Siegel argues that CAPE's recent overvaluation signal was distorted by accounting-rule changes rather than simply by high stock prices. Mark-to-market write-downs drove reported earnings close to zero during recent recessions, depressing CAPE's ten-year earnings denominator and mechanically inflating the ratio.

CAPE historically forecast ten-year returns well
Modern accounting rules changed the meaning of reported earnings
Asset write-downs made 2009 earnings look worse than Depression-era earnings
CAPE uses a simple ten-year average without weighting
Operating and national-income earnings produce less extreme valuations

“CAPE has done a fantastic job at forecasting tenuere returns until the last in years when I think it has gone off the rails.”
Jeremy Siegel · 15:52

“So for two years we've got almost a zero in there, a very low number, and when that's in the denominator, that pushes up the…”
Jeremy Siegel · 18:29

#cape#valuation#accounting#earnings

Myth Buster27:37

Does Survivorship Bias Invalidate Long-Run Stock Returns?

Siegel distinguishes the carefully constructed post-1871 record from the less certain early nineteenth-century data. Later researchers reconstructed individual securities from historical newspapers, and adjusted estimates remained close to his original long-run return result.

Bankrupt stocks were entered as zero after 1871
The main uncertainty in early data was missing dividend information
Researchers reconstructed securities from historical newspapers
International evidence tests whether US success alone drives the result
The United States was not the top-performing country in the cited comparison

“from eighteen seventy one on very careful to remove uh any survivorship bias in whereas every stock is there if it went bankrupt in zero,…”
Jeremy Siegel · 28:02

“South Africa had higher and this is in the US hours. This is converting South Africa and Australia. US was number three.”
Jeremy Siegel · 30:17

#survivorship bias#market history#returns#data

Myth Buster1:03:33

Why Famous IPO Winners Misrepresent the Whole Asset Class

Siegel's research examined all IPOs rather than highlighting celebrated winners. A few companies generated spectacular gains, but the many losers left the aggregate portfolio unable to outperform a comparable small-stock index.

Evaluate the full IPO cohort rather than famous successes
Use a small-stock index as the relevant benchmark
A small number of extreme winners can disguise widespread losses
Profitless IPOs warrant particular caution
Fewer public companies reduce ordinary investors' access to growth

“I looked at all the I p o s. Everyone not cherry picking the cherry picking the high one.”
Jeremy Siegel · 1:03:43

“there were a few of these huge winners, but there were so many losers that you really, uh didn't beat a small stock index”
Jeremy Siegel · 1:04:11

#ipos#benchmarking#small caps#capital markets

Hot Take· 1

Hot Take1:10:39

The Correlation Error Behind the Student-Debt Boom

The discussion challenges the inference that sending more people to college automatically reproduces graduates' historical earnings premium. Easy government-backed credit allowed weaker institutions to charge high tuition, while some students left without the skills or earnings needed to service their debt.

Graduate earnings do not prove every degree creates the same return
Credit availability can enable tuition inflation
School quality and employment outcomes vary substantially
Non-dischargeable debt shifts risk toward students
Government accounting can make lending appear profitable

“They weren't giving them the skills that they weren't getting placed and as a result, after they get out, they weren't getting the jobs that…”
Jeremy Siegel · 1:12:06

“Graduate students get high paid. So therefore, every let's make everyone to graduate. Yeah, we can make everybody graduate. It's lake will be gone and…”
Barry Ritholtz and Jeremy Siegel · 1:12:28

#student debt#education#credit#policy

Explainer· 3

Explainer1:07:58

How Free Smartphone Features Can Disappear From GDP

Siegel suggests that measured productivity may miss consumer value when formerly separate products become free smartphone features. Cameras, navigation, communication, and computing improve, but conventional GDP statistics struggle to record output whose observed standalone price falls to zero.

Smartphones replace multiple separately purchased products
Zero-priced features are difficult to capture in GDP
Quality adjustments for technology are inherently difficult
Measurement error may explain part, but not necessarily all, of weak productivity
Regulation and administrative overhead are alternative contributors

“The government doesn't count it anymore because something that goes to zero and price doesn't get in g d P.”
Jeremy Siegel · 1:08:23

“all sorts of things now have become free.”
Jeremy Siegel · 1:08:44

#productivity#gdp#technology#measurement

Explainer1:29:43

What Drives Value, Small-Cap, and Momentum Premiums

Siegel attributes the value premium partly to investors' preference for exciting growth narratives over boring companies. He links the small-cap premium to illiquidity, transaction costs, and limited coverage, while warning that crowded momentum strategies can produce abrupt reversals.

