John Coumarianos: Investors have been on, really, a wild ride for 2008, with a dramatic decline that year and then a great rebound in 2009. How do your portfolios stand now in relation to the price of the stocks in your portfolios relative to their underlying value? Is that spread still fairly significant?
David Herro: Yeah, there's still a very healthy spread. In fact, we actually measure this on, literally, a daily basis. We can see, basically, the cents on the dollar, what the portfolios are trading at.
Just to give you a little historical background, in a typical downturn, they would maybe go to the high 40 cents to the low 50s. This downturn, they went to about 35, 36 cents, both of them. So you saw it really go down a standard deviation or two. Where do they sit today? In the mid-50s. So just a little bit above of where we were in previous downturns. Usually, at the top of a cycle, you see it around 70--69, 70, 71.
So we're still finding good value. It wasn't as easy as it was last March. We were enthused. Maybe we were the only ones who were. Price is important. And we did not believe the global economy was coming off the tracks. We knew it was a strong recession. We knew it was a severe downturn. But we do have the emerging markets. That is something very different than what existed in past downturns. And that helped, and I think it will continue to help, in fact.
But I think stocks are still cheap, by the way, especially compared to other asset classes.
Coumarianos: We've seen a tremendous amount of money flow into bond funds, and that's definitely...
Herro: Yes, bonds. And even the money that's on the sidelines today, still, in CDs and Treasury bills. I mean, you're getting paid nothing to lend the U.S. government money short-term, and I don't know what kind of credit the U.S. government has.
Coumarianos: Well, David, thanks so much for joining us today, and congratulations again on the award. We really appreciate it.
Herro: Thank you very much. Thank you.