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Bob Rodriguez Has Less Than 1% of His Portfolio in Equities

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  • Bob Rodriguez Has Less Than 1% of His Portfolio in Equities

    In a previous thread I reported that I told everyone in my vicinity from 2003-2007 that we were in the middle of an epic credit bubble driven by an unprecedented housing bubble. I also reported that Buffett didn't appear to see it and Martin Whitman definitely didn't see it. Most of the investors that I respected seemed to have no idea what was happening. (I thus learned that I should expect to be blindsided from time to time in the future. No one sees everything.)

    Bob Rodriguez was one of the investors that I respected who not only saw the tidal wave building, but was very outspoken about it long before the crisis occurred. He likewise sidestepped the late 90s tech bubble (and like Grantham, lost many clients due to his prudence).

    He is retired now, but managing his own portfolio. He gave this recent interview: https://www.advisorperspectives.com/articles/2017/06/27/bob-rodriguez-we-are-witnessing-the-development-of-a-perfect-storm.

    He reports that he has less than 1% of his portfolio in equities, and that if he was still managing his mutual fund that he would be holding 60% cash, more than the 45% cash he held in the run-up to the Great Recession.

    I know most of you are indexers and EMH believers and don't care. I'm not trying to convince you otherwise. There is nothing to see here. Please go on about your day.

    However, there are a few value investors among us. This is for you, fellow value investors. No one is correct about everything, including Rodriguez, but you may be interested in his opinions.

    Like Rodriguez I have < 1% of my portfolio in US equities. Unlike Rodriguez I have almost 25% in foreign equities (whereas he owns some unspecified tangible assets).

    Rodriguez expects QE on steroids during the next downturn. I agree, but he appears to believe this will lead to inflation. I think that will be incorrect unless the government embarks on massive deficit spending (at levels similar to WWII). In the absence of that, I think Lacy Hunt will be correct (Rodriguez alludes to Hunt in the article), and that's why I hold a significant but fairly small LT treasury bond position (unlike Rodriguez).
    Erstwhile Dance Theatre of Dayton performer cum bellhop. Carried (many) bags for a lovely and gracious 59 yo Cyd Charisse. (RIP) Hosted epic company parties after Friday night rehearsals.

  • #2
    This is bait for Johanna if ever it existed.

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    • #3
      Why don't you share your written investing plan with the readers of this thread? For instance, how will you determine your asset allocation moving forward.
      Helping those who wear the white coat get a fair shake on Wall Street since 2011

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      • #4
        thank you for sharing.  I was about to post the same article but I am aware that most in this group are index investors.

        There a few active managers that shifted to holding more cash.  however, they are being slaughtered for underperforming the S&P 500.  It is hard to be in that position when >50% of the market are touting you that you suck at your job.  Tides may turn, but until it happens, majority is exuberant with the stock market.

         

        http://www.mutualfundobserver.com/2017/06/the-dry-powder-gang-updated/

         

        the last few lines of the article:

        Bottom Line: being full invested in stocks all the time is a bad idea. Allowing greed and fear, alternately, to set your market exposure is a worse idea.  Believing that you, personally, are magically immune from those first two observations is the worst idea of all.

        You should invest in stocks only when you’ll be richly repaid for the astronomical volatility you might be exposed to.  Timing in and out of “the market” is, for most of us, far less reliable and far less rewarding than finding a manager who is disciplined and who is willing to sacrifice assets rather than sacrifice you. The dozen teams listed above have demonstrated that they deserve your attention, especially now.

         

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        • #5
          Okay, so let's say that the people above are correct...the markets are extremely over priced, there's a major market correction coming soon...so what?  What should I, an average Joe investor, do differently?  I'm currently following a passive index fund strategy and I don't really plan on changing, but I'm curious to understand what the value investors are recommending and what they plan to do with their own portfolios.

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          • #6
            I think this link may help some people out who follow this line of thinking:

            http://www.instructables.com/id/Aluminum-Foil-Hat/

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            • #7
              OK, so you holds the money in cash. 60 %. When do you get in and invest. Or are you going to hold it and see inflation eating its value away.

              I have been an investor since the late 1970's. First my father taught and managed it for me and later I started on my own in 1985 with British Gas when it was privatized by Margaret Thatcher ( was in UK at that time). I have been through many bubbles, crashes ( 1987, 2001, 2007 etc) and so called overvaluations. But over a period of time the value of my holding has far outpaced inflation. And I am a dividend reinvestment (DRIP) investor.

              Even a broken clock is right twice a day.

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              • #8
                Idiot Maker Rally - if only they had updated it to the present. How quickly we forget.
                Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                • #9


                  As for these investment plans. To (again) paraphrase the great Mr. Tyson, everyone has a plan until they get punched in the face. One of the few things that I will put my money on is that the next 5-10 years is going to be a period of great change. I have certain guidelines and goals but my biggest concern is being nimble enough and have sufficient optionality within my retirement/personal accounts to adjust to the change that is coming. There are a few tried and true assets that weather this volatility. However, I do not believe in having a static asset allocation plan involving mostly equities and bonds for the next 5 or 10 years without contingency plans for macro events. Maybe I am right or wrong and we will see how that plays out.
                  Click to expand...


