Took my balance in my 401K program out of all stocks, bonds

[turbo]

If the US does default, how will this effect the market? Who will the government owe money to and how will they pay them back? I am guessing if they default they will not have to pay them back, but the strength of the dollar will not do so well.

If the US defaults, its bond rating will fall, making it very expensive to borrow money to service existing debts. If this happens, we should remember who forced the default, and send them back home as soon as possible.

 

[khemist]

I see. How do you think this will effect the stock market?

If bonds are expensive, where will people put their money?

 

[turbo]

I see. How do you think this will effect the stock market?

If bonds are expensive, where will people put their money?

If the US bond rating falls, the US will have to pay more interest to get people to buy Treasury Bonds, so people who are skittish about stocks but still fairly comfortable with US solvency can get into the bond market.

 

[khemist]

nvm i misread.

 

[Ms Music]

Well, let's let play out whatever events will, then return to this thread a few months or perhaps a few years from now, and see how many of us are doing face palm's.

I am sure *I* will be doing a face palm. I always do the wrong thing... I never thought our government would/could default. The next few months should be interesting.

 

[rhody]

I am sure *I* will be doing a face palm. I always do the wrong thing... I never thought our government would/could default. The next few months should be interesting.

Ms Music,

No you won't if you have stocks in any type of 401K or IRA, and your plan allows you to sell the stock and move it to fixed funds, there is still time. Obviously, you should look at the stock price before you do. It made sense for me it because the price of the stock was up before I sold them.

Rhody...

 

[Containment]

I thought people in this forums where rational beings this thread makes me wonder 0_o

 

[Drakkith]

I thought people in this forums where rational beings this thread makes me wonder 0_o

Well, you can contribute to the thread, or you can keep posting insults for no reason.

 

[Willowz]

I wonder what kind of news you should expect to see gold drop dramatically.

 

[rhody]

This is my personal opinion. Most people I work with do not idenfity with the far left, far right, or tea party, yet, they long for someone, anyone who really represents their views when it comes to local, state, and federal representation when it comes to business and fair taxation. They, myself included see the chaos that is caused about not backing off extreme positions in order to further their agenda, and insure their stay in power coming the next election cycle.

We see this tragic comedy playing itself out day after day before our eyes. This time, there are tremendous short and long term consequences of not acting wisely and fairly, it will affect everyone in this country, everyone. I believe my decision to get out of all stocks is justified. In the end cooler, rational heads must prevail, or this country is in for some dark days ahead.

P.S. edit: http://www.reuters.com/article/2011/07/25/us-usa-debt-idUSTRE7646S620110725"

Rhody...

 

[rhody]

Scroll to the bottom of this http://www.bbc.co.uk/news/business-14282351" for debt ceiling chart, and how Congress and the Senate were stacked from 1980 - 2010. It seems the amount of debt is changing rapidly, first under Bush Jr., further accelerated under Obama. Puts things in perspective now, doesn't it ?

Rhody...

 

[Ivan Seeking]

Scroll to the bottom of this http://www.bbc.co.uk/news/business-14282351" for debt ceiling chart, and how Congress and the Senate were stacked from 1980 - 2010. It seems the amount of debt is changing rapidly, first under Bush Jr., further accelerated under Obama. Puts things in perspective now, doesn't it ?

Rhody...

Of course the important number is the debt-to-GDP ratio, which was still about twenty percent worse after the depression and WWII.

Obviously much of Obama's spending can be attributed to the economic collapse. There is no excuse for Bush until his last year. In fact, we were in the black under Clinton, but under Bush and Republican control the debt skyrocketed in a thriving economy.

 

[rhody]

Scroll to the bottom of this http://www.bbc.co.uk/news/business-14282351" for debt ceiling chart, and how Congress and the Senate were stacked from 1980 - 2010. It seems the amount of debt is changing rapidly, first under Bush Jr., further accelerated under Obama. Puts things in perspective now, doesn't it ?

Rhody...

Of course the important number is the debt-to-GDP ratio, which was still about twenty percent worse after the depression and WWII.

Obviously much of Obama's spending can be attributed to the economic collapse. There is no excuse for Bush until his last year. In fact, we were in the black under Clinton, but under Bush and Republican control the debt skyrocketed in a thriving economy.

Ivan,

I winced when I used the word "accelerated" in my post above. I knew it would stir controversy. Regardless, the apolitical, pragmatic, realist side of me says we need to put our differences aside and address the issue fairly (which may be impossible) or suffer as a country (which is very possible). I promised myself I would never get political in my posts. Sadly, I find myself dragged kicking and screaming into it. This issue is too important to approach with anything except a clear (apolitical) head.
Rhody...

