The latest commentary from famed money manager Bob Rodriguez is far from blue skies and sunshine, taking specific, and at times personal, aim at Fed Chairman Ben Bernanke.
“My worst fear is that fiscal gridlock continues, coupled with the policies of this activist Fed chairman,” Rodriguez, FPA Capital’s managing partner and CEO, wrote on Thursday in response to the central bank’s announcement that it would initiate a third round of quantitative easing. “Today’s Fed actions add to my anxieties. ‘All in’ may be a good strategy for poker but not for this economy.”
After a brief history of economic stimulus since 2009 and a discussion of market reaction late last week to the Fed’s latest announcement, Rodriguez bluntly stated the challenges he sees for the economy.
“The Fed chairman recently expressed the opinion that he does not view unemployment as structural. However, he is using this ‘All In’ approach to shock the economic system. This reflects something other than normal times. He believes if the Fed gets interest rates low enough for a sufficiently long period, the recovery will finally gain traction. This is pure speculation. I view this approach as highly dangerous, misdirected and untested.”
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Rodriquez noted that Bernanke is held in high esteem by the consensus, but that, “As usual, I am not with this consensus.”
“He refuses to admit the Fed made monetary policy errors that helped create the housing bubble,” he wrote. “He maintains it was a worldwide savings glut that caused it and not the Fed. In fact, for both 2005 and 2006 he held the view that there was no housing bubble—a major miss.
“In contrast, at FPA we were of the opposite opinion and took action in the portfolios to hopefully protect capital before the bubble burst. The only retraction Bernanke has made was in reference to his May 2007 comment that he thought the subprime mortgage mess would be contained. I publicly expressed the opposite view and said that subprime was the canary in the credit coal mine.”