Debt ceiling talks are underway in Washington, DC ahead of a default deadline. Michael Rosen, chief investment officer with Angeles Investments, joined Cheddar News to explain how a potential default could affect investment portfolios, among other items, for Americans.

<div class="block">Debt ceiling talks are underway in Washington, DC ahead of a default deadline. Michael Rosen, chief investment officer with Angeles Investments, joined Cheddar News to explain how a potential default could affect investment portfolios, among other items, for Americans.</div>

Closing Bell

Stretching Your Dollar: How a U.S. Default Could Affect Your Investment Portfolio

Time now for stretching your dollar where we give you changeable tips to help you make the most of your money with talks to raise the debt ceiling under way in our nation's capital and the deadline to avoid a default looming. My next guest is a potential default would be a self imposed nightmare. So how might a default affect you in your investment portfolio? Well, joining me now is Michael Rosen, chief Investment Officer at Angela Investments. Michael, thanks so much for joining. Good to be with you. Ok. 10 days, the time is ticking. We've never actually defaulted on our debt here in the US. But what do consumers and Americans need to know as we get closer to that deadline? Well, Kristen, the first thing I'd say is is this is a crisis of our own insanity. It, it really makes absolutely no sense. On the one hand, Congress passes a budget that requires the treasury to spend about $4 trillion and collect about $3 trillion and therefore to borrow about $1 trillion to fund the gap. And then at the same time, we have another law, this is a debt ceiling law. That prohibits the treasury from borrowing any more money. So, on the one hand, Congress tells treasury to borrow money. On the other hand, tells them they can't borrow money. It is like the literal definition of catch 22. So it's just complete insanity, completely unnecessary. And yet we go through this, this dance every year. Uh And somehow we manage to, to get through it. However, I would point out that we, we did actually go over the brink in 2011 where we actually had a technical default. Uh At that time, we stopped paying federal employees. You may recall, we shuttered National Parks uh interest on debt, however, remained uh current uh bondholders got their money on a, on a timely basis. The, but the market did not react very well. The S and P was down about 15 to 20% in the course of a month in the weeks before and after this, this debt crisis and there was a massive flow into us treasury bonds. The 10 year treasury went from a yield of about 3% to a yield of about 2% in the course of two months or so. So it was a pretty significant move in the market reaction to this. Let me ask you this for investors who are watching this deadline tick closer. Are the moves that they should be making with their brokerage accounts, even their 41 K or Ira to protect themselves against the potential of. Yeah. Well, I'm, I'm tempted to say, take a nap and, and sleep through this uh this exercise. But uh uh look in, in the very short term, there's actually a premium to be had for investors. If you're willing to uh to buy treasury bills into uh over the next 30 days or so into the, the middle of March or so, you'll pick up a pretty nice premium yields are running at around 5.5 to 5 and three percent. That's about a half to three quarters percent higher than the yield that you get on treasuries going out, say two months or so. So there clearly is a premium to be had for investors who don't mind sort of living through some of the uncertainty around this. I do think investors will be paid back in full if there's a delay in payment, which is not expected, they'll be paid back with, with, with interest. But there certainly will be a lot of volatility around this. I think the, the, the, the real big impact that this is going to have though is just another example, another reason for the public to lose trust and confidence in the institutions of our government and and just help to continue to fray the social fabric of the country. This is really not necessary and yet we are still made to go through this. So what are the potential ripple effects Michael that we've seen? Across the economy so far that we could see things that would impact the average daily American. And I asked because CEO joined me recently and said that it would massively impact its business if this happened. Yeah, look, the, there's a lot of sign of weakness in the economy, particularly in the manufacturing area, a bit in the retail area, certainly in the housing market as well. Uh, you know, anything that, that, that, that erodes confidence in the markets uh And in the Treasury's ability and the government's ability to uh to function. I think we will have people pulling back spending and just increase the risks of a recession which are already growing some time by the end of the year. So this, this really relates to confidence which translates into spending, which translates into a slowing economy. Ok? Well, knowing that there are some potential investment moves that can be made here, Michael, I want you to walk me through how an investor might be able to take advantage of some of these treasuries that you said that are offering a decent yield right now. Well, there's a couple of ways to, to, to buy treasuries actually pretty, pretty easily. One is uh directly through the treasury. There's a, a website called Treasury Direct uh dot gov. You can set up an account and wire money into that account and buy treasuries directly if you have a brokerage account, uh very easy to buy treasuries that way uh as well. Uh So uh really, really uh a very simple and easy to do, just really look within, within 30 day maturities and, and, and capture those higher yields. Uh Michael Rosen, we'll leave it there. Chief Investment Officer, Angela Investments, Michael. Thank you.