Well, my father to some extent repeated the mistake of his father-in-law, and after investing in nothing but common stocks from 1945 through 1967 refused to consider any alternatives. He died right in the middle of the 1973 decline, having watched his savings dwindle by 40% in a short time. It took until about 1986--about 14 years--for my mother's investments to recover to what they had been (in dollars) in 1972. And because of inflation, they really were only about half of what they had been in 1972. They never really recovered because she had to start spending them for round-the-clock nursing.
I argued and argued with my parents and with the bank that administered their assets, to take at least some money out of the stock market in 1972. The bank wouldn't. They finally took a lot of it out in the later 1970s, about the time I wanted them to invest in stocks again, thereby locking in the losses.
The trust department in the bank was doing what the trust departments in every other bank were doing, just as I imagine they are doing now, following the fashions of the times.
The fashion of our time is, "Buy stocks. Stay in for the long term." The teams that manage the endowments for universities are doing the same. In 1968, McGeorge Bundy, having caused trouble at Harvard and having helped start the Vietnam War, moved on to the Ford Foundation. Here he urged universities to "live adventurously" with their endowments. Yale did and lost about half. Harvard didn't and kept theirs. But Now Harvard has 10 billion a a youngish new guy who thinks like you, not an old banker from the Cabot family. Harvard will be learning humility. Yale will be learning all over again, having missed the point of thirty years ago. So it goes. (Read John Train's "The Money Masters" for details.) |
