Welcome to The Index Investor

Regular Monthly Updates(2010):
Global Asset Class Returns
Uncorrelated Alpha Strategies Detail
Table: Market Implied Regime Expectations and Three Year Return Forecast
Table: Fundamental Asset Class Valuation and Recent Return Momentum
Investor Herdng Risk Analysis
Global Asset Class Valuation Updates - Detail
Monthly Updates to Model Portfolios

05.10 May 2010 Letter's to the Editor: New Advocacy of Dynamic Asset Allocation, How to Limit Volatility While Still Achieving the Goal of Hedging Inflation Risk?, Many Asset Classes Overvalued Today, Would it be Prudent to Reduce One's Exposure to Them?; Feature Article: The Critical Challenges Posed by Leverage and Legitimacy; Product and Strategy Notes: "The $100 Billion Question" by Andrew Haldane; Confirmation of Diversification in Portfolios; Growing Concerns of Credit Quality; Inflation Risk and the Inflation Risk Premium; Windham Capital's Mark Kritzman - Principla Components as a Measure of Systemic Risk, Timber, and Algorithmic Trading Programs - the Crash

04.10 April 2010 Letter's to the Editor: How Can a Retail Investor Access Volatility? Clarification of "Return Momentum"; Feature Article: What Lies Ahead for China; Product and Strategy Notes: State Street's IBND, Claymore's WFVK, Investing in Bond Indexes and New Paper - Sharing Longevity Risk - A Must Read

03.10 March 2010 Letters to the Editor: Changes to Attitutes About Investing - Mad for Alpha, Does Index/Retired Have a "Black Box" Toward Your Asset Allocation Strategy?; March 2010 Economic Update: Do We Still "Have the Bubble?"; Product and Strategy Notes: Investment Stategies: MSCI Barra- What Drives Long Term Equity Returns, Implication of Algorithmic Trading to Active Management Strategies, and New Products - Longevity Risk Indexes, Disturbing Trends in the ETF Market; and Advisers' Corner: What Makes Clients Tick?

02.10 February 2010 Letters to the Editor: Shift from Long-Only ETF to LSC for Commodities; Your 2007 Call Was Correct - How Do You Guide Readers Back Into the Market?, Why Do You Not Place More Emphasis on Risk Tolerance?; February 2010 Economic Update; Feature Article: Norway Debates Factor Based Allocation and Active vs. Passive Investing; and Product and Strategy Notes: New Research Papers; Benchmark Bias; Investment Horizon, Value Weighted Approach; Active Management Biase, Residential Property, and Commodities for Diversity

01.10 January 2010 Investor Herding RiskAnalysis; Letters to the Editor: Investing for Different Time Horizons; Uncorrelated Alpha Strategies - Beneficial?; Why Didn't the Three-Year Return Forecast Change?, Equally Weighted vs Model Portfolios, Why Don't You Include Emerging Bonds as an Asset Class?; January 2010 Economic Update; Global Asset Class Valuation Updates Detail through December 31 2009; Feature Article: What is the Proper Role of Gold?; Product and Strategy Notes: New Research Papers and Analysts' Recommendations; and Financial Advisers' Corner

12.09 December 2009 Overview of Our Methodology; Market Implied Regime Expectations anad Three Year Return Forecast; Fundamental Asset Class Valuation and Recent Return Momentum; Letters to the Editor: Followup on Luck, How Does One Get Lucky: Deloitte's Study - Skill Versus Luck; Vanguard's New ETFs; December Economic Update; Feature Article: End of 2009 Review: Feature Article: Learning From the Past, Anticipating the Future, and Adapting Quickly in the Present; Product and Strategy Notes: Muni Market Update, Commodity Futures vs. Direct Oil and Gas Investments, New Research on Alpha/Beta Allocation, and Research Highlights; and A Year-End Overview of Major Asset Class Valuations Drivers and Best Regimes

11.09 November 2009 November 2009 Market Implied Regime Expectations and Three Year Forecast; One Year Asset Class Valuation Conclusions and Recent Momentum; Market Phase Change Risk Analysis; II's Perspective on Risk-based Factor Modeling and II's Definition of Alpha and Beta; November 2009 Economic Update; Feature Article: Changes in Investor Behavior; H1N1 Update - Nov 2009; Corporate Management Success: Luck Versus Skill; New Products; and Who Knew?

