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Ariel Investments Vice Chairman Charles Bobrinskoy argues the U.S. is not at real risk of defaulting in the short-term.
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First this debt warning -- saying if congress doesn't -- hike -- feeling by the second of August it will put the United States on negative watch.
Our first guest today does not think though that a US default that's likely at all Charles -- -- boys and vice chairman of Ariel investments and he joins us now.
So basically what Fitch said by the -- it's just to be clear about it is it's very likely we will get a deal us Tim Geithner also said today on the debt ceiling but -- -- if not.
Then all bets are off what's your position on this.
He -- markets obviously very focused on the debt ceiling negotiations and having a long term solution to the unsustainable deficits.
But I think we and the market believe that we're not gonna have default.
We will have -- here is we will probably have some bad headlines that the US government is not gonna default.
Well let me ask you that -- ask it this way -- -- we do get to August 2 which is.
That it's somewhat arbitrary as the deadline because we've been able to push it off a number of times in the the treasury has a number of accounting.
The -- that it can put in place the kind of by itself more time say we get to August 2 and don't have a deal what's the market reaction.
That day and the and in the days to follow there's still no deal.
There are no magic dates in which the government is gonna stop paying its bills these are as you just -- arbitrary dates.
The government's -- stop or slow down payments and certain programs.
They can.
Create money and lots of different ways including old fashioned way of printing currency.
So.
They're gonna have to start slowing down payment certain programs may the will get paid slower but the government is not gonna stop making payments on its interest -- not.
So that help our viewers -- what they should do with their money -- today the market is up and looks like -- we prolong what may be or may not be the inevitable in Greece and people are saying look what we can -- kind of kick the can down the road -- 76 points right now on the Dow but we also have our debt issues that you and I've been talking about so people should be what.
Cautious or -- looking at the market's -- a little bit and say now's the time to get aggressive again.
They should be long term thinkers the answer that question is always the -- they should not try to make investment decisions.
Based on headlines coming out about the next couple of months they should have a portfolio.
That takes into account their long term needs.
Where you get in big trouble is by reading the newspaper and buying today's trend and understand that right around about that is that the debt issue is kind of a long term issue right it's something that's that way down the line that we have to get -- so.
Should people incorporate the idea that we will tackle this problem into their long term thinking.
Yeah I do happen to believe that one of the long term trends it's going on is that we are gonna have very high levels of government debt.
And if that is gonna mean -- interest rates are gonna be heading higher and probably inflation is going to be heading higher.
So you wanna have a portfolio that is not negatively impacted by the increase in interest rates and increased inflation.
-- very likely what that means is you tend on a lot less long term bonds.
You tend on hard physical assets that we'll do well in an inflationary environment from our Chicago bureau there at the CME Charles thank you Charles Prince flight from --
