We've managed to benefit both ways in Japan.
   Cundill: You may recall that we had been short the Nikkei 225 in Japan from 1987 -- which served us well for a very brief period during the market crash. However, thereafter, every 90 days, I'd come out into the ring and the Japanese market would knock us down -- or me down anyway -- for an eight count.
   But by a combination of patience and obstinacy, we held on. And during the first quarter of 1990, we made up in 90 days all of the accumulated losses we had plus some.
   We were essentially short the Japanese market -- because the valuations were extreme -- until early 1995. And at that time, the Japanese market was around ¥15,000 and the yen was 84 to the U.S. dollar. Fuji Photo, which is a large and important Japanese company, as you all know, was trading below net net working capital, below book value and at five times cash flow. So we moved our assets -- basically covered the short position -- and went into Japan. We also hedged the yen against the Canadian dollar. And that has been a very satisfactory investment route to follow.

We continue to see substantial risk in the U.S. today....
   Cundill: One area that has not worked yet -- and when you get into overvalued situations, you have to be just as patient as you do on the undervalued side -- is the U.S. where even in 1995, we felt that the valuations were getting very high. There's an old investment saying -- which I think is a good one: "Valuation defines level of risk. It doesn't help with timing."
   And we were penalized last year... [for that reason]. But we continue to believe that there is substantial risk in the U.S. and are proceeding accordingly....

When we saw fire bombs and strikes, we couldn't resist....
   Cundill: Also, near the end of the year, we began to see TV accounts of people in France throwing fire bombs and striking and so forth. And that's usually a good time -- although, of course, it's not always -- to buy securities. As John Templeton points out, you really have to go to the points of maximum pessimism. And so we did.
   And, thus, our largest holding is Paribas.
   Tim McElvaine: Paribas' NAV is easily over 400 francs. It probably exceeds 500 francs. Management feels that they can earn a 10% return on that NAV -- which suggests future earnings of about 50 francs a share. Its stock is down significantly from its high. When we started to acquire it, it was 250 francs. And that's the average cost in the Cundill Value Fund.
   It's our largest position in the Cundill Value Fund -- I'm using April 30th figures -- at about 6% of the assets. So at 250 francs, we were paying 60% of NAV and 5 times potential earnings. And no brokerage reports were saying, "Buy Paribas." And that made us feel kind of good.
   We still feel very confident in the position. And there were developments today that make it look even better.¹

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