                  I, for one, will stick to the only reality that we know, which is the history of the market over the long term, in the face of more "macro" events than most of us were even around to experience. Anyone who invests without a plan and with a short-term perspective is sure to get punched in the face as a result of that gamble at least once before learning a difficult lesson. This holds true whether they are investing in real estate, the stock market, bonds (heaven help us), or something else purchased with the intent of making a few bucks while short-cutting the plan. An investment plan should be put into place only after constructing a proper and feasible financial plan.

                  When you really look at events and cycles, I'm not sure I can think of any 5 - 10 year period which the prognosticators did not declare a period of one-time market-disrupting events and great change. Ho-hum.
                  Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                  • #10


                    Ah, yes. The advisor who recommends “100% equities” for investments being held longer than 5 years. Never did hear back about my comment that holding cash during the 70s was just as good or even better than their proposed equity strategy. https://www.whitecoatinvestor.com/forums/topic/there-are-such-things-as-secular-bear-markets/page/2/#post-43422
                    Click to expand...


                    That is a very oversimplified statement about our process, just as dangerous as your ideas. Let's just say I don't have the time or inclination to get into forecasting, no matter which "expert" you want to copy and paste or using the formula du jour that is sure to be right today because, as we all know "This time is different!!!" (With props to Sir John Templeton.)

                    The problem is, we hear about these "successes" only after they happen, not in advance of the event, and we rarely, and I mean rarely, read about the failures. Which is why I posted that most interesting link. Some pretty epic "failures" from well-know professional prognosticators there that cost a lot of people a lot of savings.
                    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                    • #11
                      Bob Rodriguez in June of 2011:

                      "I believe that within two to five years we'll have a crisis of equal or greater magnitude of what we just went through," he says. "And it will emanate from the federal level."

                      Source: http://fortune.com/2011/06/06/bob-rodriguez-the-man-who-sees-another-crash/

                      He sounds like a fascinating guy, and his sabbatical sounds amazing. He may be right about some aspects of the future, and he has been in the past, but he's also been wrong.

                      Given the fact that the article indicates he has 7 Porsches, I think he'll be alright no matter what happens.

                      Also, if you look at his fund, FPPTX over any lookback period on Morningstar (months, 1 yr, 3 yr,5 yr, 10 yr, max), it has underperformed the S&P 500. You could cherrypick particular dates to find times when it hasn't, just like you can cherrypick the times his predictions worked out.

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                      • #12




                        Bob Rodriguez in June of 2011:

                        “I believe that within two to five years we’ll have a crisis of equal or greater magnitude of what we just went through,” he says. “And it will

                        emanate from the federal level.”

                        Source: http://fortune.com/2011/06/06/bob-rodriguez-the-man-who-sees-another-crash/


                        Good Find PoF! This brings to mind the famous 2010 open letter to the Fed where conservative economists and investors predicted runaway inflation because of expansionary monetary policy.

                        https://blogs.wsj.com/economics/2010/11/15/open-letter-to-ben-bernanke/

                        Hasn't happened 7 years later!

                        I found the Bob Rodriguez article kind of incoherent. Even if we are in a stock market bubble, in a rising rate environment, I don't see how treasury bonds are the right investment. Monetary policy is complex and it seems many successful investors don't understand it and thus fear it.

                         

                         

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                        • #13
                          I would agree that TARP and TLGP helped banks weather the Great Recession. Both of these actions happened in 2008 and preceded the 2010 predictions of massive inflation. I would argue that the programs which guaranteed and bought bank debt showed the competence of the Federal Reserve and earned Uncle Sam a solid profit.

                          And Deutsche Bank falls under European regulators' purview. The ECB has done far less than the Fed to boost their banks and that's why some European banks are in trouble.

                          Getting back to the original topic, I don't see how any of this means you shouldn't invest in U.S. stocks as the U.S. seems more solid than Europe at this point.

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                          • #14


                            Nice. I’ll add “dangerous as your ideas” to my top ten WCI’s ad hominem list. It’s at #2, right below being called a “delusional narcissist”, which is still #1.
                            Click to expand...


                            Sigh, guess I'll have to settle for #2 and try harder next time.
                            Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                            • #15





                              Nice. I’ll add “dangerous as your ideas” to my top ten WCI’s ad hominem list. It’s at #2, right below being called a “delusional narcissist”, which is still #1. 
                              Click to expand…


                              Sigh, guess I’ll have to settle for #2 and try harder next time.
                              Click to expand...


                              If "delusional narcissist" made the top ten list of things I've been called online, I would have never developed skin of any significant thickness.
                              Helping those who wear the white coat get a fair shake on Wall Street since 2011

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