Thursday, May 21, 2009

Time to Sell America?

American FlagToday, Bill Gross came out and said that America might lose its AAA rating.  For those who are not completely familiar with how bonds work, the AAA rating is the highest rating any entity can have.  It means that there is very little risk of default and thus enables the entity to borrow at low rates.

America has had its AAA rating for almost a century and it seems almost unthinkable that it could lose its AAA rating.  But just look at the facts.  The U.S. got into the mess it did because we as a nation borrowed too much money and spent on things we could not afford.  All the "growth" we have had for the last decade was a mirage.  We should have never reached the levels of economic activity that we did because we borrowed it from the future.

Now look how we are trying to get out of the problem. The U.S. is borrowing from the future to pay for the problems of today.  We have been doing this for the last two decades.  It is like a credit card junkie that pays off one credit card with another.  It just doesn't work in the long run.  The U.S. keeps taking on more and more debt hoping for a brighter future and an economy that will lift us out of this mess.  That day isn't coming.  To fund this, we are printing money.  It is working for now since other countries are buying our debt, but if we really lose our AAA rating, that will stop as the U.S. will no longer look to be an absolute safe haven.

So it is probably time to sell America.  I've been doing this slowly by selling treasuries, TBT.  I only have a small position right now but will look to take a bigger one soon.  You also want to own commodities and commodities stock.  When the dollar drops, "stuff", things that are actual and real, go up in price.   Things like gold, copper, and silver will all go up in price.

It doesn't feel good as an American to say sell America.  It feels like I'm playing against my own team.  But I just don't see how we can get ourselves out of this mess with our current path.  What do you think?  Am I just overly nervous?

1 comment:

  1. [...] decided to put my money where my mouth and sell America.  I did this by buying TBT which shorts the twenty year US treasury.  I am not a fan of this [...]