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January 07, 2008



Mr. Kessler, my hat is off to you. You've got Prof. Siegal exactly right-the teflon academic, and it's about time Wall Street and the financial media take a closer look at this man and his record. I have been a subscriber to his weekly letter-and have the bruises to prove it. In the October 5th letter he put out a very bullish call on the financials, specifically the banks. You'll recall that is literally days before these stocks then collapsed. Since then he has bullishly updated that call twice-of course, for the long run. Well, by acting on his advice I estimate it will take two years, if I'm lucky, to get even by following this permabull's advice that has to be one of the worst calls in history-and the media doesn't notice, let alone call him to task.


That's just one year's results. Surely it just means that this past year the market rotated out of cyclical industrials into growth tech stocks. Anyone who makes investing decisions based on one-year results is just being silly.


Also your "You can read it here" link is a 404 error.


I think your S&P 500 return fails to include dividends paid during 2007 which raises the total return to 5.48% for calendar year 2007. The DLN returned 2.48% including dividends for 2007. Both according to Bloomberg.

Barry Ritholtz

I like Prof Siegel personally -- he is a gentleman and a scholar -- but I have been in total disagreement with him on everything else.

The major problem with looking at just dividends, which are earnings reliant -- is the cyclicallity of the earnings themselves. The Financials had great earnings, because early in the cycle they ignored risk. (Same for the Home Builders) When that risk embracing approach came up snake eyes, the earnings (and dividends) took a giant hit.

So much for the dividend basis for investing . . .


I have to say that I'm on the dividend side of this particular fence. Any SERIOUS dividend investor checks the sustainability of the dividend, before pulling the trigger. Recently, I read a quote by somebody to the effect "More money has been lost chasing yield, than has been lost at the point of a gun", and I'd be inclined to agree. Top down sector analysis, followed by bottom up company analysis will keep one from making any truly huge mistakes.


Drake McHugh

Good catch Andy. When Mr. Siegel started floggin value investing in August of 2006, I knew the macro trend back to favoring growth stocks was about to occur. Seigel had worked for various money managers implying a tacit recommendation for years. Capitalism is great and really great to see an academic go out and actually try to work for a living. I guess my concern is that his imprimatur as an academic intellectual is a bit of a ruse as the true role is promoter extraordinaire. A little more disclosure of his conflict of interest would be helpful....... after all - we all know there would be no interest if there wasn;t a conflict of interest - cheers-


I guess you missed that one book, Stocks for (READ:) the Long Run.
Only time will tell with the returns of the Wisdom Tree funds. Evaluating a value fund's performance off it's first year is just naive.
And I guess someone already caught you on misstating the S&P 500's return for 2007...i would think that would be something basic.


One comment said "Anyone who makes investing decisions based on one-year results is just being silly."

I'd use stronger language than "silly" if I were allowed here. It would probably be deleted!
This article is MEANINGLESS because of the short term figures and thinking.

Another comment said "by acting on his advice I estimate it will take two years, if I'm lucky, to get even"
Oh, well, if you are a short term trader, do that. Don't follow long term advice if you are going to care about 2 years. I'm LOVING my bank purchases over these past months! I'll collect juicy yielding dividends and FIVE TO TWENTY years from now I'm not going to care about the short term you guys are so concerned about.

So how wrong is Siegel really? You are short term thinkers and he is long term. So the comparison is bogus. Would you write an article comparing the taste of a companies beef to another companies tofu and say the beef people are wrong? : )



I just heard a rumor that Steve Cohen is laying off 90% of the staff at SAC because investment decisions based anything less than one year are just silly. Word has it he plans to launch an alpha investment dividend strategy ETF under the ticker "AIDS". Oh, and if that wasn't exciting enough, AIDS will be "elevated" to the power of Red too!!! .00005 bps of the investment management fee will go towards...? It's a dream come true...dividend stocks compounding Red times every YEAR! Tell your friends!

Safety of the dividend? I believe that requires a value judgment to be made. Apparently, the sage quants at Wisdom Tree aren't very good "dividend stock pickers" than.

It's f'ing marketing. Seriously, save the maxims. Every strategy has seasons and dividend strategies are no different. Got Dogs of the DOW?

When is the street going to give me the structured product I really want...a leveraged long against the "dumb investor index". With the cooperation of Tony Soprano it should be an easy product to hedge long deltas.

Andy, thanks for your contributions with entertaining delivery.


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