IFO has wondered for weeks now, amid predictions of collapse, etc., if Congress didn’t let the federal government increase its debt limit beyond the already excruciatingly high $14.x Trillion, what that might mean to her portfolio. Last Monday, May 16 was supposed to be the absolute drop-dead deadline for increasing the debt ceiling.
Republicans, to their credit, dug in and refused to do it without an agreement between the Administration and the Democrats that spending would be cut by an amount large enough to pacify angry voters fed up with the government’s profligate ways.
Guess what? The sky didn’t fall in.
But over at the ever-alert Footnoted.com, we find that two companies are now subtly warning about possible negative consequences of such an event in their SEC reports. You can look up the filings yourself, but we find Footnoted has a knack for finding the salient features of the very wording filings. For example:
MetLife is circumspect about its concerns, which it disclosed in the 10-Q it filed on May 10 by working them into a longer, existing risk factor warning that “Difficult Conditions in the Global Capital Markets and the Economy Generally May Materially Adversely Affect Our Business…”
And they begin their analysis of KKR like this:
KKR is more specific in the 10-Q it filed on May 5, disclosing a new risk factor dedicated to the debt ceiling, titled “A failure or the perceived risk of a failure to raise the statutory debt limit of the United States could have a material adverse effect on our business, financial condition and results of operations.”
We highly recommend that you read the entire posting. Sadly, politics and government spending and debt are intricately intertwined with the private sector. But the stock market, as reported in the Indexes, doesn’t seem worried. What do they know that we don’t know? IFO will look into this in coming days.