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Debating Jeremy Siegel & Stocks for the Long Run

Posted By Barry Ritholtz On September 30, 2012 @ 4:00 pm In Investing,Philosophy | Comments Disabled

Over the years, I have debated Wharton (University of Pennsylvania) Professor Jeremy Siegel numerous times. He is a very nice fellow who wrote the widely read book Stocks for the Long Run [1] (aka SFTLR).

If I were to take the other side of the SFTLR argument, I would focus on 3 things:

My main critiques are:

1) Buy & Hold delivers inferior returns. Even worse, most Humans have a hard time sticking to it.

2) A simple system of either Valuation — think Shiller’s 10 Year Cyclically adjusted P/E — or Tactical application of Moving Average — Mebane Faber’s 10 Month moving average — significantly improves returns by reducing equity exposure and volatility as markets crash or have major corrections;

3) The current Fed driven markets (indeed, from 1981-2011) is an aberration that STFLR does not (and indeed, can not) anticipate. To quote either Jan L. A. van de Snepscheut or Yogi Berra: “In theory, there is no difference between theory and practice. But, in practice, there is.”

4) There are a myriad of data issues with SFTLR, particularly Survivorship bias, as described by jason Zweig in the WSJ [2] and Birinyi Associates [3].

Regardless of my views, I want to crowd-source the arguments pro and con for SFTLR — What does Siegel get right, what does he get wrong? What is the weakest and strongest parts of his viewpoints?

What say ye? [4]





Bonds for the Long Run [5] (August 9th, 2012)

140 years of Equity Yield vs US Bond Yield [6] (September 4th, 2012)

Bonds Beat Stocks: 1981-2011 [7] (October 31st, 2011)

Revisiting Stocks For The Long Run [8] (August 20th, 2012)

Jeremy Siegel is not having a good year [9] (July 11th, 2009)

Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2012/09/debating-jeremy-siegel-stocks-for-the-long-run/

URLs in this post:

[1] Stocks for the Long Run: http://www.amazon.com/exec/obidos/ASIN/0071494707/thebigpictu09-20

[2] WSJ: http://online.wsj.com/article/SB124725925791924871.html

[3] Birinyi Associates: http://tickersense.typepad.com/ticker_sense/2009/10/what-do-stocks-really-return.html

[4] What say ye?: http://www.ritholtz.com/blog/2012/09/debating-jeremy-siegel-stocks-for-the-long-run/#comments

[5] Bonds for the Long Run: http://www.ritholtz.com/blog/2012/08/bonds-for-the-long-run-2/

[6] 140 years of Equity Yield vs US Bond Yield: http://www.ritholtz.com/blog/2012/09/140-years-of-equity-yield-vs-us-bond-yield/

[7] Bonds Beat Stocks: 1981-2011: http://www.ritholtz.com/blog/2011/10/bonds-beat-stocks-1981-2011/

[8] Revisiting Stocks For The Long Run: http://www.ritholtz.com/blog/2012/08/revisiting-stocks-for-the-long-run/

[9] Jeremy Siegel is not having a good year: http://www.ritholtz.com/blog/2009/07/jeremy-siegel-is-not-having-a-good-year/

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