Robert Savickas, GWU Associate Finance Professor: “All You Say Makes Sense. I Agree That Buy-and-Hold Is Not Good. I Figure That Everything In This World Is Very Transitory, So There Is No Need to Get All Worked Up About It Because It All Is Going to Come to the Same End.”

I have been contacting numerous people, letting them know about my article reporting on The Silencing of Academic Researcher Wade Pfau by The Buy-and-Hold Mafia.

Yesterday’s blog entry  reported on my correspondence with Robert Savickas, Assistant Finance Professor at George Washington University School of Business. Set forth below is the text of the e-mail that Robert sent to me in response to the e-mail from me described in the early blog entry:

Hi Rob,

>

Sorry for not following up; I got very busy lately with various deadlines, etc., so had no time to follow up.  All you say makes sense.  I agree that buy-and-hold is not good, I definitely always hesitated to lock up all my money in one place and hope that fortunes work out well by the time I get to retirement.  But then I also know that there probably is no optimal strategy because we are not smart enough to figure it all out.  There are so many factors: rational, irrational, environmental and a bunch of stuff we don’t even know until it hits (and when it hits, we know but too late).  I figure that everything in this world is very transitory, so there is no need to get all worked up about it because it all is going  to come to the same end.  Of course, it is still good to make our lives, and others’ lives better, while we are still on this journey.
 >
Robert

Comments

  1. The Pink Unicorn says

    Oh oh……. A few comments that don’t fit with Rob’s story:

    “But then I also know that there probably is no optimal strategy because we are not smart enough”

    ”  There are so many factors: rational, irrational, environmental and a bunch of stuff we don’t even know until it hits (and when it hits, we know but too late).  I figure that everything in this world is very transitory, so there is no need to get all worked up about it because it all is going  to come to the same end”

  2. Rob says

    “But then I also know that there probably is no optimal strategy because we are not smart enough”

    I believe that Valuation-Informed Indexing is the optimal strategy, Pink. That much is certainly so.

    I believe that it is possible that I am wrong. But I personally have a great deal of confidence that VII is optimal.

    Rob

  3. Rob says

    There are so many factors: rational, irrational, environmental and a bunch of stuff we don’t even know until it hits (and when it hits, we know but too late).

    You are correct that I don’t agree with this statement either.

    I agree 100 percent that there are things we don’t know about. In that limited sense, I agree with the statement.

    But I do not believe that the stuff we do not know today amounts to a big deal. I believe that it is possible for the average person today to employ a valuation-informed strategy to invest in index funds and to be confident that he or she will earn a solid return while taking on only minimal risk.

    As above, I of course accept that it is possible that I am wrong about this. But I personally possess a great deal of confidence that we have a good grasp of the most important stuff we need to do well in the long term.

    We will certainly refine our understanding over time. But I believe that the huge advances have been achieved, starting in the 1960s with Fama’s work, accelerating in the 1980s with Shiller’s work and then coming together in one workable model with the work that I have done with John Walter Russell and Wade Pfau and hundreds of my fellow community members over the past 11 years.

    Rob

  4. Rob says

    I figure that everything in this world is very transitory, so there is no need to get all worked up about it because it all is going to come to the same end”

    This is the one I agree with least. This one actually elicits a bit of a negative reaction from me.

    Yes, things are transitory. I can certainly go along with that much.

    Re the remainder, my reaction depends on the way the words are intended.

    If “no need to get all worked up about it” translates into “we should not feel hate or anger toward those who have different views,” then I sign on 100 percent. I couldn’t possibly agree more.

    But if “no need to get all worked up about it” means that we don’t all pull together and work as hard as we possibly can and with as much passion and energy as we can muster to help every last one of our fellow middle-class investors learn about the amazing insights we have developed over the past 11 year, then, no. that ain’t my style and it’s not a close call.

    I LOVE what we have accomplished. I LOVE, LOVE, LOVE it.

    And I want to share what we have learned with every single person alive on Planet Earth today.

    Out of a spirit of love.

    Guess who shares that general outlook with me?

    A young whippersnapper named Jack Bogle. Perhaps you’ve heard of him.

    We wouldn’t be here today if it were not for the love of learning and the love of what learning the realities of investing can do for the lives of millions of middle-class people possessed by my good friend Jack. I am honored to have taken his ideas to places that he never imagined they would ever be taken. And I very much look forward to the day when Jack and I will be working together to spread these ideas as far as we possibly can and as fast as we possibly can.

    I wish you all good things, man.

