Bring the milk and water to a boil in a heavy-bottomed saucepan over medium heat. Stir in the salt. Slowly add the grits, stirring constantly. When the grits begin to thicken, turn the heat down to low and simmer for 30 to 40 minutes, stirring occasionally to prevent the grits from scorching. Add the butter and cream, stirring to incorporate thoroughly, and simmer for 5 minutes. Stir in the pepper. Serve the grits immediately or keep them warm, covered, in a double boiler over simmering water.
Note: If the grits are too thick, stir in more cream or milk. Remember that grits solidify as they cool; they will get thicker once on the plates.