Newspaper article The Journal (Newcastle, England)

US Default Would Be Trip into Unknown; SHARE WATCH

Newspaper article The Journal (Newcastle, England)

US Default Would Be Trip into Unknown; SHARE WATCH

Article excerpt

Byline: ANDREW MILLER

IF the US defaults materially on its debt, the outlook is clear: risk assets will fall, a lot, and only the safest of safe havens will perform.

Private investors should not be seduced by the idea that they can buy some tailor-made insurance against this specific outcome: even if they were able easily to join institutional investors in buying credit default insurance, its usefulness here is untested.

As we've noted before, it's a little like an insurance policy against the world being destroyed by an asteroid strike: few financial institutions exist that would be sufficiently unscathed by such an event to pay out on it.

Specifically, we do not advise restructuring investment portfolios here. It is not surprising that stocks are suffering more than treasuries from the impasse: if the US government runs out of money, the economy will slow, possibly sharply, and even downgraded bonds will look relatively attractive vis-a-vis growth assets. …

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