Can a respected Professor of the funds will never escape his reputation as a”Bo The Cow?”
This is a question runs through my mind in a long conversation with Jeremy Siegel, Professor of money at Wharton School. We discussed stock valuation, bonds, government relief, inflation, and even gold. This is our first in-depth conversation in 5 years, and possibly 10 in the first such dialogue since the mid-2000s.
He ably maintained his reputation—appeared on television in Wharton classrooms, but the majority, especially in the books–by using his in-depth study of market history. “The chief of the the period of running”for the first time was released in 1994, as a data-rich academic work on the market. It sold more than 300 million copies, a solid multi such a book.
Data grouping in the book explains many of Siegel’s ideas: his studies show that there is no other liquid asset classes may produce long-term returns of the stock. The revised and updated 6th Version SFTLR(such as the Bogleheads call the book)is due sometime next year.
The 2020 edition of Jeremy Siegel is a similar revised and updated. He thinks the stock has(surprisingly)has made progress. A little more moderate than before, showing a small Bo Ox of thinking, so many critics–present company, including the effective. Siegel demonstrates not so much like a break from the prior belief as a evolution; he assessment unit within a world that is constantly changing. He also advocates investors need to own The Chief period of running, But he very clearly recognized that real-world events, from the dot com crash in 2000, the great financial crisis of 2007-09, and most recently, 2020 Covid-19 crash, how it affects stock performance. Not only stock, but how he thinks about them.
The cow logo is a touch unfair. Siegel point, his Wall Street Journal column entitled”big-cap tech stocks are a sucker bet.” Timing is refined, released November 14, 2000, within days of the 1990s bull market top. His admonition to investors, both in foresight and in a timely manner:”Many of today’s investors are calm of history and by the failure of any large-capitalization stocks proved, by its subsequent record, a P/E ratio approaching 100.“In the next 3 years, the technology heavy NASDAQ market crash of 80%.
This is a Finance Professor grinding his data, in 2000, while the many investors are caught up in the excitement. However,”valuation”is still the impact of Siegel’s ideas about the stock; in this case, driven by the relative change in bond prices, while their potential for further capital appreciation.
A lot in the past 40 years, fixed income as an asset has been in a powerful bull market Field. The inflation rate peaked at about 14. 7% in 1980; this is to tame and control by, the Federal Reserve Board Chairman Paul Volcker. Since then, it has been neck and neck race between stocks and bonds. In the long term, the stock should be trouncing bonds, according to Siegel’s research. However, in the past 20 years, has debt and the enterprise, must be thoroughly thrashed unit. Since 2000, the annualized return of the S&P500(calculated as the wiki gold)has been 5. 87%and 8. 32% of the long-term corporate bonds, and 8. 34% of the long-term government bonds. The compounds of the thoroughly prepared in the teeth of the shares since 2000 Total Return 215. 6%of the S & P 500 index,401.2%for corporate and 402. 9%for US Treasuries.
Wider and shorter duration Bloomberg, Barclays US Aggregate Bond Index is an annual average of 5. 20% return rate in the past two decades(with 5. 87%of the S&P500). Yes, all the reserves, the risk and volatility of the stock value to less than one percent?
Siegel says it is. According to his analysis, the great bond bull market that began in 1982 officially died. He pushed back hard in the”bonds of the long-term,”the paper, hope that means recovery play a large part. The bond performance for the past two decades is a function of an aberrational times, resulting in an unusual peak in the rate of inflation in the 1970s. This lead to the collapse of bonds, as well as large-scale long-term recovery. Congress and the Federal Reserve actions during each of the last three crises-in 2000 and 2008-09 years, by 2020–has driven yields so low level, they have nowhere to go but up. (Siegel is not a negative rate). “Bonds is going to do better than inflation,”Siegel said in our recent interview. Recently the low interest rates marks a”low-volume generation, and perhaps forever,”he said.
The end of the cattle market bonds led Siegel down some strange roads. He believes, as all of the massive stimulus plan of the Congress and the Fed work, by economic, and will(eventually)send inflation higher. Not like the 1970s, but we should expect rising consumer prices in a few years.
Here, he is doing some pretty amazing advice, and investors to make their investment portfolio:
“75/25 is the new 60/40.” The lower expected returns of bonds, combined with higher life expectancy, reduce the level of bonds required as ballast to offset stock volatility of the portfolio. He expected the bonds provide a real return. This is why he wants the portfolio to keep even more stock.
“Lower your back to the expected stock.” The stock is in the overestimated value, and if the yield is higher, stocks will look more expensive. He does not want the same 6-7% return on stocks has been over the past two centuries. Look into the next century, he hopes that U.S. stock returns will be closer to 5-6%;
StimulationThe government response today is very different from the one we experienced in 2008-09 the year: in addition to the zero interest rate+ $ 3 trillion in Fed liquidity, this time, no more than $ 3 trillion of fiscal stimulus, another trillion dollars likely before the election. According to the embargo, the savings rate has risen to double-digit levels; consumer has been stuck at home for several months, building a strong pool of pent-up demand. Once a treatment and vaccine available, Segal saw a huge surge in consumer spending.
Inflation:Siegel was invited to participate in the 2010 open letter to Ben Bernanke warning of Hyper inflation and the collapse of the dollar and politely refused. He believes that in 2010 all the shipping money action is just as Bank reserves too large. It is not lent out, nor to distribute, which is why there is no inflation after the financial crisis.
The current situation has been the stimulus measures will directly into the consumers Bank account. He saw a large, but temporary moves in the consumer price inflation rate rose to 3-5% in the next few years. Not like the 1970s, but a big change from the past ten years. “Besides,”he added, almost unable to help himself,”I think the stock is really good as a modest inflation hedge.”
“Buy a small piece of gold.” For the first time in his career, Siegel is recommended that investors”a small piece”of gold in their portfolio as an inflation hedge. He suggested that in several of the portfolio’s earnings per share on behalf of its use of his model’s recommendations. In the Segal-earnings per share represent the life mode, for example, a 3% weighting in gold.
This Siegel is still bullish on the stock is hardly a surprise. However, his ideas have change over time. The investment environment has clearly changed, and with it, he has become more flexible.
This may be partly due to his work the tree of knowledge, the management of more than 40 billion dollars of client assets. Real world feedback from actual portfolio has created a very different experience of academic research. Perhaps, adding some of the nuances, how he sees the world.
Anyway, Siegel is the rare academic market ideologues who came to public attention for his core philosophical principle, but seems to be willing to change their views as the facts change. He is still bullish on stocks for the long run, but he presided over his expected future returns.
Intellectual flexibility is very rare in the world of academia and investment. It should be noted and appreciated in these rare cases when found. Segal, academics and practicing lawyers, is one of the rare birds of the thinking of sustainable development as the market.