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September 24, 2007

how the world looks to $25 million

I spent yesterday at a board meeting of a nonprofit that has an endowment of about $25 million--not very big, but big enough to employ a major investment firm that sent two guys from the West Coast to make a presentation about market conditions. Since I don't have millions of my own to invest, nor a stake in any private company, I'm not used to seeing such presentations. It occurs to me, however, that there's a substantial class of Americans--call it the ruling class--that does listen regularly to investment advice. The kind of presentation I saw yesterday reflects an influential worldview.

I noticed, first of all, that the presentation was very cogent and comprehensive. Almost all the information came from public sources, so we should be able to obtain the same ideas from business magazines, daily newspapers, or even the television. But I don't recall seeing such a neat package of trend lines and statistics presented in the Washington Post or New York Times. If corporations and investors are willing to pay for general advice about market conditions, I wonder why news organizations don't provide it to their readers. In size and talent, newsrooms must rival the research departments of investment banks; but they produce very different kinds of information. One reason may be that the target audience of the business section of a national newspaper already gets the kind of presentation I saw yesterday, and they are interested only in breaking news and features.

Second, I observed that "the economy" looks pretty good from the perspective of $25 million. To be sure, there is a risk of a downturn. The guys from LA put the odds of a recession in '08 at 30% (with due humility about their foresight). But the past five or six years have been very impressive--we've seen solid returns, productivity growth, and moderate inflation and unemployment. If you wonder why the Bush years don't provoke outrage down at the Rotary Club, it's because business people see the world from the perspective of an investment bank.

Third, I was struck by the gap between an investor's interests and the national interests. An index of "emerging market stocks" has far outperformed US stock indexes, and we were told that that trend will continue, mainly because of the lower cost of manufacturing overseas. This is bad news for the US, but not for $25 million, which can happily move.

September 24, 2007 8:35 PM | category: none


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