Rodriguez is the CEO of $16 billion money management firm First Pacific Advisors where his equity fund has returned on average 15% per year for the last 25 years.
In a recent article in Fortune magazine, Rodriguez sounded the alarm bell on the US fiscal outlook.
"Rodriguez argues that the US debt as a percentage of GDP ratio (currently 64%) is massively underreported because it doesn't count off-balance-sheet entitlements such as Medicare, and debt owed by Fannie and Freddie. If you factor in those liabilities, he says, the actual ratio is greater than 500% and growing. The US must reduce that before 2012, Rodriguez says, because it's unlikely to accomplish anything during the election year. If nothing changes, he adds, investors will start to get nervous about the amount of debt on the US balance sheet. As lenders balk at buying Treasuries, rates will spike, causing borrowing costs to skyrocket across the financial system. "The financial system is held together with a very thin filament called confidence," says Rodriguez. "When you clip that, all hell breaks loose."
As we approach this fiscal end game, Rodriguez is trimming his equity exposure.
"FPA Capital now has 30% of its portfolio in cash and 38% in energy stocks because he believes the world's oil supply is declining. Still, even in that sector, he doesn't see many opportunities. (Forget other sectors.) He refuses to buy most bonds or long-term government debt."
As of March 31, 2011, Rodriguez had over 22% of his portfolio in two oil stocks. His largest holding is Rowan Companies (NYSE:RDC). His second largest holding is Ensco (NYSE:ESV) at over 11% of his portfolio.