larry-the-k

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I will be appearing on The Kudlow Report tonight to debate with Wharton professor Jeremy Siegel whether stocks really are the best asset class for the long run. I will be on CNBC at 7:05 – 7:15 or so.

Recall over the weekend, I mentioned that Jeremy Siegel is not having a good year — which was a look at a WSJ article (Does Stock-Market Data Really Go Back 200 Years?) that challenged Siegel’s claims made in his book Stocks for the Long Run.

As we have seen, CDs beat Stocks from 1994-2009, and Bonds outperformed stocks from 1968-2009.

It will be my first time on since in about a year- – we will see if I can still mix it up with Larry the K.

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UPDATE: July 13, 2009   9:21pm

Video is here

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Sources:
S&P500 vs CDs 1994-2008 July 7th, 2009

http://www.ritholtz.com/blog/2009/07/sp500-vs-cds-1994-2008

Stocks vs. Bonds (March 28th, 2009)

http://www.ritholtz.com/blog/2009/03/stocks-vs-bonds/

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

http://online.wsj.com/article/SB124725925791924871.html

Category: Media

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.

45 Responses to “Media Appearance: The Kudlow Report”

  1. ben22 says:

    can’t wait to watch this on re-run, will be in a meeting, going to be interesting. Good luck BR, I hope you don’t get shouted down.

  2. I-Man says:

    Oh this should be some good stuff… CNBC owes you one viewer… for a limited time only.

  3. leftback says:

    Kick some U. Penn Wharton School Ivy League ass, Bazza. He deserves to be pantsed on national TV.

  4. DL says:

    At least J. Siegel is courteous and respectful (unlike a number of Larry’s other guests).

  5. matt says:

    @DL:

    Are you telling me that you don’t like 8-panel YELL!-evision? You’re not a true American.

  6. emmanuel117 says:

    Don’t make him cry now, y’hear?

  7. f97tosc says:

    I am guessing the CD case is based on some kind of CD average. In that case it should be pretty easy to do even better by simply shopping around a bit for different CD rates. Many online banks offer rates that are much higher than traditional brick and mortar banks.

  8. Pat G. says:

    Based on your earlier post you already have the ammunition to destroy Siegel’s position. The question then becomes will you get a chance to let those facts see the light of day or will Kudlow shout over you because he believes in stocks for the long run as well.

  9. Is Siegel still on the board of The Vanguard Group?

  10. BR,

    maybe you should remind J. Siegel that if “Juanito” had defaced UPenn signage the way his ‘works’ have blemished the Quakers reputation, he’d be in Jail.. with that, you should ask him if feels fortunate for the Tan he’s sporting..

  11. franklin411 says:

    Sorry Barry…watching you on Larry K’s show would mean I would have to watch Larry K from 4:00 to 4:05 Pacific, which is about 5 minutes longer than the maximum Kudlow exposure allowed under the Geneva Convention.

  12. Dogfish says:

    GO GET EM BARRY!

    I just realized I’ve never seen Kudlow in my life.

    First impression: He looks like someone doing an impersonation of the late Phil Hartman doing a caricature of a financial talking head.

  13. Moss says:

    I guess I will have to hold my nose and watch.

  14. Dogfish says:

    RAARRRRR

    Too many times today (Just heard it on Kudlow, fifth time today it seems) have I read/heard something about the victimized rich people. How it irks me. Then they’ll throw out a quote about how the top 1% consume the most goods, pay the most taxes, ect, as if we need to further support the greed and trickle-down economics that have brought us into this mess.

    The percentages they quote are a RESULT (h/t cvienne) of the economic inequality that helped get us into this mess – not a justification.

    Kudlow just teased Barry’s appearance going into commercial… gogogogogo

  15. Greg0658 says:

    let the well oiled CA knivers move down to Mexico and employee those poor souls down there ..
    someone will fill the void here in the USA .. a green CEO is easier to spot and foil

  16. Dogfish says:

    Jeebus… Siegel needs a speech therapist.

