It’s January of 1973. I’m barely 12 years old, barely 5 feet tall and not close to being 100 lbs. It’s late at night; the entire city has been all but shut down for a month due to record snows and low temperatures.
Every other kid attending Rolling Green Elementary is home watching TV, but not me. I’m blocks from home, freezing, as I bang on a door louder and louder. The owner of the home, not wanting to answer his door, turns off his TV hoping the darkened interior will stop my efforts… after all, it’s happened before. This guy has been dodging me for two months. I’m his paperboy.
What my “client” doesn’t know is that I’ve got problems of my own. I buy these papers from the Des Moines Register & Tribune on credit, and my Route Manager, while no Don Corleone, is not someone I can say no to. So, I rear back my Sears & Robuck leather-clad work boot and slam it into his screen door while screaming (loud enough for all of Urbandale to hear). “You owe your paperboy! You are overdue, now answer this door or I’m cutting you off!”
The TV comes back on, I see a paper land on the ottoman and the fellow comes down the hall, opens the door and pays me, doesn’t say a word, just the money. He pays me promptly for the next few years. I haven’t seen him since.
Managing cash flow and staying liquid – you learn those lessons young, or you spend your life hiding in the dark from 12-year-olds… unless you’re an Ivy League endowment.
This year, several of our most prestigious universities borrowed hundreds of millions of dollars to cover budget shortfalls, despite having billions of dollars in their endowments, because they can’t get hold of their assets. You see, most of the Ivy League endowments invest, heavily, in “non liquid alternatives” (the non-liquid part here is key: there is no marketplace to sell at, and private transactions are few and at steep discounts). So heavily invested, in fact, that this year’s special circumstances (mostly the Executive Branch holding up/cancelling their funding) have created a cash flow discrepancy that has their trustees banging on screen doors and yelling into the night, so to speak.
Maybe those trustees never had the advantage of delivering papers, owning a business or handling a family’s household budget, though it seems impossible they wouldn’t understand the dangers of illiquid investments. Many of these same foundations had similar issues during 2008-2010 because of the “great recession”.
As for Iowa Wealth Management, we’ve stuck to investments that are easily bought and sold such as stocks listed on the New York Stock Exchange and U.S Treasury bonds. The benefit? Lots of liquidity and plenty of income for your cash flow needs. These investments have continued to climb up a wall of worry this year. A year that, so far, has been surprisingly good.
