Calling the Housing Market Bottom, Continued
Legend has it that Joseph Kennedy (father of President John F., and the first SEC Commissioner) bailed out of the stock market just before the 1929 crash because of something his shoeshine told him. Specifically, the shoeshine had discovered stocks, and was blithely sharing his latest “can’t-miss” picks with Kennedy.
Kennedy reasoned that if even shoeshines were buying stocks, speculative fever had gotten out of hand, and a crash couldn’t be far behind. So he got out.
In that vein . . . I’m happy to report that I got my hair cut today, and was not offered a mortgage loan by my stylist.
Beginning about four years ago, that was actually a fairly regular occurrence. Apparently, originating mortgage loans was such a lucrative, low-entry barrier business that anybody with a pulse got into it. (To be fair to hair stylists, I was also solicited for mortgage referrals by people whose day jobs were flight attendant, cable repairman, and insurance sales).
We all know how that ended.
What makes me a little dubious about the apocryphal Kennedy/shoeshine story is the timing. In 2004, when I first noted that hair stylists were dabbling in real estate, the market still had another 6-8 quarters of upside left. So anyone who heeded this contrarian indicator would have gotten out too soon. Or would still be waiting to get in: even with a 10%-15% drop since the mid-2005 peak, housing prices nationally are still ahead of where they were in 2004.
In Joseph Kennedy’s case, it’s likely that shoeshines were talking about stocks well before September, 1929, if for no other reason than the 20’s bull market — like the recent housing boom — went on much longer than many rational observers expected.
My guess is that Kennedy, a notorious (and notoriously well-connected) investor, got a “heads up” about the market’s direction from some better-placed sources than his shoeshine.