A question I'm always asked as editor of The Independent Adviser for Vanguard Investors is why don't I don't just recommend Vanguard's index funds for my Model Portfolio?

The answer is simple. As the chairman of the nation's largest independent organization of Vanguard investors, my goal is to help you get the most out of Vanguard funds, and there is no disputing that Vanguard's actively managed funds outperform their index funds.

Two industry legends that outperform the relevant indexes time and time again are none other than Selected Value's Jim Barrow and Mark Giambrone. Their performance as fund managers over the years has been strong and stable, and frankly, I trust them with my money, and so should you.

Recently, I got a rare chance to interview both of them and see what they're doing to protect themselves from the volatility in the stock market. Both agree that the current crisis on Wall Street simply needs time to simple run its course. And both are convinced that after it does, there will be some uncovered gems worth buying before they rebound!

What to Do Now: Simply Wait Out the Storm

DW: Jim, the last time we spoke, you were not overly concerned about the housing "crisis." It seems to have pushed a lot of people into fear mode.

JB: This boom took 10 or 15 years to grow, so it'll take longer than a year to clean out. I have seen this happen before. It happened here in the early '90s, and you go through it and eventually work your way out of it. The bigger problem, Dan, is not the housing market. The bigger problem is that these banks and brokerage firms have to 'fess up to their bad mortgage-backed paper and write it off and then go back and recapitalize their balance sheets, they are also going to right-size their assets–which means that they are going to get rid of loans. That means it's going to be increasingly difficult to acquire loans.

Now, the average corporation has a pretty good-looking balance sheet, so it's not going to make much of a difference to them, but it's going to affect the marginal user of credit (private equity capital and hedge funds), and they may not be able to get a loan.

DW: And that's causing the sell-off?