Saturday, June 27, 2009

Barron's latest

Alan Ableson on the latest market surge:

We've had a hunch for a while now that a quantum gob of the stimulus bucks, under whatever guise and through whatever channel, was finding its way into the stock market. Which would explain a lot of things. Like the size and speed of the surge since the dark days of early March. The more than passing strange upward bursts of prices toward the end of so many sessions. And the overall racy character of so much of the market. A miniature resurrection, in other words, of what Alan Greenspan called "irrational exuberance." We sure hope we're wrong.

On the other hand, Barron's suggested that the alternative asset class mix of the Ivy league endowments needed to be changed.

At Yale and Princeton, hedge funds, private-equity and real-estate funds, and commodity-related investments accounted for about 75% of endowment assets as of last June; the total for Harvard was around 55%, above the 35% allocation to alternatives favored by the typical nonprofit endowment.

And since their endowments have fallen significantly, it brings problems with their private equity committments.

In the near term, endowment chiefs may be wrestling with how to handle commitments to private-equity and real-estate funds. At Harvard, investment commitments totaled $11 billion on June 30, 2008; at Yale, $8.7 billion, and Princeton, $6.1 billion. These commitments are especially large relative to shrunken endowments. Harvard's endowment could end this month in the $25 billion range; Yale's is about $17 billion, and Princeton's, $11 billion, after investment declines, yearly contributions to university budgets and new gifts from alumni and others.

Which led to this conclusion:

The brutal market of the past year could mark the end of the alternative-investment boom they abetted, as managers of trend-setting university endowments, as well as their followers in the nonprofit world, move back toward the traditional stocks and bonds that once were staples of their investment portfolios.

Which leads to this:

Buy what the Government is buying!


Anonymous said...

Say Palmoni,if you don't mind, but I keep hearing how the markets are bigger than the fed, or else the bond markets are bigger than government, etc., etc. So, for how long can this goosing of stocks continue? If it can continue for a long time, then the markets are not bigger than government, am I correct? Thanks.

palmoni said...

Since the markets are bigger, then it means that they are going up for a reason, helped by the so called Government goosing. Look at the bond market. We know that the Fed's couldn't control that, just like the stock market wouldn't go up if it didn't have a propensity to trade higher.

Also, all the governments around the world want things higher.. Otherwise the seeds of social unrest would be sown faster than they could uprot them.

So we have to go long despite government meddling. It's like the hong kong crisis when they stepped in and bought. They pulled it off. I think the same thing happens here. Look at Goldman when it was at 50 that was a real price because at that time they were on the ropes. But they got off, as distatesful as it was!

Looking back, people will say it was in the greater good--I just can't stand how they'll move mountains to help their buddies but they don't do anything for main street.