Harvard predicts that public equities will continue to suck wind

Harvard has picked a new investment manager for its $26 billion in liquid assets (the university is weathier than this but much of its wealth is in real estate).  According to this New York Times story, Mohamed A. El-Erian is “an emerging markets bond specialist” from “the bond powerhouse Pimco”.  Choosing someone like this to manage its money is essentially a vote that public equities (stocks) will continue to perform poorly for some years to come.  How is it possible for stock prices to remain stalled while corporations earn reasonably good profits and only pay out a small percentage of those profits as dividends (the average S&P 500 company pays out 32 percent of profits as a dividend)?  Looting and dilution by managers granting themselves stock options.  So Harvard, which has been mostly right since World War II and earned more than 19 percent in the last fiscal year, seems to be betting on the continued looting of American corporations by their managers and is apparently planning to put its money to work in foreign countries and via debt instruments.

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