CNBC had this to say
Standard & Poor’s spoke loudly and clearly when it downgraded US debt, but the Treasury market on Monday didn’t appear to be listening.
While stock markets were selling off around the world bonds rallied. The 30-year bond gained more than a point in price as investors sent their own clear message that in times of turmoil, Treasurys were still the safest house on the block.
The movements seemed to suggest that S&P, for all the bluster and bold headlines its move created, was not calling the shots.
All over the media and my social media network people keep saying things like this. However, this is just the wrong way to think about the world.
Let me explain this way. Lets forget about S&P or downgrades or Europe or any of that.
I was shocked and appalled by the way the debt ceiling debate was handled. I was even more appalled that some people in positions of power seemed to endorse this as the new normal. Playing games with the global economy is no joke and no way for the leaders of the most powerful nation in the world to behave.
In my mind the political mess in Washington was worth a downgrade. And, indeed, I felt less safe than I did a month or two ago about the world and the fate of humanity.
However, what should I do in response to that? I should buy US Treasuries. Yes, buy.
Because you cannot escape US default risk. Its not like you could go out and buy something else that would guarantee you income in the event the US government defaulted. I am not even sure that investing in farmland or other wild schemes would do it.
Certainly there is no place to stash the trillions of dollars that now sit in Treasuries.
You have to buy Treasuries. There is no alternative.
This is why my reaction to the debacle wasn’t. OMG sell Treasuries. It was OMG we need to create an alternative to Treasuries and fast.
Right now, there is just no way out but through.