Its been a tough year for the U Penn prof.

First, the market has gotten cut nearly in half, something many buy & hold investors admit is possible, but is supposed to a rare occurrence. But as we have seen in 2008, and 2001-03, and 1972-73, these sorts of brutal bear markets are a lot more common than the theorists like to admit. These 100 year floods seem to come along with disturbing frequency.

Now, Stocks for the Long Run, Siegel’s well regarded book (now in its 4th printing), is under increased attack: Its assumptions have been shown to be false, its conclusion called into question, and now its methodology has been attacked as statistically invalid.

In a WSJ article this morning, Jason Zweig puts together a pretty compelling critique Does Stock-Market Data Really Go Back 200 Years? :

“There is just one problem with tracing stock performance all the way back to 1802: It isn’t really valid.

Prof. Siegel based his early numbers on data first gathered decades ago by two economists, Walter Buckingham Smith and Arthur Harrison Cole.

For the years 1802 through 1820, Profs. Smith and Cole collected prices on three dozen banking, insurance, transportation and other stocks — but ended up including only seven, all banks, in their stock-market index. Through 1845, they tracked 19 insurance stocks, but rejected 95% of them, adding only one to their index. For 1834 onward, they added a maximum of 27 railroad stocks.

To be a good measure of stock returns, an index should be comprehensive (by including many stocks) and representative (by including the stocks commonly held by investors). The Smith and Cole indexes are neither, as the professors signaled in their 1935 book, “Fluctuations in American Business.” They cherry-picked their indexes by throwing out any stock that didn’t survive for the whole period, whose share prices were too hard to find or whose returns seemed “inflexible,” “erratic,” or “non-typical.”

Thus, Siegel’s basis for Stocks for the Long Run exclude 97% of all the stocks in the early history of the US market by cherry picking winners, ignoring survivorship bias, and engaging in data smoothing.


What did this do to the results? As you would imagine, it juiced them significantly. The era of 1802-1870 ended up with a much bigger dividend yield then it should have had.  Siegel originally started at 5.0%, but over ensuing versions, that crept up to 6.4%. The net impact was to raise the average annual real returns during the first half of the 19th century from 5.7% to 7.0%.

If you artificially raise the initial returns in the early part of the data series, then the final annual returns become much higher.

As Zweig sardonically notes, “Another emperor of the late bull market, it seems, has turned out to have no clothes.”


Video here

Does Stock-Market Data Really Go Back 200 Years?
Jason Zweig
WSJ, July 11, 2009

Category: Index/ETFs, Investing, Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

53 Responses to “Jeremy Siegel is not having a good year”

  1. danm says:

    engaging in data smoothing
    Red herring. These are getting more and more frequent. You don’t have the data… it does not exist.

    Something tells me that equity would have been quite riskier then than now… with no Fed there to make sure no one goes under!

  2. CuriousCreature says:

    This article is spot on for a question that has been nagging me- What if some or all of the underlying assumptions for fund analysis are wrong? When a fund manager is asking you about how tolerant you are or risk, they are still showing you a sample volatile trend (you guessed it) that shows a rocky path UP.

    i.e. Dollar cost averaging- buying a little over time. Does investing evenly over time reduce risk? Or does it mean you simply lose less while not making any gains in a secular bear market.

    i.e. Target funds- assumes more risk in younger years and becomes more conservative closer to target age. This assumes you are in a structural bull market which may be volatile but goes up over time. You get killed in a secular bear market unless the manager is buying and selling as needed.

    Personally I don’t think professionals have been given the tools or the training to advise their clients properly in this kind of market. They are still giving the same old tired advice 1) buy and hold strategy 2) dollar cost averaging 3) trust me and I’ll watch over it for you….. blah blah blah.

    IMHO- What must be done is the advisor must know and discuss the primary and intermediate trends and the underlying economic environment. Otherwise it’s all smoke and mirrors.


  3. krice2001 says:

    So what does it mean for stocks going forward if people start to feel that stocks are not THE great investment for the long haul? Between the shock of 2 recent severe market downturns and the “stories” creeping out that the proponents of buy-and-hold may have had alterior motives… It could get interesting going forward. How will people invest their long term money? More bonds? More CDs? Money Market Funds?

