Stocks for the Long Run? Stop Smoking Green Shoots

My dad, regular blog reader and link contributor, just sent me a classic "stocks for the long run" article, published over on Fidelity.com. This piece is a real gem - with the author genuflecting at the feet of the chief stock cheerleader himself, Mr. Jeremy Siegel, author of Stocks for the Long Run. We've even got some recent quotes and insights from Siegel in the article!

Maybe they'll get a hold of the author of DOW 36,000 next week.

Anyway how about we have a little fun and punch a few holes in this beauty.

We now present highlights from: "Buy stocks now - and hold them" (with our own sarcastic comments):

#1 - Opening red flag... The article is published on Fidelity.com. Expecting impartial stock advice on Fidelity.com is like expecting a libertarian slant on Recovery.gov. Or bearish commodity news on CommodityBullMarket.com.

#2 - Wow, really?... Making predictions about short-term market moves is extremely hazardous, as Siegel well knows. Like me, he failed to predict the collapse in the financial system last September and its impact on the markets. "I didn't see the balance sheets of these banks and investment banks," Siegel says. "I didn't realize they held so many subprime mortgages."

Dear reader - please, if you're going to buy a "stock for the long run" - take a look at the balance sheet. If you can't figure out what's on the balance sheet...you may want to hold off on buying the stock.

#3 - Swami predicts... At any rate, Siegel thinks the economy has probably turned up already: "We're going to have a faster recovery in the second half of the year than most people think. The upward slope on the V will not be as steep as usual, but we're not going to have an L-shaped economy, either."

From the guy who was blindsided by the subprime meltdown...a contrarian indicator?

#4 - Easy short candidate... He's also bullish on high-yield "junk" bonds, even though they have rallied strongly this year after tumbling in 2008.

Nothing like jumping into a rally in the 8th inning! Buy high, sell higher!

#5 - Stock jocks rejoice... "Tell me what investment will do better than stocks today," Siegel says. "Real estate is in the doghouse. Commodities aren't cheap. Bonds, except for junk bonds, are overpriced. Treasury bonds are ridiculously overpriced."

I can't wait for his next book 15-years from now entitled: Farmland for the Long Run

Comments

[basehitz:]

A little comic relief. Thanks.

On a more serious note, this is troubling: "Tell me what investment will do better than stocks today," Siegel says.

How about, not losing money? They seem to assume it can't get any worse. This "recovery" is based on hope and money printing, without resolving the core issues of gutting our jobs base, energy dependency, mounting debt, and staggering unfunded liabilities. The green shooters (at least some) apparently assume things will follow the usual course of recovery, or at worst a little softer than usual. I am unconvinced.

Jul 05 10:00 AM

[Old Trader:]

No doubt the new mantra is fast becoming "return OF capital", rather than "return ON capital". Even given the run up since early March, the average investor is still a long ways from being made "whole".


On Jul 05 10:00 AM basehitz wrote:

> A little comic relief. Thanks.
>
> On a more serious note, this is troubling: "Tell me what investment
> will do better than stocks today," Siegel says.
>
> How about, not losing money? They seem to assume it can't get any
> worse. This "recovery" is based on hope and money printing, without
> resolving the core issues of gutting our jobs base, energy dependency,
> mounting debt, and staggering unfunded liabilities. The green shooters
> (at least some) apparently assume things will follow the usual course
> of recovery, or at worst a little softer than usual. I am unconvinced.

Jul 05 04:29 PM

[Northstar10000:]

How about "Jogging For The Long Run".

Jul 05 04:48 PM

[Robert A. W...:]

Siegel's doubling down, going "all in" to try to save his reputation. Just like Glassman (Dow 36,000), Siegel timed the first edition of Stocks for the Long Run to coincide with the tech stock bubble. He made a lot of money on that book as investors bought it in search of the temporary peace of mind only cognitive consonance can bring. Siegel's dividend-weighted index funds have done poorly as well, so he's making one last stand with this prediction -- if he's right, and the market rallies, he'll be one of the few "smart money" pundits who saw it coming. If he's wrong . . . well, there's no more downside, is there? History has proven him as deeply wrong as it gets.

Jul 05 04:53 PM

[Brett Owens:]

basehitz, Old Trader: Well said, I agree completely...return of capital completely overlooked by these guys.

Jul 06 12:40 AM

[Brett Owens:]

Washburn: Great point, you're right...no more downside for this guy, why not push another stack of chips out and bet on a rally.

Jul 06 12:41 AM