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First this debt warning -- saying if congress doesn't -- hike the debt ceiling by the second of August it will put the United States on negative watch.
Our first guest today does not think -- that US default is likely at all Charles -- -- -- the vice chairman of Ariel investments -- he joins us now.
So basically what Fitch said Bob it's just to be clear about it is it's very likely we will get a deal -- Tim Geithner is also said today on the debt ceiling but they're saying if not.
Then all bets are off what's your position on this.
-- -- 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 but the US government is not gonna default.
Well let me ask you -- ask you this -- -- say we do get to August 2 which is.
It's somewhat arbitrary as -- deadline because -- -- -- 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 -- we get to August 2 and don't have a deal what's the market reaction.
That day and it ended 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 can stop or slow down payments and certain programs.
Create money and lots of different ways including -- fashioned way of printing currency.
They're gonna have to start slowing down payment certain programs -- -- we'll get paid slower but the government is not gonna stop making payments on its interest in -- So that -- our viewers with what they should do with their money -- today the market is up -- looks like -- -- prolong what may be or may not be the inevitable in Greece and people are saying look we -- 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 -- Cautious or looking at the markets pull back 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 same 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 I -- I understand that right around about that is that the dead 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 -- it's going on is that we are gonna have very high levels of government debt.
And if that is going to mean that interest rates are going to be heading higher and probably inflation is going to be heading higher.
So you want to have a portfolio that is not negatively impacted by the increase in interest rates and increased inflation.
It is very likely what that means is you -- on a lot -- long term bonds.
You tend on hard physical assets that will do well in an inflationary environment -- from our Chicago bureau there at the CNV Charles thank you Charles for France flight from there.
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