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 (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 and Birinyi Associates.
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?
Previously:
Bonds for the Long Run (August 9th, 2012)
140 years of Equity Yield vs US Bond Yield (September 4th, 2012)
Bonds Beat Stocks: 1981-2011 (October 31st, 2011)
Revisiting Stocks For The Long Run (August 20th, 2012)
Jeremy Siegel is not having a good year (July 11th, 2009)
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