Does the weak credit environment change the value investing proposition?
The first thing is that for value investors, you are not going to try to forecast the future. Most value investors would say if it’s anything like credit crunches we’ve seen in the past, it will be gone in a year. That’s what the betting has to be. It’s a short-term problem and not something you focus on. It has, however created opportunities in debt markets. Banks are dumping senior secured debt, selling it on the market for 50-60-70 cents on the dollar. The implied returns are north of 15 percent, and because you’re senior to everybody else in the event of bankruptcy, you’re likely to get paid. That’s where opportunities have been created by the credit crunch. If you listen to Buffet, it’s where he’s been investing up until now. Those opportunities are still there, but my guess is they’re going to go a way. Any advice for inve s tors who a re still nervous? If you look at any (mutual) fund and you look at the average annual return—a dollar invested every year through the life of the
