DEBT CEILING WILL BE RAISED, WITH OR WITHOUT A SHUTDOWN
July 10th, Moneytalk, Brinker said: They must, those in power in Washington, must raise the debt ceiling. They have no choice. They either do it before a government shutdown, in which case, things go on as they are. Or they do it after a shutdown, like they did back in 1994 -- short government shutdown and then they re-open. In either case, they must raise the debt ceiling....There is no alternative of no debt ceiling increase....It must be raised."
July 17th, Moneytalk, Brinker said: "The debt ceiling must be raised with or without a short-term, stage-produced government shut-down and that's because the country cannot afford to go into default. If you wonder why, $14.4 trillion in national debt, annual Treasury sales of way over a trillion dollars. The country cannot afford to go into default on its Treasuries obligations."
July 20th, Moneytalk, Brinker said: "I guarantee you they're going to raise the debt ceiling, with or without a government shut-down....You can take that to the bank. But when you talk to the politics of this, and I think you have to take it to the general election in order to decide where the country is going to go on this issue -- spending versus revenue and fiscal responsibility."
BUT WHAT IF THE UNTHINKABLE DOES HAPPENS?
July 10th, Moneytalk, Brinker said: "If the United States were to refuse to raise the debt ceiling -- remember, I don't believe that's an option and I don't expect that to happen -- then the credit quality of US Treasuries would be degraded....because of political posturing."
SHOULD YOU SELL STOCK BECAUSE OF POSSIBLE CRISIS?
June 26th, Moneytalk: Caller David asked: "Assuming that Congress and the president stalemate on the debt ceiling and we face a crisis of high interest rates or plunging stocks or both, would it be smart to protect against that now by transferring all bonds and stock funds to a money market fund?"
Brinker replied: "I would say the answer to that would be as long as you are willing to run the risk that if it doesn't turn out you're way, which would be a de facto default by the US Treasury, which would be an event of enormous historical significance. If we don't have a de facto default, which can only occur if the debt ceiling is not raised, then you have to be prepared if you exit now to do one of two things. Either to stay out indefinitely or whatever, or to re-enter at a higher level......
If you are going to exit now on the theory that you're exiting because they won't raise the debt ceiling. And if you turn out to be wrong, and they do raise the debt ceiling, I think that the probabilities would be unfavorable that you would re-enter at a lower level. Of course, it would be always possible to re-enter at whatever level you were looking at .......but you might be really unhappy if you made a move like that and then you had to re-enter at a higher level.
And there's another factor. You would lose all of your timeline toward long-term capital gains on any positions held for less than a year in a taxable account.......Meanwhile you've got people like me saying they are going to raise the debt ceiling......... because they don't have any choice. And guess what, they know it.....What you are looking at in Washington is political theater of the absurd."
Brinker has used his enormous word-smithing ability to avoid actually telling callers to either sell or not to sell stock based on the "political theater of the absurd" going on in Washington. He has never told the Moneytalk audience not to sell stock. He has only said that if you decide to do it, and nothing happens, be prepared to "re-enter at a higher level." (Brinker's Marketimer model portfolios remain fully invested.)
On the other hand, he has said that even though the government will absolutely have to raise the debt ceiling, he admits that it could be AFTER a shutdown. He has also clearly pointed out that raising the debt ceiling is a "big deal," and could lead to a Treasury downgrade or even a default.
A word of caution before reaching any conclusions based on Bob Brinker's views: Remember that he remained fully invested throughout the 2008-2009 megabear market meltdown. And even though he was well aware of what was happening in the banking system and the sub-prime problems, he never sounded an alarm of warning for Moneytalk listeners or for his Marketimer subscribers. Just the opposite, he kept issuing new bottom-calls all the way down to the March 2009 S&P 500 Index low of 677.....
Smudge sent this little polished gold beauty. I think she is hoping that Congress will lay one of these instead of the other kind. :)
We're all in this together and we all have a lot at stake. But on a lighter note, take a look at this Johnny Carson as a politician taking a polygraph test. Hilarious!
