nt Conta October 11, 2011 - Vol 5 Issue 41            Dear Reader,            If you are experiencing problems opening or navigating through our newsletters, we can send you a text-only version.  Please send an email to feedback@advisorperspectives.com requesting the "text-only" version.   If you have received this newsletter in error, or you do not wish to receive future newsletters, please reply to this email with the word “unsubscribe” in the subject line.                A Critical Look at Obama's Economic Team        By Laurence B. Siegel   Confidence Men is an exposé, by the reporter Ron Suskind, of what he claims is incompetence, infighting, and insubordination at the highest levels of economic leadership in the Obama administration during the global financial crisis.  Those accusations are largely misdirected. After all, there was no playbook for the administration's economic thinkers to work from - the rapidly unfolding crisis forced them to improvise.          The European Debt Crisis: Our Perspective        Sponsored Content by American Century Investments   One of the most significant factors impacting the investment landscape over the past 18 months has been the sovereign debt crisis in Europe. Fiscal stress in a number of eurozone countries has weighed on the global economy, put pressure on the banking sector, and roiled financial markets worldwide. The following is a look at how the crisis has unfolded, what is likely to happen next, and what that means from an investment perspective.          Thomas Friedman's View of the Future of the US        By Michael Edesess   Andy Rooney once said, 'It's just amazing how long this country has been going to hell without ever having got there.'  Our country's roughly 30-year march to perdition is the subject of Thomas Friedman's and Michael Mandelbaum's new book, That Used to Be Us. Rooney may still be right, though - the authors identify, albeit not all that convincingly, a path to salvation.         Improving on Morningstar Style Boxes        By Stephen Dodson   No one would ever confuse a short man with dark hair and a tall one with light hair.  But this is precisely what investors do when they categorize stocks as either growth or value.  Those style definitions, championed by Morningstar and others, are flawed, and I have a way to fix them.         Managed Futures are not a New Asset Class        By Michael Kitces   The focus on finding investments that have a low correlation to equities has grown to such an obsession that we're willing to name anything that has a low correlation as 'a new asset class.' While some alternatives truly have their own investment characteristics unique from stocks and bonds, other alternatives - like managed futures - simply represent an active manager buying and selling existing asset classes.         A Q3 Client Letter Drawing on Buffett's Optimism        By Dan Richards   Since 2008, each quarter I have posted a template for a letter to clients; these are consistently among my most popular articles.  This quarter's letter provides clients with perspective on the recent market turmoil.         The Global 'Old Normal'        By Michael Nairne   Amidst a torrent of dismal economic news and plunging stock prices, investment horizons have become increasingly short-sighted.  The new normal of  faltering growth and painful deleveraging appears to be only too true. However, investors capable of taking a long-term, global view will find forces at work that will likely drive resurgent world growth akin to that which occurred in the decades right after World War II.         Market See-Saw Brings Us Back to April 2010 Double-Digit Third Quarter Losses Erase Previous Gains         By Ron Surz   Stock markets around the world plummeted in the third quarter, with the US market losing 16% and foreign markets faring somewhat worse with 17% losses.  This quarter's loss reverses the gains of the first quarter and brings year-to-date returns below water, with domestic markets losing 11% and foreign markets losing 13%.         Letters to the Editor   A reader responds to Richard Vodra's article, The Energy Expert You Shouldn't Trust, which appeared last week. Another reader responds to Geoff Considine's article, Reexamining Bill Gross' Decision to Sell Treasury Bonds, which appeared on September 27.         Highlights from Market Commentaries   Below are the three most widely read commentaries during the last week:   Why Good Companies May Get Even Cheaper for Awhile    Should investors buy good companies trading at historically attractive prices? According to conventional wisdom, this simple question has an equally simple answer - "of course" - that is supported by the vast majority of historical cases. But before acting on conventional wisdom, investors should ask themselves why so many unthinkables have turned into reality over the last few months. By doing so, they would be forced to consider important qualifiers arising from historic structural changes buffeting the global economy and, therefore, financial markets. Tags: Equities US Sovereign Debt   Why Good Companies May Get Even Cheaper for Awhile by Mohamed A. El-Erian of PIMCO   The Markets for Contagion   Markets are in the unusual and very uncomfortable position of being wholly dependent on policymakers and politicians. The investment relevance of company analysis, no matter how good, pales in comparison to the importance of getting the policy calls correct. Faced with this, investors should also remain cautious. Yes there are already opportunities but they will be even more attractive down the road given that the world is now subject to both a synchronized slowdown and de-leveraging. Tags: Equities US Sovereign Debt Investment Themes   The Markets for Contagion by Mohamed A. El-Erian of PIMCO   Recession, Restructuring, and the Ring Fence   We are headed toward a recession because our policy makers never addressed the underlying problem in the first place, which was, and remains, the need for debt restructuring. This is an issue that I suspect will re-emerge to the forefront of public debate in the next year. Hopefully, the response of our policymakers will be at different. In Europe the only real option is to allow peripheral defaults; to allow distressed and insolvent countries to exit the euro; and then for those countries to redenominate their own national currencies and peg them to the euro at a gradually depreciated level. Tags: Gold US Sovereign Debt   Recession, Restructuring, and the Ring Fence by John P. Hussman of Hussman Funds

 

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