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The Debt Ceiling and Other Dangers

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July 29, 2011 – Comments (4)

Here's my column for Fool.com today:

http://www.fool.com/investing/general/2011/07/29/the-debt-ceiling-and-other-dangers.aspx

The folks at Footnoted.com have noted a recent surge in SEC filings disclosing the risks of the debt ceiling/default potential to companies' businesses. It's a good reminder why digging into the SEC filings and reading up on risks (and here we have a new risk increasingly being disclosed) is important. We've got a lot of risks to contend with these days, right? We need to do our best to at least be aware of them and how the ripple effects could hurt companies we invest in.

I haven't been engaged in the big heated debates about the economy here lately. Too much politicized animosity. But I will say (as I say in the article) that regardless of the outcome of all this debt ceiling debating, the economy is clearly in a shambles. It's a good time to cull the weaker companies out of portfolios. (I said that in 2008, of course, and for some reason we've had a weird bull market. I guess the whole "kicking the can down the road" issue we keep having props up a lot of stocks, eh?)

I hope this doesn't sound too dismal. ;) We do live in interesting times, that's for sure. Have a great weekend, Fools! 

4 Comments – Post Your Own

#1) On July 29, 2011 at 6:05 PM, leohaas (31.17) wrote:

Government contractors such as Northrop Grumman must warn their investors of this potential problem, if only to avoid being sued when the sh!t hits the fan.

Good digging. Keep on doing that, and keep the Fool community up-to-date on your findings!

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#2) On July 29, 2011 at 8:03 PM, rfaramir (29.34) wrote:

“We believe that without a debt ceiling increase, the U.S. government could default on its obligations, triggering increased interest rates”


Unnecessary scare words that are politically useful for extortion. The only ‘obligations’ that would trigger an increased interest rate are obligations to pay their debts. Other ‘obligations’ foresworn would be seen as responsible austerity and likely result in continued low interest rates, even without the Fed buying Treasuries (the normal way they ‘target’ low rates).


“If the debt ceiling is not raised, it is unclear how the U.S. Government would prioritize its payments and where our payments would fall in that priority list.”


Exactly. Interest on our debt can and should come first. Every other government teat-sucker should worry about their place in line. They are expendable and they know it.


“The best investment decisions honestly assess risks.”


Yes. I’ve learned more in a short time about a company and how they make money by reading the Risks section of their reports. They lay out pretty clearly all the ways their plan to make money could fail, which reveals their chosen method of making (us) money. It requires reversing their logic, a bit like reading the Screwtape Letters.

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#3) On July 30, 2011 at 5:25 AM, moonblazerix (< 20) wrote:

Where should we go from here?   In 7 days I lost $ 7,000 

I HOPED. AND LOST.

Am I mad?  Yes

Who in charge here, Someone needs to make a desion on who runs this country. 

Mr. Obama?  Look around people.

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#4) On July 30, 2011 at 6:16 AM, Wolfen682 (< 20) wrote:

Nobody runs the country because nobody wants to go to jail. Nobody runs the big corporations because nobody wants get sued or go to jail.Everybody wants the benefits these large institutions can offer if you are director,president or chairman. But dont be mistaken ... when it comes to running or making decisions nobody is interested. ie Rubert Murdoch testimony last week in the UK. No meaningful decision will be taken until the US debt ceiling becomes an iminent catastrophe. Then Obama will pile in with rescue saving decisions..That way he looks good...

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