Tom Atteberry, co-manager of First Pacific Advisors, took heat for his concern about the credit market years ago. He spoke with us about this position now—and that of our economy.

You and co-manager Bob Rodriguez were pilloried for years for holding cash. So now you're buying?

People can't sell bad-quality assets right now—there aren't good bids for them. So they have to sell the good assets. In a poor market with few buyers, we can dictate price. Great-quality assets are selling at prices they shouldn't sell at. Case in point: an agency-backed mortgage fund. About a three-year average maturity, and the loans are 30-year fixed mortgages, issued in 2001. I'd load it at a 5% yield. That's more than 300 basis points higher than the corresponding Treasuries. We're still in "careful mode," but we're seeing returns.

What else are you looking for?

We continue to buy agency debentures. We didn't buy Fannie Mae and Freddie Mac after 2005, because they couldn't produce an audited financial statement. So why should I lend to them? But now we're getting financial statements. The government will back them up now, and I'll get a wider spread today than I was getting before. We're buying things from the home loan bank and others too.

The last area we started on was TIP bonds. Inflation is going to be higher than people expect. It's won't be 6%, but say it goes to 3% for the next three or four years, I can buy a four-year TIP bond with 3% inflation, and I get a deal right around 1.67% to 2%. I'm thinking 4.67% in a Treasury over the next three years-not bad. And I've insulated myself against inflation, which we think is a risk going forward.

It kind of has to be with all this money poured into the economy, right?

Every central bank has made a coordinated effort of expansionary monetary policies. Pumping money into the system to keep it alive. And we're talking numbers with B's [billions] and T's [trillions]. So what is that going to cause one, two, three years from now? It will probably mean inflation is going to be at 3%, 4% or 5%. Buy something today while people are scared.

What do you think of the rescue bill?

It's not the government's purpose or job to go in and bail out private companies and buy investments they've made. That's not what government is designed to do. We've known for a while that credit would be a problem. Paulson's a smart guy, Bernanke too. Why didn't they see this?

They give us one idea. Where is the private market alternative? The private capital alternative? We were told, vote on this today to give me $700 billion to go play with. Paulson is a bureaucratic official; he's not elected. Where does he have the authority to play with the taxpayers' money like this? Public money isn't the way to go. There's private capital out there that will come into the market. It exists. More than $20 billion was given to Morgan Stanley, JPMorgan and Goldman Sachs just weeks ago. There's money around. It has violence to it, but it's there. Let's figure out how to get it into the system. That's a better way to run capitalism than finding out how the government can do it for you.