Jeremy Siegel

Jeremy James Siegel (born November 14, 1945) is the Russell E. Palmer Professor of Finance at the Wharton School of the University of Pennsylvania in Philadelphia, Pennsylvania. Siegel comments extensively on the economy and financial markets. He appears regularly on networks including CNN, CNBC and NPR, and writes regular columns for Kiplinger's Personal Finance and Yahoo! Finance. Siegel's paradox is named after him.

Biography

Siegel was born in Chicago, Illinois, and graduated from Highland Park High School. He majored in mathematics and economics as an undergraduate at Columbia University, graduating in 1967, and obtained a Ph.D. from MIT in 1971. At MIT he studied under Paul Samuelson and Robert Solow, both Nobel Prize winners.

He taught at the University of Chicago for four years before moving to the Wharton School of the University of Pennsylvania.

As of 2007, Siegel was advisor to WisdomTree Investments, a sponsor of exchange-traded funds; he owed about 2% the company then worth an estimated $700 million.

Investing advice

In his books Stocks for the Long Run (1998) and The Future for Investors (2005), Siegel outlines his investing theories and advice.

He recommends against holding bonds, arguing their long-term performance tends to be negative after inflation.

For stocks, Siegel recommends relying primarily or exclusively on index funds when possible, as active management tends to underperform market averages over long periods. He is not opposed to holding a small portion of the portfolio in single stocks, provided their selection is prudent.

For all stocks, Siegel advise following a "D-I-V" mnemonic as a guideline: dividends, international, and valuation. His research found dividend paying stocks tend to offer superior long-term performance, as they are associated with profitable mature companies that hold up well during broad economic and are more likely to be reasonably valued. He has endorsed the Dogs of the Dow method, of holding the highest-dividend stocks in the Dow Jones Industrial Average. Siegel recommends substantial international stock holdings, 40-50%, to avoid home bias and obtain a broader variety of options. For valuation, Siegel recommends stocks or indexes that are fairly valued or undervalued while avoiding sectors that are overvalued or trendy, as they tend to offer poor long-term results. He calls this phenomenon the "growth trap" and notes that fast-growing companies, industries or economies are not necessarily good investments.

TV programs

He has been a frequent guest on the business TV program Kudlow & Company on CNBC, hosted by Lawrence Kudlow. Siegel, like Kudlow, tends to favor supply-side economics. Siegel is also a lifelong friend of Robert Shiller, an economist at the Yale School of Management, whom Siegel has known since their MIT graduate school days. Siegel and Shiller have frequently debated each other on TV about the stock market and its future returns, and have become financial media celebrities, regularly appearing on CNBC.

Criticisms

IPO debate

Siegel has said that Initial Public Offerings, stock sold by new companies, typically disappoint. In his The Future for Investors: Why the Tried and the True Triumph Over the Bold and the New (Crown Business, 2005), Siegel analyzed 9,000 IPOs between 1968 and 2003 and concluded that IPOs consistently underperformed a small-cap index in nearly four out five cases. Others disagree.

2000 bullishness

Some have criticized Professor Siegel for being bullish on the stock market back in 2000. In a BusinessWeek interview in May 2000 when asked about the stock market, he replied:

"Seven percent per year [average] real returns on stocks is what I find over nearly two centuries. I don't see persuasive reasons why it should be any different from that over the intermediate run. In the short run, it could be almost anything."

That being said, Professor Siegel was correct when he also stated in the same interview:

"I have voiced my concern about the technology sector, and I sometimes advise people to shade down from that sector relative to its percentage in the [Standard & Poor's 500-stock index.] I really am concerned with these companies that have p-e ratios of 90, 100, and above. I still think stocks, as a diversified portfolio, are the best long-run investment. I will say that indexed bonds at 4% are an attractive hedge at the present time. To get a 4% real rate of return, although it's not as high as 6.5% to 7% that we talked about in stocks, as a guaranteed rate of return is certainly comforting against any inflation."

On March 14, 2000, The Wall Street Journal published an opinion piece by Siegel titled: "Big-Cap Tech Stocks Are a Sucker Bet". The piece issued warnings against investing in some of the hottest technology stocks during the dot com bubble.

Bibliography

Authored or co-authored

• The Future for Investors: Why the Tried and the True Triumph Over the Bold and the New (2005).
• Stocks for the Long Run: The Definitive Guide to Financial Market Returns and Long-Term Investment Strategies, McGraw-Hill (1994), ISBN 0-07-149470-7.
• Revolution on Wall Street: The Rise and Decline of the New York Stock Exchange (1993).
• David R. Henderson, ed. (2008). "Stock Market". Concise Encyclopedia of Economics (2nd ed.). Indianapolis: Library of Economics and Liberty. ISBN 978-0865976658. OCLC 237794267.

Awards

1994: Best Business School Professor in worldwide ranking, Business Week

2002: Lindback Award for outstanding university teaching

1996, 2005: Helen Kardon Moss Anvil Award for outstanding MBA teaching

2005: Nicholas Molodovsky Award by the Chartered Financial Analysts Institute to “those individuals who have made outstanding contributions of such significance as to change the direction of the profession and to raise it to higher standards of accomplishment.”

External links

• JeremySiegel.com where the "Wizard of Wharton" weighs in on the markets, the economy and investment strategies.
• Bloomberg Article: "The Shiller & Siegel Show"
• EricTyson.com Summary of global investing perspectives in "Stocks for the Long Run"
• "Jeremy Siegel". JSTOR.