Discussion in 'Economics' started by stock777, Jul 12, 2009.
I never trusted this weasel
I thought you were talking about "The General".
the whole entire Money magazine is based on those BS returns(7-8%)
how they can sell this bs for so many years and stay in business?
7-8% returns for stocks is not a "BS" theoretical amount. Indeed, stocks should theoretically return far more than bonds over any "lengthy" time horizon, as they exhibit more volatility and such risk must be compensated.
There are therefore 3 possibilities as to why 25 year bonds have outperformed stocks:
1) 25 years is not a lengthy enough time horizon for the law of large numbers and volatility-adjusted averages to work itself out, or
2) There is a deep and systemic flaw in the system that has the end result of damaging wealth while favoring debt-holders, or
3) The market is currently extremely (and irrationally) under-valued OR bonds are extremely over-valued.
We can basically forget about (1) since it is virtually outside the realm of statistical chance for bonds to randomly outperform stocks over 25 years.
Number (3) has some merit in that bond prices may be far over-valued due to Fed manipulation of yields (smaller yields --> higher bond prices), combined with investors' flight from risk and therefore over-demand for bonds and under-demand for risky stocks.
But is pure irrationality really enough to explain such a strange phenomenon by itself? Probably not.
Thus, I contend that this phenomena indicates the deep and systemic flaws of a free, unrestrained, unconstitutional (money-creation), and immoral credit / banking / derivative system and the tendency of such a system to parasitically feed upon itself.
the return for people in the US with taxable accounts is higher for stocks than it is for bonds for the period in quesion.
Siegel is indeed a weasel, if for no other reason than he leaves survivorship bias out of his doctored equations for long term returns on index funds. No one doing that deserves credibility, nor do they have any.
There are plenty of other reasons he's a weasel, but they're too innumerable to list at the moment.
Finance profs. are generally pretty dumb. MBAs are so worthless. They don't understand stats at all. How you could extrapolate anything from such a small sample is ridiculous.
Anyhow, stocks should outperform bonds...by how much is anyone's guess. But think about it, ignoring past data-a stock's price represents a discount of future cash flows to the firm. The discount rate is the risk free rate plus an equity risk premium. Why would anyone by a stock without a risk premium?
And even if you look at c-bonds, why would ownership in a company return less than a company's debt obligations? This doesn't make sense for a healthy company.
We are in a period of disequilibrium in financial markets.
I was thinking of Uncle Sam
Mandelbrotset's multiple aliases are:
Just to name a few.
Separate names with a comma.