THE RETURN OF STOCK POOLS

Congressman Barney Frank from Massachusetts has been in the news pointing out that rumor mongering short sellers were very actively spreading negative and possibly false rumors about Bear Stearns before it collapsed.

During the Great Depression of the 1930's, famous speculators with a bearish bent created stock pools; pooling their money together to attack and short sell stocks, often armed with misinformation that they spread about the prospects for the companies they were shorting. The operators of the pools often created big profits for themselves and huge losses for the stock holders of the companies that they had shorted.

Many observers point out that the pools certainly helped expand the stock market decline of the 1930's and may have substantially prolonged the depression. Joe Kennedy was later appointed the first head of the Securities and Exchange Commission because of his firsthand knowledge of the pools; and he worked to disallow many kinds of their destructive behavior.

Today, we believe short selling pools have reappeared. Any CEO of a public company that has been the target of them can tell you that there is a lot of inaccurate and very negatively spun disinformation and misinformation connected with today's short selling tactics. The Internet has allowed for the spread of information both true and misstated. The Internet is hard to regulate and this has given power to those who spread such disinformation and misinformation.

Short selling itself is as widespread as ever, and in itself can be a great market equalizer. It can serve the good
purpose of keeping fraudulent stock promoters in check. Our only complaint is about misinformation, disinformation and lies being spread about companies and industries. This may have debilitating effects on their ability to access the capital markets, and on occasion has resulted in forcing good companies unfairly out of business or into selling
out at a low price.

RUSSIA...THEFT OF COMPANIES BY BUREAUCRATS...WHAT IS HAPPENING IN RUSSIA IS NOT GOOD FOR INVESTORS.

WE ARE CONCERNED THAT INVESTORS MAY HAVE THEIR ASSETS STOLEN BY WELL ORGANIZED GOVERNMENT BUREAUCRATS. WE PLAN TO SELL OUR SMALL REMAINING POSITIONS IN RUSSIA ON RALLIES.

Please note the following excerpt from a letter written on April 3, 2008 to shareholders of the Hermitage Fund, a large mutual fund investing in Russian stocks.

It now appears that the Moscow Interior Ministry officials whom we named in our criminal complaints are retaliating by coming up with new spurious claims and inaccurate press leaks. We are confident that in any proper hearing all of these accusations will be thrown out.

While this story of official corruption may sound completely unbelievable, it is unfortunately not unusual in modern Russia. The theft of companies via these tactics (office raids, forgery, false contracts, fraudulent court judgments, attachment orders) has become so common that those who perpetrate these frauds are now known in the Russian vernacular as simply "raiders." Every day small businessmen, landowners and even large Russian companies are the targets of raiders, and the problem has become so endemic that President Medvedev specifically referred to it in a speech in February this year, calling for "real instruments to prevent raider activity."

After reading this, you can see why we have abandoned our bullish outlook on Russian investments.

Thanks for listening. Please contact us with your questions or comments.