There is almost "near certainty" that Netanyahu is "planning an attack [on Iran] ... and it will probably be in September before the vote on a Palestinian state. And he's also hoping to draw the United States into the conflict
who used his influence to thwart an Israeli attack during the Bush and Obama administrations. But he's gone now and "there is a warning order inside the Pentagon" to prepare for war.
But an Israeli attack on Iran would be different. It would endanger countless Americans (in the region and here at home, too). It would kill off any economic recovery by causing oil prices to skyrocket. It would engulf us in another Middle East war. And it would threaten the existence of the state of Israe
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- U.S. Debt Ceiling Deadline: Best Investments for a U.S. Debt Default
U.S. Debt Ceiling Deadline: Best Investments for a U.S. Debt Default
- By Jim Fink
- 7/15/2011
- Stocks to Watch
Master Limited Partnership (MLP) distributions are highly tax-advantaged and offer a significant tax shield for investors.
-- Roger Conrad, MLP Profits
It’s not funny anymore. Yesterday, when asked about the negotiations between the White House and Congressional Republicans over raising the $14.3 trillion U.S. debt ceiling, House Minority Leader Nancy Pelosi said with a straight face that “Republicans may need to see markets drop 500 points” before agreeing to a deal.
Did that get your attention? Sure, Pelosi’s statement may be mere political gesturing, but I am starting to worry. The debt ceiling deadline is August 2nd, which is less than three weeks away. And to get legislation passed in time, an agreement needs to be reached even earlier, like by July 22nd (one week away). I think it fair to say that most investor portfolios are not prepared for a 500-point stock market drop.
With both sides engaged in brinkmanship -- President Obama vowing not to accept a short-term debt extension and Republican House Speaker John Boehner opposed to any tax increases and calling the chances of a default a “crapshoot” -- things look dire. So dire, in fact, that Standard & Poor’s now rates the chances it will downgrade the triple-A credit rating of the United States in the next day 90 days as “at least one-in-two.”
Although S&P says that it still believes the risk of an actual U.S. credit default is “small,” it surprised me to learn that it might lower the U.S. credit rating even without a default if its analysts do not see progress towards long-term debt-reduction:
We may lower the long-term rating on the U.S. by one or more notches into the 'AA' category in the next three months, if we conclude that Congress and the Administration have not achieved a credible solution to the rising U.S. government debt burden and are not likely to achieve one in the foreseeable future.
Wow.
Below are five investments that could do relatively well in case of a credit downgrade and/or U.S. default:
1. SPDR Gold Trust (NYSE: GLD)
Despite Ben Bernanke’s recent statement that gold is not money, many people disagree and the shiny yellow metal just recently broke out to a record high price of $1,590 an ounce and is poised to go higher. If investors in U.S. debt can’t be assured of getting paid in dollars, they will flee to gold bullion.
2. PowerShares DB U.S. Dollar Index Bearish (NYSE: UDN) and Rydex CurrencyShares Swiss Franc (NYSE: FXF)
I’ve argued that the European debt crisis would cause the U.S. dollar to rally, but the exact opposite will occur if the U.S. defaults. Why? Because the Euro’s value ultimately depends on Germany and Germany is not going to default – ever. For those who don’t like inverse ETFs because they involve high-cost futures trading (like me), a better bet may be the Swiss Franc ETF, which has been skyrocketing lately.
3. October $132 Put Option on SPDR S&P 500 ETF (NYSE: SPY)
If Nancy Pelosi is right and the Dow Jones Industrial Average needs to fall 500 points before a deal is reached (I’m assuming she meant the Dow and not the S&P 500!), then buying this put option (SPY111022P132) would make a big profit. A 500-point decline in the Dow equates to about a 5.5-point decline in the S&P 500 ETF (SPY). The October $132 put is currently worth about $5.90 and would rise about 50% to $8.80 if the SPY fell to $125.50 by August 2nd from its current price of $131.
4. Lender Processing Services (NYSE: LPS)
There are several companies that profit from home foreclosures, but this company is a pure play. A U.S. debt default would cause interest rates to rise, which would trickle down to home mortgage rates and increase the number of foreclosures. The stock has decline recently on lowered earnings guidance and news that its CEO resigned, but a U.S. default would help cure many of these corporate worries.
5. Smith & Wesson (NasdaqGS: SWHC) and Sturm, Ruger (NYSE: RGR)
If the government can’t pay its bills, including salaries to police officers, crime will run rampant and U.S. citizens will need to arm themselves for protection. Thanks to the U.S. Supreme Court, gun control is unconstitutional and anybody can buy a gun.
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