Monday, May 2, 2011

Financial Frenemies: Robert Shiller vs. Jeremy Siegel

Siegel (left) and Shiller (right), from a Bloomberg article in 2002

They're both decorated professors, celebrated economic thinkers, and bestselling authors -- and each considers the other a lifelong friend. Yet, Robert Shiller and Jeremy Siegel agree to vehemently disagree on one thing: investing.

Tale of the ticker tape

In the "bear" corner:
  • Name: Robert Shiller
  • Home university: Yale
  • Famous book: Irrational Exuberance
  • Investment philosophy in a nutshell: Stocks are overpriced
  • Quotable quote: "There is fundamental difficulty with advising individuals and institutions to get out of the stock market... In fact, we cannot all get out of the market. We can only sell our shares to someone else. Somebody must be left holding the outstanding shares... But it is entirely feasible for everyone to diversify better: those whose portfolios are overexposed to certain assets, such as stocks, can sell these to others who are less exposed." 
In the "bull" corner
  • Name: Jeremy Siegel
  • Home university: Wharton, UPenn
  • Famous book: Stocks for the Long Run
  • Investment philosophy in a nutshell: Stocks are cheap
  • Quotable quote: "The past performance of actively managed equity funds is not encouraging. The fees that most funds charge do not provide investors with superior returns and can be a significant drag on wealth accumulation. Furthermore, a good money manager is extremely difficult to identify, for luck plays some role in all successful investment outcomes."
From the quotes above, it's clear that if there's one thing Shiller and Siegel agree on, it's that stock picking is futile and investors are better off with passive, well-diversified portfolios. So what exactly is the beef between these two? Watch the video below to find out.

Are you ready? Fight!

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