The U.S. government and the Congress "are still delusional," Robert Rodriguez, the principal and CEO of First Pacific Advisors, the $16 billion money management firm, told CNBC Friday.
"Unless the government starts to get its fiscal house in order, does mandatory budget reform in the Congress with this [super] committee, I fear things will get considerably worse," said Rodriguez.
The moment of truth, he explained, applies to the super committee, which should be meeting right now but instead is in recess. "They have very little time and the markets are going to be watching it critically."
Rodriguez is one of the mutual fund managers who correctly predicted the last two stock market crashes. The super committee was created when Congress approved legislation raising the debt ceiling.
"The odds are escalating" the U.S. will have a recession, he explained. "We have approximately 15 months to really start demonstrating fiscal rectitude in this country."
The debt ceiling bill signed by President Obama earlier this month "was a joke, the cuts were deferred," he added. "That was one of the key elements that led to the markets' downside volatility beyond the S&P downgrade" of the United States.
For that reason his firm continues to hold "large amounts of liquidity—35, 45 percent still concentrated in a limited number of areas."
Rodriguez also noted that the 2 percent level on the 10-year Treasury bond is a problem that he keeps coming back to.
"If the 2 percent level would be breached and stay there it would be an indication of far more volatility on the downside" because it would imply "recessionary elements," he concluded.
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