Kokomo Tribune; Kokomo, Indiana

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October 15, 2013

As default nears, investors shrug

Treasury says it will run out of money Thursday.

NEW YORK — Warren Buffett likens it to a nuclear attack. Economists warn that government spending on programs like Social Security would plunge. The Treasury says the economy would slide into a recession worse than the last.

Yet you wouldn’t know that a U.S. debt default could amount to a nightmare from the way many companies and investors are preparing for it: They aren’t. The assumption seems to be that in the end, Washington will find a way to avert a default.

“Doomsday is nigh, and everyone shrugs,” said Nicholas Colas, chief market strategist at CovergEx Group, an investment brokerage in New York.

Brian Doe, a wealth adviser at Gratus Capital Management in Atlanta, has 35 clients who’ve entrusted him with $50 million for safekeeping. He isn’t losing sleep over a potential default. Neither are his clients, apparently. Not one has called him about the issue, he said.

“I’ve not done anything,” he said. He puts the odds of default very low. “People in Washington are stupid but not that stupid.”

Marcello Ahn, a fund manager in Seoul, is more prepared, sort of. He doesn’t think the U.S. will default. But if it does, the economically sensitive stocks of shipbuilders and chemical companies will get hit especially hard. So he’s held off buying them.

But he hasn’t sold a single stock or made any big moves to protect his portfolio.

“We are not taking actions based on the worst-case scenario,” he said.

That worse case is inching closer. The Treasury says it will run out of money to pay its bills if Congress doesn’t increase its borrowing authority by Thursday. That includes paying interest and principal on already issued U.S. Treasurys, considered the most secure financial bet in the world.

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