  17. Greg0658 says:

    if the ecomony doesn’t turn around … somehow … few will want to own much of anything .. maybe open land with utilities using a modern compact land based roving self contained living quarters vehicle

  18. ben22 says:

    well that was about as expected, jeremy’s only argument was “in the past this is what happened” therefore it must happen again.

    He thinks he has some out by saying the last 10 years were bad “I’ll admit that!” but that right there should ruin him if people are paying attention. The 30 year old that was buying and holding in 1998 might now be down 30% or so over the last decade, needing 43% now to break-even, they could be 50 by the time they break-even and as BR was trying to say, we have to tell people what to do with their money because they will need to live off of it, etc. What if you were 40 and finally could start to save in 2005 and put ALL of your money in stocks right up until 1/1/08, how long until you get your money back?

    BR, thank you also for putting down the 76-81 period he tried to say was good for buy and hold stock investors as if inflation doesn’t matter to the person trying to buy things with their retirement portfolio.

    last, did he seriously try to say trailing stops were not a great risk mgmt strategy? I didn’t really get what he was trying to do there.

    Oh also, as he seems to do when he doesn’t like the direction of the convo Kudlow tried to turn this into something else with the “shouldn’t 25-30 year olds buy stocks?” Please.

    Anybody that understands compounding knows that if you start saving young you don’t need to depend on stocks for the long term.

    The most enlightening part of the whole thing was Kudlow revealed it was Siegels book that changed his thinking on things regarding stock market returns.

  19. BG says:

    Sorry Barry, but I swore off Larry Kudlow a while back. Good Luck though.

  20. EricTyson says:

    Barry – of the three participants the outcome tonight was crystal clear to me…

    You won by a wide margin…

    You were CLEARLY and BY FAR the best dressed…and you clearly had the best tie…

    Seriously, though, I wish there was a more substantive debate about Arnott’s recent paper (which I’ve found some flaws with) vs Siegel’s work which Zweig has issues with…

  21. Mike in Nola says:

    Barry:

    You were good, but it’s a rigged game. I’m surprised Larry let you say as much as you did.

  22. karen says:

    I’m afraid… should I watch it?

  23. tommyp says:

    missed it, hopefully I will see it in the video collection soon. By the way, who is that tool hosting a show on CNBC? I hope he’s just filling in for someone. I think his name was Dennis Neil? Is he on every night? Who would watch that? What an asshat.

  24. Bruce in Tn says:

    Ben 22:

    Once again, when I read what you write I have no doubt you are doing a very nice job for your clients. Keep cookin’…..I can tell you from experience for the last 10 years I was 100% long less than 1/3 of the time…and very happy today with where I am. Stocks are fine, but return is king…

  25. DL says:

    Siegel didn’t adequately address the point that there are many (rolling) periods of 15-20 years over which stocks produce very poor returns.

    A period of 15-20 years is a long time, relative to the time period over which the average middle-class person actually saves money.

    What would Siegel’s advice have been to a person who was 50 years old in January of 2000…?

  26. Thor says:

    Bruce and Ben – what makes a “good” trader though? The amount of profit a person makes each year? If so, how much profit? I’ve often wonder how much many of the traders here make in a year – enough to live off? Or is that even the goal? If a person is spending say, 20 hours a week trading stocks, and they’re making 30K a year doing so, what would that compare to say, getting a part time job somewhere? Or is trading stocks for many of you, the ultimate goal – the act of buying and selling is enjoyable and making a lot of money is irrelevant . . . .

  27. DL says:

    Thor @ 9:56

    Yeah, 30K/year for 20 hours/week isn’t great.

    OTOH, there aren’t a lot of great jobs that are readily available for people who are only willing to work 20 hours/week… regardless of how much training or education they may have. And add the fact that, as a trader, you could work 40 hours one week, and not work at all the next. Not many employers allow that either.