10.09 October 2009 Uncorrelated Alpha Strategies Detail; Oil and Gas Partnerships- Do They fit in your Portfolio?; What's the best Asset Allocation; Is it Possible to Over-diversity a Portfolio; PIMCO Heavy Weighting for Emerging Markets - II's Thoughts?; and Timber Followup; October 2009 Economic Update; Feature Article: Equal Risk Weighted Portfolios in 2007 and 2008; Challenges Facing Investors in Ventrue Capital Funds; Improving Warning of Future Financial Crises; A New View on the Fundamental Drivers of Equity Market Returns; and The Long-Term Impact of the 2007-2008 Crisis on Financial Advisers' Compensation

09.09 September 2009 Uncorrelated Alpha Strategies Detail; Index's Position on Timber; Right Question to Ask a Fund Manager; Why not 7 Year Forecasts?,Credit Beyond HYG; September 2009 Economic Update; Feature Article: What Causes Failure?; Interesting Commodity Research; The Coming U.S. Muni Market Train Wreck; New Volatility Research; Harvard and Yale Endowment Results; and More Interesting Research

08.09 August 2009 Market Implied Expectation of Most Likely Economic Regime; Asset Class Valuation Conclusions and 3 Month Return Momentum; Country vs Industry Factors; Management of Client Expectations; Sold in 2007/08 What Now?; August 2009 Economic Update; Feature Article: A Letter to the New Graduate; Analysis Risk/Return AUD,CAD,CHF and GBP Based Investors; Trends, Momentum, Inefficient Markets' Argument for Index Investing, AQR Capital Products; Private Equity - Again and Four New Research Papers

07.09 July 2009 LSC or GCC; VXX and VXZ ETFs; Regency Bias - Balance With New Information; July 2009 Economic and H1N1 Influenza Update; Feature Article: The Outlook for Venture Capital Returns; Developing Better Foresight; Interesting New Research; Big Changes Underway for Financial Advisors; and New Products - Canada (XEM and XWD): US Leveraged and Inverse ETF Performance, UMM and DMM and UK Longevity Bonds

06.09 June 2009 Fidelity vs Schwab vs TD Ameritrade - Opinion?; Index Investors' Allocation Models vs MVO Models - Superior? Yes; Asset Class Valuation Updates: Possible, Likely and Probable - What They Mean; and Commodity Valuations Long/Short (LSC) or Long-only Fund?; Feature Article: The Role of Property in a Portfolio, Given Recent Experience; June 2009 Economic Update; and Powerful Impact of Regret; More Research - Why Successful Actively Managed Funds are Rare; Did the Media Do a Good Job Predicting the 2008 Crisis?; and How Rigorous is you Investing Logic?

"My great regret is that I and so many of us who have been involved in this industry for so long did not recognize the serious possibility of the extreme circumstances that the financial system faces," [Robert] Rubin wrote in a letter to Vikram Pandit. - Reuters, Jan 10, 2009

"In 2007, the people who ran Wall Street, and the ones who regulated it, did not understand how serious the financial crisis was becoming." - Floyd Norris, The New York Times, Dec. 19, 2008

"Big (and negative) changes are not too far away in the world economy, even as global growth continues to be strong, equity indexes around the world hit new highs, and credit risk margins are at near record lows...There is still an element of chance as to what will be the event or events that reverses the herd and sets the crash in motion. That these events frequently aren't clear, even in retrospect - just read the studies about the events of 1929, 1987 or 2001 -- means that forecasting them is basically impossible. However, we are not without indicators that something dangerous is building up in the system....For example, earlier this year we had a sudden burst of volatility that disappeared almost as quickly as it arrived...Foreign central banks - not private investors - are today funding most of the U.S. current account deficit...Most recently, we have seen many U.S. housing indicators plunge, without apparent impact on consumer spending or financial market risk premiums and returns...Liquidity is at record levels, and this is typically associated with the quickening development and subsequent rapid deflation of financial market bubbles...There is also considerable evidence that many asset classes have simultaneously become overvalued, which is a rare event in historical terms. Moreover...the collapse of housing bubbles is likely to have a far more severe impact than the collapse of an equity bubble...Analysts tend to underestimate the risk they face, and financial models - including the Value At Risk Models that underpin many institutional investors' risk management plans - inadequately capture it...Greed and fear are finely balanced today, and it won't take much to tip the balance in the latter direction...Given the strong linkages between asset classes created by developments in the derivatives markets, we think any downturn could quickly accelerate and spread across many asset classes...In the ten years our publications have been in existence, we have never suggested taking what for us is a radical step: reducing one's exposure to different asset classes, and raising holdings of cash...Yet in spite of the possibly unpleasant tax consequences, we think that reducing exposure to the most overvalued asset classes and either raising allocations to undervalued asset classes or moving into cash (or short term government bonds) looks more and more like the most prudent course of action. We wish that wasn't so. But we can't ignore the increasingly insistent warning voice that keeps us awake at night." - The Index Investor, May, 2007 - "Why We Don't Sleep Well at Night" (Complete Article is available.)

"We are often asked whether or not we believe the U.S. equity market is overvalued. Our answer is a resounding "yes!" .... It is certainly possible that from time to time relative valuations (e.g., of bonds versus equities) will get so glaringly out of line that it makes sense to temporarily move beyond your target portfolio weights for each asset class. If you believe (as we do) that this is the case today in the United States, then your next question is "what can I do about it?"...The first option is to simply sell your S&P 500 index, and reinvest the proceeds in a bond market index fund...The second option is to purchase a put option on the S&P 500 Index..." - The Index Investor, March 2000