<p>To borrow a theme from historian Walter McDougal, we are a nation of hustlers in both the positive sense of working hard, and the negative sense of swindling the gullible, and always have been so. The irony of bastions of liberal arts facing financial disasters because of the values vacuum apparent in those graduates chasing the big bucks is depressing. Moral courage to identify and report the fact that King’s rear end is exposed is in short supply, but my alma mater used to try to teach those things. No, I am not claiming any greater courage than anyone else who posts anonymously.</p>
<p>I think Bogney hit it right on the nail. Integral to the can-do attitude, fearlessness, and work ethic that built this great nation in centuries past were also essential aspects of fraud and criminality, that we are not so proud of.</p>
<p>We can see this mechanism at work right now, in fact, but not here. My Chinese friends talk about China today as a land full of opportunities, like the wild west era of the United States. There is no excuse to be poor in China, they say, if you are willing to use your brain, work hard, and take risks. So yes, they achieved the most amazing and extensive wealth-creating decades ever in history, but at the same time, they have poisoned air and rivers, foods that kill, and massive corruption (that whole gleaming high-speed train construction project was not much more than a giant exercise in public theft, they tell me). So far, the Chinese seem to have accepted the trade-off – people are not starving to death every couple of years – as they describe Americans as lacking in intiative and work ethic, over-nannied by the governemnt and lawyers, and socialistic, and that’s when they are polite.</p>
<p>Not passing a value judgement here to approve criminality, but just that as a general principle, peoples make trade-offs, and the penalties can be substantial, whether , in extreme forms, they are visible, like killing your own people, or invisible, like giving up growth and prosperity in future generations. One can do better, one should never stop trying, there are never excuses for bad actions, but, stepping back, and looking at history, if one can be philosophical about it, there is a sense that you have to take the some of the ying with the yang.</p>
<p>[SEC</a> Charges Former Goldman Employee Spencer Mindlin With Insider Trading With His Father](<a href=“http://www.businessinsider.com/spencer-mindlin-insider-trading-2011-9]SEC”>SEC Charges Former Goldman Employee Spencer Mindlin With Insider Trading With His Father)</p>
<p><a href=“http://www.businessinsider.com/zvi-goffer-10-years-2011-9[/url]”>RAJ IS SCREWED;
<p>[Yale?s</a> endowment ?on track? | Yale Daily News](<a href=“http://www.yaledailynews.com/news/2011/sep/22/yale-endowment-track/]Yale?s”>http://www.yaledailynews.com/news/2011/sep/22/yale-endowment-track/)</p>
<p>Endowments will be posting 15-20% gains this year. Ofcourse that is through June 30, and the market is down 15% since that time.</p>
<p>My favorite line which sums up the attitude of endowments that are heavily invested in illiquid, risky alternative investments is when the Yale guy say he expects"less sophisticated" endowments to outperform for a few years. Personally I would use the term “less risky” but I can understand why they wouldn’t use that.</p>
<p>“when the Yale guy say he expects"less sophisticated” endowments to outperform for a few years. Personally I would use the term “less risky” but I can understand why they wouldn’t use that. "</p>
<p>:) </p>
<p>The more sophisticated the strategy…the more you get paid…and if nobody can understand what you are doing…you can make size. </p>
<p>And if you start losing…gibberish works well…I am dating myself…but the Sid Caesar technique works well… :)</p>
<p>Kind of why they changed the name of Leveraged Buy Out to Private Equity–Less risky sounding, more sophisticated.</p>
<p>Yeah…you’re right…</p>
<p>[2011</a> Harvard endowment results: value rises $4.4 billion to $32 billion | Harvard Magazine](<a href=“http://harvardmagazine.com/2011/09/harvard-endowment-rises-to-32-billion]2011”>http://harvardmagazine.com/2011/09/harvard-endowment-rises-to-32-billion)</p>
<p>In hard times, when you are woking from valuations that are not objective, the temptation and likelihood of distributing (consuming) a higher percentage than you believe you are consuming is quite high. We’ll see.</p>
<p>Anybody with risky assets - emerging markets, commodities, high yield debt- got hammered yesterday. The 3 months since the end of the endowment reporting period has been devestating for endowment type assets including PE and Hedge funds. Whatever increase that they are reporting has I am sure been wiped out.</p>
<p>Need to learn to use the word sophisticated rather than risky. It will be interesting to see how endowments word their endowment returns in coming weeks. They are trying to say that they are almost back to where they were before 2008 but the fact is that with the crash in all risky-sorry sophisticated-assets since june 30 endowments are right back where they were after the 2008 crash.</p>