  4. danm says:

    Personally I don’t think professionals have been given the tools or the training to advise their clients properly in this kind of market
    Not everyone can beat the market. If all pros had the proper tools and training then they would all see the same opportunities and they would all generate the same returns = market return. They would also avoid the same pitfalls and the economy would me much smaller due to less IPOs.

    The equity market has always been good to a small % of investors. If the market benefits everyone, then you have socialism and you don’t need equities.

  5. dead hobo says:

    I just see hypocrisy here. Magic charts that cover 200 years are now no good, but they’re OK if they only cover dates since 1929 or 1945 or 1973? Next, someone with newspaper credibility will claim that it’s no longer OK to compare two charts and claim history is repeating itself if someone changes the scale and scope of one chart in order to make it look like another. If selective data over the short run is OK, the stocks for the long run must still be OK.

  6. CuriousCreature says:

    Right now there is a structural issue that trumps any philosophy of investing. IMHO we are in a credit bubble deleveraging deflationary environment. Frankly I think there are two ENORMOUS asset bubbles that have not burst yet- college costs and healthcare. It will come. Throwing more money at anything just creates inflation. Taking it away is the cure.

    There is a danger in having any long term philosophy of just save it and forget it. There is a danger of inflation probably years away, but it bears watching.

    What always works- pay down debt aggressively. Avoid credit as much as humanely possible. Live below your means. And give what you have in time and money to those in need. Time tested.

  7. danm says:

    What always works- pay down debt aggressively. Avoid credit as much as humanely possible. Live below your means. And give what you have in time and money to those in need. Time tested.
    This goes totally against the economic system we have in place. Individually you can pay down debt but in aggregate, they will not let debt go down.

    Since 90% of our population is producing non-essential goods and services, if everyone did what you promote, it would be cataclysmic.

  8. Transor Z says:

    Barry, yesterday you asked why anyone should pay attention to the economists. This helps answer that.

    The lack of objective standards in Economics for principled analysis adds urgency to the need to cheat, bribe politicians and invest billions in supercomputers to bottom-feed off of inefficiencies. Billions in GDP spends its “working” day in the interstices between bid and ask, “providing liquidity,” which in a sense means getting paid to make the market appear to be more efficient than it really is. Investing in dueling algorithms that are just sophisticated versions of sniffing out and gaming autobid settings on eBay. It beats doing the real work of slogging through piles of paper to sniff out value or lack thereof in equities, I guess. But, absent objective standards, this is where the smart money will always go because it’s safe.

    In another discussion some time ago the point was made very well that, in hard sciences, consensus is a red herring. This is something the global warming skeptics pick up on. Because in the real sciences, you’re either right or you’re not. But the hard sciences advance verrrrrry slowly and methodically. Certainly not “at the pace of business” like the commercials say. Scientists make modest additions to the body of existing knowledge and only rarely do you get the genius quantum leap forward.

    So analysts/fund managers like you who have a certain amount of independence — and no budget for co-located nuclear-powered supercomputers like the big market teams and only limited access to the Commissioner’s office — get to play Moneyball in a field where the majority rely on scouting wisdom from the time of Abner Doubleday (Adam Smith). “I sure like the way that kid spits his tabacky.”

  9. CuriousCreature says:

    Since 90% of our population is producing non-essential goods and services, if everyone did what you promote, it would be cataclysmic.

    The cataclysmic failure you mention is already upon us.

    The system as we know it is not healthy. This country used to produce goods and services and forfeited all of that to become a nation in debt.

    The American people really do get it. They are retrenching and shedding what was never really necessary to begin with. We never needed a new wardrobe every year. We never needed a TV in every room.

    To live without debt and within your means will become a most sought after freedom.


  10. Steve Barry says:

    Does this mean we shouldn’t have been spending billions on ring tones for our cell phones?

  11. danm says:

    To live without debt and within your means will become a most sought after freedom.

