Yes, I am (I actually wrote incorrectly in the post that I am citing Boston Globe), while the source of Lubos’ data is Boston Globe report made in the beginning of Dec 2008.

for the size of the current endowment, see e.g. the window on the right side of Wikipedia?s entry about the school,

http://en.wikipedia.org/wiki/Harvard_University

Or hundreds of other places. Seven years is still very far from being “near” bankruptcy, and it is absurd to imagine that there will be no inflow of money for those 7 years

Yes, that’s what I thought, this is data from Dec 2008, at least quarter of those money is already gone.

http://en.wikipedia.org/wiki/Harvard_University

Or hundreds of other places. Seven years is still very far from being “near” bankruptcy, and it is absurd to imagine that there will be no inflow of money for those 7 years.

The swaps, like any contracts that are based on uncertainty and hedging, inevitably make one side win and the other side lose. It is impossible to “win” all transactions in the world – and only the “sum” determines whether managers of Harvard or something else are doing a good job. In this case, either Harvard or the superbig financial experts in Goldman Sachs must be losing money from this contract at every given point of time: for Goldman Sachs, it would be even more painful.

But 500 million is simply a relatively small amount of money – if you compare it with the drop of the price of the assets in the same period of time. I think that in the long run, the contract Summers made is sensible, and if it will last, it will return to the black numbers for Harvard simply because the interest rates will be raised heavily in a year or so, to fight the significant inflation that is likely to be initiated by the irresponsible printing of the dollars.

The endowment is USD 29 billion right now

where is your info from?

I generally agree with Summers’ characteristics of yours, but 500 million of Harvard’s money he lost playing with interest rate swaps – it’s a lot of money. I think, if the man is considered financial guru, he does not really have right to make mistakes like that… Thhough, this is really nothing compared to how much current administration lost.

Second, the title “near bankruptcy” is absurd. The endowment is USD 29 billion right now which, with your figure and assuming no other inflows, guarantees 15 years of life. That’s simply not “near” and it?s actually the lower bound. The endowment exists exactly to protect the school in possible hard times, and protect it even against such catastrophes as a new president elected because of her reproductive system.

Not really. Among those 29 billion 11 billion are to be repaid as capital commitments in the next 10 years. So, Harvard really has money for 7 years, not 15 years.

What I am saying is that if the crisis did not yet reach its bottom (and optimistic S&P estimation is that the bottom is to be reached around mid 2010), they are probably to expect serious endowment losses for the rest of the year as well as for 2010. If so, they are in real troubles (take a look how much did they loose for 2008-09 period), and I really hope that they did as you suggested – rethought their investing strategy.

Cheers,
Dmitry.

First, Summers has been a stellar president, and when it comes to finances, the biggest sin he did was to throw USD 50 million into the toilet of the whining f*-up (or, in the more serious cases, those non-f*-up) dishonest feminist losers. Financially and by all meritocratic criteria, the university went up immensely under Summers, and if his stable successor suggests otherwise, then she is a dishonest bitch. If he were able to follow the same policies as Obama’s economist, the U.S. wouldn’t be on the verge of bankruptcy itself.

Second, the title “near bankruptcy” is absurd. The endowment is USD 29 billion right now which, with your figure and assuming no other inflows, guarantees 15 years of life. That’s simply not “near” and it’s actually the lower bound. The endowment exists exactly to protect the school in possible hard times, and protect it even against such catastrophes as a new president elected because of her reproductive system.

Moreover, unless the current managers did something really stupid recently, which would be a return from the irrationally depressed “risky” assets to the U.S. dollar whose collapse may be looming due to the skyrocketing debt piled up by the current irresponsible socialist U.S. government, the Harvard portfolio is mostly stored in “now” safe assets of international equities and similar assets that have likely bottomed already.