<p><a href=“http://www.pionline.com/article/20110926/DAILYREG/110929910[/url]”>http://www.pionline.com/article/20110926/DAILYREG/110929910</a></p>
<p>As with last year some colleges are reporting increases before distributions and some after. In this case Stanford is before so their net increase in endowment is similar to others at around 17%.</p>
<p>I am becoming less enamored of sophisticated economic schemes by the day. What euphemism should we use for greedy bast@@@@, the economic avant guard?</p>
<p>[Shares</a> In Huge Hedge Fund Getting Destroyed As Clients Race For The Exits](<a href=“http://www.businessinsider.com/man-group-shares-fall-after-bad-earnings-2011-9]Shares”>Shares in Huge Hedge Fund Getting Destroyed As Clients Race for the Exits)</p>
<p>[John</a> Paulson sold $100 million in Lehman debt, sign of $2-3 billion sale](<a href=“http://www.businessinsider.com/john-paulson-sells-lehman-debt-2011]John”>John Paulson Sold $100 Million in Lehman Debt, Sign of $2-3 Billion Sale)</p>
<p>Seems like a repeat of 2008 is developing. Endowments ran into trouble as there was a run on hedge funds for cash-being their main source of liquidity. Alot of hidden problems started to get exposed as the run on hedge funds accelerated.</p>
<p>[Stephen</a> Feinberg’s Mea Culpa - Private Equity Beat - WSJ](<a href=“http://blogs.wsj.com/privateequity/2011/09/27/stephen-feinbergs-mea-culpa/]Stephen”>http://blogs.wsj.com/privateequity/2011/09/27/stephen-feinbergs-mea-culpa/)</p>
<p>Great quote from head of Cerberus-one of largest PE firms:
“One thing about the money management business is you should never cease to be amazed by your own ability to be an idiot” - of course he is still a billion dollar idiot-the idiots are those that made him a bllionaire. Don’t think we will hear a quote like that from the sophisticated managers of the elite endowments. </p>
<p>PE firms and their investors in a world of hurt at the moment.</p>
<p>First of the LAC’s to report. Bowdoin’s endowment was up 19.9% on an investment return of 22.3%. Accoridng to this article, Cambridge Associates pegs the mean investment return for college endowments at 19.1%</p>
<p>[The</a> Times Record > Features > Bowdoin endowment returns 22.3%](<a href=“http://www.timesrecord.com/articles/2011/09/28/features/doc4e8341fab5bf0680402954.txt]The”>http://www.timesrecord.com/articles/2011/09/28/features/doc4e8341fab5bf0680402954.txt)</p>
<p>Dartmouth’s endowment increased by 18.4%</p>
<p>[TheDartmouth.com:</a> College endowment increases by $415 mil.](<a href=“http://thedartmouth.com/2011/09/28/news/endowment]TheDartmouth.com:”>http://thedartmouth.com/2011/09/28/news/endowment)</p>
<p>The markets are very volatile…but at this time… those great returns went poof…</p>
<p>A couple of examples of what has happened to highly sophisticated assets since June 30:</p>
<p>Emerging markets down 25%</p>
<p>[EEM</a> Basic Chart | iShares MSCI Emerging Index Fun Stock - Yahoo! Finance](<a href=“EEM Interactive Stock Chart | iShares MSCI Emerging Markets ETF Stock - Yahoo Finance”>EEM Interactive Stock Chart | iShares MSCI Emerging Markets ETF Stock - Yahoo Finance)</p>
<p>Foreign stocks down 20%</p>
<p>[^STOXX</a> Basic Chart | STXE6EURP Stock - Yahoo! Finance](<a href=“^STOXX Interactive Stock Chart | STXE 600 PR.EUR Stock - Yahoo Finance”>^STOXX Interactive Stock Chart | STXE 600 PR.EUR Stock - Yahoo Finance)</p>
<p>good recap of state of PE:</p>
<p><a href=“Preqin | Alternative Assets Data, Solutions and Insights”>Preqin | Alternative Assets Data, Solutions and Insights;
<p>And Yale’s $8,888,888 man in China Lei Zhang does not appear to be doing so hot</p>
<p>[Hillhouse</a> Capital Management Portfolio - Performance at tickerspy.com](<a href=“http://www.tickerspy.com/member.php?mid=-1510589&pid=-1&view_tab=pf]Hillhouse”>http://www.tickerspy.com/member.php?mid=-1510589&pid=-1&view_tab=pf)</p>
<p>Virtually all asset classes endowments regularly trade in are down atleast 20% - if you add a 5% draw that means if performance doesnt improve they are currently looking at a 25% decline for 2012 which would put them all below their 2009 low values.</p>
<p>In these super-volatile markets, it’s hard to draw any conclusions. The investment alternatives all carry risk. Even “safe” investments like government bonds carry risk because of their low returns and the possibility that deficit-driven inflation could reduce their real value. Tough time to be a money manager trying to keep an endowment out of trouble and earn a solid, predictable return.</p>
<p>
</p>
<p>On the other hand, the well-managed colleges have made some belt-tightening changes over the last three years that puts them in a better position to ride out these market swings.</p>
<p>What I’m interested to find out is how many colleges got caught by recent variable rate bond demand calls and remarketing. If those have been widespread, there is probably some cash flow pain.</p>