    There are a lot of historical situations where fiscally conservative people lost everthing.

    IMO, it’s not an obvious winning strategy.

  12. Steve Barry says:

    Anyone who is not out there warning that unless earnings miraculously rebound, stocks are going to become a smoldering crater, is a fool. Siegel appears to be the Chief Fool:

    Buy and Hold? You Bet
    Over periods of 20 years or longer, stocks have never lost money, even after inflation.
    By Jeremy J. Siegel, Contributing EditorFrom Kiplinger’s Personal Finance magazine, August 2009

    Stock-market investors are an unhappy bunch. Standard & Poor’s 500-stock index is no higher than it was 12 years ago, and over the ten years ended in May, stocks have returned a dismal -1.7% per year. So it’s no surprise that investors wonder whether “buy and hold” and “stocks for the long run” are discredited concepts (see Can You Time the Market?).

    The short answer is that stocks are still the best long-term investments. As bad as the past decade has been, there have been other ten-year periods during which stocks have recorded even bigger losses. Yet over periods of 20 years or longer, stocks have never lost money, even after inflation. Including the latest bear market, stock returns have averaged 7.8% per year over the past 20 years and 11% annually over the past 30. Nevertheless, the assault on buy-and-hold investing continues. Robert Arnott, of Research Affiliates, recently observed in a widely publicized article that over the past 40 years, even lowly government bonds had outperformed stocks. Just a few months later, though, events overtook that claim as stocks rallied from their March lows and bond prices skidded.

  13. Pete from CA says:

    “How will people invest their long term money?”

    Maybe they (i.e. most of us) simply won’t have any. To turn CuriousCreature’s point of view upside down, the social change may be coming in the form of eternal indebtedness. People will “pay down debt aggressively” in the sense that they won’t have any money left to save. Financial independence and retirement for the masses may turn out to be a fluke of the late 20th century…

  14. danm says:

    Yet over periods of 20 years or longer, stocks have never lost money, even after inflation
    True but when inflation starts appearing stocks crater. Stocks only bounce up when inflation expectations start getting incorporated into business models.

    Right now there NO inflation expectations in business models. So I will buy stocks to protect myself from inflation only when inflation makes some sort of appearance.

  15. Pete from CA says:

    Btw, I am not sure why the fact that stock data from the first half of the 19th century is unreliable is such big news. Did anyone really think that it was as reliable as the S&P500? Anyone who pays any attention to the markets knows that even the DOW index is a piece of shit compared to the S&P500.

  16. call me ahab says:

    Reich Says-

    “So instead of asking when the recovery will start, we should be asking when and how the new economy will begin.”

    Amen to that- let’s start fresh- clean sheet of paper- the wish for a continuance of what we had become- is a wish for that which is unsustainabile


    “Detroit Public School System Ponders Bankruptcy”

    It is becoming apparent that many of our larger cities are becoming nothing more than 3rd world countries- zero tax base- impoverished populace- societal breakdown in play

  17. CuriousCreature says:

    @Pete from CA
    People will “pay down debt aggressively” in the sense that they won’t have any money left to save. Financial independence and retirement for the masses may turn out to be a fluke of the late 20th century…

    There is a slice of the population that you refer to. I see them as the generation in debt. You know them, and I know them. They got way over their head just like the banks and are losing everything.

    However, not all Americans lost their minds on credit. I would even say the majority didn’t do it. We always wondered how those folks afforded the house on the hill. Well now we know. They never owned it really.

    I’m VERY optimistic about the end point here. Americans have something in our DNA that enables us to climb out of catastrophe better then anyone on the planet. Innovation and hard work will return as we continue to show the world what we are made of.


