5 Ways You Can Prepare For Debt Default

Don't wait around for the government to decide your financial future

Look for investment opportunities. Jason Tyler, senior vice president of research operations of Ariel Investments (No. 6 on the BE ASSET MANAGERS list with $5.5 billion in assets under management), believes default is unlikely and maintains that U.S. government debt remains attractive “because we’re seen as such a safe haven.  If the Euro wasn’t suffering so much because of Greece and Italy, I think people would be flocking to the Euro.  Luckily, the political turmoil in Europe is helping mask some of the longer-term issues here.”  Here’s his commentary: We’re prepared to look for [investment] opportunities if the market over-reacts. We’re thinking about companies that might get hit hard. Clearly the companies that everybody’s watching carefully are the SIFIs, the systemically important financial institutions [that] carry a lot of U.S. debt on balance sheets and have to maintain very, very vigorous capital requirements and if the U.S. Treasuries get downgraded, you could see some risks to some of those large financial institutions.  Selling a lot of stock at this point is not a good idea.  The market is very good at assessing risks, especially in the short run. So everybody’s thought through which stocks are going to suffer and those types have all ready been hurt.  The market has slipped down a little bit so these things are mostly factored in.  [Also], U.S. Treasuries are and should continue to be seen as the safest place to park money. This is still a $13 plus trillion-dollar economy.  It still dwarfs everything else in the world.  It’s still stable but the political environment is volatile right now.

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  • Potomac Oracle

    A sovereign fiat currency nation cannot be insolvent in its own currency or default on its obligations when it is the sole issuer of its currency.
    We are no longer bound by gold standard and fixed exchange rate rules.

    The debt ceiling fandango was pure theater. The rating agencies knew full well that we had the capacity to meet our obligations because we are a sovereign fiat currency nation. The down grade was a politically driven act which backfired.