Management's Biggest Mistakes in a Downturn

Jason Stipp: One last question for you. The last year and a half in the market has been a trial by fire for all sorts of companies. What do you see as some of the biggest mistakes that management has been making in the last downturn, or really in any downturn? What are the critical errors that they make in the tough times that could lead to a company's demise?

David Nierenberg: In two words, debt kills.

Debt kills. Sometimes debt kills absolutely.

People need to be mindful of the importance of having liquidity in their companies and they need to have liquidity in their investment portfolios. So, the lethal power of debt is something that is very important.

Another thing that's very important whether you're running a company or running an investment portfolio like I do is you need to know enough about your investors so that you can build some symmetry between their timing for exit and your timing for exit because when there's a discontinuity as there was between September 15 and March 15 and people have very, very different needs, then otherwise healthy businesses and otherwise healthy funds can get in trouble as people rush for the exits.

Stipp: David Nierenberg, thanks so much for joining me. It was a pleasure talking to you.

Nierenberg: Thank you, Jason.