Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
(a) It'd be best to invoke the 14th before a default, as a way of avoiding one ... like the language suggests.
(b) The SC-5/6 have shown they can "creatively" justify anything they want, constitution and precedent be damned. Ayatollah Alito may be on it right now.
@AndyJ. Timing the 14th will be tricky. Better sooner to avoid actual default but as Yellen says invoking the 14th would create its own issues. So the President is wishing and hoping for a miracle. It’s always tough to get timing perfect. One can retire too early or too late. Sell the boat too early or too late. Sell the house too early or too late . Hard to get it just right.
@AndyJ. The choices facing the President are excruciating … The bad guys can either agree to a deal or not but POTUS has another alternative which may start constitutional crisis. To my thinking the 14th may be the best of the lot. Meanwhile, to use an analogy to sailing, we are actively preparing for heavy weather to the extent we can.
Politico. Com has an interesting discussion of how POTUS views the timing of the 14th. Too soon would make it appear as though he is not negotiating in good faith. So much of this shitshow is theatrics.
I agree with the view that the optics of invoking 14th before an actual default will be much worse than doing it post default.
AOC assessment is also correct -- forget McCarthy actually knowing how many votes he has, the t**d can't even differentiate between a food inlet and a food outlet.
Any compromise coming out of the current "negotiations" will have a pretty tough time passing both the Senate and the House and McCarthy leaning on House Dems to pass any bill will be the end of his tenure as Speaker.
The negotiations are theatrics, a sharp stock market crash of 20%+ and delays in issuing SS/Medicare payments will open up eyes and minds and bring a closure to all of this including the invocation of the 14th. GOP voters don't understand default but they sure will understand missing SS/Medicare payments.
@StayCalm. With you all the way to the last sentence. You are giving GOP voters WAY too much credit. Those morons are still solidly supporting the former guy after everything that has happened. Most of them vote against their own economic interests time and time again. They aren’t gonna change now. Sadly.
At this time, and for lack of any better alternatives that meet my comfort level, I am keeping 100% of my portfolio in a Treasury Only MM fund and in FDIC insured CDs issued by the largest national banks until the proverbial dust settles.
So what's the (GQP) plaintiff's argument for likely suing the administration for invoking the 14th as a way of killing this stupid debt ceiling nonsense? "Your Honors, we disagree with requiring the government pay for things it's already purchased?" Could any (sane) lawyer seriously make that argument without being drunk first?
What kind of legal precedent would *that* create if SCOTUS agreed with that argument? Heck, I'd use it to rack up a zillion bucks of purchases on my Amex and then declare my intention to not pay for it when the bill came.
@fred495...question if you are comfortable answering...how much of a change meaning your 100% Treasury MMKT and FDIC CD portfolio from your past portfolio...were you very heavy in those investments prior and if so what % of your portfolio?
FWIW...I've been 85-90% for many years in those types of investments....now ~ 95%...."stop playing the game if you feel you've got enough...don't get greedy...get your portfolio where you can sleep well at night" I'm still working and do I guess you would say better than average out there...working for the "fun of the game, camraderie and challenge.."
Have to say, my current thinking is you might be "safer?" in AAPL as due to a better balance sheet than the govt (no printing press though) as it is a utility without the interest rate exposure of a normal utility and has plenty of "fan boys/girls/others" who are addicted to their products...maybe BRK-B too but I saw during the Pandemic ole'Warren kinda froze up a bit, he seemed really rattled for someone who has had many trips around the sun...
I've been adding to FPACX...nice cash buffer in portfolio, thinking Romick and the boys will know what to do AND act at the somewhat correct time...heard on recent podcasts that the "technicals" are looking better, throwing off buy signals...who the heck knows though right?
