The Federal Reserve's asset purchases created financial asset price inflation that exists today across many different asset classes.
Most of the people who say that "diversification failed" in the financial crisis have in mind not the diversification gains associated with avoiding concentrated investments in companies like Zynga, but the diversification gains that come from investing across many different asset classes, such as domestic stocks, foreign stocks, real estate and bonds.
"Individually, we couldn't have spread our investments across as many different asset classes," Baird says.
They're not even close, because they own so many other asset classes.
While many global asset classes in the 20th century produced spectacular gains in wealth for individuals who bought and held those assets for generational long holding periods, most common asset classes experienced regular and painful drawdowns like those in 2008.
With every bit of bad news, nervous investors around the globe have been selling many of their positions across all asset classes, no matter what they are, driving prices down, and rushing into perceived safe havens like cash and United States bonds.
Moody's benefits from a strong network effect as well since there's a great need for ratings comparability across asset classes, across geographies, and across market cycles.
Financial advisers will tell you it's good to diversify across and within all asset classes.
As the crisis endures, it is clear that markets are social arenas, where fears of financial contagion spread reflexively across seemingly disparate asset classes and across borders.
And we need to know correlation across different asset classes.
