To Our Shareholders:

           If you were to use marriage as a metaphor when writing about the financial markets over the past six months, you would have to say the relationship is going through a difficult time. While permanent damage has been limited, there have been a lot of difficult days. Volatility in the indices has been extraordinary, baffling and hard on the emotions. If your spouse was Bank of America (BAC) (a stock we do not own) you might be at wit’s end trying to understand his or her behavior, despite knowing a great deal about the company’s personal (financial) background. On a number of days over the past several months, the intra day spread between the high and low price has been in excess of 10%. Nor is this an isolated example, if you look at equity markets around the world as we do. There are similar examples of volatility in individual company stock prices that have far fewer questions surrounding their financial prospects than is the case with Bank of America. As an aside, if this leaves your appetite for volatility unmet, you could go to the credit default markets for BAC’s senior debt where the lack of liquidity creates a pogo stick-like phenomenon. Needless to say, the credit default swap market is not a market where we invest any of your or our hard-earned money. What we do know is this is an extremely illiquid market place with all the caveats that suggests, yet it is frequently cited in the financial press as a barometer for a company’s health. To us, it seems more like a place where the weekend Vegas crowd hangs out during the week.

Full Letter Below:

9-30-11InvstmntAdvLtrToShrhldrs