I had been calling out this impending crisis since June 2021. We are now at 25th Sep 2021.
Do reference my post regarding the 3 options that the US Government had for approaching the US Debt Default potential crisis here
The democrats did not opt for Option 1. They are now left with 2 options.
1.Second option would be to set up a stand-alone vote to raise the debt ceiling. However this is not popular with Democrats as it exposes them as irresponsible spenders.
update: this option is not possible as it is now confirmed the Democrats need at least 10 GOP votes.
2. Instead of raising the debt ceiling, Democrats could try to suspend the limit for another year, either through a stand-alone vote or as part of an unrelated bill. A one-year suspension would need to pass both chambers, and the Senate’s 60-vote threshold means Republicans could hold up the bill’s passage until they win concessions from Democrats on any number of other issues.
This is the only option left.
The Republican’s stand ?
Republicans have been saying for weeks that they will not support an increase. Senate Minority Leader Mitch McConnell on Monday reiterated this position. “Senate Republicans would support a clean continuing resolution that includes appropriate disaster relief and targeted Afghan assistance. We will not support legislation that raises the debt limit.”
There could be a long drawn out conflict between Democrats and Republicans leading up to October/November.
I am of the thought that the markets may consider this bear scenario and resume its correction which is now at –5% from this coming week.
For those who are already invested, i would suggest
- To invest in good companies with consistent earnings, positive operation income,
- Low PEG, low PE Ratio.
- Stay away from Chinese stocks due to regulation risk. If you must, trade Chinese stocks with stop loss, do not invest in them
- Consider investing in safe haven assets e.g. gold . GLD certainly seems at a attractive price point at the moment. (i am not holding GLD now)