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Tuesday, March 09, 2010

Shiller vs. Siegel

Are stocks cheap or expensive?:

Worries Rebound on Bull's Birthday, by E.S. Browning, WSJ: ...The great debate among stock-market analysts these days is whether the market has finally worked off years of excessive prices and can return to steady growth. ...
This uncertainty has fueled a prolonged debate between two old friends, renowned economists Robert Shiller and Jeremy Siegel. ... Mr. Shiller, a Yale University professor whose book "Irrational Exuberance" warned of the tech bubble just before it burst in 2000, still worries about the market's future. Prof. Siegel of the University of Pennsylvania's Wharton School, whose book "Stocks for the Long Run" was the bible for many investors in the 1990s, is bullish.
Each of them can marshall a slew of data to bolster his viewpoint. Their reputations as forecasters may be affected by which of them winds up being correct. ...
Shiller

One concern of pessimistic analysts such as Mr. Shiller is that despite the two bear markets, stocks have spent almost all their time since 1991 priced above historic averages. History suggests that when stock prices are high, performance in ensuing years is disappointing. ...

Mr. Shiller worries that the housing market could be turning down after a brief recovery, which could contribute to a decline in U.S. stocks, which already look expensive to him. ... Mr. Siegel scoffs at his friend's concerns—and at his numbers. "This is an extremely cheap market," he says, and its future is bright. ...

    Posted by on Tuesday, March 9, 2010 at 01:10 AM in Economics, Financial System | Permalink  Comments (28)


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