Great interview with Robert Rodriguez of FPA (to see my new resource page for Robert Rodriguez click on the following link-https://www.valuewalk.com/robert-rodriguez-resource-page/). He has been out of the spotlight but giving a lot of interviews lately. Rodriguez returned 15% annually for 25 years for FPA’s flagship fund. He saw the housing bubble as early as 2005, and also predicted the dot com bubble.
Rodriguez is warning that the debt load that the US government is taking on. Robert Rodriguez estimates that the Government has 500% debt to GDP when off balance sheets liabilites are included. That would make total debt closer to 70-75 trillion than the 14/15 trillion number quoted in the media. Rodriguez is not alone. Bill Gross thinks that the US Government has $100 trillion of total debt. This would be closer to 700% debt to GDP.
Below are recent interviews with Bill Gross and Robert Rodriguez, followed by the transcript for Rodriguez’s video:
Chilton Capital's REIT Composite was up 6.1% last month, compared to the MSCI U.S. REIT Index, which gained 4.4%. Year to date, Chilton is up 6.3% net and 6.5% gross, compared to the index's 8.8% return. The firm met virtually with almost 40 real estate investment trusts last month and released the highlights of those Read More
you think greece has a debt crisis? bob rodriguez says that unless the u.s. gets its fiscal house in order, you ain’t seen nothing yet. and he should know having successfully navigated the two last stock market storms. mr. rodriguez joins us from los angeles. very nice to have you on the program. you know, you obviously are both a bond and stock investor in your various funds at pacific. at first pacific, excuse me. but let’s start with the bond market. a lot of people have been expecting that rates would head higher this year. of course that has not happened.in fact, we’ve seen the opposite. do you continue to stay awayfrom the bond market because of your fear ultimately that rateswill start to climb? that is correct. we still will not commit tolong-term bonds because of what’s going on in this country. i thought that there could be a rally in the market due to theweakening in the economy this year going into next year. aren’t you afraid ultimately of kind of being left behind? that results from the fact that the government back in 2009 took some very arbitrary and what i viewed capricious actions ad hoc with regards to gm and chrysler, and various elements in that crisis.that continues today. and so we view the high yield market as being extremely overvalued presently. bob, let’s talk abouttechnology. you had as david mentioned a fantastic call in terms of the tech bubble a decade ago. having navigated yourshareholders, your clients out of that, talk about now. are we on the verge of another massive tech bubble that’s going to end quite ugly for a lot of people, as an example looking at this pandora or linkedin? give us your opinion on that. well, we have a smaller allocation to technology today, considerably less than where we were a couple of years ago. we’re never involved in those kinds of what i would call high expectation stocks. but where we kind of view looking over the last several years was companies that had more of an international allocation. having said that, we’re still quite cautious and have been raising liquidity here over the course of the past year. you have, what, almost 30% of your portfolio in cash. is that correct? that is correct. it’s over 30%. i would clarify that my associate, my partners, dennis brian and ricard exstrand, continued to manage the fund quite well, as does tom atbury over on the fpa new income side. you took a sabbatical, did some traveling, thought about the world. what has given you the most fear, given what is your view of the world where you would have a30% cash position? obviously not want to own bonds at this point. and also you’re particularly worried about the stock market. well, i think it’s broader than that. here we’re debating about various types of music that are being played on the ship uss titanic, as it’s heading toward the fiscal calamity iceberg.the congress and the executive branches of government for thelast decade have been totally irresponsible in their spending.we have had in my opinion fiscal policy that has beenmisdirected. monetary policy that has been misdirected and been foolish. and now we are getting to the point in time where time is growing shorter. many of the politicians will tell you, including the fed chairman, that we have to wait for another couple of years for the economy to recover. in my opinion, we have less than a decade. and each year represents 10% of the time that we have to deal with our fiscal problems. our politicians in congress have been misleading, misguiding, andkeeping the american public uninformed, and now that bill iscoming due. you know, bob, what do you say to the strategists, there are tons of strategists that will be tell you that the s&p istrading at a very attractive multiple, and companies have record cash. we’re going to grow earnings this year. you should be fully invested. what would you counter to them if they came to you and said, why are you not fully invested in equities? again, we are unprecedented. i have been arguing for the last three years that the economy would be substandard, low economic growth. much of the earning power that you’re witnessing is coming from overseas and secondly in the financial sector the reduction of loan loss reserves. i think sheila bear has madesome very significant comments recently about the financialservice companies. so we would not view this earnings growth that people are look at, which has not been top line driven, as more as margin generated. and the margins are in the process of peaking. you know, 10 years, some people think is still arelatively long amount of time. but what do you — what would ittake, mr. rodriguez, for you to start to get more constructive in terms of your view of the world? first of all, we need to start cutting our expenditures now. not three years from now, fiveyears from now. the president’s commission has 40% of its cuts back out in 2019, 2020. i believe we have to start cutting today. cuts come first. tax increases second. unless they demonstrate that very much like a borrower who has been foolish and extravagant, you don’t lend more money, you don’t get optimistic about the borrower unless they start to show fiscal rectitude and sobriety. that is not the case today. i’m looking forward to what comes out in the next six weeks. right.this is a test. you know, i recollect of course i think one ofhemingway’s book, you go bankrupt or broke, and he sai yslowly at first, and then suddenly. but i wonder, right now you can borrow at 3% from the u.s. government for 10 years. and nobody sometimes to be paying a great deal of attention about the concerns you’re raising about the markets. the 3% is an illusion. it’s a manipulated market. according to bloomberg, about 2/3 of the treasury purchases now are done by foreign central banks and the u.s. federal reserve. so these are buyers that are not, shall we say, interest rate sensitive. they have other agendas. and actually, interest rates are more coincidental rather than forecasting. take a look at what’s going on in greece. two years ago, you had a 10-year bond at less than 5%. then in one year, it went to 10%. and now you see it north of 17%. history shows that interest rates can change verydramatically in a short period of time. yeah. in fact, north of 18% right now on that greek 10-year as it continues to move up.wow. yeah. wow. robert rodriguez, i hope you’ll join us again sometime. this is a subject we’d like to come back to and worthy of a lot more conversation. thank you. thank you. and please listen to dave walker who is out there and has beenleading this charge for a very long time at the comebackamerica initiative, as well as the peterson foundation to seewhat they have to say as well. these are two very unbiassedspokesman. all right. bob rodriguez joining us.