  18. call me ahab says:

    curiouscreature Says-

    “Americans have something in our DNA that enables us to climb out of catastrophe better then anyone on the planet. ”

    I have to disagree- here’s a catastrophe-

    - operation Barbarossa and invasion of the Soviet Union- siege of Leningrad- 872 days- 1.5 million dead- battle for Stalingrad- 2 million dead

    Russians are some pretty tough mofo’s


    carpet bombing of Dresden and Soviet destruction of Berlin- complete and utter defeat- unconditional surrender- country partitioned for 40 years- and yet Germany is the largest exporter in the world today and very prosperous-

    now that is climbing out of catastrophe better than anyone on the planet

    as far as America- i have my doubts

  19. daniellepark says:

    Barry, I appreciate Jason Zweig’s article, and I have long been critical of Jeremy Siegel’s long always cheerleading. But here is a strange paradox. Zweig himself was rejecting any efforts at cycle timing or technical analysis in his anotated edition of Graham’s “The Intelligent Investor” updated in 2003. This was back in the wake of the last 50% decline when buy and hold advocates were still pummeling the helpless masses with their harmful drivel.

    At page 276 of his revised edition of Benjamin Graham’s book The Intelligent Investor, editor Jason Zweig refers t0 a “leading financial planning” newsletter that had canvassed dozens of advisors as to how prospects should go about selecting an advisor. A few of the suggested questions include:

    “What is your investment philosophy? Do you use stocks or mutual funds? Do you use technical analysis? Do you use market timing? [And then Zweig adds] ” (A “yes” to either of the last two questions is a “no” signal to you.)”

    I pointed out this WTF comment in my book “Juggling Dynamite (2007, p. 150).

  20. thetanman says:


    Ding ding! I’ve been involved with universities since I was a tiny tot, and the system is presently bubbled up right nice. Not many people mention it, but institutions supposedly stocked with the brightest people we have, cannot make it without tuition increases twice that of inflation. Just more highway robbery and debt enslavement. Our local university was $182/quarter in 1977 and now its over $4000/semester. Really quite insane. And what do we get? Graduates that can do LaPlace transforms, but can’t find their asses with both hands. Half of the EE curriculum consists of interesting, but ultimately useless, math tricks.

  21. Nice catch, Danielle!

    Why don’t the academics understand the difference between risk management such as stop losses ands market timing ?

  22. thetanman says:


    Comparing anyone to the Germans is a pretty high standard. The effects of communism on the East German’s can still be seen, but over all Germans are efficient tight asses. And very clannish. No wonder they thought they could win a World war with only 80 million people. Germany has the World’s most efficient people, with some of the crappiest land and weather, and has come back from utter destruction twice. Now they face their ultimate undoing-demographic Götterdämmerung.

    To compare contemporary Americans to people in the past who have pulled out of serious trouble is a joke. We can do it, but basically we must become a whole different people. We have begun, but the elites want us to remain debt slaves, and until we reject what are basically modern day robber barons, we are lost wondering aimlessly in a sea of lies and deceit. To say we’ll pull out of it because we are Americans is arrogance that is begging to be proved wrong.

  23. BG says:

    IMO, You guys and gals can forget about DCA, BnH and all the other lovely myths we have been lead to believe over the years. We now have a much bigger problem in the reality that there is no accountability, ethics or fairness in any financial instruments coming out of Wall Street.

    Couple that with the demographics of the Baby Boomers along with no decent paying jobs in the US required to generate the discretionary income and you are basically fucked regardless of what you chose to do with your so-called investments.

  24. sharkbait says:

    Re: Jeremy Siegel not having a good year:

    “Buy and hold” is a secular bear mkt.? Maybe in a secular bull mkt., but we’re about 9 yrs. now into the former… I believe that some form of mkt. timing is essential here. In fact, I have put my $ where my mouth is, and invested w/ Barry’s group at FusionIQ. I also follow, and respect Danielle Park at Venable Park as well. I even looked into investing there, but as a US investor, no can do (Canadians only).

    The retail investor must realize that the typical financial advisor/ mutual fund industry is not doing us any favors. How can they when it’s a sales-driven entity, and as in RE, it’s “always a good time to buy”? This is a difficult mkt. I defer to the pro’s. Keep up the good work Barry! At least we can get some useful info here, and at other objective fin. blogs. Turn off your TV.

    Good luck to all!

