I have been following the saga in Capitol Hill pretty closely over the last ten days or so. The markets are drifting down but there are no real signs of panic.... yet. My feeling is that there is too much complacency - a sense that we have been here before and a last minute compromise will eventually be found.
However, things are just so entrenched that it is difficult to see any way through the mess. I think it will a take real fear, some kind of 'Lehman's moment' to provide the catalyst to come up with a political solution.
If this comes to pass the effects will be global so, I have taken the decision to cull my portfolio. I am now at 20% cash. I reckon the odds of a 10% or greater fall over the next 2 weeks are more than 2:1 and there is a good chance it could be more like 20% (or more). I don't make a habit of predicting where markets will go, but I think this time things ARE different.
I want to have a war chest ready to take advantage of a likely pullback. Is anyone else is taking similar steps?
Filed Under: Economics,