I am a prejudiced observer.  We own a lot of Toyota Common.  Both GM and Chrysler seem to be toast.  They have to be able to sell cars and there is no demonstration that they will be able to do that.  Fixing their financial problems doesn’t solve this problem.  Success for GM and Chrysler doesn’t look to have a strong probability from where I sit.

We haven’t done anything because, insofar as we have had investable funds, those opportunities have not been attractive against the background of the other opportunities we were seeing. Performing loans that are likely to stay performing loans with 25% yields are better opportunities.  We haven’t paid much attention to equities because we have been using available funds to buy performing loans. 

Going forward we will be very interested in bank common stocks, assuming we have investable funds.

We had huge redemptions, and went from 180 to 129 million shares outstanding.  This has eased up lately.  In 2008, we were more in the cash management business than in the investment management business. 

There is no question that investors refuse to focus on the long term.  If I ever had my life to live over again, I would not manage investments in a structure that allows daily redemptions.  The public sells when they should be buying, and buys when they should be selling.

What we do in equities is a direct outgrowth of my background in distressed credit and my desire to be in the most senior issue to participate in a reorganization.  But if a company has an exceptionally strong financial position, then we want to own the common stock.  We only buy the common stock of companies with exceptionally strong financial positions and when we can buy at a huge discount to net asset value, with growth rates projected to be 10% or more per annum compounded. 

Indeed, companies in Hong Kong are all blue-chip institutions, audited by the Big Four, with statements published in English.  All our investments are active in real estate and private equity.  For our purposes, international accounting standards are a lot better than U.S. GAAP, especially when it comes to income-producing real estate.  Under international standards, income-producing properties are carried at appraised values, which are a lot more helpful than GAAP, where they are carried at historical cost less depreciation, less any impairments. 

We buy common stock at a discount to readily ascertainable net asset value, and those net asset values are a lot more ascertainable in Hong Kong than in the US.