I was really hoping I wouldn’t have to write about the debt ceiling this week.
I’m sure you’re as tired as I am of all the headlines, and the “will they / won’t they” tension of just when this showdown will conclude. But as the week has worn on, I’ve decided it’s too big to avoid.
As I pen these words, talks remain stalled, and the government is stretching to even greater lengths to pay its bills.
While I have not always been a fan of Janet Yellen, I’ve had sympathy this week for our top treasurer. She’s quite literally been personally taking to the phones to remind senators, congress members, and business leaders just how serious this is. She’s had to shuffle around the books just to get the bills paid — and she’s done everything short of starting a “GoFundMe” for Uncle Sam.
The good faith of the government's obligations is being held hostage by partisan politics and it’s embarrassing to watch. While I’d be the first to say that America needs to mend its spendthrift ways, and that serious reforms need to be made, so far all we’ve seen is grandstanding and pointless posturing from all sides.
The last time this circus happened, in 2011, the US was punished with a credit downgrade. Lawmakers seem ready to let it happen again.
But enough on that. I promise that this isn’t “just one more article” on the debt ceiling, and that I have some practical thoughts below.
This debacle has reminded the world to think twice about where they stash their value, and where they should turn next if that value is in question.
Last week Bloomberg ran a poll to get an idea of what investors would turn to as a backup plan.
The results speak for themselves…
The obvious answer is gold.
When times get tough, that’s when gold shines brightest. And prices have supported the sentiment. Today’s price was just shy of $2,000 / oz, maintaining its multi-week momentum. We continue to see a trend toward higher highs and higher lows.
Even once the debt ceiling crisis is solved (any day now…!), the volatility and uncertainty it’s caused will continue to work in gold’s favor.
But I wouldn’t let it sit — I personally topped off my mining investments earlier today. And sure enough, the weekend’s uncertainty is already suggesting that was the right call.
If you’re looking for ideas, I’d take a serious look at Nick’s new issue of Foundational Profits, where he’s outlined a plan for exactly this scenario. We saw what happened in 2011… the lending fallout, the retreat to hard assets… there’s no sense in smacking your head on the ceiling again.