In theory, the recent increase in market volatility opens the door for superior results from active management. In practice, it’s still hard to beat relevant benchmarks. You wouldn’t know it from the promises from the usual suspects, but the numbers suggest another reality.

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Can market volatility be tamed? Sure, but it comes at a price, usually in the form of reduced return. The real question is whether you can tame volatility without materially lowering expected return. Analysts have been dissecting this problem for years, although interest in the topic has exploded lately for obvious reasons. One of the more intriguing strategies is available through a new breed of hedging strategies designed by several large investment banks. A number of financial planners are using the products, which have been stress-tested during the recent market turmoil. How do these strategies hold up upon closer inspection? For some perspective, take a look at my article in the September issue of Financial Advisor.

In Euro Zone, Banking Fear Feeds on Itself
The New York Times | Sep 7
“This crisis has the potential to be a lot worse than Lehman Brothers,” said George Soros, the hedge fund investor, citing the lack of an authoritative pan-European body to handle a banking crisis of this severity. “That is why the problem is so serious. You need a crisis to create the political will for Europe to create such an authority, but there is still no understanding as to what the authority will do.”
German court gives MPs bigger say in euro bailouts
Reuters | Sep 7
Germany’s highest court said parliament must have a bigger say in euro zone rescue packages, a landmark ruling that may make it more difficult for Europe to respond swiftly in delivering aid to crisis-hit member states.

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