This week we are going to look at one aspect of the future of investing. A few weeks ago, I was with good friend Doug Fabian in LA. I spent a session or two on his weekend radio show and then we went out to dinner. Not surprisingly, we began to compare notes on investing. While I generally spend my time focused on the hedge fund world, Doug is a true expert on mutual funds.

I wrote in my book that I think the day will come when hedge funds will be available to the public and as an industry will be as large as or larger than mutual funds. Doug, however, looks at a different end of the investing spectrum. He thinks the world of mutual funds will shrink for entirely different reasons. I found his thinking quite interesting and asked him to do an article so I could share it with you while I am out on vacation. I will be back next week, but I am glad to be able to share these thoughts from Doug.

Why do we continue to make the same classic investing mistakes, generation after generation, throughout the world, in all times and in every culture? It is as if history has no meaning for each new age, yet it is there for all to read. We explore this and more in today's letter.

But first, let me offer a few observations about the current mutual fund scandals. I find it interesting that the funds which are the target of investigations still have 90% of their assets. To illustrate this point, I will first offer an insight about hedge funds. In the hedge fund world in which I mostly reside, if a manager leaves the fund, the tendency is to shoot first (redeem) and ask questions later. If there is a rumor of a problem, head for the exits. It is exactly opposite of stock trading strategy. In the hedge fund world, you sell on the rumor and buy on the news. It doesn't make any difference to the managers of the fund of hedge funds who have about 1/3 or so of all hedge fund assets. "Kill them all and let God sort them out," is the attitude. Since it takes several months (end of the quarter) to actually redeem from these funds, the knee-jerk reaction is to send in your redemption notice and then ask questions later.

Given the wide disparity of views about the economy, it is little wonder that the reaction to Greenspan's latest speech has been all over the board. That is compounded by the fact that bond price expectations are totally disconnected from Fed expectations. Are the bond market critics just a bunch of whiners (give me back my risk free trade!) or is there substance to their major beef? Who's really in charge here? Can the Fed trump the market? Predictably, I answer the latter question with both yes and no. It all depends upon your time perspective, but timing is everything. There's a lot to cover, of course, so we begin.