John Coumarianos: Your value consciousness now really has caused you to hold a significant amount of cash at least according to our last filings in both funds. I believe the large cap fund had about 20% cash and the small cap fund had north of 20, maybe 25, 26%. Talk about that, I'm sure that's valuation-driven and then…
Steve Scruggs: It is. And they've come down a little as some prices – there have been some attractive opportunities, so that's …
Coumarianos: And many prices came down, yeah?
Scruggs: That's right. But, as I said earlier, we don't stretch our valuation discipline just to be fully invested. We have models that we run that are discretionary cash flow based, and our required rate of return in those doesn't change with the sentiment of the market on a short-term basis.
So when risk goes out of the window and folks aren't focused on that, we remain focused on that. And in doing that, sometimes it causes our cash to build a little bit higher than we would like for it to be, but we're looking diligently to find ways to put that into good investments.
Coumarianos: Right. You'd rather preserve capital and put into security that's overpriced?
Scruggs: Exactly, that's exactly right.
Coumarianos: And then, of course, the other component of that conservatism, which we should talk about is gold, which in some ways is unusual for a value investor, although there is precedent for it, of course, at the First Eagle Funds, which are run for many years by Jean-Marie Eveillard, who always had a little bit of gold stake. Talk about your gold stake in both funds and why you have it?
Scruggs: Okay. And then I want to go on the record that I'm not a gold bug. But in the same vein as Jean-Marie we see it as a bit of insurance. And a lot of times people think as an insurance against inflation and it is, but it's also an insurance against deflation, periods of significant deflation where gold did well. And what we think is its insurance against monetary uncertainty.
And if there is one thing that I think that we have now is monetary uncertainty, and how that's going to get reconciled is going to be a difficult process as we see. But it is unusual, it is a stored value in these turbulent times is how we look at it.