Posted May 08, 2023
By Zach Scheidt
Two Ways to Profit From the Debt Ceiling Debacle
I'm proud to be an American...
You may have heard me talk before about my grandpa who fought through Europe during WWII.
My brother also served his entire career in the Army, with tours in Iraq, Afghanistan and Korea (among other places he won't tell me about).
Bottom line, I consider myself a patriot. And I'm proud of our country and the freedom we enjoy as Americans. However…
When it comes to the debt ceiling debate and the way our politicians are bickering over this issue, I'm absolutely disgusted.
Unfortunately, it's probably going to get worse before it gets better. And that means plenty of turbulence for your investments.
Fortunately, there are some things you can do to protect and grow your wealth, even as the market adjusts to the challenges.
So today, let's dive into what could happen as we approach the debt ceiling limit and how to set your investments up to profit.
The Stage Is Set for a Standoff
In true political form, both the Republicans and Democrats have dug in their heels on the debt ceiling debate. This sets the stage for a major standoff until the eleventh hour (if not later).
The Democrats, led by President Biden, have made it clear that they’ll only accept a clean raise of the debt ceiling with no strings attached.
Quite frankly, this makes absolutely no sense. What's the use of even having a debt ceiling if it just gets pushed higher any time the U.S. spends more than it receives in revenue?
The whole concept of a debt ceiling is to put the brakes on our debt as a country and make responsible decisions before the debt burden becomes too onerous.
On the other hand, Republicans insist that any raise to the debt ceiling must also correspond with spending cuts.
While this makes sense, it's doubtful the Democrats will agree to any further spending cuts. So we're at an impasse.
And most recently, Treasury Secretary Janet Yellen has publicly stated that the U.S. risks running out of funds and failing to meet obligations as soon as June 1.
A Default Would Throw Us Into Recession
Some people think a technical default by the U.S. wouldn't be that big of a deal. And yes, the sun would still rise and no one will likely starve if the U.S. goes into default.
But there are still some very important ripple effects that are already starting...
Companies with government contracts now have big questions about whether or not they'll be paid…
Retirees are becoming concerned about Social Security and Medicare payments…
Government employees are aware that they could be laid off or forced to take an unpaid leave of absence very soon…
Even the anticipation of these issues is dangerous. Because if your business may not get paid, you'll be less likely to hire new employees...
If you’re worried about Social Security payments, you’ll start spending less today...
And if you're one of the government workers in danger of missing a few paychecks, you're not going to take that vacation or go out to a nice dinner next weekend.
You see, the looming debt crisis is already causing people and businesses to hunker down and spend less.
And this crisis may be just the right amount of pressure to tip the U.S. economy right into a recession.
Here at Rich Retirement Letter, we've been preparing for a recessionary environment for a while now. So hopefully this new wrinkle doesn't catch you off guard.
But as we head into what is sure to be an even more turbulent period, there are two major steps you can take to protect — and even grow —your wealth.
Trade Up in Quality
The first move I want you to make is to adjust your investments towards more quality plays.
I'm talking about owning stocks of companies that will do well in good times and bad and companies with reliable profits generated from customers around the world.
Apple Inc. (AAPL) is a good example of this. Apple sells products that everyone wants. And on top of its revenue from iPhones, iPads and Mac computers, Apple also has recurring revenue.
When you pay for a new app, buy a storage plan for your data, or tap into Apple's streaming TV product, Apple gets paid — month in and month out.
Another example of this type of investment is Procter & Gamble (PG), a company that sells the things you buy no matter what’s happening in your life like laundry detergent, toothpaste, and bathroom tissue.
So regardless of what happens during the U.S. debt crisis, PG is going to continue to generate profits.
Here are some other important benefits that stocks like Apple and Procter & Gamble offer...
- Dividends: You'll receive a cash payment every quarter, giving you much-needed income.
- International Revenue: Customers in overseas markets may not be as affected by a U.S. debt crisis. Plus as the dollar edges lower, foreign profits become more valuable to American investors.
- Capital Flows: This is just a fancy term for other investors moving into quality names. During uncertain times, big institutional investors buy safe stocks, pushing prices (and your profits) higher.
Focusing on quality investments is a great way to profit from stocks that will trade higher as the debt ceiling crisis looms.
But there's another way to lock in some short-term gains — even from stocks that are set to trade lower!
Crash Profits to Pad Your Retirement
Over the past few weeks, my team and I have been hard at work setting up a new system to profit from some of the market's most powerful short-term moves.
The idea behind this system actually started a long time ago, back when I was a hedge fund manager in charge of investing millions of dollars for our wealthy clients.
Last year, during one of the most challenging markets in recent memory, I used this method to lock in some great profits. And many of those profits came from stocks that were trading lower!
You see, there are specific transactions you can make in your account (even in a traditional retirement account) that make money when stocks trade lower.
So as we head into this period of debating the debt ceiling and possibly defaulting on U.S. obligations, I have my eye on a handful of trades that could hand you profits from stocks trading lower.
My team and I are putting together a presentation for you that should be available later this week.
So please stay tuned to your inbox for more information on how this trading system can add extra income to your account…
Even as the debt ceiling debate sends ripples through our financial markets.
I want to make sure you're prepared to take advantage of every opportunity possible to grow and protect the retirement wealth you worked so hard to save.