The bears have been having a field day.
I mean, forget double-dip recessions, mining bust and property crashes… …there is a FINANCIAL APOCALYPSE on the way.
And it is due to strike this coming Friday.
It will devastate stock markets and blow up borrowing costs for billions of people.
Now I don't want to worry you unduly, but apparently the United States is running out of money.
To cut a long story short, as you probably know by now, American politicians can't agree on their country's spending and whether they should increase the level of their so-called debt ceiling…so the U.S. Treasury may become unable to borrow any more cash and then have to default on its debts.
Default Day is in fact set for Friday 18th October, Australian time.
Your portfolio is at grave risk
Circle the date in your diary, just in case, as the market might be in for a rough time in the coming days and weeks.
To give you a flavour of what could be in store, here is an extract from a recent Bloomberg article:
"Failure by the world's largest borrower to pay its debt — unprecedented in modern history — will devastate stock markets… blow up borrowing costs for billions of people and companies, ravage the dollar and throw the U.S. and world economies into a recession that probably would become a depression."
Apparently the US debt is 23 times the liabilities owed by Lehman Brothers when the investment bank went under during 2008.
No wonder that Bloomberg article also claimed:
"Few view a U.S. default as anything but a financial apocalypse."
Sell everything right now and reinvest in a bunker, a shotgun and tins of baked beans
It all sounds very worrying, I know.
But I must admit, I am quite relaxed about the forthcoming market catastrophe.
I mean, Financial Armageddon will not win anybody any votes, so I'm convinced those crazy American politicians will eventually see sense and work out a deal right on the brink.
Well, they always have done in the past with this sort of thing.
And if the States does default and a financial apocalypse does occur?
Well, if you believe some of the doomsters, there will be absolutely nowhere to hide — not in gold, not cash in the bank and not even cash under the mattress… they might become worthless anyway as banks, businesses and brokers all go bust as the global economic system suffers a cataclysmic meltdown.
In fact, if you are betting on a U.S. default, I'd have thought the best decision you could make today is to sell everything right now and reinvest in a bunker, a shotgun and tins of baked beans.
No wonder Warren Buffett was involved in the acquisition of Heinz earlier this year…
And there is no shortage of other gloomy news to add to the uncertainty
Talking of Warren Buffett… the guru has mixed feelings on the market right now.
The other week he said:
"We're having a hard time finding things to buy."
While Buffett wasn't exactly uber-bearish, he does join Investors Mutual senior portfolio manager Hugh Giddy in the chorus of high profile investors now suggesting us mortals approach the current market with caution.
Bring on a much needed recession
In The Australian Financial Review, Giddy dropped the bombshell:
"I think we need a recession and I think we have needed a recession almost everywhere… we need some global banks to go under…"
Based on the above comments, Giddy may well be cheering on a U.S. default…
And there is no shortage of other gloomy news to add to the uncertainty ahead of the possible financial apocalypse.
For instance:
- Oz Minerals (ASX: OZL) shares slumped almost 10% yesterday after slashing its production guidance.
- The International Monetary Fund (IMF) recently confirmed it expects Australian economic growth to remain below trend this year and next, as the mining investment boom wanes.
- Regardless of whether the U.S actually defaults on its debt, a number of commentators and observers are already predicting the ongoing government shutdown will result in the U.S. falling back into recession.
Amidst all the doom and gloom, I'm still buying stocks…
Truth be told, I was hoping for a little more panic to hit the markets.
There's nothing better than a short-term market wobble to pick up some of my favourite stocks — and the growing number of stocks on my watchlist — on the cheap.
Go ahead… call me brave, complacent, stupid or naive.
But despite my alarmist messages above, I'm confident this particular financial apocalypse will be averted.
And right on cue, The Age is this morning reporting U.S. senators have made "tremendous progress" on a U.S debt deal.
Not surprisingly, the S&P/ASX 200 has jumped in morning trading, up 50 points to 5,260, and back within sight of 2013's high of 5,307.
Source: The Age
Financial apocalypse? If this is how the market reacts to an impending financial disaster and global depression, I say BRING IT ON. Perhaps Bell Potter's Charlie Aitken's ASX 6,000 target in the next 12 to 18 months is on the cards.
And if he's right, now could be a great time to put money to work in the stock market.
And with the Aussie dollar now riding relatively high again, back above US95 cents, I've also got my eye on a number of top quality U.S. stocks, looking to add to my stable of companies that already includes Google, Intel, Warren Buffett's Berkshire Hathaway and even Facebook.
Yes — I have some cash held back, just in case the current worries throw up some bargain buys.
It may not earn me a whole lot of interest, but it does help me sleep better at night, and I'm always prepared for the next market meltdown.
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Of the companies mentioned above, Bruce Jackson has an interest in Google, Intel, Berkshire Hathaway and Facebook.
