October 15, 2007
When Wall Street takes over the world, sell
Here is an intriguing indication - less obvious than the credit squeeze - that the markets are due for a fall. It comes from Ray Soifer, a veteran bank analyst who has for several years tracked the proportion of Harvard MBA graduates who go into finance.
Mr Soifer argues that, when 30 per cent or more of a single year’s graduating Harvard class goes into finance, it is a "sell" signal for stock markets. He does not say why in his report but presumably they flock to Wall Street when times there are very good. And when they are very good, they are due for a fall.
This year, 44 per cent of Harvard MBAs have become financiers, up from 42 per cent in 2006, which amounts to a screaming "sell". It also corresponds to a lot of people’s sense that Wall Street - and the City of London - now pay so much more than other industries that they are corralling a huge amount of talent.
Mind you, Mr Soifer admits the S&P 500 has gained 25 per cent since 30 per cent of the 2005 Harvard MBA class chose finance and his indicator first started flashing "sell". So his investment strategy is for long-term value investors with deep pockets.
