Wizard of Wharton believes now is the time to buy
Add comment May 29th, 2009
Jeremy Siegel is a well known bull about Wall Street.
He has authored several books on long-term investing including “Stocks for the Long Run” and “The Future for Investors : Why the Tried and the True Triumph Over the Bold and the New.”
This decade he has become a media darling. Siegel, a professor of finance at the Wharton School of the University of Pennsylvania, is regularly introduced as “The Wizard of Wharton” when appearing on the financial channel CNBC on shows such as Kudlow & Company.
Thursday the Chicago native was in Rockford — the first time he’s actually gotten off Interstate 90 and stopped here — speaking to an invite only group of wealth managers for AMCORE Financial and the company’s more affluent clientele.
His basic message was simple. Even if you suffered severe losses in the market collapse of late 2008 and early 2009 now is the time to buy.
“Things are very different looking forward once you are down 50 percent,” Siegel said before his talk. “Long-term returns are better when you’ve had a bad period.”
Siegel said one of the reasons investors have hesitated is because of the continuing struggles of the financial sector.
“Dividend yields have been moving up but few are talking about it,” he said. “All of the dividend cuts came from the financial sector. Obviously, this is a severe recession, but it’s interesting that outside of the financial sector companies are maintaining or even raising dividends despite falling profits.”
Recently, two companies on the Register Star’s Star 60 stock index increased dividends, Anderson Packaging parent AmerisourceBergen and Honeywell International, which has a major division over in Freeport.
Certainly, Siegel said people probably held on too long when the market was crashing but they are making as big a mistake by hoarding cash now.
“Many people are sitting on the sidelines waiting for all of the uncertainties to resolve,” Siegel said. “If you wait for all of those to resolve the market will be 30 to 40 percent higher.”
Indeed, investors who pulled out in March and didn’t jump back in already have missed a bounce. On March 9, the Dow Jones Industrial Average, Nasdaq and S&P 500 all hit lows not seen since the mid-1990s.
Since that day, the Dow has climbed more than 28 percent, the S&P 500 34 percent and the Nasdaq has soared 38 percent.
