OID: Wow.
    Nygren: Yeah. But because of that asbestos cloud, it's likely to remain a difficult environment for these stocks. In fact, ironic that I've been so concerned about tobacco litigation and what it could do to those stocks and yet I could have been so comfortable with the asbestos issue.

OID: Apparently you and Marty Whitman.
    Nygren: But I think the contrast between the two is enormous. The asbestos companies were generally making their product according to government-issued specifications. And as soon as there was evidence that there were any health issues associated with it, production was stopped. The amount of sales or profits that these companies made from producing products that contained asbestos was tiny relative to their businesses today. Nevertheless, about 25% of the companies that were asbestos manufacturers have filed for bankruptcy already.
    Contrast that with tobacco companies. When was the Surgeon General's warning - about 35 years ago? Tobacco companies have continued to produce a product for a generation after the scientific evidence was compelling enough to label the package with a warning that the product was dangerous. Yet in lawsuit after lawsuit, they end up winning.
    To me, it's a striking contrast. If you're a construction worker who walked through an asbestos plant and have no signs of any health impairment whatsoever, you can file a claim against these companies and likely win a significant amount of money. Yet if your spouse was a heavy smoker and died from lung cancer and you take that to court, you'll lose.

OID: Of course, that's in part because there's been a warning label on the cigarette pack…
    Nygren: It doesn't strike me as right. But I can't let that get in the way of making a right choice on the stock.
    So I continue to like USG. I think it's a very undervalued situation. I don't think the difficulties that they're having with energy costs are sustainable long term. I think the building cycle will continue to go up and down. And when it gets into an up cycle in a clearer environment for asbestos, I think it will be accorded a much higher multiple. On the other hand, I have to admit that I'm reluctant to add to the position given the legal uncertainty.

OID: Too bad there's no way to invest in the lawyers.
    Nygren: It is. But I just wouldn't feel clean doing it. What goes on in these cases is ridiculous. They have a plaintiff's attorney go to some plant where a generation ago they produced asbestos. They find some guy who's got lung damage - basically because he smokes. The risk increases geometrically if someone was both exposed to asbestos and smoked.
    So they'll go through the plant and have people walk through x-ray machines on their way out. And then they find the one where there's some sign of lung damage. Generally, it's someone who's smoked all of his life. Then they go to everybody in the plant and get an agreement that they'll all file suits through their law firm.
    And the settlement - not USG's share, but the total - winds up being something like $50,000 per person despite the fact that the majority of plaintiffs by far have no indication of any health problems at all.