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View Diary: If GOP Forces a Default, Americans' Wealth Could Be Cut in Half (151 comments)

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  •  If you are in stocks or mutual funds in your 401k (22+ / 0-)

    go to cash. This storm may turn out to be nothing but you risk very little being in cash if the bottom falls out. Please note I am not saying cash out your 401k and take the cash. I am saying sell your investments inside your 401k and have that money as cash inside the 401k.

    He who makes a beast of himself gets rid of the pain of being a man...Dr. Johnson (HST)

    by mikeypaw on Tue Oct 08, 2013 at 04:58:45 PM PDT

    [ Parent ]

    •  That's what I did yesterday (5+ / 0-)

      Although in the process I learned that selling mutual funds only occurs after the trading day has ended.  I put my sell orders after the sell day ended yesterday (1:30 pm Pacific time) and the orders won't be processed until the end of the day today.

    •  can I do that? (5+ / 0-)

      i think I only have the option of a fixed money market account if I sell investments...is that the same as cash?  I think it is the lowest risk i can go in my deferred comp.

    •  yes, I've been considering moving 50% of my 401k (5+ / 0-)

      Balance funds into cash just so that doesn't wipe me out totally. In my mid 50's so I cannot make up a huge loss anymore.

      Republicans only care about themselves, their money, & their power.

      by jdmorg on Tue Oct 08, 2013 at 08:31:06 PM PDT

      [ Parent ]

    •  NOOOOOO!! (2+ / 0-)
      Recommended by:
      northsylvania, Pluto

      Stocks are ownership stakes in companies. Cash is an ownership stake in the US Government.

      If default lowers confidence in the US Government, the dollar will plunge (inflation) but stocks will pass that through. Would you rather own a fistful of green paper, or an ownership stake in Apple Computer?

      If you want to keep "cash", you could switch currencies, but that has transaction costs that are generally prohibitive.

      •  No, the U.S. Dollar is unlikely to fall. (7+ / 0-)

        Confidence in the U.S. government's debt obligation has little to do with confidence in the value of the dollar. (It has a great deal to do with the value of U.S. bonds, of course.) Instead, the Dollar actually looks as though it will continue to be seen as the safe haven for wealth that will soon flee stocks, bonds, and many commodities. It is likely to hold up better than other major currencies too -- a conclusion based in part on technical analysis of the charts for each (U.S. Dollar, Euro, British Pound and Yen).

        If stocks fall in value, and if commodities also fall in value (as they would if there were expectations of rocky economic times ahead), then the value of something else must rise. It's all just ratios. The most likely thing to rise in value is the U.S. Dollar -- effectively meaning we should expect Dollar deflation.

        If you want more detailed analysis of this, seek out some of Numerian's old posts at The Agonist. One of them is linked here.

        I was just in the middle of writing a post for a different website describing how the Dollar is poised to rise over the next two years, or so. In the nearer term, the Yen and the Pound are getting ready to break downward out of consolidation patterns. The Euro chart is messy, but it should do the opposite of whatever the Dollar does, as each of the two currencies is the largest component in the valuation of the other one.

        Keep your cash. Cash will be king, for awhile.

      •  Not really: (0+ / 0-)
        If you want to keep "cash", you could switch currencies, but that has transaction costs that are generally prohibitive.
        Transaction fees are pretty low. (See everbank.com)

        However, I am not suggesting that folks invest in currencies. And I agree on your general stock perspective at the moment.

    •  I'm not so sure going to cash (4+ / 0-)
      Recommended by:
      dharmafarmer, Contra, Creosote, terabytes

      ...is such a good idea. Large cash positions are basically bonds.

      Timing this is difficult and hard to do inside a 401k -- but if things operate as Our Overlords demand, the debt ceiling will be raised without fuss (behind a wall of kabuki) and the markets will likely soar with exuberance for a period of time.

      (After all, almost all government spending turns into corporate profits -- 50 cents of every dollar in the pockets of defense contractors, alone. Yay.)

      Meanwhile, tremendous damage has been done to the US in the global derivatives market (insurers for the big bond buyers). Sovereigns. Nothing can reverse it. The risk is too high because the Federal government is demonstrably paralyzed and unable to function in a sane manner. It's sad, but it is what it is.

      It's important to keep in mind that the vast majority of US Dollars in existence are held outside the US. The US government has no dollar wealth at all. It lives from paycheck to paycheck, borrowing 40 cents for every dollar it spends.

      Should those Dollars out in the world start to come home, the US will suffer severe economic dislocation. (It's a reserve currency issue.) If that starts to happen, we will have to offer great monetary incentives to global dollar holders to stop it. Vast amounts of interest.

      US corporations are cash rich and they can exploit the American people's sad economic situation.

      For a time.

      My 2 cents.

      (I don't invest in equities -- in the interest of disclosure.)

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