March Update

For the month of March the Model Portfolio’s return was -0.4% versus S&P 500’s total return of 1.1%. For the six months ending March 31st (our fiscal year ends in September), the Model Portfolio's return is 12.0% versus S&P 500’s total return of 7.2%.

March was a quiet month for the portfolio. One highlight was Chaparral's (Nasdaq: CHAP) strong earnings and guidance. The stock has marched on to an all time high. Speaking of steel, our decision to sell Posco (NYSE: PKX) may have been premature as Warren Buffett disclosed a 4% ownership in the South Korean steel maker in his annual report.

Meanwhile, subprime mortgage woes unfolded fast and furious and took many by surprise. Sure enough, homebuilders have been hit hard. Nothing is going right for the housing sector these days. All this happened after we made small additions to our positions in Centex (NYSE: CTX) and Pulte Homes (NYSE: PHM). At current levels, both stocks are trading barely above book value. To be sure more land write-offs could be in the works. And the housing slump may last well into 2008. Needless to say this is the time to be buying when all others seem to be fearful of anything related to housing. Further declines from current levels will provide us with the opportunity to continue to build our position in these companies. The Model Portfolio is a cash-constrained portfolio, so inevitably we will be forced to raise cash by selling or reducing other positions to add to our homebuilder positions. If any of you are interested in contributing cash to the Model Portfolio, we would be more than willing to oblige.