Details of the overall portfolio are as follows:

The portfolio is currently invested in the following fashion:

Very little has changed in the past month to alter any of my opinions stated in the last report.

March was, as I stated, an excellent time to be a large scale buyer of equities and, in fact, we had a large stock position accumulated in the early spring. This allocation was the largest commitment we had made to stocks in many years and we expected to hold the stocks for some considerable time. As you know the markets have been very positive in the last six months and we are now in the odd position of holding the smallest stock allocation in our history. What was extraordinarily cheap became, in extremely rapid fashion, fully valued based on our demanding value criteria.

As you know, we have very large cash positions and these aren’t making a statement about the future but, rather, merely reflect the dearth of attractive opportunities. We invest when the odds of a successful outcome are significantly in our favor and we wait, patiently, through those times when too much risk is in the marketplace.

As I mentioned above the only new area of investment has been in the area I call arbitrage. I have long been interested in finding the right vehicles, and the right time, to invest some of the portfolio in this sector. They are the scrap dealers and pawnbrokers of the marketplace and they have interesting prospects as we sort through the economic mess. The emphasis is on liquidations, bankruptcies, reorganizations and the opportunistic acquisition of assets. I believe that the returns through time should be, in the aggregate, quite satisfactory and, importantly, not overly dependent on the equity markets.

It is interesting, and a measure of public disgust, that the public have not been net buyers of common stock mutual funds this year despite the significant rise in the indices. As is often true in times of low interest rates the focus had been on yield (dividends and particularly interest) and this has meant a FLOOD of money into bond funds of all types. THIS WILL NOT END WELL. In several years investors will look back on this and say “What were we thinking?” We have nothing in this segment and although we are certainly early, we are not wrong.

The flood of Government money has temporarily propped up some of the hardest hit sectors in the economy, but I am not at all convinced this will be enough although there is a small chance it could succeed. The odds suggest a messy and troubled future but, as always, we are prepared for most eventualities.

We, as a country, will eventually muddle through with, I fervently hope, meaningful reform in all of the vital areas of the economy and Government that have failed us over the last 15 years.

I cannot even begin to express my dissatisfaction (which is growing) and disgust for the economic and political leadership in this country over the last 15 years. It is hard to know where to start, but I have to emphasize the comically incompetent Greenspan, every regulator in the entire financial system and a venal and tragically inept congress. The role of Goldman Sachs et al is well known, but at least they knew what they were doing when they aided and abetted in the collapse.

But ranting is just that and it lets off steam, but has no effect on how we manage the portfolio. We don’t have much belief we can change the world and we do NOT make statements with the portfolio. We merely try to see the world as it is and act accordingly.

To summarize in managing your money:

• We will remain calm.
• Expect portfolio fluctuations. They are a normal part of the process. I usually respond to declines by making additional purchases.
• Our basic value methodology is unchanged.
• Our own money is invested, in its entirety, in exactly the same fashion as the portfolio.

Please don’t hesitate to call if you have questions.