Weekend Linkfest

Catching up on some podcasts: Masters in Business: Yale Professor Robert Shiller (Audio) by Bloomberg View https://soundcloud.com/bloombergview/masters-in-business-yale …
Maria Popova on Writing, Workflow, and Workarounds | The Blog of Author Tim Ferriss http://fourhourworkweek.com/2014/10/21/brain-pickings/ …
Digital Journalism and Investing: Charlie Rose (11/18) - Businessweek http://www.businessweek.com/videos/2014-11-18/digital-journalism-and-investing-charlie-rose-11-18 …
#2 The Secret, Gruesome Internet For Doctors http://gimletmedia.com/episode/2-instagram-for-doctors/ …
Specials: Here's The Thing: Jerry Seinfeld - WNYC http://www.wnyc.org/story/heres-thing-jerry-seinfeld/ …
Here's The Thing: Ira Glass - WNYC http://www.wnyc.org/story/ira-glass-interview/ …

And some other stuff: The man who taught Warren Buffett how to manage a company - Quartz http://qz.com/273797/tom-murphy-taught-warren-buffett-how-to-manage-a-company/ …
Howard S. Marks, CFA: Dare to Be Great (II) on Livestream http://new.livestream.com/livecfa/marks2014 …
Easy Ways to Think About Hard Finance Stuff http://www.fool.com/investing/general/2014/11/26/easy-ways-to-think-about-hard-finance-stuff.aspx …
The Cost of a Thanksgiving Food Coma http://briefs.blpprofessional.com/viz/The-Cost-of-a-Thanksgiving-Food-Coma/index.html …
Pershing square..Q3 Letter http://cdn1.valuewalk.com/wp-content/uploads/2014/11/Pershing-Square-Holdings-Ltd.-Q3-Investor-Letter-Nov-25-.pdf …
The Excrement Experiment http://www.newyorker.com/magazine/2014/12/01/excrement-experiment?intcid=mod-most-popular …
Whole Foods Detroit: Can a grocery store really fight elitism, racism, and obesity? http://www.slate.com/articles/life/food/2014/11/whole_foods_detroit_can_a_grocery_store_really_fight_elitism_racism_and.html …
If you read one thing today, make it Anne Lamott on gratitude and grace during life’s darkest moments http://buff.ly/1row8sH
Through a micro-agriculture program, there's hope for girls living in an unbendingly patriarchal society: http://ow.ly/EqFMw
Data and development: Off the map http://econ.st/14iy294

Roast of Bill Ackman

Global Borrowing costs vs. GDP

via: JPM

Value links

As Sears Gasps, Lampert Turns to Financial Engineering to Revive It - http://NYTimes.com http://dealbook.nytimes.com/2014/11/11/as-sears-gasps-lampert-turns-to-financial-engineering-to-revive-it/?ref=business&_r=2 …
Applying Decision Analysis to Venture Investing | Kauffman Fellows http://www.kauffmanfellows.org/journal_posts/applying-decision-analysis-to-venture-investing/ …
Value Investing World: Walter Isaacson in converstaion with two pioneers of the Internet, Vint Cerf and Bob Kahn http://www.valueinvestingworld.com/2014/11/walter-isaacson-in-converstaion-with.html …
BeyondProxy | Value Investing Ideas and Wisdom http://www.beyondproxy.com/skill-luck-gaining-investment-edge/ …
Others:
Romance: A BCG Analysis http://www.seth-smith.org.uk/images/laughter/LoveLife.pdf …
Dr. Atul Gawande on "Being Mortal: Medicine and What Matters in the End" | The Aspen Institute http://www.aspeninstitute.org/about/blog/atul-gawande-being-mortal-medicine-and-what-matters-in-the-end …
Interview: Christer Tryggestad, Director, McKinsey & Company Norway | EnergyBoardroom http://www.energyboardroom.com/interviews/interview-christer-tryggestad-director-mckinsey-company-norway …

Guy Spier Q&A

Some thoughts on Harvard Management Company

1. What are some advantages that HMC has over its competitors? 


Some of the biggest advantages of the HMC over it’s competitors i.e. other endowment funds can be stated as following:

·      Because of Harvard Management Company’s association with Harvard University (a globally recognized Ivy league institution), the portfolio managers and research analysts enjoyed access to some of the best research from around the world

·      HMC also had a AAA credit rating – which implies that it had extremely low borrowing costs to leverage up its bets, regardless of size

·      AAA rating also helped HMC to be recognized as a favorable swap counterparty

2. In class you saw a number for the target real expected return for HMC: around 6.25%. How is this figure derived in the case? 


Basically:

6.5% = 4.5- 5% + 1.5 %

If in the long run – the endowment fund was able to generate returns of 6.5 % over the CPI (benchmark), then that would meet the needs of the policy stated by the board.

Where the 4.5% is what is needed to cover the expense of the university, and the 1.5% gap would need to be filled by gifts and donations.

“In the last several decades, spending as a percent of endowment value had been as high as 5.9% and as low as 3.3% but had averaged 4.6%.”

3. What is the Policy Portfolio? Can HMC deviate from its weights? Do you think the Policy Portfolio is a useful concept? (Is it really necessary, or did HMC set it up just to satisfy the Board?) 


Meyer essentially established the ‘policy portfolio’ in 1990 after an extended set of analysis and discussions about return expectations and risk Tolerances. One of the key pillars of the policy portfolio was to focus on long-term opportunities for the endowment and not to focus on short-term market fluctuations.

Exhibit 3 shows what the policy portfolio is under ‘neutral conditions’ and what the expectations are under normal conditions.

While the Policy portfolio is the guideline for performance – the HMC fund is allowed to deviate from its weight as stated in exhibit 3, provided it stays within tolerance. This system of allocation and rotating asset classes and capitalizing on opportunities is what is termed as ‘tactical asset allocation’.

The policy portfolio is a good guideline/mechanism because it let’s users observe performance of asset managers from an objective standpoint and prevents them from succumbing from their biases i.e. moving too far away from their area of expertise and deviating from the portfolio goals. 

By keeping a policy, HMC can control and measure the performance in one core way – over performance over the policy requirement.

via: HMC

Linkfest

BeyondProxy | Value Investing Ideas and Wisdom http://www.beyondproxy.com/skill-luck-gaining-investment-edge/ …
The ultimate guide to everything that will matter in 2015: http://buswk.co/1ux9eGa #yearahead via @BW
Value Investing World: Walter Isaacson interview with Elon Musk http://www.valueinvestingworld.com/2014/10/walter-isaacson-interview-with-elon-musk.html …
Greenlight Q3 Letter: Short http://Amazon.com (AMZN)? http://www.valuewalk.com/2014/11/greenlight-q3-letter-amzn/ …
The Gulf, explained in 40 maps http://www.bqdoha.com/2013/08/the-gulf-explained-in-20-maps …
Tim Cook Interview: The iPhone 6, the Apple Watch, and Remaking a Company's Culture http://rdd.me/he9cfjk2 via @readability
Anthony Scaramucci On The Activist Investing Boom And Other Recent Hedge...: http://youtu.be/KG-RHVMf_6o via @YouTube
Tom Wagner’s Big Idea: American Airlines http://bloom.bg/1CQv5qx via @BloombergTV
Russ Roberts: Adam Smith’s Surprising Guide to Happiness (But Not Wealth) http://www.valuewalk.com/2014/10/russ-roberts-adam-smiths-surprising-guide-happiness-wealth/ …