Shift In Harvard MBA Career Path Away From Wall Street May Be Positive Signal For Markets

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The number of Harvard MBS’s going into “market sensitive jobs” is no longer so high that it signals a long-term sell for the stock market.

Ray Soifer, a former banking analyst and Harvard Business School alumnus who now runs Soifer Consulting, just released his “Harvard M.B.A. Indicator.” According to the index, Harvard graduates are contrary indicators. When they take too many Wall Street jobs, the market is probably overheated and could be heading for a tumble.

More specifically, if the share of a given years Harvard MBAs wind up in investment banking exceeds 30 per cent, private equity, or hedge funds, the Soifer says that this is a long-term sell signal. If that shareis below 10 per cent, it is a long-term buy signal.

Only 28 per cent of the MBA class of 2009 went to market sensitive careers, the first time since 2005 that the index has not sent up a sell signal. Last year, the index found 41 per cent took market sensitive jobs.

Cyrus Sanati of DealBook reports:

The reductions were across the board. About 3 per cent of Harvard’s latest class took jobs at hedge funds, and about 6 per cent went to work at investment banks, compared with 4 per cent and 9 per cent last year, respectively. About 11 per cent went to private equity or leveraged buyout jobs, and 2 per cent took positions in the venture capital industry, compared with 17 per cent and 4 per cent last year, respectively.

Mr. Soifer notes that the Harvard M.B.A. indicator has historically been more prolific as a source of “sell’ signals, showing strong results in 1987, 2000-02, and 2005-08, than “buy” signals. In fact, the last time it reached the 10 per cent “buy” level was in the early 1980s, when the Dow Jones industrial average traded below 1,000.

The all-time low was reached in 1937, when only three graduates — about 1 per cent — braved the market and ventured into the securities industry.

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