The increased market volatility in recent months as well as Vanguard's announcement that it will launch a market-neutral fund for institutional investors before the end of the year got me thinking (a dangerous development, to be sure). Are any of Vanguard's funds any good at reducing volatility without sacrificing the potential for capital appreciation like a market-neutral fund is supposed to do? And if market-neutral funds are such a great idea, does the typical Vanguard investor need one in his or her portfolio?

To answer these questions I looked at the bear market ranks of Vanguard funds, as well as measures of their volatility, such as standard deviation. I also checked how the funds have held up relative to their peers during the tumultuous third quarter. I found that quite a few Vanguard funds looked good according to the bear market ranking (which gauges how funds have done in down markets over the past five years), so the answer to the first question is a resounding yes. That also answers the second question. With so many options with long histories of minimizing market risk while delivering some capital appreciation, most Vanguard investors could live long and happy lives without a market-neutral fund. I've highlighted below what I think are the best Vanguard funds for a bear market. Granted, they don't use the sophisticated strategies of a market-neutral fund, but they've delivered pretty good downside protection and absolute returns at less

Spooked by the sudden realization that they might lose money on securities backed by subprime mortgages, big investors started taking harder looks at their portfolios this summer. They quickly started dumping all kinds of other investments--derivatives, commercial paper, municipal bonds, and stakes in hedge funds--because of what they saw.

Or, rather, what they didn't see. There's been a fire sale on just about any investment that doesn't provide what Wall Streeters call "transparency"--detailed information about the finances and business behind the security.

Investors today are enacting a classic "flight to quality," trading complicated, risky investments for ones that are safer and easier to understand. Congress and market regulators have responded to the credit crunch with baby steps so far--scheduling hearings and calling for rules that would require brokers to provide more information about at least some of the mysterious investments. But they are afraid of overreacting, since many argue that too much transparency can hurt investors as much as too little. So in the meantime, whole swaths of the investment markets are being pummeled, as investors attempt to figure out exactly where

NEW YORK (AP) -- Wall Street finished a volatile session mixed Monday as investors grappled with the possibility that the Federal Reserve might not lower interest rates as much as they hope.

The stock market ratcheted up and down throughout the day, with Wall Street still nervous after Friday's dismal employment report. The data, which showed the first monthly decline in jobs in four years, rekindled fears about housing and credit market weakness bleeding into the overall economy and squeezing consumer spending.

Speeches from Fed officials Monday seemed to give investors a bit more reason to be optimistic about the economy, but the officials avoided hinting at how the central bank might alter rates.

San Francisco Fed President Janet Yellen said that while market turmoil has the potential to hurt the economy, rate policy should not be used to shield investors from losses. Dallas Fed President Richard Fisher said the economy appears to be "weathering the storm," and Atlanta Fed President Dennis Lockhart said investors

When The Business Press Maven first cast his eye for business journalism onto business books, it was with the ultimate hope of familiarizing investors with historical insight, which is more common in books than what is demonstrated in newsrooms and trading floors -- where yesterday's news and trades qualify as fixtures from a bygone era.

This short-term orientation has a long-term drawback: When journalists or traders try to make a parallel with history, they invariably pick the most recent time that something similar happened. But while history repeats itself -- as many losing military generals can attest -- it hardly does so tidily. Many errors are born assuming that it does.

That is why I am going to grant The Panic of 1907: Lessons Learned from the Market's Perfect Storm, a resounding "Help" label from The Business Press Maven, putting it in the probable running for Top 10 Business Press Maven Books of 2007. In case you still don't get it, this is very high praise.

It even starts with a quote attributed to Mark Twain that should be the guiding light of every investor and

BENTONVILLE, Ark. (AP) -- Wal-Mart Stores Inc. reduced its reported second-quarter profit by $153 million due to expenses from selling its German retail operations, the world's largest retailer reported Monday.
In a regulatory filing, Wal-Mart said the added cost reduced its earnings per share for the quarter that ended July 31 to 72 cents from the 76 cents it originally reported Aug. 14. That compares with 50 cents per share in the year-ago quarter.

Wal-Mart said the late charge came after "recent nonbinding discussions with Metro at the end of August 2007." Germany's Metro AG agreed last year to buy Wal-Mart's German operations.

Wal-Mart called the new charge a "post-closing adjustment."

Metro bought Wal-Mart's 85 sites in Germany last year for an undisclosed sum as Wal-Mart quit Germany and South

SAN JOSE, Calif. (AP) -- It was supposed to be Advanced Micro Devices Inc.'s day Monday with the launch of its highly touted new server chip, but Intel Corp. swooped in and stole some of the headlines from its smaller rival with a boosted financial forecast.

Still, financially struggling AMD managed to have a good day on Wall Street after announcing the newest version of its Opteron server chip -- while Intel's news elicited a ho-hum reaction from investors.

Intel surprised Wall Street with a mid-quarter financial update -- a practice the company discontinued last year.

Intel added $200 million to the top of its financial outlook, saying it now expects sales of $9.4 billion to $9.8 billion in the current quarter. That compares with the previous forecast of $9.0 billion to $9.6 billion.

Analysts polled by Thomson Financial had expected revenue of $9.4 billion.

Intel also told investors that its gross profit margin, a key measure of the company's profitability, is expected to be

SAN JOSE, Calif. (AP) -- Apple Inc. sold its millionth iPhone over the weekend, days after it slashed the price by a third to spur sales.

The milestone was reached weeks earlier than expected and sent shares of Apple up $4.94, or 3.8 percent, to $136.71. The stock regained some of the ground it lost after the price cut spooked investors as a sign of weak demand and slimmer margins.

It took just 74 days for the combination cell phone-iPod to hit the 1 million mark, which Apple had said it would achieve by the end of September. By comparison, it took two years for the company to sell 1 million iPods, Apple CEO Steve Jobs noted in a statement.

Last week, Apple knocked $200 off the price of the 8-gigabyte iPhone, bringing its price to $399, and discontinued the 4-gigabyte version. Apple spokeswoman Natalie Kerris declined to comment on whether the price cut helped spur sales.

The price cut may have helped a bit, but Apple clearly was on track already to exceed its own expectations, analysts say.

"I'd argue that sales have been fairly strong, and this alleviates concerns that sales were weak," said Shaw Wu, analyst at American Technology Research.

The swift price cut -- not surprising in the cell phone industry but rare behavior for Apple -- angered hundreds of early buyers who bought the touch-screen gadget

How Banks Create Money out of Thin Air

Most money in the economy is held in the form of deposits with banks rather than in the form of notes or coins. If you purchase an asset from me for $1000, payment is normally effected by reducing your checking account by $1000 and increasing my account by $1000. The net change in bank deposits is zero.

If one year later, you decide to sell the asset and I purchase it back from you for $2000, where does the additional money come from? The transaction this time increases your account by $2000 and reduces my account by the same amount. The net effect is still zero.

The bank can loan me the extra $1000 simply because there is a corresponding deposit of $1000 in another account. It does not matter if the deposit is not with the same bank; the clearing system offsets all transactions between banks and any temporary shortfall is made up by