This Month's Issue: Key Points

This month's issue begins with our economic update. In our view, the critical uncertainty that will determine whether we muddle through with a painful but "normal" recession or plunge into something much worse is the future actions of China. We are not optimistic, as helping to bail out the United States does not seem to fit with their long-term ambitions. Assuming we head into more serious economic crisis, we believe that the actions of three different groups will determine whether cooperative solutions (which will shorten the crisis) or increasing conflict will rule the day. These include Chinese peasants (who seem to be growing more disaffected and becoming better organized, neither of which is good news for the Chinese leadership), Iranian youth (with President Ahmadinejad appearing to have squandered the opportunity presented by the revised U.S. National Intelligence Estimate on Iran's nuclear capabilities, the upcoming March parliamentary elections will provide a key indicator of the path that lies ahead), and the American middle class (which, as evidenced by the results of this presidential primary season, is in a volatile mood). We continue to believe that for many investors an increase in liquid, precautionary balances is warranted. However, in our product and strategy notes section we take a deeper look at the argument for staying fully invested.

Elsewhere we review the asset classes we have not included in our model portfolios, and the logic behind our decisions. In our product and strategy notes, we recommend new research products from James Montier and Michael Mauboussin, review a number of new academic papers, and cheer the beginning of the ETF consolidation process.

| Global Asset Class Returns | A Note from the Publisher | This Month's Letters to the Editor: Why Not Cleantech?; PTF for UK Investors?; Beinhocker's The Origin of Wealth | Asset Class Valuation Update | Product and Strategy Notes: To Time Markets, or Not?; Two of Our Favorite Writers; Research of Note and ETFs Claymore Shut Down | Economic Update | This Month's Issue: Key Points | What's Not in Our Model Portfolios, and Why | 2006-2007 Model Portfolios Update | 2007-2008 Benchmark Portfolios - All Currencies |