Marking to Last Year’s Market, Charity Ball Edition

In the very first issue of Portfolio, last year, Tom Wolfe reported on the annual charity ball held by the Robin Hood foundation. After listing the excesses of the auction (ten "power meals" for $650,000; a "five-day “Surf and Sun” trip" for $240,000), he got to the bottom line: "an astounding $48 million" was raised for charity over the course of the evening.

Wolfe, however, was referring to the 2006 event. In 2008, things are different:

Giving away $56.5 million in a night would strike most people as extravagant. But to the tycoons of modern finance, it seems a bit low key.

At the 2008 Robin Hood Foundation benefit this week, auctiongoers donated that much money to charity. But many of the market wizards are making less these days — and they are giving away less, too. Robin Hood’s haul was down 21 percent from last year.

Thus are expectations changed: the 2008 haul was up 18% on the amount raised in 2006. But because it’s down on the ridiculous amounts of money being thrown around in 2007, it’s now considered "a bit low key", and reflective of "the somber mood on Wall Street."

I’m in London this week (which is one reason I’m not posting as much as normal) and I’ve noticed a similar phenomenon regarding house prices. People are worried about falling prices and gazundering, to the point at which they seemingly forget that they’re still selling their house for a lot more money than they bought it for.

Call it mark-to-market gone viral. If you’re an investment bank or a fund manager, it makes sense to mark your positions every day to their market value. But if you’re a homeowner, there’s not much point in doing so – certainly not unless you’re borrowing more against the increased value of your house. If you’re not taking out home equity lines, then obsessing about whether your house is worth more or less than it was a few months ago is rather silly and pointless.

Similarly, a charity ball which raises $56.5 million over the course of an evening is an extremely impressive event. Even if it did raise more than that last year.

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