Q.    Have you bought any energy stocks?
 
      A.      Yes, it made good sense to us last year. We're gratified that oil prices have risen. It's had a very positive impact on our portfolios. Frankly, until recently, it's been a very difficult stretch for us. We felt like we were standing by the side of the street, telling people not to play in the road because it's dangerous and we kept getting hit by cars driving on the sidewalk. Value stocks just kept getting cheaper and cheaper than we thought they would, and stocks that seemed overpriced kept going up.

    Q.        Now what?

    A.        Every value manager faces a dilemma. We've all been told since we were children that at every market top, people will tell you that the world has changed, that there are new ways to value companies.

                One negative for the entire market is the growing appeal of bonds relative to stocks. Wien's (Byron Wien, Morgan Stanley) model, which measures the relative merits of stocks and bonds, suggests that the S&P 500 now is nearly 30% overvalued, marking the most extreme overvaluations since just before the 1987 market crash. Before last summer's market drop, the S&P was about 23 overvalued.