    (I have a full time job unrelated to the stock market).

  28. Thor says:

    DL – guess that part of my question wasn’t clear :-). If a person already has a full time job, which I know some of the traders who post here have. How much are they making each year by trading stocks in addition to their full time job. If they’re spending 20 hours a week on their own trading stocks, and the motivation is money, then why not just get a part time job at starbucks? I know the answer to that question is probably because the traders really love trading stocks, but I’m interested in the motivating factors behind trading.

  29. DL says:

    Thor,

    I don’t have a complete answer at the moment.

    But I would point at that I can easily make…. or lose…. $10,000 in a week with stocks (and both have happened many times).

    Can’t do that flipping burgers in McDonald’s.

  30. Andy T says:

    Well….I hate to say it but I actually think Siegel is probably going to be right over the next 10 years. Even a blind squirrel can find a nut sometimes.

    When this current pattern finishes this year or early next year, that’ll probably be the low for a long time….unfortunately the low will be sub-600…..Siegel may be jumping out a window by then…

  31. Andy T says:

    Thor says

    “Bruce and Ben – what makes a “good” trader though? The amount of profit a person makes each year? ”

    Great traders make strong risk adjusted returns…..

    If I wager $1mm everyday and I make 30K, then I’m terrible trader.
    If I wager $2-5K everyday and I make 30K, then I’m a friggin’ great trader.

    To your point, it’s difficult to make a lot of money trading if you’ve only got 20 hours to devote. There are professionals whose livelihood depends on making good calls who spend 70-80 hours a week only studying markets. They spend that amount of time so that they’re prepared for the few trades they’ll do that week….

  32. DL says:

    AT @ 11:01

    Yeah, the S&P500 will be higher in 10 years.

    Anyone who’s 25 years old and happens to have an extra $100K lying around can go ahead and put it in the market.

  33. Onlooker from Troy says:

    Andy T

    LOL! Yep, there will indeed be a good buy and hold period again (i.e. another secular bull). And I want to be alive with capital to invest when it comes. Whether that’s this year, next or later is a pending question, eh? It’s going to be interesting!

  34. Alan says:

    I’m surprised Kudlow let you make your case. I expected him to go off on how you can never lose long-term on the American economy. It was a good segment.

    Stops are always the way to go. If your stops keep hitting take a break and let the charts paint a better entry in the direction of the trend–I always say. :)

  35. Mannwich says:

    Here you go, leftback. This one’s for you. The real estate bag of excrement just hitting the fan and getting started now now in the ‘Burg, Brooklyn. Insane. But, yep, yes siree bobby, we’ve bottomed and a recovery is just around the corner. Say that three times and click your heels. Maybe We The Sheeple will believe it.

    http://nymag.com/realestate/features/57904/index1.html

  36. ddrich says:

    Does Larry ever shut up? Talk about someone in love with his own voice…..geeez

  37. investorinpa says:

    Barry, your point on stop losses was a great one and is something that is COMPLETELY ignored by every financial news network, interviewer, etc. I cannot tell you how much it would have saved my butt if I used stop losses on a couple of dog stocks I bought. Why do you think that there is next to no education on stop losses? This is one of the greatest reasons TO invest in the stock market. I own a lot of real estate and can tell you how I would have loved to bought stop losses for some of my rental houses and apartment buildings.

    While we are at it, are there other simple mechanisms that are never disclosed to the public that they can do to safeguard their investments?

  38. jb says:

    Barry,

    I’m c0nfused and need clarification. Is it ” 60% long since March” or ” … 70% cash and 30% stocks …” that I believe you may have said in June of this year?

