than Gold today!

Hey, very cool observation.  My overall prediction has been flat or slightly falling yields but I'm surprised to see it outperforming gold.  Neat.

And I agree with TBV that there's no reason the US can't still pay its bills, debt ceiling increase or no.  From what I understand, the Social Security "trust fund" is included in the current ceiling also.  So if you've got breathing room on SS and then prioritize interest payments, it seems like you're left with the question of what the disorderly flow of money to other parts of the government would look like.  Not good, obviously, but I don't really see how default happens (without someone at Treasury really messing up.)

[RickV42]

Medium Tex:  Thanks for your thoughtful responses, as always.

Gumby:  Good call on long term bonds! 

Glad I didn't sell my TLT!  Well, at least today. 

In all seriousness, I am committed to keeping with the strategy through thick and thin, but it is interesting to wonder at what point I will cry mercy. 

[AdamA]

It is interesting to wonder at what point I will cry mercy. 

Probably never once you've seen the PP work just as advertised a few more times.

[MediumTex]

It is interesting to wonder at what point I will cry mercy. 

Probably never once you've seen the PP work just as advertised a few more times.

Normally, it's crying mercy that gets you to the PP in the first place.

[RickV42]

I'll admit I might have cried mercy once or twice watching past portfolios plummet.  The PP has helped, but most importantly, I don't minimize the protection leather chaps can offer.

[MediumTex]

I'll admit I might have cried mercy once or twice watching past portfolios plummet.  The PP has helped, but most importantly, I don't minimize the protection leather chaps can offer.

I actually have a matched set of Kevlar belt and suspenders with a flashy "MT" monogram on the suspenders and "MediumTex" written across the back of the belt.

They look great with my leather chaps.