Morningstar Advisor - Fall 2008 - (Page 14)

10 Questions State of Financials 1 What do you wish you saw earlier than you did as the credit crisis was unfolding? Jeff Arricale T. Rowe Price Financial Services PRISX It seems obvious that we were in an asymmetric reward/risk situation in 2006 and early 2007, given the absence of a risk premium in the fixed-income market, the proliferation of esoteric financial instruments, and the poorly underwritten garbage that flooded the system. 2 What is the biggest lesson you’ve learned from the crisis? Don’t assume CEOs and boards are in touch with the realities of the capital markets during times of crisis. They often fail to grasp the urgency of the situation and act decisively. Paulson and Bernanke have 3 Federal government’s handling of the crisis: Thumbs up or thumbs down? Thumbs up. in handling the crisis. demonstrated flexibility, patience, pragmatism, and creativity 4 Investors don’t pay enough attention to which part of the financial system? What the fixed-income markets are telling us and the off-balancesheet exposures that lurk behind the curtain at financial companies. 5 What is your current favorite segment of the financials sector? Property and casualty insurance sector, including insurance brokers—cheap stocks, good returns, solid balance sheets, and fundamentals that are quite good relative to the fundamentals at most financial and nonfinancial companies right now. 6 In three years, your shareholders will be glad you bought (or added to) . If you could have one do-over this year, what would it be? Citigroup convertible bonds, Aon Corp. AOC, Goldman Sachs GS. 7 Investing in several bond insurers; we no longer own them but incurred significant losses. Valley National Bank of Arizona. 8 9 Where did you open your first savings account? What song best captures the past year’s pain? “Won’t Get Fooled Again”—The Who. . Herb Kelleher, who said, “Think small and act small, and we’ll get bigger. Think big and act big, and we’ll get smaller.” Balance sheets got way too big over the past five years, and now many of these companies don’t exist. 10 After experiencing the past year, you can now relate to 14 Morningstar Advisor Fall 2008

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Morningstar Advisor - Fall 2008 Contents New on MorningstarAdvisor.com Letter from the Editor Contributors Inbox Are You Preparing for Higher Taxes? State of Financials Oracles of Alabama Investment Briefs Managers’ Investment Secrets Revealed Conformity Becomes a Growing Concern at American Gimme Shelter Location, Location, Location Rooted in Buffett, Going for Growth Keeping Little Company Away from the Numbers Consumer Confidence What about Natural Gas? TIPS to Beat Back Inflation Investing in Hidden Assets Funds That Have an Edge Come Tax Time Mutual Fund Analyst Picks 50 Most Popular Equity ETFs Undervalued Stocks Most Popular Variable Annuities New at Morningstar One for You, 19 for Me

Morningstar Advisor - Fall 2008

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