Tags: Investors | Blind | Eye | default | Fallout | debt | ignore

Investors Turn Blind Eye to Default Fallout

Monday, 25 Jul 2011 09:25 AM

As the White House and Congress spar over lifting the $14.3 trillion government debt ceiling, the possibility of default and market chaos is very real, but investors are surprisingly turning a blind eye to it, experts say.

The administration has said the government will default on Aug. 2 if the ceiling isn’t lifted, but Republicans and Democrats are at odds over ways to narrow deficits in return for allowing the government to borrow more.

Terms such as “catastrophic,” “financial Armageddon” and “Lehman on steroids” have been used to describe what awaits the financial sector if default occurs.

Still, many investors appear numb to it.

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NYSE traders
(Getty Images photo)
"I find it amazing that we have not gotten a single question or comment about it," says Theodore Aronson, a partner at Aronson Johnson Ortiz in Philadelphia, which oversees $21 billion in stock investments for 90 institutional clients, according to the Wall Street Journal.

Then again, Aronson asks, is there anything any investor can do in such uncharted waters?

"We've thought about it, but we don't know what to do," Aronson says.

"As best we can figure it, there isn't anything we can do."

Others say a default will be bad but not terrible, with the Treasury market already pricing in problems.

"You're not going to wake up one morning over the next couple of weeks and find they're priced at 50 cents on the dollar," says William Bernstein of Efficient Frontier Advisors in Eastford, Conn.

Treasury Secretary Timothy Geithner has said lawmakers need to resolve their political differences and lift the ceiling now.

"The most important thing is that we remove this threat of default from the country for the next 18 months," Geithner tells CNN.

"You want to take this out of politics."

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As the White House and Congress spar over lifting the $14.3 trillion government debt ceiling, the possibility of default and market chaos is very real, but investors are surprisingly turning a blind eye to it, experts say. The administration has said the government will...
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2011-25-25
Monday, 25 Jul 2011 09:25 AM
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