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Bob Rodriguez Outlook on Global Economy and Investing


txlaw
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I didn't think his views were off-basis one way or the other.  You could argue the politics either way as far as the Fed pumping up the economy or not...we've never really been down this road in recent history, so you are going to have people on both sides. 

 

His comments about securities are about right, but he made it clear also that he no longer digs around for individual securities, so there may be opportunities that his screens aren't picking up.  Basically, he thinks plenty of macroeconomic risks, along with unusually high profit margins, warrant caution.  He's dealing with billions, not millions, so it's a different universe.  Cheers! 

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I dunno, he didn't offer a real thesis on interest rate directions except to offer a variation of "they can only go up". Similarly, the statement about japanese flows is descriptive, not explanatory. It's like saying that Mcdonald's outperforms because they get customers who pay money for food.

 

Does anyone follow FPA? Why were their returns so low despite holding so much cash leading up to the market drops? Did they let the cash allocations blow up when their stocks collapsed?

 

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I dunno, he didn't offer a real thesis on interest rate directions except to offer a variation of "they can only go up". Similarly, the statement about japanese flows is descriptive, not explanatory. It's like saying that Mcdonald's outperforms because they get customers who pay money for food.

 

Does anyone follow FPA? Why were their returns so low despite holding so much cash leading up to the market drops? Did they let the cash allocations blow up when their stocks collapsed?

 

Bob predicted the mortgage meltdown and consequent financial panic with great forcefulness in 2007, going to 50%+ cash in his equity funds more than a year before everything blew up.  Unfortunately, after the market tanked in Oct, 2008, he took his cash and bought energy stocks, not realizing that these would soon follow the market down despite seeming to be great bargains.

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Thanks for the summary. That is really unfortunate. Looking at the March '08 report for FPA Fund, they had some really interesting ideas in retail, but plunked most of their risk money into energy and tech underperformers.

 

The retail picks were really impressive, particularly given their bearish view. Lots of contrarian and thoughtful names... almost seems like a sub-portfolio w/ separate management.

 

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The commentary on gov debt is interesting, and it's easy to get buy into the storyline as well.  One thing that always rattles around the back of my mind was the story from the Snowball about Buffett's uncle who was worried the US would default after WWII and bought a farm out in Nebraska.  Up to the day of his death he was talking about how the US was going bankrupt. 

 

Ever since the 1940s people have been worried about this, so I'm not sure this time is any different.  In the past we paid inflated it down, so I'm not sure why we wouldn't this time either. 

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The commentary on gov debt is interesting, and it's easy to get buy into the storyline as well.  One thing that always rattles around the back of my mind was the story from the Snowball about Buffett's uncle who was worried the US would default after WWII and bought a farm out in Nebraska.  Up to the day of his death he was talking about how the US was going bankrupt. 

 

Ever since the 1940s people have been worried about this, so I'm not sure this time is any different.  In the past we paid inflated it down, so I'm not sure why we wouldn't this time either.

 

...and just continue to use up that virtue Charlie Munger was talking about.  Then one day, there isn't enough virtue left.

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The commentary on gov debt is interesting, and it's easy to get buy into the storyline as well.  One thing that always rattles around the back of my mind was the story from the Snowball about Buffett's uncle who was worried the US would default after WWII and bought a farm out in Nebraska.  Up to the day of his death he was talking about how the US was going bankrupt. 

 

Ever since the 1940s people have been worried about this, so I'm not sure this time is any different.  In the past we paid inflated it down, so I'm not sure why we wouldn't this time either.

 

...and just continue to use up that virtue Charlie Munger was talking about.  Then one day, there isn't enough virtue left.

 

Maybe I'm just dense but what the heck does that even mean?

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The commentary on gov debt is interesting, and it's easy to get buy into the storyline as well.  One thing that always rattles around the back of my mind was the story from the Snowball about Buffett's uncle who was worried the US would default after WWII and bought a farm out in Nebraska.  Up to the day of his death he was talking about how the US was going bankrupt. 

 

Ever since the 1940s people have been worried about this, so I'm not sure this time is any different.  In the past we paid inflated it down, so I'm not sure why we wouldn't this time either.

 

...and just continue to use up that virtue Charlie Munger was talking about.  Then one day, there isn't enough virtue left.

 

Virtue?  Like a woman who is almost a virgin . . . compared to someone who is a little more active . . . Compared to . . .  ???

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Thanks for the summary. That is really unfortunate. Looking at the March '08 report for FPA Fund, they had some really interesting ideas in retail, but plunked most of their risk money into energy and tech underperformers.

 

The retail picks were really impressive, particularly given their bearish view. Lots of contrarian and thoughtful names... almost seems like a sub-portfolio w/ separate management.

 

He's got a great team who get deep into certain industries and companies.

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The commentary on gov debt is interesting, and it's easy to get buy into the storyline as well.  One thing that always rattles around the back of my mind was the story from the Snowball about Buffett's uncle who was worried the US would default after WWII and bought a farm out in Nebraska.  Up to the day of his death he was talking about how the US was going bankrupt. 

 

Ever since the 1940s people have been worried about this, so I'm not sure this time is any different.  In the past we paid inflated it down, so I'm not sure why we wouldn't this time either.

 

...and just continue to use up that virtue Charlie Munger was talking about.  Then one day, there isn't enough virtue left.

 

Maybe I'm just dense but what the heck does that even mean?

 

Inflating away debt is theft by another name, and theft is not virtuous.  The trust that a society commands in the market is a function of its overall virtue.  Creditors will tolerate an erosion of that virtue for only so long.

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The commentary on gov debt is interesting, and it's easy to get buy into the storyline as well.  One thing that always rattles around the back of my mind was the story from the Snowball about Buffett's uncle who was worried the US would default after WWII and bought a farm out in Nebraska.  Up to the day of his death he was talking about how the US was going bankrupt. 

 

Ever since the 1940s people have been worried about this, so I'm not sure this time is any different.  In the past we paid inflated it down, so I'm not sure why we wouldn't this time either.

 

...and just continue to use up that virtue Charlie Munger was talking about.  Then one day, there isn't enough virtue left.

 

Maybe I'm just dense but what the heck does that even mean?

 

Inflating away debt is theft by another name, and theft is not virtuous.  The trust that a society commands in the market is a function of its overall virtue.  Creditors will tolerate an erosion of that virtue for only so long.

 

Not sure Munger would agree with you that inflating away debt is theft by another name. 

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I think that you could make a reasonable argument that unexpected inflation is theft, although then again, you could say that the very existence of inflationary mechanisms implies that the threat is in the discount rate.

 

Why would homo economicus care about "virtue"? It simply views the world in its various possibilities and makes its bets.

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I think that you could make a reasonable argument that unexpected inflation is theft, although then again, you could say that the very existence of inflationary mechanisms implies that the threat is in the discount rate.

 

Would you also consider an unexpected tax hike theft?  Because I view purposeful inflation through currency debasement as a stealth tax on savers/creditors.  A necessary one in the case of the US in order to make sure we don't technically default on our currency denominated obligations.

 

Perhaps not quite an aboveboard tax, since it is not apparent to most people, but more like a tax than theft.  Of course, some people consider taxes as theft, so I suppose it really depends on where you stand on that issue.

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