wayne m. cohen wcohen at
Mon Apr 8 22:21:56 EST 1996

"Arthur E. Sowers" <arthures at> wrote:
> On 6 Apr 1996, Marc Andelman wrote:
> > >Hi Bert and Art.  I think the term Art was looking for was
> > "Derivatives".  The universities do not want to spend the principal
> > on their endowments.  They want uncle sam to pay as much of the
> > tab as possible.  This makes good sense to bean-counters.  The
> > correct word, as Art said, is leverage.  I just hope they hang
> > on to that wad of cash until the day my confederate dollar is
> > worth something ( it never was worth anything, as it says, not
> > redeemable until victory over the North, or something like that).
> >
> > Marc
> >
> >
> Marc,
> That was the word, "derivatives," I just couldn't think of it at the
> time. I'd say that that word was used as a label for what wiser folk would
> call "smoke and mirrors", but a lot of "administrator/manager types" were
> "taken in" by the flowery platitudes of quick and large profits, as the
> fairy tail was cooked up by fast, smooth talking broker-types. Another
> good trick was the hedge funds (where you had to dump in at least half
> million, to get in the running for 50-200% return on principal) but they
> were cruising along for a while and then, like the titanic, some big funds
> took a hit in the wallet and, a lot of rats abandoned ship just before it
> sank. Now, Marc, I'm thinking of some big mother brokerage firm (again,
> being really bad at names, I can't think of it) that went under about,
> what, 1-2 years ago and the investors all took a bath except the upper
> level management (with obscene golden parachutes). Its on the tip of my
> toungue.
> Leverage.... ah yes. How to get faculty and instruments and publications
> and patents for almost free? And not pay taxes? Start a university or
> private research institute! Its interesting that at my place, the fraction
> of the operating budget that comes from state sources is very close to the
> sum you would get if you add up the actual and estimated salaries of all
> of the administrative level people. Aw.... it must be a coincidence.
> Art S.
Hmmm...there is nothing wrong with derivitives which include options--both
puts and calls--and futures, as well as others.  The instruments themselvs
are used to controll risk.  If you want to put a floor under paper gains, 
such as those represented by the current run-up in the market (Art is
correct about the market being overvalued) they acually decrease an
investors exposure to risk.  When used for speculation they introduce
an unacceptable level of risk.  As the Wall Street types say, "Bulls
make money, Bears make money, Pigs get led to the slaughter house every

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