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States Likely to Head Off Major Bond Defaults: Ross

Faced with the threat of massive bond defaults, state and local governments have taken proactive steps to deal with their problems and are thus likely to avoid disaster, investor Wilbur Ross told CNBC Tuesday.

Lucien Capehart | Getty Images

The issue of municipal defaults has been the subject of hot debate over the past several months since banking analyst Meredith Whitney issued a dour forecastfor the industry.

Ross said those fears are probably justified but will not devolve into a worst-case scenario.

"I think it's been correctly stated," he said of the default threat, "but what's good is the states are starting to deal with it more so than the feds. That's the disconnect, and I find it very peculiar."

Defaults probably will be limited to special-purpose bonds, which are issued to fund individual projects but are not reflective of a government's overall fiscal standing. Ross cited health care as a specific example.

"Localities and states are really trying to deal with their entitlement benefits issue," Ross said. "The federal government so far is ignoring Social Security, which is its analog for the pension funds."

On a separate issue, Ross said he's focusing some of his investing efforts on natural gas, which he said is "pretty compelling" particularly as it relates to the crisis in Libya and its effects on oil prices.

He said he has invested in Exco Resources, a gas and oil company in which Ross has taken a 10 percent stake.

"Natural gas is domestic. It is a much better solution to the worries we're having about the Mideast," he said. "If we used more natural gas now we'd be a lot less worried about what's going on in the Mideast, and that would be a good thing."

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