Blue

In your face

I’m not sure whether it’s in spite of me, or to spite me, but Princeton once again has raised tuition and student fees. [fn 1] It feels a little like this: you’re screaming at an ump who has missed one too many calls. You’re an inch from his face, waving your arms, kicking dirt. He isn’t saying anything, doesn’t seem to be listening, and finally just turns his back. The center seam on his shiny blue pants is taut, reaching the limit of its endurance. It appears that he has been storing Horlacher in the manner of a camel, with a repositioned hump. You’re still screaming and waving your arms, but your train of thought has been derailed by the immensity of Blue’s cheeks. He pauses, adjusts his protector, puts his mask on the top of his head, reaches in his pocket, bends over, and...calmly dusts off home plate. And you.

[1] Princeton.edu posting dated 1-25-10. The increase is 3.3% ($1,740), in a year when retired Americans received no increase in their cost-of-living-adjusted social security benefits, because there is no inflation. The increase in undergraduate charges is not designed to generate additional net revenue, because it is offset by increased financial aid. The obvious, although unpublicized, effect of simultaneously increasing charges and aid is to redistribute wealth from the undergraduate families who do not qualify for aid (approximately 40%; nearly 2,000 families) to those families who do. In this way Princeton indulges its love affair with social engineering.

McGwire

Come clean

In 1995, when I wrote my “Open Letter to Princetonians”, Princeton was breaking the endowment home run record.

Three years later Mark McGwire broke the other home run record.

This month Mark finally came clean about how he did it.

Also this month, I started reading the university’s recently released 2009 fiscal year financial statements. I stopped halfway through the auditors’ note headed “Fair value measurements.” The note begins by explaining that the fair value of an investment should be measured by using one of three methods, depending on the nature of the market in which the investment is bought and sold. Level 1 applies to investments for which there is an active market. The fair value of those investments is measured simply by referring to the market quotations. Level 2 applies to investments for which no active market exists, but an inactive market or an active market for similar (by not identical) investments can be found. The fair value of those investments is measured by correlations between the markets, which of course is a less reliable method than that used for Level 1 investments. The next step down, Level 3, the lowest level, applies to investments for which there is no active market, no inactive market, and no active market for similar investments. In short, for Level 3 investments there is little or no market at all. Measurement of their fair value requires use of something euphemistically called “unobservable inputs” and judgment to “develop estimates using discounted cash flow and income valuation approaches.” Needless to say, Level 3 investments are illiquid and have uncertain, subjective, “unobservable” values, if any. As of June 30, 2009, Level 3 investments comprised 80% of Princeton’s endowment—eighty percent. That’s where I stopped reading.

It’s about time the administration came clean about this. How did this happen? Who’s responsible?

In 1961 Miss Becky fed us well, Roger Maris hit 61 home runs, and Princeton invested in old-fashioned, domestic stocks and bonds. Most of what has happened since 1961 with respect to the Gun, home runs, and Princeton investments has not been real.