Summary Chapter 5-9 According to Stocks for the Long Run, U.S. history is divided into three sub periods 1802-1870, 1870-1925 and 1926-1990, and Siegel analyzes the returns on stocks, bonds, and other assets classes over the last two centuries. Over the period from 1802 through 1990, equity provided returns greater to those on fixed income investments, gold or commodities. In addition, the real rate of return on equity held remarkably constant over this period, while the real return on fixed income assets decreased dramatically. Furthermore, over the sub periods 1802-1870, 1870-1925 and 1926-1990, the real compound annual returns on equity were 5.7, 6.6 and 6.4 percent; however, the real returns on short-term government bonds dropped. Thus, the magnitude of the excess return on equity during this century seems excessive relative to the behavior of other macroeconomic variables. In addition, in the future, the real return on fixed income assets could be closer to historical norm. Thus, while stocks returns will most likely continue to dominate bond returns, they will not do so by nearly as wide margin as they did during the past. According to Siegel, the person who invests in bonds is speculating in the level of prices, or the great purchasing power …show more content…
Thus, this supply and demand imbalance compounds the projected failure of social security systems challenged by the same root demographic issue. In addition, Siegel argues that globalization of financial markets promises to resolve this issue because the new generation of people in developing nations will add a market for the assets of old individuals in the advanced industrial