This Month's Issue: Key Points

With this month's double issue, we are shifting our publishing schedule to the beginning of the month. Of course, long-time subscribers will remember that this is how we started in 1997. Sometime later, in response to reader requests, we changed our publishing schedule so that our cover month matched the year-to-date model portfolio returns we reported. Now, with many more new readers asking what possessed us to take a different approach than most other financial publications, we have decided to switch back to our original course. Life is like that, sometimes.

There are four feature articles in this double issue. The first summarizes a very important new report on the economics of climate change that was published by the U.K. Treasury (aka, the Stern Review). We believe it will mark a turning point in the debate, and end our coverage with a review of emissions credits as a possible new asset class. Our second feature takes a closer - and very disturbing - look at other systemic risk issues that have been growing more dangerous beneath the deceptively calm surface of the world's financial markets. We summarize key points from the U.S. Comptroller General's "Fiscal Wake Up Tour", and a recent IMF working paper on pension, longevity, health care and housing risks.

Our third feature follows logically from the first two, and takes a closer look at market microstructure, and how it contributes to volatility, liquidity and correlation risk. We conclude that the stage has been set for a very severe problem at some point in the future. Finally, our fourth feature article reviews yet another dismal report about individual investor's self-defeating (and very costly) behavior, and as well as recent research into investor decision making that highlights some of its possible causes and the implications for how financial services businesses should change their practices.

Our product and strategy notes cover the Bank for International Settlements' cheerleading for greater use of the Euro as a reserve currency; the collapse of the Canadian Income Trusts sector; infrastructure, the latest new new thing in investing (we've seen this movie before); new ways for U.S. investors to gain exposure to international commercial property, and two good reads that should be on your Christmas list.

| This Month's Letters to the Editor: "What is a Market Index? - GCMI?" | Climate Change and Asset Allocation | Asset Class Valuation Update | Global Asset Class Returns | Market Microstructure: A Key to Volatility, Liquidity and Correlation Risk | Product and Strategy Notes: BIS Endorses Euro as Reserve Currency, Canadian Income Trusts, "Infrastructure", and US Investors - International Commercial Property Exposure Option | 2006-2007 Benchmark Portfolios - All Currencies | Recent Research on Investor Decision Making | Other Sources of Deep Systemic Risk | This Month's Issue: Key Points |