There is an article in Forbes about Money Market funds and default, https://www.forbes.com/advisor/investing/debt-ceiling-impact-money-market-funds/ It says that In 2008 there was a problem with one such fund, the Reserve Primary Fund, it was unable to meet redemption requests and was forced to suspend operations and liquidate. But this is very rare. As they say, default would affect only a small number of Treasury securities, those that mature on the date that the Treasury’s cash runs out. Only funds holding debt that the Treasury actually defaults on would be affected directly. Many money market mutual funds have had months to pare down their Treasury holdings, replacing them with other high-quality, short-term debt from issuers other than the Treasury.
The pieces are now falling into place. Biden has given a heads up that invoking the 14th(eventually) is on the table. This is basically a dare which will further harden the GOP stance making a technical default almost certain now.
The debt ceiling law cannot over-ride a Constitutional Amendment and one would expect SC to go along with that but as someone else commented in this thread, the current band of suave and coarse GOP thugs on the SC have shown that anything can be twisted and shaped to fit into a political agenda judicial restraint, precedent and common sense be damned. So SC ruling is a toss up but my bet is still on SC agreeing with Biden.
Cuts only to non-military spending with no new revenue is a red line that has almost no chance of clearing the Senate. Any compromise agreement coming from the current negotiations will need to go through multiple rounds of revisions before the House and Senate both pass it. A redux of McCarthy's path to House Speaker!
@Finder. Based on your research wouldn’t a Treasury only MM fund be at risk in a default? Perhaps greater risk than a Prime MM fund. And even the bond ETF AGG has 43% government securities. How would those be valued? Concerned? Nervous? Freaking out? Thank a repuglican.
DC political media was reporting the other day that the House Dem leadership met w/Kevin and said they'd protect his right flank should hard-right GQP'ers launch an effort to oust him as a protest to whatever deal he might arrange. (Sure, it'd keep his speakership but probably kill his legacy.) Not sure it'd come to that, but it's an extraordinary thing to even raise ... but this Congress and this Country are in very choppy waters and uncertain times. (((
McCarthy resorting to Dems to maintain his position as Speaker might get him through this session of Congress but that would be the end of any chance of him remaining Speaker in future sessions. He could even lose his seat in the next election as Eric Cantor knows all too well. McCarthy is a weasel, Speakership before party and party before country he's not going to castrate(Cantorize) himself!
Boehner and Ryan were practically saints compared to McCarthy.
At this time, and for lack of any better alternatives that meet my comfort level, I am keeping 100% of my portfolio in a Treasury Only MM fund and in FDIC insured CDs issued by the largest national banks until the proverbial dust settles.
Good luck,
Fred
Hi Fred, I am not sure what kind of portfolio you have. I have both a traditional taxable account, along with an IRA account. I am keeping my Brokerage IRA portion in MMs and CDs, but I am transferring "part" of my traditional brokerage taxable account to my Banking Account (checking and Savings) for liquidity reasons. Do you count your Banking Account as part of your portfolio?
10%+ can be easily chopped from discretionary defense spend with no impact at all to our military capabilities. But then how would the GOP pay for their masters in the MIC. Kissing the ring isn't sufficient payback ya know, it's just cherry on the top.
There's something rotten in Denmark when Congress provides MORE defense money than asked for (as happened a few years back)
I just can't believe all of the panic going on with the investors posting on this forum. First, IMO the 14th was not meant for this kind of situation. Second, this mess will be worked out. Even if it is not, there are worse things that can happen. If the national debt is allowed to keep going up and going up, you are going to see much worse. Your portfolio will not only go down, it will no longer exist. The FIDC insurance for banks will disappear. Your cash with be worthless. The increase in the national debt must be stopped to save the country. We must stop thinking of ourselves and think of the country. That goes for both parties. So stop the blame game, (that includes me), and lets get our country out of debt.
[snip] The increase in the national debt must be stopped to save the country. We must stop thinking of ourselves and think of the country. That goes for both parties. So stop the blame game, (that includes me), and lets get our country out of debt.
