Tag Archive for 'Washington Spectator'

SENATORS AND IVIES WEATHER FINANCIAL STORM

GREENPOINT, Brooklyn, Aug. 24…Wanna make a fast dollar?

“Find a hacker and go to Harvard.”

That’s what Efraim Durg, CEO of Durgometrics, a hedge fund that specializes in high risk investments, is advising his clients these days.

Durg has just returned from the Federal Reserve Bank’s annual retreat in Jackson Hole, Wyoming, where the mood was dismal. Central bankers from all over the world were puzzled and distressed by the slow but steady erosion in the global economy.

“We are in the midst of the greatest financial crisis since World War 2,” said Stanley Fischer, governor of the Bank of Israel. Yutaka Yamaguchi, former Deputy Governor of the Bank of Japan warned that the world was in a period of “exceptional uncertainty.”

But Durg is optimistic. “The economy is like a seesaw,” he says. “if somebody is down that means somebody else is up.”

Durg says he has found two classes of investors that are doing exceptionally well–US Senators and university endowment funds.

“Our research shows that the net worth of all US Senators has risen almost 20% since 2004,” he says. “And this same period recorded substantial gains for endowment funds.”

Durg quoted a report in the Washington Spectator, which said that Senators who played the market earned an “abnormal rate of return” According to the report: “Senators consistently anticipated movements in stock prices; they often purchased stocks before prices took off like a rocket and revealed an uncanny ability to sell just when a stock was about to flatten out.”

Senators and their spouses outperformed the market by by around ten per cent annually, the report said.

“Nobody gets results like this in the financial world,” said Professor Tom Ferguson of UMass-Boston, “Any manager of a mutual fund who beats the market by two per cent is considered a genius.”

“Just shows you how clever these politicians are,” says Durg with a knowing wink.

University endowments have done almost as well in this down market. The top fifty funds have risen over a 100% in value. The managers of these funds may have done well in former jobs, but they became financial wizards when they went to work in the Academe.

“Must be the food in the campus cafeteria,” says Durg with an ironic tap of his nose.

But Durg says the “numbers really explode” when you pair a Senator with his/her alma mater.

“Take Senator Kennedy (Edward Kennedy, D. Mass.) for example,” he says. “During the periods 2004 to the end of fiscal year 2006 his maximum net worth rose 300% from $51 million to $162 million. As Kennedy contributed less than 1% of his income to charity he was able to spend most of it on his lifestyle, his homes and especially his beloved yacht where he recuperated after cancer surgery.”

At the same time Kennedy (Harvard ’56) was getting rich his alma mater’s Endowment Fund was getting richer, growing at a rate of 23% per annum to $35 billion at the end of fiscal 2007. And this year with the finest minds in finance going bankrupt or to jail the Harvard Fund is up 9%.

This means that it has $1,456, 940 to spend on every student, not counting tuition and grants. But the fund plows most of its profits back into investments.

“University Endowments are run by managers, not educators,” says Durg. “They just want to use their money to make more money.”

What’s behind this incredible success? Do lobbyists and anxious constituents feed inside information to Senators? Do wealthy alumni tip off their endowment fund managers?

Durg refuses to speculate. “If you catch a guy playing with loaded dice, you don’t turn him in, you get a piece of his action.”

Unlike Warren Buffet, Senators and endowment funds don’t share their wisdom.

“You’ll have to get shady to get rich,” Durg says.

He suggests trying to corrupt an employee of the endowment or the senator’s staff–”maybe drugs or sexual blackmail, incriminating e mails or photos–” and getting information on the daily trades.”

Or planting a mole inside the endowment–”an MBA with a streak of larceny–” and have him spy from the inside.

You can always find a cleaning lady or maintenance person to bring you the all the trash from the trading floor.

But the best way is to find a hacker–”some nosepicker in Slovenia or Mindanao–”to plant a keystroke in their computers that sends all their transactions right back to Mama.”

Just be careful not to get caught.

“Insider trading is nothing,” Durg says. “Senators can get away with murder, too.”