June 2010 Issue: Key Points

This month we begin a two part series on Understanding and Predicting Uncertainty Shocks.  We start with an overview of how different asset classes respond when markets shift in to the high uncertainty regime. We then develop a better understanding of the nature and impact of uncertainty by reviewing the classic writings of Knight and Keynes, as well as newer research by Andrew Lo. Next month, we will explore the root causes of uncertainty shocks, the extent to which they can be predicted in advance, and steps investors can take to gain relative advantage by responding more quickly and effectively when they occur.

This month's Economic Update reviews the findings of the biannual "Joint Operating Environment" report published by the Joint Forces Command of the U.S. Department of Defense. In our experience, the JOE is always a very insightful look at key trends and uncertainties and the way they could affect the global environment over the next decade.

This month's product and strategy notes include a look at how investment mangers' can improve their agility, the hidden nuggets in the U.S. financial reform legislation, and other interesting research findings.

| This Month's Letters to the Editor: How can a UK Investor Access Volatility as an Asset Class? and II Uses Crystal Ball for some of its Monte Carlo Simulation and Calculations. Do you have a preference for CB over @Risk? | Table: Fundamental Asset Class Valuation and Recent Return Momentum | June 2010 Issue: Key Points | Product and Strategy Notes: Developing an Agile Mindset; Good News in the U.S. Financial Regulation Bill; Impact of High Frequency Trading; Common Sense and Value Investing; Two Excellent Papers on Risk Management | Investor Herding Risk Analysis | June 2010 Economic Update: The Joint Operating Environment | Global Asset Class Valuation Updates Detail through May 31, 2010 | Overview of Our Valuation Methodology | Uncorrelated Alpha Strategies Detail | Global Asset Class Returns | Table: Market Implied Regime Expectations and Three Year Return Forecast | Feature Article: Understanding and Predicting Uncertainty Shocks, Part 1 |