When Celebrities Like Mila Kunis Talk Stocks, It’s Time To Get Out Of The Market

So there was beloved actress Mila Kunis talking about plunging into the stock market on CNBC on Friday morning. “I just started investing in stocks, which is new for me,” she told an interviewer. “I'm an advocate of like put things in the bank, put it in a CD, be safe. And I've been pushed kind of forward to take chances and then learning a little bit about the stock market and companies.”

For some observers, the prospect of the star of That ’70s Show and Friends With Benefits talking about moving cash into the market after it had doubled in the past four years is a troubling sign. Historically, whenever amateurs and self-professed naifs start expressing interest in stocks after a big run-up, that’s a sign that a top is near—if not a crash. Joseph Kennedy, famous speculator and father of politicians, reportedly knew it was time to get out of the 1920s bull market when shoeshine boys were dispensing stock tips. My personal tell for the impending demise of the 1990s bull market was when the guys behind the counter at my local Roosters rotisserie-chicken franchise kept an eye on CNBC and held forth on the virtue of options as they carved up the birds.

Now, the implication isn’t that celebrities like Kunis are stupid. (And Kunis is clearly conversant with financial terms. She starred in a movie called Black Swan.) Rather, it’s that they are the stupid money. People can be smart, savvy, and excellent at their chosen profession and yet complete idiots about asset allocation. It’s always dangerous when people get outside their core competency. Actors wouldn’t take advice on diction from hedge-fund managers, after all.

Kunis isn’t the only celebrity expressing a mild form of exuberance over stocks. Rachel G. Fox is a 16-year-old actress who had recurring roles in Desperate Housewives and Melissa & Joey, which stars grown-up 1990s-era teen stars Melissa Joan Hart (my neighbor in Westport, Connecticut) and Joey Lawrence. Fox is also, by her own account, an accomplished day trader. Too young to remember the crash of 2008 in vivid detail, Fox has been slinging stocks while on the set for the last few years. She has a blog, Fox on Stocks, where the self-taught savant holds forth on the ins and outs of the market. Here’s her exegesis on Groupon. “For the longest time, probably since I was like eight years old, my mom had this finance book that she would always bring up to my sister and I,” she told Jeff Macke for Yahoo Finance’s Breakout. “Last year I did 338 day trades, and my return last year was 30.4 percent, which is pretty great,” she said. Indeed.

Last summer, on August 20, 2012, to be precise, Kim Kardashian tweeted about the awesomeness of Apple as a stock:

“Wow RT @sheerazhasan: Apple Becomes the Most Valuable Company in History”

At the time, David Wismer at Forbes flagged this as a potential contrary editor. After all, Apple had enjoyed a multiyear, epic run. But Kardashian, a savvy trend sniffer in reality television, fashion, and self-merchandising, was apparently the last to know. In the weeks after her Tweet, Apple’s stock continued to rally. But it quickly commenced a nausea-inducing 37 percent slide. Soon after Kardashian’s RT, Apple was no longer the most valuable company in history.

And who can forget the famous Bündchen euro-dollar call of 2007? Here’s the story: It was November 2007. The euro had been rallying against the dollar for years, from a low of $0.88 per euro in the summer of 2001 to $1.45 per euro in the fall of 2007—a 64 percent increase. And why not? The world was convinced of the superiority of Europe’s monetary union and growth prospects. Jet-setters like model Gisele Bündchen, the then-girlfriend and now wife of New England Patriots quarterback Tom Brady, began to realize that the dollar didn’t go quite so far in St-Tropez as it did in South Beach. As Bloomberg reported at the time, the dollar was “the weakest since the euro’s debut in 1999.” And so Bündchen asked to be compensated for photo shoots in euros instead of dollars. In effect, she was going long the euro and short the dollar, as many investors were at the time. The rest is history. The following year, the unity of the euro zone began to crumble, and so too did the mystique behind the continent’s common currency. Today, the dollar trades at about $1.30 per euro—about 10 percent higher than it did in November 2007.

What’s next? James Franco starting a newsletter on derivatives? Justin Bieber throwing in a few lines about dollar cost averaging in his next single?

Of course, the prospect of celebrities commenting on the markets shouldn’t be troubling. Financial television is always looking to spice up its guest list. And professional market mavens haven’t exactly covered themselves in glory in the last several years. Very few saw the crash in the fall of 2008 or the recovery that began in the spring of 2009. Year in and year out, most professional money managers underperform the market.

For my part, I’m far more troubled by the stock-market complacency expressed by another celebrity who appeared on CNBC on Friday morning. In the 1990s, this person was huge in pop culture, invested with mythical and mystical powers, and able to make things levitate. No, I’m not talking about Melissa Joan Hart, a.k.a. Sabrina the Teenage Witch. I’m talking about Alan Greenspan, former chairman of the Federal Reserve, lionized by Bob Woodward as the “maestro.” In hindsight, Greenspan was more like Mr. Magoo—a libertarian, GOP-friendly hack who dangerously conflated the health of the market with the health of the economy as a whole and willfully overlooked signs of bubbles in technology stocks and in the housing and credit markets.

Early this Friday on CNBC, Greenspan, too, was expressing optimism about the stock market. Sure, stocks had doubled in four years to record highs, breaking the prior record. And yes, the stock market had risen for nine straight sessions. And sure, actresses and ingenues were getting excited about it after the huge gains. But Greenspan doesn’t see any problems. “Irrational exuberance is the last term I would use to characterize what is going on at the moment,” he said in an appearance on CNBC. Stocks, he said, remain “significantly undervalued.”

As if on cue, stocks fell Friday morning.