We do need to keep our national debt at a reasonable level. Otherwise, interest payments on this debt will crowd out other necessary spending/investments. However, I vehemently oppose these periodic kerfuffles to raise the debt ceiling. Certain politicians commandeer debt ceiling discussions and, in effect, hold the entire country hostage. There should be no doubt whatsoever that the U.S. will pay all debts already incurred. The only other western nation that limits borrowing in absolute terms is Denmark. However, Denmark intentionally sets a high limit and avoids all the political drama we experience. Our current debt ceiling process is deeply flawed and must be abolished. U.S. spending priorities should be negotiated during the Federal Budget and Appropriations Process.
@dtconroe what makes a banking account (checking and savings) more liquid than a money market fund at the likes of Schwab?
Hi Mona, I have a brick and mortar branch of my bank 10 minutes away. I literally can get whatever cash I need out of that bank within just a few minutes. If the bank is closed, I have a drive through ATM 5 minutes away where I can get cash. I can move money between my checking account and savings accout online, instantly. I have FDIC protections and I have tremendous trust in my bank as a result of many years of membership. I also have a large number of bills linked to my bank account online, for monthly drafting to pay the expenses. I also have a large number of ongoing deposits from social security, spouse pensions, etc. and if any of those are disrupted by Default problems, then I have other cash available in my bank savings account that I can quickly shift to my checking account for bill drafting coverage.
With my Schwab brokerage MM account, I have to put in a trade to sell a certain amount of the MM fund, and it goes to brokerage cash the next day. Then I have to transfer the brokerage cash electronically to my bank, and it takes a couple of days for the trade to settle and the transfer to be completed. Sometimes the weekend delays the process for a few more days. When the money finally arrives at my bank, then I can go through the withdrawal, bill paying process, that I already described.
From my perspective, everything is faster and more dependable by have adequate assets in my banking account, and quite frankly I trust my bank more than my Schwab brokerage to protect my cash.
@Finder. Based on your research wouldn’t a Treasury only MM fund be at risk in a default? Perhaps greater risk than a Prime MM fund. And even the bond ETF AGG has 43% government securities. How would those be valued? Concerned? Nervous? Freaking out? Thank a repuglican.
I mostly quoted Forbes. They claim that for money markets the risk is very slight and only due to a small fraction of treasuries. Thus according to these arguments, Prime MM is better, and there is the main part of my cash now. However, "à la guerre comme à la guerre", so I can only hope that we will not test it experimentally.
"U.S. Treasury Secretary Janet Yellen on Sunday said June 1 remains a 'hard deadline' for raising the federal debt limit, with the odds quite low that the government will collect enough revenue to bridge to June 15, when more tax receipts are due."
"Yellen, speaking on NBC's 'Meet the Press' program, said there would be hard choices to make about payments to Americans if Congress failed to raise the $31.4 trillion debt ceiling before Treasury ran out of cash and was forced to default."
Comments
(b) The SC-5/6 have shown they can "creatively" justify anything they want, constitution and precedent be damned. Ayatollah Alito may be on it right now.
AOC assessment is also correct -- forget McCarthy actually knowing how many votes he has, the t**d can't even differentiate between a food inlet and a food outlet.
Any compromise coming out of the current "negotiations" will have a pretty tough time passing both the Senate and the House and McCarthy leaning on House Dems to pass any bill will be the end of his tenure as Speaker.
The negotiations are theatrics, a sharp stock market crash of 20%+ and delays in issuing SS/Medicare payments will open up eyes and minds and bring a closure to all of this including the invocation of the 14th. GOP voters don't understand default but they sure will understand missing SS/Medicare payments.
That is a fair point. GOP voters will blame who Fox, Tucker and the political "leaders" will direct them to blame.
So hopefully Dems do a better job in explaining it better to the masses.
Good luck,
Fred
What kind of legal precedent would *that* create if SCOTUS agreed with that argument? Heck, I'd use it to rack up a zillion bucks of purchases on my Amex and then declare my intention to not pay for it when the bill came.
