Your Grandma is on Facebook

Joe Kennedy, the patriarch of the Kennedy dynasty, said just after the crash of 1929..

“Taxi drivers told you what to buy. The shoeshine boy could give you a summary of the day’s financial news as he worked with rag and polish. An old beggar who regularly patrolled the street in front of my office now gave me tips and, I suppose, spent the money I and others gave him in the market. My cook had a brokerage account and followed the ticker closely. Her paper profits were quickly blown away in the gale of 1929.”

The point being, when everyday people are talking about a stock, its time to get out. It’s remained true through the last few cycles as well. I remember vividly people talking about their crazy stock payoffs in .com companies too obscure to remember. And while its true that if you bet on Google, Apple and Amazon you’d be sitting pretty now; given the froth on the market at the time, you were just as likely to have picked Pets.com, AOL and Yahoo. People were batty about tech stocks just in the same way they were batty about their home values 7 years ago.

Its the classic sign of a bubble. Big high valuation estimates on privately held companies based on conjecture, hope and voodoo. Facebook’s recent valuation was at $50 billion and Zynga (the company that makes Farmville) ws at $10 billion.

To put that in perspective, in 2010 Dr. Pepper/Snapple’s valuation was $9 billion.

I’d sell the farm.

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