Zero Percent Chance of U.S. Default: Parker

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Oct. 7 (Bloomberg) -- Morgan Stanley's Adam Parker Pension Partners' Michael Gayed and Bianco Research's James Bianco discuss the possibility of a U.S. default with Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)

We not pricing in a real threat?

I don't think we are pricing in a real threat because we are not going to have one.

We have a zero percent chance of a default great what about the instability this environment creates?

The bigger issue is could you get an economic slowdown that could weigh down the recovery that is on the way?

We don't think that is a reasonable option.

Investors have been program that everything they have worried about in the last few years has turned out to be y2k. what makes you so sure.

It's just an option that can't be -- we just can't go there.

I don't think we will go there.

There'll be other alternatives that are less severe.

Corporate earnings seem to be growing in a positive direction.

They were worried about an earnings decline that did not materialize.

Should people be more worried than what they have been worried about?

Not about washington.

They should be worried u.s. markets are extended.

If anything, i think what's happening in washington is an excuse to rotate into washington.

But if you look at the 52-week returns, you are at a point where historically, it is extended.

On a rolling 52-week basis, we haven't had that.

I think what's happening at the start of the fourth quarter, since you can see it consistently is money going into emerging markets.

If you look at small caps relative to emerging markets, they are outperforming u.s.. that seems to be one of the reasons the money is going to the brakes.

You have this washington drama which i don't think matters at all.

You still have this disconnect despite 85 ilion dollars a month and the u.s. market diverging completely jim bianco, are we just passed the point of this conversation?

Lex i agree that the odds of the default are zero.

I would even go as far to say the odds of the default of going to the debt ceiling is zero.

We are not going to default whether we have a deal or whether we don't have a deal.

They're going to prioritize payments.

They only need 35 or so to pay debt service.

We are going to make good on our bonds?


That leads into the problem.

If we run past the 17th, note that deal and we find a way to get away from default, this could drag on for a long time and be negative for the economy.

This is the issue we get at with the ceo debt summit area three ceos told me this morning they are concerned about what it means to the economy overall.

They are not committing capital to projects.

They are not hiring because of the uncertainty.

I think that is bullish.

When you put all these costs in place and revenue disappoints, it might mean the economy doesn't recover at the rate people want but you don't put cost in place that make you afraid of the earnings cycle for corporate america.

Which is why spending has been so low.

That's right.

I don't know if it is bad for companies if they don't have a big.

I think it's better if they keep it under control.

You would rather put your money in emerging markets.

They performed roughly in line with the u.s. since -- they're much cheaper on a valuation basis and are -- everybody is chasing u.s. small caps and emerging markets are performing in line with small caps area where is the momentum now?

It's not really in the bond market.

There's only one other area to play.

They be gold has some momentum as well.

Old down 18% in six months.

On a rolling two months basis, it has been outperform.

It is really hard to forecast the overall s&p 500 forecast.

A 52-week rolling performance anchored to june, sometimes it works, sometimes it doesn't. i'm focused on the earnings trajectory.

I think the earnings season will be slightly better than the last quarter and as long as he developed market economies are slightly better, i'm not afraid of the barricades.

Do you tell clients to buy here?

If we see a few more days like this going toward the 17th, is this a buying opportunity?

I think so.

We are three percent from an all-time high.

There are all of these things that are a problem, but they know the earnings trajectory is not going to crater.

It comes when you have a debt that you can pay your revenue disappoints.

We are probably two years away from that.

There's a little bit of gamesmanship until the 17th.

You sought last thursday.

The dow goes down, the "new york times" without a story about john boehner.

Anytime a goes down, we're going to ramp up the rumors and right back up we go again.

I don't have a 10 day investment horizon.

I think 12 months out, the markets are going to be higher.

I think you have to look at

This text has been automatically generated. It may not be 100% accurate.


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