One of the best managers in the last 25 years sees another crash
“Bob Rodriguez is the manager of mutual funds with the best record of profitability in the last quarter century and who correctly predicted the last two stock market crash. So why do not people listen when he says that Bob Rodriguez another disaster looming, that’s what is asked Mina Kimes Rodriguez in an interview in Fortune magazine. The answer can be summed up in that people do not want to hear bad news. Rodriguez has predicted stormy times twice. Twice has warned world. Twice seen as fun and as investors abandoned the two funds it manages. Twice he has taken steps to protect their customers from the crisis was coming.
And twice – first with Internet stocks in late 1990, and then with the 2008 financial crisis – Rodriguez has been successful.
As the catastrophe unfolded, the man who mocked once lost one of the hottest markets for life, was anointed as a seer. The Wall Street Journal pointed to Rodriguez as one of the naysayers who did well. Barron’s label made him a prophet. MarketWatch described it as one of the four horsemen of the market.
Rodriguez, CEO of the firm First Pacific Advisors, which manages 16,000 million dollars, is not the type to be satisfied with having successful. Apparently the man who is committed to sharing the harsh reality. It’s as if I had that terrible gift and with that came an obligation to tell the world the coming disaster.
Like most iconoclastic, Rodriguez often feels as if shouting into an abyss. But in the spring of 2009, thought that people were finally listening. Sobriety apparently was back. Leverage is melted. Frugality was again hailed as a virtue. It seemed the world had finally begun to understand the risk.
After a period of rest, Rodriguez returned in January for First Pacific Advisors – just as the CEO – and realized, to his horror and disgust, almost nothing had changed. Risk taking had become fashionable, and the debt burden of the United States, which he believes is the biggest threat that investors face today, had soared. Now, once again, Rodriguez is sounding alarms.
His new prophecy: if we do not fix the budget – soon – the economy is facing a disaster. “I think within two to five years we will have a crisis of equal magnitude or greater than that just happen,” he says. “And it will come from the federal level.”
Bob Rodriguez never liked Internet stocks. As the dotcom bubble in recent years increased from 90, made him nervous to see how companies that lost money were trading at higher multiples than companies that generate large amounts of cash flow. In 1999, described this phenomenon as nothing more than speculation dressed in the garb of investment. With the fear that the bubble burst, began to cut its presence in technology companies.
That decision hurt his back in the short term. The stock fund Rodriguez behaved worse than the rest of the market and shareholders closed accounts. The fund’s assets dropped from $ 800 million to 350 million. Don Phillips, president of research funds from Morningstar says: “There is growing pressure in the late 90′s when people were saying, ‘Bob Rodriguez has been lost. For the love of God, man, you live in California. How can you not understand tech stocks? ”
But when the bubble finally burst, Rodriguez was vindicated: From 2000 to 2002, First Pacific Advisors (FPA) gave a yield of 29% -38% versus the S & P 500. Then, Rodriguez was the toast of the investment world, and the two funds assets accumulated steadily over the following years.
Then in 2005, again began to detect signs of trouble. Rodriguez and his co-manager of FPA, Tom Atteberry, noticed an unusually high number of mortgage defaults in supposedly safe tranches. Quickly began to remove their investment asset class and began to improve the credit quality of its portfolio. In 2006, Rodriguez sold all the bonds of Fannie Mae and Freddie Mac to your bond fund.
Although the mortgage market “subprime” was starting to crumble in 2007, most managers were still fully invested stock. Rodriguez, however, had increased to 40% its liquidity position and invested the rest in oil and gas companies with strong balance sheets. “Many experts believe the housing cycle is at a stable level,” he said in a speech this summer. “We are not of this opinion.” He concluded: “We are willing to bet our company and our reputation for being right.” Once again, investors punished him. In 2007 and 2008, the stock fund was beaten with an output of 711 million dollars.
Like virtually all funds, FPA Capital fell in 2008. But unlike most, had huge cash reserves. As prices plummeted, Rodriguez was able to double your bet on stocks. The result: your stock fund made a profit of 54% in 2009 vs. 27% of the index.