Lessons From The US Debt Debacle

Uncle_Sam_(pointing_finger)Phew! It’s finally over. I am not sure I could have taken much more of US politicians arguing over what should or should not be included in the budget.

But at long last, we can get on with our lives again because Uncle Sam will not be defaulting on its debts. As if he ever would.

I am sure that most of you will agree that this is no way to run an economy, especially the largest economy in the world. But we can only work with what we have. So, whilst the present situation is far from ideal, it is the best we have until a better one can be found.

Incidentally, the solution to America’s debt problem is only temporary. The US is expected to bump against the debt ceiling again in less than three months. So be warned.

In my view, there are many words to describe what has happened over the last two week – some of which are unprintable. But a ‘debacle’ probably describes it best.

The Oxford Dictionary traces the origin of the word ‘debacle’ to the early 19th century when it was used to describe the breaking up of ice in a river. Meanwhile, the Cambridge Dictionary describes a ‘debacle’ as a complete failure, especially because of bad planning and organisation. That, for me, sums up events in America over the last couple of weeks perfectly.

But what were you doing over the last couple of weeks? Were you paralysed into inaction by events in America? Were you like many around the globe wondering what might happen if America were to default on its debts? Or were you busy looking at investing opportunities brought about by America’s debt crisis?

Unfortunately, for us investors, there was no abrupt sell-off, which, on the one hand is disappointing but on the other hand, speaks volumes for the outlook for shares

It would suggest that stocks are still attractive and that the global economy is likely to continue growing, albeit at a slower rate. Nevertheless, economies, both developed and developing, are likely to expand, which bodes well for global equities.

Currently, the Straits Times Index (SGX: ^STI) stands at 3,187 points, which values Singapore shares at around 13 times historic earnings. That does not look too demanding. Additionally, this is an average, which means that some shares could be even more attractive.

So rather than fret over something that you have no control over, spend time looking for investing opportunities over the next few weeks and months. Remember that today will always be the tomorrow that we worried about yesterday.

Bear in mind also that that there are three types of investors: Those who make things happen; those who watch as things happen and those who wonder what has happened after it happens. I know which one of the three I would rather be as America sorts out its debt problems.

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