FWIW...I've been 85-90% for many years in those types of investments....now ~ 95%...."stop playing the game if you feel you've got enough...don't get greedy...get your portfolio where you can sleep well at night" I'm still working and do I guess you would say better than average out there...working for the "fun of the game, camraderie and challenge.."
Have to say, my current thinking is you might be "safer?" in AAPL as due to a better balance sheet than the govt (no printing press though) as it is a utility without the interest rate exposure of a normal utility and has plenty of "fan boys/girls/others" who are addicted to their products...maybe BRK-B too but I saw during the Pandemic ole'Warren kinda froze up a bit, he seemed really rattled for someone who has had many trips around the sun...
I've been adding to FPACX...nice cash buffer in portfolio, thinking Romick and the boys will know what to do AND act at the somewhat correct time...heard on recent podcasts that the "technicals" are looking better, throwing off buy signals...who the heck knows though right?
Good Luck to ALL,
Baseball Fan
It says that In 2008 there was a problem with one such fund, the Reserve Primary Fund, it was unable to meet redemption requests and was forced to suspend operations and liquidate. But this is very rare. As they say, default would affect only a small number of Treasury securities, those that mature on the date that the Treasury’s cash runs out.
Only funds holding debt that the Treasury actually defaults on would be affected directly. Many money market mutual funds have had months to pare down their Treasury holdings, replacing them with other high-quality, short-term debt from issuers other than the Treasury.
The debt ceiling law cannot over-ride a Constitutional Amendment and one would expect SC to go along with that but as someone else commented in this thread, the current band of suave and coarse GOP thugs on the SC have shown that anything can be twisted and shaped to fit into a political agenda judicial restraint, precedent and common sense be damned. So SC ruling is a toss up but my bet is still on SC agreeing with Biden.
Cuts only to non-military spending with no new revenue is a red line that has almost no chance of clearing the Senate. Any compromise agreement coming from the current negotiations will need to go through multiple rounds of revisions before the House and Senate both pass it. A redux of McCarthy's path to House Speaker!
Boehner and Ryan were practically saints compared to McCarthy.
10%+ can be easily chopped from discretionary defense spend with no impact at all to our military capabilities. But then how would the GOP pay for their masters in the MIC. Kissing the ring isn't sufficient payback ya know, it's just cherry on the top.
There's something rotten in Denmark when Congress provides MORE defense money than asked for (as happened a few years back)
Otherwise, interest payments on this debt will crowd out other necessary spending/investments.
However, I vehemently oppose these periodic kerfuffles to raise the debt ceiling.
Certain politicians commandeer debt ceiling discussions and, in effect, hold the entire country hostage.
There should be no doubt whatsoever that the U.S. will pay all debts already incurred.
The only other western nation that limits borrowing in absolute terms is Denmark.
However, Denmark intentionally sets a high limit and avoids all the political drama we experience.
Our current debt ceiling process is deeply flawed and must be abolished.
U.S. spending priorities should be negotiated during the Federal Budget and Appropriations Process.
With my Schwab brokerage MM account, I have to put in a trade to sell a certain amount of the MM fund, and it goes to brokerage cash the next day. Then I have to transfer the brokerage cash electronically to my bank, and it takes a couple of days for the trade to settle and the transfer to be completed. Sometimes the weekend delays the process for a few more days. When the money finally arrives at my bank, then I can go through the withdrawal, bill paying process, that I already described.
From my perspective, everything is faster and more dependable by have adequate assets in my banking account, and quite frankly I trust my bank more than my Schwab brokerage to protect my cash.
when more tax receipts are due."
"Yellen, speaking on NBC's 'Meet the Press' program, said there would be hard choices to make
about payments to Americans if Congress failed to raise the $31.4 trillion debt ceiling before Treasury
ran out of cash and was forced to default."
Link