Jeremy J. Siegel
Forfatter af Stocks for the Long Run: The Definitive Guide to Financial Market Returns and Long-term Investment Strategies
Om forfatteren
Jeremy J. Siegel is the Russell E. Palmer Professor of Finance at The Wharton School of the University of Pennsylvania.
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This covered a lot of stuff; I'm still in the early-beginner phase but I feel like it was very educational.
Professor Siegel's venerable analysis of the stock market is the comprehensive history and guide book you need. I'm well read in this genre and found Stocks for the Long Run unrivaled for several reason. More than anything, the clarity of the writing and supporting figures leaves little margin to dismiss the conclusions. Siegel is sharp in his analysis, which is backed by years of iterating and building on his own research along with the primary findings of finance and behavioral science experts. Siegel is also intellectually honest enough to bring out the rare criticisms of his work, in one case explaining how his past conclusions have since evolved. I especially appreciated the historical context and Siegel's ability to take a forward-focused point of view. The book ends with a practical summary for portfolio construction, based of course on the long-term benefits of stocks.… (mere)
Well written, descriptive overview of stocks and what manipulates their prices. Ultimately recommends indexed mutual funds and ETFs. Lots of informative tidbits.
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(from chapter 16)
Also, this: "as the holding period increases to between fifteen and twenty years, the riskiness of stocks falls bellow that of fixed-income assets" (chapter 12). Again, not exactly shocking news that risk is a function of time, but Siegel articulates the point more clearly than I've ever seen elsewhere. It's easy to forget that inflation, well, inflates a company's prices and assets, so in the long run stock returns have to adjust for that, while bonds offer no such "natural" protection. (And that is probably especially true in countries whose governments have a history of "tweaking" official inflation indices, not to mention countries whose governments have a history of outright defaulting.)
The book is from 2005 but at times it feels like Siegel is addressing 2021 investors. Like when he discusses the signs of a bubble:
And see if this doesn't make you think of today's SPACs:
In 2021 there is even a SPAC whose ticker is JAAC, which stands for "Just Another Acquisition"; and you can now buy SPAC ETFs.
I also learned a lot from Siegel's discussion of how different companies calculate their earnings differently, and how that may affect the P/E ratio. He discusses the concept of "core earnings" and I wonder if that could apply to every country and how the P/E ratios would change, say, in Brazil, if Brazilian companies adopted it, and what investment strategies could be built on top of the gap between conventional P/E ratios and P/E ratios based on core earnings.
This is an uneven book though - about 1/3 of it is just opinative or speculative. For instance, Siegel goes on and on about how you should buy stocks that pay dividends because dividends are a strong signal of value. And he shows that some dividend-based strategies (like the "Dogs of the Dow" strategy) would have been successful. But you could find a strategy that involves, say, picking companies with 5-letter names, and show that it too would have beaten the market. I'm reading Marcos López de Prado's "Advances in Financial Machine Learning" and he has seven chapters on all the stuff you need to worry about when doing backtesting; TL;DR: it's 100x more complicated than saying "you would have beaten the market if you had picked these companies", which is what Siegel does.
Also, Siegel doesn't engage the literature that shows dividends to be irrelevant. Math-wise, it isn't that hard: $1 paid in dividends means $1 less in market value. And that's a literature that stretches back at least to the 1960s (see here), not something that only started after the book came out. Stocks that pay good dividends do tend to perform better, but there is evidence showing that that's because dividend-paying stocks have excess exposure to the value, profitability, and investment factors. Hence you can do just as well by buying stocks that have similar excess exposure to those factors, whether they pay dividends or not - which about doubles your pool of stocks to choose from.
Finally, Siegel makes a scary prediction that haven't materialized. He says that as boomers retire they will sell their stocks and bonds, which will make prices go down a lot. Sixteen years later, the S&P500 has a P/E ratio of about 27 - it was 17 when the book came out. Maybe a lot of boomers haven't retired yet, maybe investors in developing countries are buying a lot of US stocks; who knows. Whatever the reason, that part of the book has aged like milk.
Despite its flaws though this book is great and totally worth it.… (mere)