Nouriel Roubini is known for
his often-prescient economic forecasts, most notably in 2006 of the current
credit crisis and housing market collapse. We speak with him about
the collapse of Lehman Brothers, why
he believes the GSE bailout was
botched, and what policy makers can do to avoid the worst recession since the Great
Convertible bonds reduce volatility,
enhance yield, and improve risk-adjusted performance. Matt
Oldroyd of American Century Investments shows how this is accomplished,
using an example from one of their funds. We welcome American Century
as an advertiser.
In a conference call on Friday, S&P's credit analysts said "We don't expect Lehman to fail."
We show how their imperfect and incomplete assessment of Lehman's situation
led to this serious blunder.
Guest contributor Ron Surz says the way advisors select fund managers will
lead to a portfolio loaded with index
huggers. Surz suggests a very different approach to
conventional benchmark selection in order to avoid this undesirable bias.
Tom Howard of AthenaInvest continues the debate on luck versus skill in active management,
and responds to two letters to the Editor from last week's edition.
He addresses a claim that he chose a benchmark that was too easy to beat
and a claim that his analogy to astronomy was misplaced.
Lastly, we highlight some recent Advisor Market Commentaries.
We had a few mistakes in our
article two weeks ago, Woody Brock: Oil Prices in the Era
of Thugocracy. First, in referencing Brock's prior research, we
incorrectly stated his findings on the effects of foreign governments
selling US Treasury debt. Such actions would affect the value of the
dollar, not interest rates. We had these effects reversed.
Second, Brock estimates that the cost of developing new oil sources is $1
trillion per year over the
next 30 years. We also stated that currently there is no substitute
for oil. It would have been more precise to say there is no
economically viable substitute for oil. These changes have been made
to the on-line version of the article.
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