Back on Tuesday we mentioned that Herb Kohl's Senate Special Committee on Again would hold a hearing on target-date funds, with special emphasis on their role in retirement plans. And hold that hearing they did.

The testimony the committee heard was all well and good, but the substantive issues are best captured in this staff report, revealingly subtitled "Lack of Clarity Among Structures and Fees Raises Concerns." If you're into this sort of thing, we recommend that you take a look. The good stuff starts on page 8.

The Target-Date debate heads to Capitol Hill tomorrow, as the Senate Special Committee on Aging holds hearings on conflicts-of-interest in target-date vehicles. Here's a four-minute preview of some of the issues from CNBC, featuring Interlake's friend and colleague Mike Alfred of BrightScope:

Frontline's latest--"The Warning," about Brooksley Born, Alan Greenspan, and the anti-regulatory ideology that helped put us where we are--is required, morally imperative viewing.

One revealing/disturbing highlight: "Greenspan didn't believe that fraud was something that needed to be enforced." No. We aren't making that up.

From this morning's Bloomberg report on consumer spending and incomes...

It was the best of times:

This morning's Wall Street Journal features an Eleanor Laise article on a few new entrants in the category of actively-managed ETFs. We aren't crazy about the concept, largely because we think ETFs work best as part of a strategic asset allocation program with rock-bottom expenses. Here's a telling passage on that front:

Many investors are attracted to ETFs because of low costs. But the new Grail funds will each charge annual expenses of 0.89% of assets, making them pricier than three-fourths of the ETFs tracked by investment-research firm Morningstar. Grail American Beacon Large Cap Value charges 0.79%, only marginally cheaper than the 0.83% charge by investor shares of the nearly identical American Beacon Large Cap Value mutual fund. And the Dent Tactical ETF charges 1.56%. That is more than the average diversified U.S. stock mutual fund.

In this space, we've written on the widespread misunderstanding of the investment value of residential real estate. Whether it's short, anomalous bursts of rapid appreciation that warp people's sense of long-term averages, or gross underestimates of the true costs of ownership, many people have made enormous financial mistakes on the premise that owning (to say nothing of "flipping") a home is a sure path to financial security.

So we were delighted to see last Penn professor Thomas Sugrue's piece on rentership and ownership in last Friday's Wall Street Journal. As usual when we make reading recommendations, the whole thing is worth your time. But this struck us as a key passage, in many ways the key to the entire story:

We've long argued (here, here, and here, for example) that most big mutual funds are a rotten deal for individual investors. Due to their size, trading costs, and diversification, many of these funds end up behaving like very expensive index-trackers over full market cycles.

Most of the evidence we've pointed to has focused on big, lumbering laggards. Yesterday's Wall Street Journal featured a story on the best-performing funds in the first half of the year, and the upshot is clear: Small is beautiful.

Over the weekend, Eleanor Laise published an enormously important Wall Street Journal story on the (slowly but noticeably growing) presence of index funds in 401(k) plans. As longtime readers know, this subject resonates in a big way here at Interlake. Here's the crux of the story:

Employers are making it easier for workers in 401(k)s to own low-cost index funds and exchange-traded funds, a move that has implications for the mutual-fund industry.

Given the meltdown in so many asset classes over the last two years (remember: it was in the Summer of 2007 that the music first stopped without enough chairs), it has become somewhat fashionable to question the benefits of diversification across asset classes.

We've weighed in on this issue here and here, arguing that diversifying across relatively risky asset classes shouldn't be--and never should have been--seen as a means of reducing risk amid crisis conditions.

From time to time a headline strikes us as an especially fraught suggestion that the investing herd is buying or selling en masse, often quite late in whatever the latest game might be. In Monday's Wall Street Journal, Shefali Anand came up with a classic of the genre: "A Taste for Risk--Again." Here's how the story opens:

It's amazing the difference a rally can make in investors' appetite for risk.

