razmaspaz

I’ve been going back and forth with Guest Poster Dylan Ross on fivecentnickel.com about market forces and a key phrase in his post :”For every dollar won over the market, one must be lost”. Ultimately I’ve decided I agree with him, but as a result of the conversation I’ve had some interesting side revelations. You can read the entire exchange in the comments. I think I’ve mostly served to frustrate Dylan, but its been a clarifying experience for me, helping to shed some misunderstandings and clarify some of my thoughts on the subject.

In my most recent response to Dylan’s comments I mention a shoe shine boy. The reference goes back to a story of John D. Rockefeller. Rockefeller was getting his shoes shined by a young boy, and the boy offered him some free advice on a stock. A tip if you will. Its assumed the boy had no idea who Rockefeller was and wanted to help the guy out. Rockefeller took a tip alright, but not the tip the boy gave him. He realized that if a shoe shine boy had advice on the market it must be overbought, and if it was overbought it was about to crash, about a year later it did just that, and Rockefeller pulled out just in time. I don’t know, or really care, that the story is true, it offers sage advice either way.

In my comment I made a comparison of the shoe shine boy to Jim Cramer. One I would think Jim wouldn’t be too happy about. Here’s my point. Jim Cramer wants to help the everyman to invest and make money in the stock market. Thats a laudable goal, and I can’t fault Jim for it at all. Jim’s show is wildly popular, I believe the most watched on CNBC. This has me wondering is Jim’s audience the shoe shine boy? Hes wildly popular with college kids, a portion of the demographic that would likely be better served spending their discretionary income on paying down debts than investing, and I think a good portion of his audience falls into a category of people who are in it for the short term.

So while Jim may have his heart in the right place, and be completely responsible in his actions on th show, I think his popularity could have been viewed as a bellwether that the market was overbought.

I don’t know what to do with that information. I’ve learned over time that trying to time the market is a fools errand. It does however make an interesting intellectual discussion. Take it for what its worth.