Equities Swing With Harvard MBAs

Everyone has his own method of timing the market. When Joseph Kennedy's shoeshine boy began asking him for stock tips in 1929, old Joe had a hunch it was time to sell.

Ray Soifer, a retired executive from Brown Brothers Harriman, has his own system. And it's proven itself to be a splendid long-term indicator of the American equities market.

Mr. Soifer tracks how many Harvard Business School graduates choose market-sensitive jobs each year. If 10% or less of that year's class take jobs in investment banking, investment management, sales & trading, venture capital, private equity, or leveraged buy-outs, it's a long-term ‘buy' signal.

If 30% or more take such jobs, it's a long-term ‘sell.'

This year, some 37% of Harvard Business School's graduate found work on Wall Street, up from 30% a year ago and 26% for the Class of 2004. The trend suggests that Wall Street is becoming bloated and the American economy is ripe for a slowdown.

Mr. Soifer, who retired from Brown Brothers in 2000 and now runs his own consulting firm, appears to be on to something. He advised his friends and colleagues to sell back in 2000, when 30% of the HBS graduating class took jobs on Wall Street. Before that, the last long-term sell he sent was in 1987. Hmmm.

Mr. Soifer has kept the index for a quarter of a century, and while it has some drawbacks, it has proven to be a fairly solid predictor of how the markets will move over the long term.

"Historically, the Harvard MBA indicator has been more prolific as a source of sell than buy signals, "Mr. Soifer wrote. "The last time it reached the 10% buy level was in the early 1980s, when the Dow traded below 1,000. The all-time low was reached in 1937, when only three graduates — about 1% — were adventurous enough to venture into the securities industry. If you had bought stocks in 1937, you'd have done pretty well since."

Why does Mr. Soifer track Harvard B-School graduates? Because he is a proud member of that school's class of 1965. "I'll let you Columbia Business School guys fend for yourselves," he said to the Sun.

Because he went straight into Harvard's Ph.D. program after graduating from HBS, he can't count himself in his own job index.