    BTW the Matt Taibbi article is worth a read (Rolling Stone July 9-23, 2009). It’s interesting that it had to be published there…


    BR: We discussed the Taibbi article here, here, here and here!

  25. Winston Munn says:

    Curious wrote, “I’m VERY optimistic about the end point here. Americans have something in our DNA that enables us to climb out of catastrophe better then anyone on the planet. Innovation and hard work will return as we continue to show the world what we are made of.”

    Are you running for office? Can you see Russia from your front porch, too?

    I am continually amazed at this thinking that Americans are somehow exceptional, better than the world at large, and thus entitled to a recovery without pain. When we torture it is enhanced interrogation because we do it for the right reasons; when they torture it is torture because they aren’t us. Our empire was right to invade; their empire was wrong to invade.

    Self-delusion got us into this mess. We shouldn’t encourage more.

  26. Marcus Aurelius says:

    Thank you, Winston Munn.

  27. matt says:

    Not to mention that he was only using U.S. equities to prove his point. I can provide a perfect counter-example of an equity index that has been in decline for more than 20 years (right across the pacific). Unless you are one of those people that thinks America is special, stocks for the long run is bullshit.

  28. TDL says:

    That’s because TA is hocus pocus, didn’t you know that?! Here is an interesting factoid, the CFA has included TA in the Level I course work for the first time in ’09 (at least I believe this is the first time it has been included, I have the 2007 course as well and it is not included.) I find it odd that techniques that have been in use as long as (if not longer) than fundamental analysis are immediately dismissed by a large portion of the profession. I imagine that this is due to some type of institutional (on the academic side particularly) bias.

    There is also something to be said about received wisdom; people in general have limited time and pick and choose what ideas they will question while accepting the received wisdom in most domains of knowledge. Since most people are better served spending their time plying away at their profession, than doing stock analysis, actively investing their portfolios, speculating in f/x or r.e., etc., they will instinctively accept certain notions that have become commonplace. This is where our profession, in general, has done a great disservice to our clients. Instead of creating an environment where we can engage our clients and make them feel comfortable questioning our assumptions, we use jargon and overly complicate issues to intimidate them. This is one of the reasons that I left the retail end of the business; frankly we are not taught to be honest, but to just sell.


  29. VennData says:

    The existence of an equity risk premium implies that stocks must be a better long run investment than debt, otherwise capitalism doesn’t work. However, the ERP’s not too big. So with varying amounts of volatility, a small difference takes a long time to guarantee results. A 1-2% ERP means decades.

    So a lifetime of investing is a way to capture that difference, however, the optimal method is to allocate (change the asset allocation slightly as you age) between equities and bonds and re-balance (when stocks go up sell some and go back to your asset allocation or when they go down, vice-versa.) Anything else is a drag on long term returns (eg. active management, technical analysis, stock picking, brokers, reading Money Magazine etc…)

    On a related note, the Wall Street Journal missed the mark with this slipshot analysis.

    First, re-balancing among fixed asset classes (asset allocation) was practiced as long ago as the Renaissance by Jacob Fuggar

    Second, only at the end do they “Discover” that “Hey! TIPs don’t correlated with stocks” Really? Well welcome aboard, been doing it for a long time.

    Wall Street is a sales machine. You don’t need it. Here’s all you need:

  30. krice2001 says:

    @ Winston
    Yeah, that’s part of my fear. I keep hearing many saying that we as Americans are different and (therefore) better than everyone else and therefore deserve and should expect a better outcome from these crises than everybody else. I’m very proud of our country and believe it’s a great place to live (compared to all other options) but we have to face that we are humans and subject to the same laws of “physics” as everybody else. If we screw things up big time, we are subject to the same outcome (pain and suffering) as anybody else who screws things up this big. Things will not end well unless we figure out how to best address the hole we’re in.

  31. Pete from CA says:

    “Americans have something in our DNA”

    Yes, the diversity that comes from immigration. I am not kidding, I think that’s a key advantage the USA has over most other countries. If you factor in geographical diversity, then you actually have a pretty good case for the US being in a very unique position. For these reasons I am betting that the US will go last even if the world goes to hell.