    Rob the Lover

  5. Trebor Martin says

    Ok…so I will assume that you write back to Robert telling him that we can eliminate all risk from the stock market, that VII is the optimal solution, that we need to get really worked up by it all, etc., etc.

    I will further assume that Robert decides that he has better and more productive ways to spend his time than interacting with you.

    That’s about right, isn’t it.

  6. Rob says

    Anyone interested in what Robert thinks about these matters can read the blog entries reporting on our correspondence.

    Anyone interested in wallowing in goonishness can do that instead.

    It makes me sad that there is even one person alive on Planet Earth who finds appeal in electing the latter choice.

    But it ain’t my call, man. It’s one of those things that I just have to accept.

    I wish you well, my old friend.

    Rob the Accepting

  7. Rob says

    I’ll put forward another answer, focusing on one aspect of what you say above that contains a tiny bit of a real and legitimate point.

    Over and over again you make the point that even people who agree with me don’t come here to post. That is true. And it is certainly an odd reality. I certainly have to give you that much.

    It’s not because of any deficiency in the Valuation-Informed Indexing concept. If that were the problem, someone would have identified the deficiency in 11 years. Nothing of that nature has ever been put forward.

    People are afraid.

    There is a Social Taboo that blocks us all from telling the truth about stock investing. The bull market of the late 1990s caused the economic crisis. We all played a part in that. We either participated in the bull or failed to speak up in opposition to it in clear and firm and uncompromising language. We have hurt ourselves and our families and our friends and our country in very serious ways. So we are ashamed.

    We don’t want people reminding us of our shame. I never shut up about it. So some people hate me. Others don’t hate me but tune me out. Others suggest that I say things differently. And even people who think my stuff is amazing rarely advocate on my behalf or come here to post or whatever.

    That doesn’t mean that I am doing something wrong, Trebor. It illustrates how dangerous Buy-and-Hold is.

    Look at the mess it has gotten us into!

    Once we create a bull market, we can’t get out of it. We come to feel shame for what we did and then we engage in these endless cover-ups. For what freakin’ purpose??????

    I get it that people don’t like hearing what I have to say. I get that loud and clear. But what I am saying is important. What I am saying very much needs to be said. If there had been enough people saying what I am saying going back to the mid-1990s, we never would have created an insane bull market in the first place. We need more people saying this stuff, enough so that it comes to seem normal and no longer shocks people. We certainly don’t need fewer.

    When we move to Valuation-Informed Indexing, we all win. Every last one of us.

    Yes, I guess there is a bit of embarrassment for the Buy-and-Holders in acknowledging that they got some things wrong. But it doesn’t have to be such a huge freakin’ deal. That’s on them, not me. And, once we make the transition, we never need to go back. It is a one-time thing. It reduces the risk of stock investing by 70 percent. So is it not worth it 100 times over?

    We cannot get from where we are to where we all want to be without someone saying these things, Trebor. So it’s not like there are any other options.

    If we don’t make the switch, our economic system collapses. A good result, in your assessment? Please be honest.

    When you know that you have to do something and there is absolutely no way around it, the thing to do is just to do it and get it behind you. I could be wrong about that. But I’m not, you know? I’m obviously right about that one.

    People are scared. That’s the story.

    They will become LESS scared as they start to see a payoff for endorsing Valuation-Informed Indexing and for coming forward with strong words of warning re the dangers of Buy-and-Hold.

    We need to see prison sentences for those who have posted in “defense” of Lindauer and Greaney, Do you not see how that helps us all out? After the announcement of the prison sentences, people are going to be a whole lot less likely to put forward death threats or to demand board bannings or to engage in tens of thousands of acts of defamation or to threaten to get academic researchers fired from their jobs. I don’t see how any sane person could even question that.

    And we need to start awarding big financial sums to those who advocate Valuation-Informed Indexing and to give them Nobel prizes and Pulitzer prizes and steak dinners and lots of links to get their blogs high on Google and all this sort of thing. When I get that $500 million settlement payment, every financial blogger on the internet is going to look into Valuation-Informed Indexing. Why the heck wouldn’t they?

    The problem we have today is that The Buy-and-Hold Mafia has scared people with its ruthlessness. We need to flip it. We need to start holding people who recommend Buy-and-Hold strategies responsible for their behavior and providing incentives for all in this field who give honest and accurate and research-backed investing advice. What you incentivize, you get more of. We will see more people posting words in support of me when we start rewarding those who work up the courage to do so.

    Does that all not make a good bit of sense to you, Trebor?

    Rob the Sensible

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