Back on April 1st, we produced an excerpt from Simon Johnson's excellent Atlantic essay "The Quiet Coup." We called our post "Line of the Year," with reference to Johnson's statement that "anything too big to fail is too big to exist."

Yesterday, at The Baseline Scenario, Johnson extended that line of thinking by wondering out loud whether the Fed--or any other "macroprudential regulator"--can "sniff" bubbles before they threaten the financial system.

Yesterday we took the risky step of turning our dial to CNBC. To our immediate delight, we were greeted by the visage of one David Rosenberg, formerly the Chief North American Economist at Merrill Lynch, now the Big Thinker at Gluskin Sheff in his native Canada.

We'd transcribe some of Rosenberg's discussion with the Squawk Box crew, but as Barry Ritholtz noted yesterday, his entire appearance was such a command performance that there's simply no substitute for watching it from beginning to end. Our only quibble is that it ended so soon.

Is the United States economy headed for a Japan-style lost decade? Evoking our February, 2008, item "Faster Markets," Slate's Daniel Gross suggests that the deep, ongoing recession in the United States may unfold much more quickly than Japan's analogous bubble-bust of the 1990s. This is good stuff:

Why the accelerated pace? It has to do in part with changing global circumstances. Nishimura argues that both crises started because problems in the property and credit markets contributed to an adverse feedback loop between financial distress and economic activity. But information, events, and distress move much more quickly around the globe today than they did in the 1990s. With just-in-time production systems, and with 21st-century communications technology, bad news travels much more quickly--and farther. In the 1990s, much important exchange of international market information was still done by fax. In addition, traders can now act more quickly on real-time bad news. In the early 1990s, analysts had to wait several months for data. And since the level of financial integration was much less intense in the early 1990s, Japan didn't export its financial problems.

A little more than two years ago, we opined that for most investors in most circumstances, a cost-conscious IRA rollover would likely be preferable to leaving assets in a former employer's defined-contribution plan. Our primary concerns were (and are) that many 401(k) plans are unnecessarily expensive, feature limited/inferior investment options, and deny participants economies of scale at the individual level.

This morning, we ran across Janet Paskin's SmartMoney piece on the rollover "conundrum." We still lean toward rollovers, but Paskin is absolutely right to point to the mutual fund industry's interest in promoting rollovers. Here's the most interesting passage:

Back in March, we posted a brief overview of Dalbar's most recent edition of its "Quantitative Analysis of Investor Behavior," an authoritative study of the perennial gaps between market returns and fund returns on the one one hand, and fund returns and investor returns on the other. Summary: The numbers get uglier with each step away from market returns--and (stock) market returns haven't been especially thrilling in the first place!

Via Mebane Faber, we found Dalbar's fuller treatment of its 2009 report (which is through year-end 2008). This is good, important stuff. Take a look.

A week ago, we posted an item on the perception that residential real estate is often a great investment (when the residential real estate market is falling off a cliff, of course). We've always thought that perception was flawed, not in the sense that it's always and everywhere wrong (because in some places and times it can be fabulously right), but in the sense that it reflects a very narrow sense of the costs and benefits of acquiring and possessing residential real estate.

In that post, we drew on a Wall Street Journal column by Brett Arends. Apparently Arends got so much feedback on that initial item that he had to write more on Friday. And once again, he got it right. After discussing tax benefits, transaction costs, the illiquidity of the collateral, and other considerations, he closed with this:

As we've noted in this space (here and here, for example), with a few local/short-term exceptions, residential real estate has been a pretty lousy investment.

So we were pleased to see Brett Arends weigh in on this question in this morning's Wall Street Journal. An excerpt:

From the hope springs eternal file, a few headlines in today's "Before the Bell" missive from Reuters:

• "Oil firms above $60 on U.S. refinery fires, Nigeria"
• "Japan GDP sinks at record pace"
• "Deere quarterly net falls 38 percent"
• "Toll Brothers' homebuilding revenue dives 51 percent"
• "Hewlett-Packard outlook disappoints"

and...