A Top Fund Manager Takes the Feds to Task

When asked if this is going to change the risk parameters of how we view investments, he said, "It's going to change everything ... we are in a new financial system. We've just crossed over to [a new system] . We've opened Pandora's box."

He says that the next crisis that we face will be a government crisis. He says that the government is creating huge burdens for future generations. He said we either take the pain today or later down the road. The bailouts of Bear Stearns, Lehman, Long Term Capital and Chrysler, he said, are part of the problem.

When asked about oil, he said that the weak economy has brought down the price of energy. As the price of energy comes down, various types of exploration is shut down, as explorers have less money. This further reduces the supply of oil. When asked whether the price of oil will go back to where it was earlier this year, he said it will greatly exceed that price. Rodriguez said the firm is currently looking at more energy companies to invest in but would not give names.

Regarding General Motors (GM - commentary - Cramer's Take), Rodriguez said that he pointed out seven years ago that it had pension obligations that it could not meet. If the company goes into bankruptcy, it could come out OK if it renegotiates its obligations. If GM goes into bankruptcy, he feels, the only losers will be overpaid members of management or union heads.

Because FPA held so much in cash, his firm experienced $1.3 billion in shareholder and separate account redemptions. One institutional investor pulled out $300 million because it threw off asset allocation. That investor is probably not feeling so smart now if he or she reinvested back into the stock market.

The fund has been not open to new investors since 2004. Rodriguez said he is not opening it to new investors, as that would dilute the existing shareholder base. The fund has experienced high redemptions as clients felt the firm was holding too much cash. Because the fund held so much cash, it did not have to sell any securities to cash people out. Had they not cashed out, the fund would have had even a higher percentage of cash this year, and that would have further mitigated losses.

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At the time of publication, Osborne had no positions in the stocks mentioned.

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Holmes R. Osborne III is a private money manager, founder of investment newsletter StockRoyalty.com and frequent author of financial columns. He has a degree in finance from the Martin J. Whitman School of Management at Syracuse University and is a CFA charter holder. Osborne is a member of the Pacific Council on International Relations, Malibu Rotary, Business Forum International and was formerly on the board of the L.A. National Association of Business Economists. He spoke this year at the fifth annual Value Investor Conference.