September 2009 Issue: Key Points

Our economic update this month concludes that the odds of our conflict scenario developing have increased, and that returns on asset classes that perform well under the high uncertainty regime are likely to show the highest rolling returns in the months ahead. These include short term government bonds (e.g., SHY for U.S. Treasuries, and ISHG for a mix of short term government bonds from other nations), gold, volatility, Swiss Francs (FXF), and Swiss and European commercial property. In this month's letters to the editor, we respond to a recent Barron's article that concluded that timber was substantially overvalued. We disagree, and conclude that timber is still likely undervalued. This month's feature article summarizes twenty years of fascinating, if rare research across multiple disciplines on a critical subject: failure. We then offer conclusions on the implications of this research for investment managers. The bottom line: self-discipline, humility and relentless curiosity are critical to avoiding failure. Our product and strategy notes cover a wide range of issues, including commentary on the performance of the Harvard and Yale Endowment Funds, the coming train wreck in U.S. municipal securities, new research papers on asset allocation, illiquidity premia, phase changes in financial systems, volatility and commodities -- including one that concludes that gold is, indeed, different.

Last but not least, we continue to implement changes intended to convey more information in a format that responds to the way subscribers with different needs use our publications (e.g., our PDFs now allow annotation, and we have expanded our momentum data). Expect to see more of these changes in future issues, and please don't hesitate to offer further suggestions about how we could further improve our offerings to better meet your needs.

| Feature Article: What Causes Failure? | September 2009 Economic Update | Product and Strategy Notes: Interesting Commodity Research; The Coming U.S. Muni Market Train Wreck; New Volatility Research; Harvard and Yale Endowment Results; and More Interesting Research | This Month's Letters to the Editor: Index's Position on Timber; Right Question to Ask a Fund Manager; Why not 7 Year Forecasts?'; Credit Beyond HYG | September 2009 Issue: Key Points | Global Asset Class Valuation Updates Detail | Global Asset Class Returns | Table: One Year Asset Class Valuation Conclusions and Recent Momentum | Table: Market Implied Regime Expectations | Uncorrelated Alpha Strategies Detail |