Crisis? What Crisis? Part 2

A couple of weeks ago I wrote a post discussing the supposed crisis that was developing regarding the US Congress’ failure to agree to raise the debt ceiling. In summary I thought it was a political issue, not a financial issue, and I took advantage of a fearful market to sell some of my bond fund and buy the S&P500 fund.

With hindsight I see that my thinking was correct (the debt ceiling issue was resolved) but the decision was dead wrong. Since I wrote the post on 25th July the S&P (^GSPC) has fallen 12% from 1337 to 1172! The cause: a surprise downgrade of US debt by one of the ratings agencies (S&P), and concern over European debt.

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The decision to sell the bond fund and buy the S&P fund might be my worst decision to date. The lesson: sometimes Warren Buffet’s maxim “Be fearful when others are greedy, and be greedy when others are fearful.” is not completely true!

On the bright side gold is up and the Sprott Physical Gold Trust (PHY-U.TO) is up 11% from the purchase price of $13.46 to $14.91.

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