by Marc Lichtenfeld, Investment U’s Senior Analyst
Wednesday, July 20, 2011: Issue #1560
Last November, I wrote about how to protect yourself from an impending crash that would take place this year – if the threat of failure to raise the debt ceiling seemed real.
As of right now, most people expect some resolution to be reached in the next few weeks before the August 2 debt-hike deadline.
And while our politicians act like stubborn, self-centered toddlers, only concerned with getting what they want rather than solving America’s problems – they’re not stupid (well, most of them aren’t). They know that not raising the debt ceiling will have catastrophic consequences on our financial system and millions of Americans.
However, we can’t have blinders on assuming everything is going to be just fine. We need to be prepared for a black swan event (a major event that’s unexpected)…
The Political Game of Chicken Endures
Should the Republicans decide that bringing down President Obama is more important than ensuring the safety of our financial system, or should the Democrats refuse to cut spending or give on taxes in order to pin the failure on the Republicans, the political game of chicken could cause severe pain in the financial markets.
So far, the markets don’t seem overly concerned. If they were, they wouldn’t be near their highs.
I’m keeping a close eye on the financial sector. Big investment banks have been weak and have all dropped recently, in particular:
If people become seriously worried about default, it wouldn’t shock me to see a run on the banks, 1930s style. Hopefully, that’s not what the weakness in the banks and other financials are telling us…
With Washington’s Continued Ineptitude… Add These Investments To Your Radar
You’ll never see me acting like one of those pundits who constantly tell you the world is coming to an end and that you should load up on gold, ammo and canned goods and move to the mountains.
But, it’s worth your time to at least consider the possibility of a financial calamity being brought on by ineptitude in Washington.
I don’t recommend selling your entire portfolio in order to put it into “safe” assets. However, the following types of investments should be on your radar, just in case.
I also still like the recommendations from the article in November, which included two ways to short treasuries:
It’s Time to Identify Quality Stocks Now…
As you can see, I’m not a nervous Nelly. Nor am I a nattering nabob of negativity. In fact, I’m using this time to identify stocks that I’ll be interested in if they come down in a Washington-induced crash.
If such a slide occurs, it could be short lived, after a solution is agreed upon. I want to be buying into a panic. So start looking for quality companies that can continue to do well in any environment.
*Note: Investment U has a commercial relationship with EverBank.