Defensive moves when lunatics are running the asylum?

[Kevin K.]

I don't know whether this belongs in the PP discussion, the bond one or politics but here goes: our fearless leaders/clueless clowns are flirting with defaulting on Treasury debt once again. We all know what happened the last time with the Moody's downgrade of Treasury bonds but it certainly seems like things could be much worse this go-round.

Understandably no one knows what the worst-case scenario is and obviously the effects would be global and potentially include many asset classes other than bonds but I do wonder what the defensive move(s) (if any) might be for PP or GB'ers holding nothing but Treasury debt. Go to all T-Bills and hope for the best? Dunno. Gold, guns, ammo and MRE's are beginning to sound appealing.

[Smith1776]

I think the only real safe harbour in a lunatic environment, or any environment for that matter, is a diversified portfolio. We don't know what the future will bring.

[Smith1776]

Oh, yeah, and the obligatory comment about guns, ammo, and canned goods.

[joypog]

Smith got it covered, aside from moving to another economy....

[Hal]

but I do wonder what the defensive move(s) (if any) might be for PP or GB'ers holding nothing but Treasury debt.

Maybe hold some international/corporate bonds? Is there a US version of something like this? => https://fund-docs.vanguard.com/ETF-Vang ... S_VBND.pdf
Our bond/cash allocation is roughly 1/3 Aussie Total Bond Market, 2/3 VBND

HB didn't rule out using Corporates, but he did state you will have to diversify and monitor their credit quality

[Kevin K.]

Smith got it covered, aside from moving to another economy....

Yeah, I tend to agree. And besides, no way my application for a New Zealand residency visa is gonna be approved before 1/19.

[jalanlong]

My portfolio now consists of my house, a lot of cash and boring, stodgy dividend stocks from tobacco and alcohol companies, railroads, utilities, gas pipeline companies etc. etc. I have no idea if it will make it thru the debt apocalypse but I’m rolling with it.

[Smith1776]

This is an interesting thread actually.

Thinking about, I can't remember when we weren't in a lunatic environment -- just different lunatics in different clothes.

The dotcom bubble, the housing crash, the crypto mania, the coronavirus crash, the ever looming debt ceiling, the QE, the ZIRP, the insane fiat monetary system that has no backing, rising China, etc. It's a big lollapalooza.

Diversification is really the holy grail.

[johnnywitt]

Smith got it covered, aside from moving to another economy....

Yeah, I tend to agree. And besides, no way my application for a New Zealand residency visa is gonna be approved before 1/19.

Moving to NZ would be like moving from Mussolini's Italy to AH Germany. NZ is a fascist state.
Pretty much ALL the G7 are now WEF Fascist States at this point.

[johnnywitt]

Diversification is really the holy grail.

Yes, it absolutely is for the average person.

Unless you're Charlie Munger, or somebody that has inside knowledge like Paul Pelosi, or Mitch McConnell et. al.

[yankees60]

Diversification is really the holy grail.

Yes, it absolutely is for the average person.

Unless you're Charlie Munger, or somebody that has inside knowledge like Paul Pelosi.

If he has it then would not everyone else in Congress (including their spouses)?

[johnnywitt]

Diversification is really the holy grail.

Yes, it absolutely is for the average person.

Unless you're Charlie Munger, or somebody that has inside knowledge like Paul Pelosi.

If he has it then would not everyone else in Congress (including their spouses)?

Yes, apologies. I meant all the scumbags from both utterly Corrupt political Party's

[yankees60]

Diversification is really the holy grail.

Yes, it absolutely is for the average person.

Unless you're Charlie Munger, or somebody that has inside knowledge like Paul Pelosi.

If he has it then would not everyone else in Congress (including their spouses)?

Yes, apologies. I meant all the scumbags from both utterly Corrupt political Party's

One of the more egregious examples of laws they have passed that apply to us but NOT to them?

[Kevin K.]

Great post by Ben Carson on this topic:

https://awealthofcommonsense.com/2023/0 ... t-default/

[ochotona]

I cleared out my portfolio of any T-Bills maturing before 12/28/2023. I just don't want any of my cash falling into that "Summer 2023 and possible aftermath" period. I took T-Bills from that period and put them in the bank for now.

[seajay]

My portfolio now consists of my house, a lot of cash and boring, stodgy dividend stocks from tobacco and alcohol companies, railroads, utilities, gas pipeline companies etc. etc. I have no idea if it will make it thru the debt apocalypse but I’m rolling with it.

