Now consider the insanity of the institutional bond fund management world. As Stratton Street's managers point out, the whole fund management industry is built around the principle of lending to the most indebted countries or companies. In 2007, as they point out, GM and Ford had combined debts in excess of $213 billion, and were clearly in financial difficulty. At the same time, most fund management groups will have held substantial amounts of their debt. Quite why they would have held that debt is a question that they should be obliged to answer. We will attempt an answer on their behalf. Because to most fund managers, asset management has played second fiddle to asset gathering. And in a startling example of the perils of agency risk, we think it likely that most if not all of those managers would have had negligible personal investments in their own funds - they were, in other words, sublimely indifferent to the performance of their funds provided that their performance held up tolerably well against their peers. The most alarming answer is that most institutional bond fund managers invest purely on an indexed basis: for their own reasons, or perhaps due to the stupidity of consultants, they feel obligated to invest in the most heavily indebted countries because those same heavily indebted countries are the largest components of global bond indices.