{"id":403126,"date":"2010-03-08T07:04:59","date_gmt":"2010-03-08T12:04:59","guid":{"rendered":"http:\/\/blogs.wsj.com\/economics\/2010\/03\/08\/qa-whartons-stock-booster-jeremy-siegel-sees-another-year-of-growth\/"},"modified":"2010-03-08T07:04:59","modified_gmt":"2010-03-08T12:04:59","slug":"qa-wharton%e2%80%99s-stock-booster-jeremy-siegel-sees-another-year-of-growth","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/403126","title":{"rendered":"Q&A: Wharton\u2019s Stock Booster Jeremy Siegel Sees Another Year of Growth"},"content":{"rendered":"

Controversial economist and author Jeremy Siegel<\/strong> took a lot of heat last year when markets hit bottom. The Wharton School of Business professor\u0092s thesis that stocks always beat bonds over the long term looked shaky with bonds outperforming stocks over the previous 5, 10, 15, 20 and 25 years ending June 30, 2009. Commentators poked at his analysis of historical stock performance, including the Journal\u0092s Jason Zweig<\/a>. (Mr. Siegel responded here<\/a>.)<\/em><\/p>\n

Since then, of course, it\u0092s been a pretty good year for stocks. And Mr. Siegel thinks there\u0092s more room to run. Mr. Siegel was in Hong Kong talking up the virtues of stocks over bonds to institutional investors at a conference sponsored by Fidelity International. He also had something to say about Bill Gross<\/strong>\u0092s \u0093new normal,\u0094 China, and why the U.S. economy won\u0092t enter into a Japanese-style funk.<\/em><\/p>\n

As we approach the anniversary of the stock market bottom, it\u0092s been a tumultuous year, hasn\u0092t it? <\/strong><\/p>\n

Siegel: <\/strong>It\u0092s been an excellent 12 months for stocks. I wouldn\u0092t call it tumultuous. One of the biggest 12 month gains we\u0092ve had in history. Now the preceding 12 months weren\u0092t so good.
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\nHow were you feeling a year ago as markets hit bottom? <\/strong><\/p>\n

Siegel:<\/strong> Was it difficult the last year and a half? Yeah. It was difficult leading up to March 9 [2009]. I would love to say I saw it coming, but I didn\u0092t know [the financial institutions] were holding these assets. Yes. It was very painful. The thesis \u0093Stocks for The Long Run\u0094 seemed pretty nonsensical at that particular juncture.\u0094<\/p>\n

What\u0092s your sense of market valuations today? <\/strong><\/p>\n

Siegel:<\/strong> We are still below the long term trend the way I measure it. I still think the market is 15% to 20% undervalued at current levels\u0085In 2000, we were way overvalued, in 2008 we were way undervalued. What\u0092s there to say. That\u0092s the way the market goes\u0085.Why do stocks offer higher returns, it\u0092s because they are so difficult to hold over long period of time\u0085they get discounted in the marketplace. It is very difficult to hold through those periods\u0085.I still think we are undervalued based on forecast earnings we are probably selling at 13 times or 14 times. And given the level of interest rates so extraordinarily low, these are fat premiums I think. This is going to be another double digit year of stock market gains.<\/p>\n

Japan has just finished up its second decade of stock market declines. Does it give you pause to see a big, industrialized economy deliver that kind of horrid stock performance? Could the U.S. be in a similar situation after the bursting of its stock and property bubbles?<\/strong><\/p>\n

Siegel:<\/strong> We never had the size of the bubble that Japan had in the 1980s. Their stock and real estate markets went much higher in terms of fundamentals than ours did\u0085 When you get 100 price-to-earnings ratio like you did in Japan, it\u0092s not so unexpected\u0085 The Bank of Japan acted slowly in reaction to the collapse of the equity market and the economic decline, while ours acted quickly. And we have a central banker in Bernanke who is very committed against deflation and provide enough liquidity to prevent it from happening\u0085<\/p>\n

You\u0092ve said Pimco\u0092s Bill Gross is wrong about a \u0093new normal<\/a>\u0094 economy, in which the developed world grows at subpar levels as deleveraging takes place. <\/strong><\/p>\n

Siegel:<\/strong> He\u0092s not right. He\u0092s only looking at demand and when you look at long term growth you have to look at productivity. And he doesn\u0092t look at productivity. He never enters into it. If you go back through history and talk about improvements in standards of living and long term growth, it\u0092s all productivity growth. He\u0092s just looking at a very short term demand oriented model. That\u0092s very good for the short terms but it\u0092s not applicable for the long term as he makes it out to be.<\/p>\n

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Controversial economist and author Jeremy Siegel took a lot of heat last year when markets hit bottom. The Wharton School of Business professor\u0092s thesis that stocks always beat bonds over the long term looked shaky with bonds outperforming stocks over the previous 5, 10, 15, 20 and 25 years ending June 30, 2009. Commentators poked […]<\/p>\n","protected":false},"author":850,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-403126","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/403126","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/850"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=403126"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/403126\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=403126"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=403126"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=403126"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}