    But of course this doesn’t say anything about the prospect of equities as a long term investment.

  32. emmanuel117 says:


    I’ll be damned. I figured the EMH crowd would never back down against that “superstition”.

    This feels like a leading indicator of something…

  33. Not everyone can beat the market.

    That is a false standard anyway IMO. It is not the job of the investor (it is the money manager, maybe) to beat the market. It is the job of the average investor to create enough cash flow to meet or beat the cost of living. If that person can do that, all other points are moot. It always comes back to food on the table and a roof over our heads. If more people could target that goal they would be much wiser and probably less risky investors. They wouldn’t serve the need of the investing ‘industry’ though which has a vested interest in keeping people in the gambling mindset

  34. mark mchugh says:

    My points:

    1) These pollyana-ish “long term” charts (like Ibbotson) have a fatal flaw: they only track the survivors. Which is about as retarded as saying the average civil war soldier (who didn’t die from dysentery or battle) live to be 67!

    2)God help us that bright, young people’s parents pay ungodly sums of money to have their kids heads filled with compost by the likes of Siegel. And we’re looking to them for answers?

    3) WTF is up with Siegel’s hair? And does he think he can “comb-over” the flaws in his thesis?

  35. CuriousCreature says:

    Self-delusion got us into this mess. We shouldn’t encourage more.

    Actually I’m not in disagreement at all with that. Pain will be a necessary ingredient for what lies ahead. What I see is a fostering of an entitlement culture. A self aggrandizement that somehow means that you don’t have to work as hard. That just creates a bunch of spoiled brats who never had to earn their way. Taking credit away is like taking heroin away from a junkie.

    No. I’m not in support of that at all. What I support is remembering what is important. To be enough of a leader in your own community and your own mind that you do not need the stuff that is being sold as essential to your identify. In reality we need very little.


  36. super_trooper says:

    @Steve Berry@danm
    “Yet over periods of 20 years or longer, stocks have never lost money, even after inflation.”

    Really? Some peopl just love to pull #2 from their ass. How about
    Nikkei225 index 10400 in March 1984 TO 8000 in March 2009. That’s not adjusted for infaltion.
    S&P 500 Jun 1962 69 to Jun 1982 109 an increase of 60%. Over the same 20 year period inflation was 300%

  37. Onlooker from Troy says:


    You’ve misunderstood. Steve B and danm were only quoting Siegel, not making those statements themselves. Your beef is with Siegel, which many here definitely agree with.

  38. call me ahab says:

    all you finance degrees out there- do they still teach the “optimal portfolio” anymore? I always thought it was kind of cool sifting through the companies trying to find the right mix- the professor I had made us make our own using 11 companies-

    who knows – maybe they’re teaching TA nowadays and everyone is looking at candlesticks

  39. Mike in Nola says:

    One other factor not discussed in these analyses was alluded to by Mark McHugh, although in a different way: survivor bias covered by Taleb in one of his books.

    Survivor bias is the reasoning that causes humans to think we must be special because we are here, when the reason we making discussing the issue is really only that we were lucky enough to have survived. The many other species that fell by the wayside on earth or on other planets that didn’t stay habitable long enough for intelligent life to develop never get to think about the reason for their existence.

    When people look at “the stock market”, they are looking at an artificially selected set set of markets that is one of the longest surviving, the American markets during the prime period of growth of what has turned out to be the most powerful economy ever. I imagine the only other that would have been in continuous operatin would have been the British markets and don’t really know what disruptions it faced or what returns it had in the 1930′s-1960′s.

    We had the benefit of the insulating oceans that allowed us to grow unmolested until we were able to become an industrial power and furnish the munitions and raw materials to the former great powers while they butchered each other in WWI and WWII. We then wound up with most of the wealth. No one studies what happened in the many other markets around the world that have fallen by the wayside like unsuccessful species. I believe Taleb cites the examples of Russia and Argentina before WWI. Both were considered to be solid investments. The French used to buy Russian bonds backed by what had been a very stable government. Argentina was a young economy with a bright future. We all know what happened.