 

[Ivan Seeking]

Ivan,

I winced when I used the word "accelerated" in my post above. I knew it would stir controversy. Regardless, the apolitical, pragmatic, realist side of me says we need to put our differences aside and address the issue fairly (which may be impossible) or suffer as a country (which is very possible). I promised myself I would never get political in my posts. Sadly, I find myself dragged kicking and screaming into it. This issue is too important to approach with anything except a clear (apolitical) head.
Rhody...

No controversy on my part, just a clarification. In order to keep the debt in perspective, the debt-to-GDP ratio is what matters. The debt alone has no absolute significance.

Yes debt has accelerated but understandably so under Obama given the greatest economic crisis since the depression. That is what a government is supposed to do in times like these. But the debt needs to be checked and some hard decisions need to be made. I think all rational people on both sides of the aisle understand this with painful clarity. The partisanship comes in when one claims this is not true.

What is true is that we are balancing debt concerns with economic recovery. This is not a one-dimension problem. Massive spending cuts or poorly targeted tax increases could actually make the debt worse by stifling the ailing recovery. Growth in the GDP has to be weighed against spending cuts and tax increases.

 

[rhody]

No controversy on my part, just a clarification. In order to keep the debt in perspective, the debt-to-GDP ratio is what matters. The debt alone has no absolute significance.

Massive spending cuts or poorly targeted tax increases could actually make the debt worse by stifling the ailing recovery. Growth in the GDP has to be weighed against spending cuts and tax increases.

Ivan,

Bingo, we agree in principal at least, Can it be done by August 2nd ?

http://www.washingtonpost.com/business/economy/house-senate-leaders-unveil-dueling-debt-limit-plans/2011/07/25/gIQApnm1YI_story.html" One plan needs to loose a Showdown at High Noon...

Rhody...

 

[Ivan Seeking]

We are also going to be making difficult choices about what sort of country this will be - who suffers and how much; how much suffering do we accept as a function of civilized society. Are we all out for number one, or are we a nation where we all share in the sacrifices that need to be made?

 

[Ivan Seeking]

Ivan,

Bingo, we agree in principal at least, Can it be done by August 2nd ?

http://www.washingtonpost.com/business/economy/house-senate-leaders-unveil-dueling-debt-limit-plans/2011/07/25/gIQApnm1YI_story.html" One plan needs to loose a Showdown at High Noon...

Rhody...

A month ago almost no one believed we might actually default. But now even people like David Brooks [Conservative columnist] are giving it a 30% chance. Moodys, S&P, and now the IMF have made it clear that we must get this under control. I cannot believe that Washington is so dysfunctional that this would be allowed to happen. I still believe we have patriots in the halls of Congress and running the WH.

Unfortunately, a siginficant percentage of Republicans [tea partiers] believe default is an acceptable option. This scares the hell out of me. It is a new paradigm in Washington and completely irrational. And these are the folks who are refusing to raise taxes under any circumstances. This is why Boehner and Obama couldn't cut a deal [the left already thinks Obama has thrown them under the bus, but Obama offered the big deal anyway]. And this is why even life-long Republicans like Brooks are worried.

 

[turbo]

We are also going to be making difficult choices about what sort of country this will be - who suffers and how much; how much suffering do we accept as a function of civilized society. Are we all out for number one, or are we a nation where we all share in the sacrifices that need to be made?

I think those choices are made along ideological lines these days. Unfortunately, the GOP that used to stand for fiscal conservatism seems to stand for the wealthy. IMO, the GOP members of Congress are scared to death of Grover Norquist. They fear that even allowing tax cuts to expire will mean that they will face a Tea-Party candidate in the next primary, and a barrage of negative ads that are legally allowed under the Citizens United ruling.

 

[khemist]

I might have missed this, but why are people saying to move their money into fixed funds? From a quick search, fixed income funds are reliant on bonds, but wouldn't the value of bonds decrease with a US default (would they not be more risky to purchase, or more expensive)?

It appears that putting your money into fixed funds essentially ties your money to the inflation rate. This could actually decrease your wealth assuming the inflation rate is high enough, or that the yield on the bond is low enough.

It appears that someone is scared for their money, but advising people to put all their money into fixed funds is ludicrous. One must have a diverse portfolio to avoid being hit from an economic blunder...

 

[rhody]

I might have missed this, but why are people saying to move their money into fixed funds? From a quick search, fixed income funds are reliant on bonds, but wouldn't the value of bonds decrease with a US default (would they not be more risky to purchase, or more expensive)?

It appears that putting your money into fixed funds essentially ties your money to the inflation rate. This could actually decrease your wealth assuming the inflation rate is high enough, or that the yield on the bond is low enough.

It appears that someone is scared for their money, but advising people to put all their money into fixed funds is ludicrous. One must have a diverse portfolio to avoid being hit from an economic blunder...

