Contextualizing Today’s Economy with Jeremy Siegel

[Christine]

I found this interview/chat with Jeremy Siegel to be very interesting:

From the blurb:


From The Great Depression and the two World Wars to now COVID and the escalation of the War in Ukraine, the world has had its fair share of economic downturns. However, the way we recover from it seems different now than it was in the early 1900s.



Here with us today to discuss the differences and similarities of past, present, and future recessions is ex-Wharton Professor and esteemed economist, Jeremy Siegel. Jeremy shares his thoughts on the Monitor hypothesis, the potential severity of a recession, and how current technological advancements make an increase in productivity highly likely.



We learn what the Federal Reserve could be doing better amidst the negative money growth we are currently experiencing [mod edit]

 

[NW-Bound]

I watched the above interview, but abandoned it half-way because Cathie Wood asked so many loaded questions with the intention of promoting her investments. And we know how much money Cathie Wood has lost for her investors in the ARK funds. I never did buy any of her funds, but checked their price every so often as a measure of the exuberance of the market.

On the other hand, I wanted to hear what Jeremy Siegel has to say. I found a shorter video that shows more to the point of what Siegel thinks.

Basically, Siegel believes that the Fed is raising rates too fast. Labor market is tight right now, but soon companies will find that they have more workers than they need. And even if the economy is slowing down, when the excess workers are laid off, companies' earnings will not suffer that much.

About the stock market, Siegel said that because everyone is expecting a recession, the market has already taken a drubbing more than it deserves. Next year is likely to be positive for the market.

 

[Lsbcal]

Here is a link to Siegel's weekly commentary. I think he updates at the beginning of the trading week.

https://resources.wisdomtree.com/weekly-siegel-commentary/

 

[Koolau]

Basically, Siegel believes that the Fed is raising rates too fast. Labor market is tight right now, but soon companies will find that they have more workers than they need. And even if the economy is slowing down, when the excess workers are laid off, companies' earnings will not suffer that much.

About the stock market, Siegel said that because everyone is expecting a recession, the market has already taken a drubbing more than it deserves. Next year is likely to be positive for the market.

Haven't watched either one. Does Siegel suggest there is the probability (maybe, just possibility) of a soft landing?

 

[JoeWras]

Here is a link to Siegel's weekly commentary. I think he updates at the beginning of the trading week.

https://resources.wisdomtree.com/weekly-siegel-commentary/

Thanks. I despise videos. This short writing is perfect and I think it captures what he thinks.

One thing he mentioned which I think is really important is the impact of the "shelter CPI" lag. Shelter is measured in the most interesting way that automatically creates about a 12 month lag on the measurement. We'll be scrubbing off the lag until Spring.

This lag was intentional and was done after the shocking high CPIs of the late 70s and early 80s. Maybe we need to go back to real-time real estate measurements.

So Siegel fears the shelter lag is causing the Fed to stay high too long. I still have to ask, why weren't all the pundits going crazy last year when it was clear shelter was out of control but wasn't making a huge impact yet?

The money people have a bias to cheap or free money. I'm personally hoping the Fed stays the course for a while to shake the free money habit that has overtaken business for the last 15 years.

 

[audreyh1]

Yes, it’s interesting that while money is cheap few financial pundits complain.

 

[Christine]

One thing he mentioned which I think is really important is the impact of the "shelter CPI" lag. Shelter is measured in the most interesting way that automatically creates about a 12 month lag on the measurement. We'll be scrubbing off the lag until Spring.

This lag was intentional and was done after the shocking high CPIs of the late 70s and early 80s. Maybe we need to go back to real-time real estate measurements.

Thanks! Very interesting. I have no financial background and am very much a rookie but I love to learn more. This was new to me.

 

[JoeWras]

Thanks! Very interesting. I have no financial background and am very much a rookie but I love to learn more. This was new to me.

Yeah, I could talk pages about the CPI shelter, and bore everyone to death. It is very interesting, and I don't necessarily think it is the wrong way to do it. Basically, it is done by a survey asking homeowners what they think they could rent their house for. It is not calculated by looking directly the market prices of homes.

Here's a link if you want some reading on it. It is a very important component of CPI because it has one of the highest weights in the index.

https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.htm

 

[Koolau]

Yeah, I could talk pages about the CPI shelter, and bore everyone to death. It is very interesting, and I don't necessarily think it is the wrong way to do it. Basically, it is done by a survey asking homeowners what they think they could rent their house for. It is not calculated by looking directly the market prices of homes.

Here's a link if you want some reading on it. It is a very important component of CPI because it has one of the highest weights in the index.

https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.htm

Heh, heh, like someone always seems to say in a RomCom: "It's complicated."

Thanks for the link.