How Much Has Harvard Really Lost?

While these assets may have lost even more than US stocks this year, it's not hard to imagine that this strategy still makes sense in the long term. It really depends on whether you think this is simply a cyclical recession in the US or whether there is a risk the US will continue to decline relative to other nations. If the latter happens, commodities may regain value much faster than US stocks.

And of course it's not just Harvard that's hit with losing nearly a quarter of it's value: Yale had announced it lost 25% [http://seekingalpha.com/article/111196-yale-endowment-down-2...] and if you do a news search on "college endowment" you'll see similar losses.

It'll be interesting to see how colleges cope with budget shortfalls especially with the initiatives that they've made on the financial aid front.

There's also the fallout from the Madoff debacle that hasn't yet been factored in: http://www.usnews.com/blogs/paper-trail/2008/12/22/tufts-yes...

Somewhat paradoxically, U.S. stocks are likely to do better if the U.S. declines relative to other nations. Very few U.S. stocks make the bulk of money in the U.S. Instead, they tend to make most of their revenues abroad (usually from 30-70% for most S&P 500 companies) and pay most of their expenses in the U.S. If the U.S. dollar declines, their expenses drop, their revenues increase, and so their earnings (and hence stock price) go way up. If the U.S. worker declines and can't bargain for the same standard of living they used to have, their wage costs go down, their revenues remain constant, and their stock price goes up.

The nightmare scenario for U.S. stocks would be if international trade goes kaput and war breaks out. Then they'd see the bulk of their market instantly disappear, with a resulting drop in earnings and stock price. But in this case, you should be worrying about how not to get killed, and not where to put your money.