    Excerpts: Nasty Fed Emails | The Big Picture
    The recovery will be different, and look different, because it is a long slow ….. My current allocations are about 70% cash and 30% stocks in my trading …
    http://www.ritholtz.com/blog/2009/06/nasty-fed-emails/

    Thanks

  39. jb says:

    Barry,

    Please disregard

    “I’m c0nfused and need clarification. Is it ” 60% long since March” or ” … 70% cash and 30% stocks …” that I believe you may have said in June of this year?

    my notes were ass backwards after reviewing an interview you did on Yahoo Finance, tech ticker on June 16.

    My apologies for the question and any negative inference.

    j

  40. ben22 says:

    Thor,

    I think the measure of success is a little different for each trader. On the point of this debate, the success of the investor depends on the short and long term financial goals which is why you can’t just say buy and hold is good for everyone, they all have different goals, different time horizon, etc. There is nothing worse than blanket financial planning and investment advice imo. What AT said is correct, since a lot of people have another full time job I think the real success as a trader comes in your risk adjusted returns, this is why I’m always talking about investing when the probability is way on your side to make money in something, that doesn’t mean it always happens but if I’m doing it that way and say I have my money at work 1/3 of the time and I make the same exact amount trading during that 1/3 of the time as someone that is invested all the time then I’m doing much better than they are, the other 2/3 of the time I can be in fixed income while they are probably losing money or moving nowhere.

    Also DL and AT said above if that’s all you do, and you are risking larger sums of money to only make $30k per year, that’s not that great and you’d probably be better off getting a different job. I don’t know why you’d take on all the stress for that kind of money. I’m only guessing but I think that most of the people you are following on this site dedicate far more than 20 hrs. per week to this, even those that don’t do it full time. I could be wrong but I don’t think so. I’m involved with the markets 55-80 hours almost every single week for the last 7.5 years but this is my job. I’m also young, don’t have any kids and have staff point being I’m sure a lot of people here have way more to deal with on a weekly basis and just don’t have the option to dedicate that much time to it. One of the best things is what DL talked about, some days I will not work at all, not that I do that very often, but I have the option, most people don’t.

    for me, there isn’t really anything else I’d rather do, this is it.

  41. Tom K says:

    This debate is really about risk management, not performance.

    Buy and hold investors have to manage risk via asset class diversification vs. timing.

    Buy and Holders have a few benefits: If you believe your time has a value, they spend less of it doing research, watching markets, or making trades. They can also benefit by using securities with low expense ratios, and because they trade less, they pay a lot less in commissions. Those savings compounded can really add up over a few decades.

    But Barry’s right, the problem with B&H is the risk of running into a secular bear towards the end of your investment horizon. It doesn’t matter if stocks are the best asset class over the long haul, humans don’t yet have an average life span of 150-200 years.

    Active management and timing is the right approach for me, but it requires more time, more expenses, and more discipline – much more than the average person can realistically put into practice. What works best in theory isn’t really practical in real life for the vast majority of people. Investing isn’t fun or interesting to them anymore than seeing the dentist.

  42. Steve Barry says:

    Siegel is officially a quack who must be ignored. He claims that starting at low interest rates and reasonable valuations, you have a winning market.

    With rates low, that is the worst time to own stocks, as rates will likely be rising…ESPECIALLY IF YOU STATE ONE MINUTE EARLIER THAT TREASURIES ARE TOXIC ASSETS.

    And a P/E of 130, going to 1800, is not exactly reasonable…in fact, I call it INSANE.

  43. ben22 says:

    He claims that starting at low interest rates and reasonable valuations, you have a winning market.

    How many times could you have made this claim in Japan the last 20 years?

    I know I know, we aren’t Japan….

  44. Thor says:

    Ben – thanks for your response, it was exactly what I was looking for. I have gotten the impression that for many of you, trading stocks is a passion rather than a way to get rich quick. My theory is that if you’re in it because you love doing it, that you’ll do much better in the long term than someone who’s doing it because they want to be wealthy. Less emotion I’d imagine.

  45. mdesq says:

    Knocked it out of the park on this one Barry. Very compelling case.