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Dear Reader,
May 22, 2012 - Vol 6 No 21
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 David Rosenberg - I am not a Permabear
By Robert Huebscher
While most sell-side analysts are correctly classified as permabulls, Gluskin Sheff's David Rosenberg has been branded as the opposite - a permabear. He rejects that label. He recently said he's indeed bullish - on bonds and income - and has been so for quite a while.
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Niall Ferguson - The West's Six Killer Apps
By Robert Huebscher
For five centuries, the West dominated Eastern economies. But, beginning with the fall of the Berlin Wall in 1989, the East has now caught up, according to Niall Ferguson. It did so by downloading six "killer apps."
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Life-cycle Finance and the Dimensional Managed DC® Pension
By Wade Pfau
Pension plans are like cars, according to Nobel laureate Robert Merton. People want a car they can drive and a pension that will maintain their standard of living in retirement; they do not care about what goes on under the hood. Advisors, however, must care. So when a new pension-like option hits the market, as DFA's recently did, it's important to go beyond simply kicking the tires and carefully examine how it works as a retirement-saving vehicle.
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Career Opportunities
As a service to our clients, we are posting career opportunities for firms that seek to add financial advisors and planners to their staff.
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A 30-minute Investment that Landed Three New Clients
By Dan Richards
On a recent flight to Chicago, I sat beside an advisor. We chatted about industry developments and the prospecting initiatives that advisors have been trying. Then he shared a story of a remarkable return from 30 minutes of his time.
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What History Tells Us about a Potential Greek Exit
By David Schawel
Greece's future is less certain given the recent elections. Is an exit now possible or probable? What would an exit from the euro look like, and how would it be accomplished? Some historical examples give us a clue to the repercussions.
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Letter to the Editor
A reader responds to Richard Skagg's article, Dividends: A Timeless Component of Equity Return, which appeared on May 15.
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Our Most Read Article from Last Week:
An Attack on Paul Krugman
By Michael Edesess
A foundational principle of modern economics is that the creation of credit leads to economic growth. That precept underlies need for quantitative easing, and it is central to the question of what role monetary policy can and should play in stimulating a faster recovery from the Great Recession. It is also the subject of a debate between one of the world's most prominent economic scholars, Paul Krugman, and a feisty Australian economist, Steve Keen.
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Highlights from Market Commentaries
Here are the top three commentaries from last week.
 The Flaws of Finance
Bad Models, or, Why We Need a Hippocratic Oath in Finance. The NRA is well-known for its slogan Guns dont kill people; people kill people. I have often heard fans of financial modelling use a similar line of defence. However, one of my favourite comedians has a rebuttal that I find most compelling. He points out that Guns dont kill people; people kill people, but so do monkeys if you give them guns. This is akin to my view of financial models. Give a monkey a value at risk (VaR) model or the capital asset pricing model (CAPM) and youve got a potential financial disaster on your hands.
The Flaws of Finance by James Montier of GMO
 Adaptive Asset Allocation: A True Revolution in Portfolio Management
Modern Portfolio Theory has been derided by practitioners, academics, and the media over the past ten years because the dominant application of the theory, Strategic Asset Allocation, has delivered poor performance and high volatility since the millennial technology crash. Strategic Asset Allocation probably deserves the negative press it receives, but the mathematical identity described by Markowitz in his 1967 paper is axiomatic in the same way Pythagoras' equations describe the properties of right triangles, or Schrodinger's equations describe the positional probabilities of electrons.
Adaptive Asset Allocation: A True Revolution in Portfolio Management by Adam Butler and Mike Philbrick of Butler|Philbrick|Gordillo & Associates
Dancing at the Edge of a Cliff
Our recession concerns remain intact, as do our separate concerns about extreme stock market risk. I've emphasized that our estimate of prospective market return/risk in stocks has slipped into the most negative 0.5% of historical data. Last week that estimate actually deteriorated, but I am reluctant to make comments on such a small sample, as the only more negative estimate in post-Depression history was on September 16, 2000. Even in the conditions that match the worst 2% of our return/risk estimates, the market has lost an average of 20-25% just in the following 6-month period.
Tags: Bearish US Investment Themes
Dancing at the Edge of a Cliff by John P. Hussman of Hussman Funds
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