  40. DL says:

    Jeremy Siegel has a financial stake in the Wisdom Tree products, and one can expect him to be biased as a result. But he was touting stocks long before he had any stake in the W.T. ETF’s.

    What is not entirely clear to me is, what would have been his motivation for being anything less than intellectually honest (at least prior to his involvement with Wisdom Tree)…?

  41. super_trooper says:

    @Onlooker from Troy
    Ditto, providing the info, Steve Berry provided the reference for the paragraphs in his comment. Damn, agreed with the 20year argument.

  42. Pete from CA says:

    @Mike in Nola

    “Survivor bias is the reasoning that causes humans to think we must be special because we are here, when the reason we making discussing the issue is really only that we were lucky enough to have survived.”

    So in your opinion the main difference between us and the Neanderthal is that we got lucky? Isn’t that the very definition of survivorship bias?

  43. danm says:

    all you finance degrees out there- do they still teach the “optimal portfolio” anymore?
    That’s the joke. Math is usually used in an ad hoc way in finance.

    Most investment pros get Math, Econometrics and Stats 101 where all they learn to do is how to plug numbers in formulas. Garbage in, garbage out!

    The theory clearly stipulates using expected numbers (i.e. expected returns…), yet investment pros keep on using historical data (very often 5 years!). The optimal portfolio is great in theory… in practice we still need that crystal ball!

  44. danm says:

    Damn, agreed with the 20year argument.
    I never said equities PERFECTLY matched inflation. But I do believe that they offer better protection than a lot of other products out there.

    I would not buy equities now as a protection against inflation because there are currently NO inflation expectations set in business models.

    When inflation starts increasing, margins take a hit due to an initial lack of pricing power and increasing costs. Stocks tank and then you get in.

  45. alfred e says:

    @Mike in NOLA: Agree.

    But what most don’t consider is how much wealth British “royalty” owns in North America. Yeah, we won the Revolutionary War. And confiscated exactly what?

    Peabody Coal. Wealth knows no national boundaries.

    They’ve been sucking on our teat for centuries.

  46. [...] Jeremy Siegel is not having a good year | The Big Picture [...]

  47. [...] As Zweig sardonically notes, “Another emperor of the late bull market, it seems, has turned out to have no clothes.” Taken from The Big Picture (link here) [...]

  48. bdg123 says:

    A spade is a spade. Siegel is a clown in professor’s clothing. Not only is his book full of deluded hyperbole, but his understanding of economics is astoundingly silly. Time after time they had this pumper writing articles for Yahoo Finance and appearing on CNBC telling us how cheap stocks were and how great the economy was before the crash. I played pin the tail on the donkey with some of those statements. I mean there was one article on Yahoo Finance citing this utterly bullshit valuation method that any high school student could have said was manure.

    I have nothing personal against Siegel and wish him the best. But, until we start to seriously criticize and call out the completely baseless dogma spewed by these clowns, society will continue to hold onto false truths and those with something intelligence to say will never get their voices heard. That means we’ll never get this economy turned around.

  49. Bob A says:

    Buy and Hold
    Santa Claus
    the Tooth Fairy
    Apples are easier to use

  50. [...] Just how long run does stock market data really run?  (WSJ also Big Picture) [...]

  51. sidmando says:

    This should come as no surprise to anyone who has followed Siegel’s commentaries over the past few years. Not only is he intellectually dishonest, he also has been completely wrong about the financial crisis. To wit, here’s a quote from a Sept., 2007 article by Siegel in which he makes a prediction every bit as foolish as Irving Fisher’s forecast of stocks reaching a “permanently high plateau” in 1929.

    “The Fed made the right move at the right time and… stanched a contagion that threatened to turn a problem isolated to the real estate sector into a full blown liquidity crisis and recession… Thanks to their concerted actions, the sub-prime crisis should not turn into a recession.”

  52. Leisa says:

    I’ve left this link here and other places. I consider this paper: Irrational Optimism, (Dimson etal) to be a must read. Some of Barry’s readers might find it worth reading.

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