Tags: Jeremy | Siegel | buy | Stocks

Siegel: Now is the Best Time to Dive Back Into Stocks

Wednesday, 18 Aug 2010 08:35 AM

Economist Jeremy Siegel says that because stocks are now undervalued, now is the time to buy.

“The last 10 years have been bad,” Siegel tells CNBC. “They were preceded by the two best decades in world history in (the) stock market … 10 years ago … the whole market was selling for 30 times earnings.”

“What you have to be careful about is not buying the market when it is overpriced. Thirteen times earnings is our current estimate,” he said.

"Earnings are actually coming in above estimates, the market has done very well for those intermediate and long-term investors who started from valuations like we have today.”

During the same CNBC interview, Megan McArdle, business editor for The Atlantic, said, “For a long time, we’ve been expecting these incredible returns.”

McArdle said that when the stock market returned 8-to-10 percent above inflation 20 years ago, it didn’t take all that long to generate a healthy retirement.

Now, McArdle says, people can't expect 8-to-10 percent stock market returns and need to save more than 10 percent of their incomes for retirement.

“The question is not, ‘Do not like equities in the long run,’ because ultimately, what else are you going to invest in other than productive companies?” McArdle said.

“The question is, 'Do we have somewhat inflated expectations?' When you look at surveys about what kind of returns people are expecting, 25 percent of the country seems to think they’re going to get well over 10 percent.”

However, investment author Nassim Nicholas Taleb has urged investors to avoid stocks. “I’m very pessimistic. By staying in cash or hedging against inflation, you won’t regret it in two years.”

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