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Author: ChloeTai   |   Latest post: Sun, 2 Dec 2018, 10:33 AM

 

When the Shoeshine Boy Talks Stocks, it is a Great Sell Signal

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JOE KENNEDY (the father of former president John F. Kennedy), a famous rich guy in his days, exited the stock market in a timely fashion after a shoeshine boy gave him some stock tips. He figured that when the shoeshine boys have tips, the market is too popular for its own good, a theory also advanced by Bernard Baruch, another vested interest who described the scene before the big Crash: "Taxi drivers told you what to buy. The shoeshine boy could give you a summary of the day's financial news as he worked with rag and polish. An old beggar who regularly patrolled the street in front of my office now gave me tips and, I suppose, spent the money I and others gave him in the market. My cook had a brokerage account and followed the ticker closely. Her paper profits were quickly blown away in the gale of 1929."

It is actually a true story as far as we know – Joe Kennedy, by all accounts an extremely shrewd businessman and investor (despite the fact that he had graduated in economics*), really did get his shoes shined on Wall Street one fine morning, and the shoe-shine boy, one Pat Bologna, asked him if he wanted a few stock tips. Kennedy was amused and intrigued and encouraged him to go ahead. Bologna wrote a few ticker symbols on a piece of paper, and when Kennedy later that day compared the list to the ticker tape, he realized that all the stocks on Bologna’s list had made strong gains. This happened a few months before the crash of 1929.

Kennedy sold all his stock market investments over the next several months and put the money in what he considered the safest banks. He had already made a fortune in the bull market, and reportedly augmented it later by going short in the bear market. We are pretty sure his meeting with the market-savvy shoe-shine boy wasn’t the only reason for which he decided to sell. He did mention the anecdote later in life though and the experience served to solidify a conclusion he had already arrived at: It was very late in the game and the market was likely to crack badly fairly soon.

Are we at the same fatal stage in the market today, when people who aren't expected to have stock tips have stock tips, including hot dog vendors, shoeshine boys, the homeless, pedicurists, barroom dancers, toll takers, and the trumpet player at the racetrack? Will stock prices fall off the cliff under the weight of enormous popularity?

 

The global stock markets are now the most overvalued they have been in history. In US, even factoring in the Trump tax cuts, stocks are roughly 30% overvalued. Of course, that’s what happens when central banks around the world flood the markets with $14 trillion in liquidity, crushing bond yields and forcing everyone into riskier assets to chase yield.

This is a long way of saying you should be very afraid, even though those words are going to fall on deaf ears because the markets can’t seem to go down.

Quote by Warren Buffett:

“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”

Looking at the current market conditions, US stock market is poised for a great crash of 2018 & in addition to this a legendary investor Warren Buffett has his take on the current market condition. The Warren Buffett Indicator is less mysterious than it sounds. It might as well be called the common-sense indicator. It’s simply the relationship between gross domestic product (GDP)—or the sum total of a country’s economic activity—and the value of stocks in the S&P 500. So, in simpler terms, the Warren Buffett Indicator in terms of Wall Street measures market capitalization versus U.S. GDP. If we believe warren buffett predictions a stock market crash in 2018 is meant to happen.

 

The vast majority of investors will be caught totally by surprise when this bull market in stocks finally comes to an end. Cultivating a healthy sense of skepticism will help protect you from the irrational exuberance that invariably accompanies a market top.

This is far easier said than done, however. Bull markets often end with a burst of impressive performance, leading even die-hard skeptics to question themselves and throw in the towel on their bearishness.

Over the last six months of the bull market that ended in March 2000, for example, the Nasdaq doubled in value. By then, not surprisingly, most of that era’s erstwhile bearishness had given way to enthusiasm and euphoria.

2018 Countdown To 2nd Global Financial Tsunami-Malaysia Will Be Devastated.

https://www.youtube.com/watch?v=nB5Ngci3PQQ

 

 

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