The current federal debt ceiling debate is running 24×7 through the financial media. A retired friend I went biking with last week seemed pretty caught up in it. He said he was keeping money out of stocks & bonds in case things “got real bad.”
No surprise he felt that way, given the way it is being reported in the hysterical media. The financial press has become completely unhinged lately, although the equity markets are up slightly over the last 30 & 90 days. Here’s an example of the extreme doom & gloom in the media, from normally-staid Reuters ….
“Missing a payment would trigger a Wall Street meltdown of historic proportions. “It would be downright cataclysmic,” says an economist at Moody’s Analytics.” They go on to say, “the value of most everything owned by Americans, from their homes to their retirement portfolios, would drop. “Stock prices would fall, commercial real estate values, house prices.”
Reuters goes on to breathlessly warn that “Within days, the financial mayhem would be a principal force putting the economy on the path to recession” with “mass layoffs just weeks away.” Adding, “Americans could quickly notice painful blows dealt to their retirement accounts as stock markets swooned, and within days the lack of federal payments could weigh heavily on doctors’ offices, retirees and workplaces throughout the country.”
In my experience, if you are a long term investor, the less attention you pay to the hysterical media like this, the better. I once had a meeting with the former Governor of MN who was facing a key fiscal deadline. Rather than showing any concern, he simply commented that he and his opposition were all politicians. “We’ll resolve it at the last possible moment, because that’s what politicians do.” He said, “there’s never a reason to get things done ahead of time in the political arena.”
I think he was right. The media can puff away with their financial apocalypsing, but I’m not going to do a damn thing. I will suggest the same to you. This too shall pass, I’ll guess, and will be forgotten until the next debt ceiling raise is needed.
Have you made any adjustments to your portfolio because of the debt ceiling debate? What advice would you give my worried friend?
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MrFireStation 
“Politics” is a Greek word with the prefix “poli” meaning many and the suffix “tics” meaning blood sucking creatures. Waiting for the last minute for maximum political noise shows how horrible fiscal managers the buffoons we have in government are.
The media that is so excited about raising the debt limit, do not seem to be that concerned about the fact that the USA’s debt has risen from $5.7 to $31 trillion since 2000. Those who want to stop the unlimited charging to the country’s credit card are now being called MAGA extremists, and before that the “Tea Party”. The real underlying story is the epidemic of financial illiteracy in our country.
Sir John Templeton said that to be a good investor, you need to be in the business of helping people. When people are panicking and desperately want to sell stocks, you need to help them by buying. When people are greedy and desperately want to buy stocks, you need to help them by selling to them. Ten years from now, we can look back at the current time as being a good time to buy.
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Yes, “Buffoons” is the right term. My Dad always says, “there are no Statesmen left in Washington anymore.” I wonder when the last time there were some there?! I’m not sure if the problem is financial literacy or just public apathy. Saving & spending is kindergarten stuff – I think the issue must be that people don’t care. They are busy leading their own lives.
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There are two issues with finances in current times. Personal finance is no longer a mandatory high school class. The second part of the problem is a lack of self-discipline to forego short term pleasure for long term profit. Your post a couple weeks ago about Robert Johnson trying to get his community to stop spending their 401-ks when they change jobs illustrates this. Washington D.C. is filled with buffoon non-statesmen giving the buffoons who vote for them what they want instead of what they need.
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“I’ve seen the buffoons and it is us!” 😉
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No adjustments here. The media thrives on catastrophic tales. The two ruling parties thrive on catastrophic finger-pointing. I thrive on long-term goals and trends, and wide diversification to preserve capitol over the long run. Perhaps it’s time for your friend to retire from media and politics. They’re not friends. Make friends with ends.
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Thrive on! (I was a bit surprised to hear anyone say they were concerned about it).
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Simple noise. Ignore and stick with your principles and longterm outlook. Yes, we had seemingly expensive lessons when young. I have mentioned before my panic selling of Amgen in October 1987. Yes, it was expensive, but a valuable lesson.
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Agree – I think Peter Lynch said, “If you are susceptible to selling everything in a panic, you ought to avoid stocks altogether.”
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