Retired Mutual Fund Manager criticizes Fed

It is no exaggeration to call Robert Rodriguez, previously of the First Pacific Advisors, California, an investment expert. The man did, after all, win awards from Morningstar when he was managing mutual funds that were stock centric and bond centric. Rodriguez has made no bones about his criticism of the Federal Reserve and he has said that it is laughable to think that the central bank can steer clear of policy error at all times.

Disregard for forecasts

Rodriguez has pointed out, defending his criticism of the Fed, that it has actually missed the mark widely as far as understanding economic forecasts is concerned. He has gone further to say that this is not a one-off mistake by the Fed but a sustained error that it has carried on for nine years now. Look at his own personal portfolio and you can see that he is playing it safe, clearly not leaving anything to chance or the Federal Reserve. Talking to interviewers, Rodriguez pointed out that he has virtually no exposure to stock. To make up for liquidity he has short term treasury bonds and similar assets, which offer safety alongside liquidity.

Soaring stock prices may indicate danger ahead

Rodriguez is a self- confessed value investor and he has always held that when stocks grew at a pace that is disproportionately high when compared to their earnings per share, it is better to remain cautious than jump into investing. Stocks have grown at a pace that is about four times as fast as they have grown historically and this is enough grounds for considering the investment environment as being risky, according to him.

Market confidence may be misplaced

The current environment of confidence that is sustaining in the marketplace may seem to be heartening but in reality, it may just be misplaced. Despite the overall upbeat atmosphere, the signs that something is wrong are becoming more evident. Market internals have been losing strength in recent times and this is a significant point to note. Another equally significant factor is that the divergence between poor quality credit and high-quality debt is becoming more and more evident now. The widening gap in spreads is a new phenomenon and a clear indicator of something going amiss in the markets. The number of securities that are falling below key trend lines is on the increases too and this is yet another clear indicator of shaking foundations in the stock market.

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