Everyone has their opinion. I agree in normal times diversification is best, unfortunately my stock is in an industry that could be especially hard hit, and to move it into a fixed fund, guarantees that it cannot go negative, I am protecting what I have now, which cannot be said for other funds. We are in uncharted territory here. I am not advising anyone to do this, it just happens to be right for me in my current situation and age. If we default on our debt all stocks, bond funds etc... will be affected. I would better be safe than sorry with stock that never returned to a value which I had it went down. Simple as that.

Rhody...

 

[khemist]

Everyone has their opinion. I agree in normal times diversification is best, unfortunately my stock is in an industry that could be especially hard hit, and to move it into a fixed fund, guarantees that it cannot go negative, I am protecting what I have now, which cannot be said for other funds. We are in uncharted territory here. I am not advising anyone to do this, it just happens to be right for me in my current situation and age. If we default on our debt all stocks, bond funds etc... will be affected. I would better be safe than sorry with stock that never returned to a value which I had it went down. Simple as that.

Rhody...

I can dig it.

If you are so sure about the collapse of this particular stock, maybe consider a short? Though if lawmakers are able to make a deal it could really bolster the economy.

 

[rhody]

http://money.msn.com/how-to-budget/how-a-us-default-could-hurt-you.aspx?page=2"

The analysis estimates that without authorization to borrow, the federal government would take in about $203 billion in revenue but have $362 billion in bills to pay.

So choices would have to be made on what got paid. Interest on outstanding debt would take priority to avoid default and damage to the U.S. credit rating. Beyond that, should the government pay Social Security benefits but not the salaries of servicemen and servicewomen on active duty? Medicare and Medicaid payments but not federal workers' salaries and benefits?

The U.S. government has 80 million bills due in August, and, no matter what choices are made, about 40% to 45% of them won't get paid unless more borrowing is authorized.

and

And if the U.S. government doesn't pay back the $500 billion in debts coming due in August -- or at least pay the $29 billion in interest on those loans -- that default is going to cause havoc in the economy's credit sector, which will eventually reach down to anyone who needs to borrow money or uses a credit card.

How much interest is charged on a loan is determined by an assessment of the chances of the money being repaid. Lending money to the U.S. government, by buying Treasury bonds, has been rated as one of most risk-free investments available, which means the government pays a small amount of interest on the money borrowed.

and

Estimates of retirement-account losses in 2008 range from 22% to 33%. But that incoming wave of the recession might have served as a warning to retirees to adjust the holdings in their accounts to protect against another dip. Losses in individual accounts because of a U.S. borrowing crisis would depend on the structure of those accounts -- how much was invested in stocks, credit instruments and other holdings.

and

Perhaps the bigger threat to the economy is the psychological factor that would be operating if the debt ceiling isn't raised.

"If people didn't get their Social Security checks, that would not be good," Palazzo said. "If people felt that government had become so dysfunctional that it couldn't carry out day-to-day responsibilities, then the symbolism could potentially be a lot more damaging in the long term than a missed check."

At least one consumer has suggested a way to use that symbolism -- along with some real consequences -- to bring an end to the wrangling over the debt ceiling. Pamela Clair of Toledo, Ohio, posted this suggestion to friends on her Facebook page and asked them to pass it on:

"Instead of threatening to withhold Social Security payments of people who really need the money, let's hold the paychecks of all House and Senate members, then see how fast it is resolved!"

Interesting comment...

Rhody...

 

[rhody]

http://www.washingtontimes.com/news/2011/jul/26/pruden-a-symphony-by-congress-at-work-on-the-debt/"

There are seven days to go before the Aug. 2 deadline, a whole week for the pols to string out the soap opera. The consequences of the debate are huge, with the winner rewriting the rules of the political game for the next generation, or at least for the next election cycle. Neither side can afford to be the first to blink. The rhetoric will grow an even deeper shade of purple as the week wears on.

and

Lost in the sturm and drang, the clanging of the background music, the thunder of approaching doom and the pipsqueakery (I love that term... priceless) of the politicians, the wringing of hands and the decrying of partisanship, is the reality that this is exactly how the political system is meant to work. Debate, argument and contention are what the Founding Fathers prescribed as the means of reaching consensus and resolution. They were not much concerned with bipartisan civility and being nice. Genteel courtesy was for the parlor, not the well of the House. The noise that frightens the more refined pundits, delicate editorialists and the stock-market traders who imagine themselves masters of the universe is merely the sound of the republic at work. Not a symphony by Mozart, exactly, but music to the educated ear.

Rhody...

 

[rhody]

http://www.washingtonpost.com/blogs...ngs-agencies/2011/03/04/gIQANRSOfI_blog.html"

What’s really annoying here is how the ratings agencies’ unearned status enables them to serve up superficial, highly conventional political prognostication and call it credit analysis.

For example, the July 14 report argues that failure to cut a deal now, when the political system is “more focused” on debt reduction than it has been for “a decade” — possibly because the debt wasn’t so bad a decade, or even five years, ago? -- could mean that no deal would happen for several more years.