Investors tend to overpay for compelling growth stories
Boring value stocks can become systematically underpriced
Small-cap returns partly compensate for illiquidity
Efficient trading is essential to capturing small-cap returns
Crowding can make momentum reversals sharp

“They don't like boring stocks. They tend to undervalue them. They like the gross story. They want to write them up and they write them…”
Jeremy Siegel · 1:30:10

“We know that io liquid assets of any sort get discounted in price. If you're a long term holder, that becomes a favorable thing.”
Jeremy Siegel · 1:31:07

#factor investing#value#small caps#momentum

Explainer1:37:07

Four Innovations That Remade Investing

Siegel identifies index funds, competitive brokerage commissions, index futures, and global capital mobility as major improvements over his career. Together they lowered costs, broadened diversification, enabled efficient hedging, and made international allocation easier.

Index funds made broad passive exposure practical
Deregulated commissions created price competition
Index futures enabled large, rapid market hedges
Global capital mobility expanded the investment universe
ETFs extended tradable exposure across assets and countries

“Obviously the development of index funds, no doubt about that.”
Jeremy Siegel · 1:37:13

“the freedom of the market to go globally I think is critical.”
Jeremy Siegel · 1:38:49

#index funds#brokerage#futures#globalization#etfs

Story· 1

Story1:20:41

The Promise That Shaped Bernanke's Crisis Response

Siegel connects Ben Bernanke's aggressive crisis response to a promise made at Milton Friedman's ninetieth birthday: the Federal Reserve would not repeat its Depression-era monetary failure. When markets seized after Lehman, the Fed supplied extraordinary liquidity, protected deposits, and helped restore interbank credit despite the political backlash.

Bernanke had studied the Fed's errors during the Great Depression
He publicly promised Friedman not to repeat them
The crisis created an economy-wide demand for liquidity
The Fed expanded facilities and reserves to prevent systemic collapse
Siegel believes the intervention prevented another depression

“thanks to you, we will not make this mistake again.”
Jeremy Siegel quoting Ben Bernanke · 1:21:38

“I absolutely do, absolutely do.”
Jeremy Siegel · 1:23:03

#federal reserve#bernanke#financial crisis#liquidity

Tool· 1

Tool1:31:37

The Hidden Cost of Moving-Average Downside Protection

Siegel's testing found that a 200-day moving-average strategy could avoid the worst bear markets but produced a risk-return result similar to buy-and-hold after costs. False signals create repeated buying and selling, so usable implementations require closing prices and a band around the average.

Trend filters can reduce exposure during major bear markets
Whipsaw trades offset part of the downside protection
Transaction costs materially affect results
A threshold band prevents excessive switching
Closing prices are safer than intraday triggers
The payoff resembles repeatedly purchasing downside insurance

“It turns on on a risk return basis. It's not much different than buy and hold.”
Jeremy Siegel · 1:32:17

“The difference is, though, if you follow two inter day moving averages, it does keep you out of the worst bear markets.”
Jeremy Siegel · 1:32:27

#technical analysis#moving average#whipsaw#risk management

Takeaway· 2

Takeaway30:32

The Two Valuations That Matter in Emerging Markets

Emerging-market exposure introduces both equity valuation and currency valuation. Siegel says investors should avoid paying too much for either, while noting that developed-market currency risk can sometimes be hedged cheaply when interest-rate differentials are small.

Assess the currency as well as the stocks
Developed-market currency hedging can be inexpensive
Emerging-market hedging can impose a large return drag
Low currencies and low earnings multiples can create opportunity

“That's why you have to make sure that one you're not buying over priced currency and to you're not buying over priced stocks.”
Jeremy Siegel · 31:24

“Currencies are low and there prices are low relatives of their earnings.”
Jeremy Siegel · 31:38

#emerging markets#currency#valuation#hedging

Takeaway1:42:23

Jeremy Siegel's Advice for Building a Finance Career

Siegel advises aspiring finance professionals to read widely, follow current events, study formal concepts, and organize their knowledge into a coherent analytical structure. The goal is not merely collecting facts but developing a paradigm that can interpret unfamiliar market situations from a global perspective.

Read widely across markets and current events
Study the structure behind market movements
Build a coherent analytical paradigm
Apply that structure to new situations
Begin accumulating experience early
Adopt a global rather than purely domestic view

“try to fit things into a paragigm that you feel comfortable in analyzing it.”
Jeremy Siegel · 1:42:51

“building a structure at which you can think about the markets, and then when a new situation comes up, you'll have a structure to analyze…”
Jeremy Siegel · 1:43:00

#finance careers#learning#mental models#global markets

Frameworks in this episode

Fundamental-Weight Rebalancing

Long-Horizon Equity Mean Reversion

Systematic Corporate Buyback Averaging

Insights & moments

⚡Myth Buster· 3

Why Siegel Says the CAPE Ratio Went Off the Rails