Inflation Fear Pushes U.S. Endowments Deeper Into Commodities

[D-Mack]

Inflation Fear Pushes U.S. Endowments Deeper Into Commodities

Sept. 9 (Bloomberg) -- George Washington University is increasing holdings of commodities such as oil and natural gas out of concern that a return to inflation rates last seen in the 1970s may ravage the value of its $1 billion endowment.

U.S. consumer prices may rise 8 percent annually within three to five years because of unprecedented government spending and deficits, said Donald Lindsey, the Washington school’s chief investment officer. Growth in the consumer price index averaged 7.4 percent from 1970 through 1979, a period remembered for economic stagnation and eroding values of fixed-income investments, compared with 0.1 percent in 2008.

“Inflation, once it starts, could get very difficult to stop,” Lindsey, 50, said in a telephone interview. “We could see a stagflation environment that’s similar to the 1970s.”

...

http://www.bloomberg.com/apps/news?p...d=aerE4nbTkUjI

I wonder what Harvard is doing nowadays

Because of Harvard's investment losses and the economic downturn, the university froze faculty salaries, slowed campus expansion plans and enacted other cutbacks. The school, which counted on the endowment for 34% of its budget, will also have to make do with a smaller contribution from the fund. The budget will receive 8% less from the endowment in the current fiscal year, and 12% for the following fiscal year.
http://online.wsj.com/article/SB125106917476952351.html

[snakela]

Re: Inflation Fear Pushes U.S. Endowments Deeper Into Commodities

A structural change to view commodities as something you hold in a portfolio, esp. oil, has been blamed for the run-up in prices when demand is falling.

It makes sense to me, esp. the ratio of oil to NG that seems to be exploding.

[GRG55]

Re: Inflation Fear Pushes U.S. Endowments Deeper Into Commodities

A structural change to view commodities as something you hold in a portfolio, esp. oil, has been blamed for the run-up in prices when demand is falling.

It makes sense to me, esp. the ratio of oil to NG that seems to be exploding.

Actually that does not make sense to me. Why would a broad based move into "commodities as something you hold in a portfolio" favour oil over natural gas to such a degree?

Ordinarily when investors "flee Dollars" [to use Herr Finster's apt phrase] "everything goes up" [rising tide for all commodities]. Investors do not have a history of discriminating to the remarkable degree that we have witnessed between crude and nat gas at present. That suggests there is something else going on [perhaps in addition to "commodities as something you hold in a portfolio"].