But that doesn’t necessarily follow. What if there’s a GOP sweep in 2012 and the Republicans actually succeed in imposing massive cuts? Or the Democrats win and impose a big tax hike on the rich? Or if there’s gridlock and the Bush tax cuts expire, yielding an instant revenue windfall?

And by the way, how meaningful is the AAA rating when France has one despite a debt-to-GDP ratio higher than that of the U.S., a decreasingly competitive economy, belligerent public-sector workers, liability for bailing out Greece, and a political system arguably even less capable of wrestling with long-term fiscal problems than that of the U.S.?

I could go on and on. But the bottom line is that the ratings agencies’ tough talk about the U.S. bond rating – to the extent they really do intend to follow through on it – probably has more to do with fighting the reputation for laxity they earned during the crash than with any special knowledge they might have regarding U.S. government finances.

Anyone see this through a different set of rose colored glasses ?

Rhody...

 

[Proton Soup]

i think the ratings are little more than marketing. you see this sort of thing in infomercials selling cheap schlock. they'll give the product some kind of bogus "award" for being the most innovative thing ever, but it's really the award equivalent of a diploma factory.

 

[rhody]

So far, my decision to move funds totally out of corporate and all stock funds has proven wise. In a https://www.physicsforums.com/showpost.php?p=3421926&postcount=58", the Washington Times reporter said:

the pipsqueakery of the politicians,

well, we squeaked that one by now didn't we, the political powers that be deftly put off some future hard decisions to a panel of six republicans and democrats who will hammer out cuts in the future. Very nicely freeing up those who otherwise would be held accountable. What a beautiful thing, you get to have your cake and eat it to. For the record the stock in my company has dropped around 7% since I moved the funds out around two weeks ago. Will see how things go as time progresses and report back every quarter.

Rhody...

 

[Borg]

DOW was down 500 today! I am so glad that I finally missed one of these and I don't think that it's over either. They still haven't decided on whether to downgrade the US.

 

[rhody]

DOW was down 500 today! I am so glad that I finally missed one of these and I don't think that it's over either. They still haven't decided on whether to downgrade the US.

Rhody & Borg breathe a collective sigh of relief... Now if only Rhody wife had listened to me weeks ago, she would be too... Sadly she choose to IGNORE the warning and now hand writing on the wall...

Rhody...

 

[Proton Soup]

maybe invest in Dollar General, Big Lots, and other dime store salvage centers.

 

[Drakkith]

DOW was down 500 today! I am so glad that I finally missed one of these and I don't think that it's over either. They still haven't decided on whether to downgrade the US.

Sounds like I should start buying stock soon.

 

[drankin]

Sounds like I should start buying stock soon.

When this settles out stocks will be on sale!

 

[Drakkith]

When this settles out stocks will be on sale!

Woohoo!

 

[Tosh5457]

Gold is a finite commodity and it WILL crash soon. If you have any substantial holdings, now would be a great time to bail out because it will soon be untenable, especially if you bought within the past year or so.

I don't think so, and you don't have any evidence to back that up. I don't see any distribution in gold, and the USD index doesn't show much strength either.

When people think the worst of the market, it makes a bull run.

Even if everyone looks bearish, markets can still drop a good amount of points before it turns up.

C'mon, to trade you need knowledge, just like you need knowledge to be a physicist or a mathematician. Just diversifying and rely on the news to get in or out is a very bad trading plan.

Gold shows supply, but it's not nearly enough to cause a crash, it could very well continue the bull market. On the USD Index (moves inversely to gold) there is some support, but it's near its down trendline. I wouldn't enter long on gold, but if I was long on gold already I wouldn't exit either.

The stock market may be in trouble on the medium term, but either way there was plenty of evidence to get out before this last correction. If you have stocks you should have exited much earlier, so cut your losses already. And for you investing long-term in US stocks I'd think twice... USA is the new Japan economically. If there isn't any major bubble, USA will go to stagnation just like Japan is in for 20 years.

 

[lisab]

When this settles out stocks will be on sale!

Woohoo!

That's the spirit! Especially if you're not going to need the money for a while. I just wish I had more disposable income to buy stock now. Well I am diverting 16% of my paycheck into my 401K, so I'll get a piece of the bargain.

 

[Drakkith]

That's the spirit! Especially if you're not going to need the money for a while. I just wish I had more disposable income to buy stock now. Well I am diverting 16% of my paycheck into my 401K, so I'll get a piece of the bargain.

Yeah, I've had 10% of my paycheck going into a 401k type thing since like 2005 or so. I'm in the military, so its not called a 401k but a TSP, Thrift Savings Plan. I believe it is nearly identical though. And I'm only 27, so I should have a decent sized retirement plan when I hit that age.