Aug 02, 2011
Debt Ceiling Done, What's Next?
The debt ceiling deal is done and now it’s onto the next “crisis.”
The deal went down to the arbitrarily assigned deadline and, although details are still coming out, we know a few critical things already.
The key is these cuts aren’t really cuts at all.
The always discerning folks at the Cato Institute showed how deep these “cuts” really go in Budget Deal Doesn’t Cut Spending:
As you can see, the cuts are really just cuts in expected spending.
If you wanted to buy a $30,000 car and instead chose to buy a quality used care for $10,000, did you really save any money?
In the real world…no, of course you didn’t.
In Washington…that’s a savings.
The rest of the remaining details will come out over the next few weeks. And if you were expecting a bit of seriousness from Washington on spending, you will surely be disappointed.
But the market is already predicting how deep these cuts will really be. The defense budget, one of the few areas to really see cuts, shows the market isn’t buying the rhetoric. Shares of two top defense contractors, Lockheed Martin (NYSE:LMT) and Northrop Grumman (NYSE:NOC), are both down just over 4% today compared to the overall market decline of 3%. These two stocks would have been hit march harder if their #1 customer was really cutting back sharply.
But it is all passed. Now, for your portfolio’s sake, it’s time to look forward. So here’s what’s coming up, what it means for your money, and the moves to start making now to get prepared.