Pre 1930's and bonds total returns rivalled stocks. Money was gold, money earned interest, inflation broadly averaged 0%. Then came fiat money, where broad bond return expectancy declined to 0% real after inflation and taxation, the same broad expectancy as for gold.

Fundamentally you can opt to hold bonds or gold to similar broad effect.

Some brokerages has the broker actually owning the shares, in its/custodian name, your share is just a book entry. Similar to bank cash deposits, becomes the banks money, with your 'share' being just a book entry.

Instead of 100% stock, 50/50 2x leveraged stock/gold broadly compares. Pushing for a more extreme reduction of counter party risk, owning a house, some 2x stock, some physical gold halves the counter party risk to just the 2x stock holdings. 33/50/17 house/gold/2x stock is similar to 33/33/33 house/gold/stock. Or from a liquid assets alone perspective 25/75 2x stock/gold is similar to 50/50 stock/gold

PV example

17% of your total wealth having counter-party risk (2x stock), 83% in-hand (house/gold), and even if the stock value were totally lost a -17% portfolio hit is within the realms of what the portfolio might naturally be down at times, non-critical.

Hard cash is OK, but is more inclined to decay in real terms than gold. Cash is also at risk of enforced re-entry into the depository arena/system, perhaps existing notes replaced with new notes, requiring that the older notes to be submitted to banks for conversion, and if you do that with $100K or more that is inclined to raise red flags/alerts. In contrast gold is gold, unchanging and even if the domestic currency totally failed other countries around the world will accept gold as valid 'currency'.

[mathjak107]

all brokerages hold your holdings in street name if you have a brokerage account .

that is so you don’t have to keep sending stock certificates.

SIPC insurance applies to brokerage ACCOUNTS .

firms that still offer mutual fund accounts like fidelity and vanguard don’t need or have sipc on mutual fund accounts since there is no intermediary like a brokerage account

[Maddy]

There is a good argument that it truly is different this time. Different in the sense that the Fed is being presented with a Hobson's choice from which there is likely no good outcome--and different in the sense that the global elite appear to actually be TRYING to take down the economy.

That said, I have no idea what is a reasonable defensive move.

[Hal]

There is a good argument that it truly is different this time. Different in the sense that the Fed is being presented with a Hobson's choice from which there is likely no good outcome--and different in the sense that the global elite appear to actually be TRYING to take down the economy.

That said, I have no idea what is a reasonable defensive move.

You may wish to revisit this Anthony Deden video from a few years back...
https://capstonelegacy.org/real-vision- ... interview/

[seajay]

Land, gold, art is the traditional choice.

Capitalism is now the minority, for instance whilst the majority of UN countries condone the Ukraine war, the small number that abstain account for near two-thirds of the total global population. US sanctions are pretty much just further self-harm, inducing more hasty migration over to non-US dollar alternatives. The decline of the American Empire, as with the decline of the British Empire isn't the end of the world, rather just a transition to a alternative rising Empire (seemingly most likely China). How do/would comfortable Chinese investors invest? Perhaps own some property in London, have some gold in Switzerland, some valued paintings that can be rolled up into tubes and transported/stored wherever. Artworks however might be substituted with stocks, where you can liquidate in T+2 (whatever) and electronic transfer the sale proceeds to anywhere in the world that may have better geopolitical security. Land (own your own home), gold, stocks.

Given land isn't liquid, a home of sufficient size to be comfortable, along with a stock/gold barbell. That will tend to get you to the same destination as a PP, but involving a bumpier ride along the way.

If once in 40 years on average one of the assets is totally lost, perhaps for instance your home/land confiscated, then provided they achieved a 1% annualized real in the interim, your overall total wealth would still have been preserved. That can arise out of trading, adding-low/reducing-high. One mechanical trading method that follows those lines is periodic rebalancing back to 50/50 weightings.

[barrett]

Just so we're absolutely clear, we're primarily talking about the debt ceiling debate and how that might play out, right? Sure, there will be a lot of posturing and maybe some actual productive debate, but I don't see the US government being shut down for a prolonged period nor the US defaulting on its debt obligations. The simple reason is that congress members have constituents who invest in US Treasury debt, collect SS payments, etc. And there are a lot of US government employees who would presumably be working without getting paid. In a country with a huge percentage of people living paycheck to paycheck, politicians will have to deal with serious repercussions if the government is shut down longer than, say, four weeks. No matter how much these goofballs hate the opposing party, they value their jobs more. So lots of public drama while "private" negotiations are going on and a new ceiling is reached.

Not to mention that politicians have portfolios too!