One of the great mythological tales of the stock market involved Joe Kennedy, father of our late, beloved 34th president, John F. Kennedy.

By 1929, it was commonplace for shoeshine boys who worked near Wall Street to give stock tips. They would overhear their customers' conversation, and pass it on to whomever cared to listen.

And as the old storyline goes, Mr. Kennedy had made a killing in the roaring 20's bull market, and was believed to be one of the very few who had managed to preserve his gain by selling before the crash.

Supposedly, Mr. Kennedy had happened into a shoe shine parlor where stocks were being discussed; and, after surmising..."when shoe shine boys enter the market, its time to get out," and allegedly sold out his position just ahead of "Black Tuesday" when the market crashed.

Or so the myth goes; but the reality is quite another story in itself.

Think about it; has any mortal investor in the market ever been able to call an EXACT top, or buy in at a precise bottom? The answer of course is a resounding no! No one in history has ever been capable of timing the market-- that would be fortune-telling.

And neither Joe Kennedy, nor any of the other large investors-- who started the decline in late October '29 -- could have known they would be touching off the most cataclysmic financial event in American history.

Once myths start, they take upon a life of their own. But despite the liberal license of Kennedy's story, it does bear some resemblance to reality:

Instead of his "shrewd insight", it was sheer luck that, on October 29, 1929-- Black Tuesday-- Joe Kennedy had been at the right place, at precisely the right time. He actually had made his fortune on Wall Street the exact same way most "smart" investors always had done-- by trading on insider information, and 'bending' the rules.

Mr. Kennedy had befriended a shoe shine boy who worked at a parlor nearby the New York Stock Exchange, where the CEO's, who ran the large N.Y. banks, would get their shoes shined after breakfast. At that time bankers had access to their customers' deposits, and were the ones who made the large block trades which influenced the market's direction.

The shoe shine boy would overhear all the talk of the "big shots", telling Mr. Kennedy (who would walk in precisely at 9:15 AM) just what they had discussed-- all he would need to know.

Kennedy-- apprised of what stocks would be moving that day-- would pay off "floor runners" (those who submit trades on the floor of the NYSE) to "front run" his order. His trade would be placed illegally, preceding the huge "buy" orders of the big shots; and upon market opening, this "strategic" placement would, of course, spike up in value, and Kennedy would have a surefire profit when he sold later in the day.

Over a period of time, Kennedy (along with bootlegging imported Irish scotch) quickly got very rich; and there was no SEC around to detect any foul play back then.

But after several years-- one morning in late Oct. '29-- the shoe shine boy had some startling news: "Mr Kennedy, I overheard all the big banking gentlemen, and they said they're not gonna buy any more...they're all gonna start selling everything!" Kennedy abruptly jumped off his chair and ran to the exchange to place sell orders (on the opening) for every one of his positions-- and had "gotten out in time."

Indeed, it was sheer luck that enabled Kennedy to get out "at the top," and why, in 1933, he became a presidential advisor to his good buddy, Franklin D. Roosevelt, who appointed him as the original head of the newly-established SEC (Securities and Exchange Commission).

After all, if you were to start a home security company, whom would you hire for advice? A house burglar!  And correctly figuring Kennedy knew all the unscrupulous ways to play the market, Roosevelt  appointed him to formulate many of the rules that are in place to this day, protecting investors from the dishonest, who are in the business of stock-brokering.

And so, the myth that Kennedy knew "just when to sell" persists to this day.

But truth be told, in 1929, most Americans didn’t play the stock market, but kept their savings in banks. It was the failure of small banks-- along with rising unemployment-- that caused the bulk of the suffering during the early 1930's.

In fact, if you ask the "old-timers" who lived through that period, there are many anecdotal stories of angered people who, having been refused the withdrawal of their savings (to prevent a "run" on their bank) would later return with firearms, holding tellers and bank presidents at gunpoint until they got their money, or were arrested by the local sheriff.

Another persistent myth of the late 20's concerned "ruined investors, jumping en masse out of skyscraper windows" and plunging 50 floors, until they came to the inevitable sudden stop that awaited them at street level.

Actually during that period there were 23,000 suicides nationwide, but they occurred over a span between 1929-1933 until FDR was sworn in, and restored hope.

However, a few documented cases exist where despondent investors had actually jumped from windows, which started the whole myth in the first place; but they were both few and far between:

A vice president of  RCA (Radio Corporation of America ) jumped to his death from the window of a Manhattan hotel. His suicide note read, "We are all broke. Last April I was worth $100,000. Today I am $24,000 in the red."

Another person was reported to have jumped from an upper floor of the Plaza Hotel in midtown Manhattan, the day after the market tumbled. Will Rogers, the great humorist, picked up on the incident, and included "jumping out of windows" in his radio routine for a number of years-- and so the legend began.

Winston Churchill (by sheer co-incidence) was visiting New York in October 1929, He was awakened the morning after Black Tuesday by a crowd outside the Savoy Hotel, writing..."under my very window a gentleman cast himself down fifteen stories, and was dashed to pieces, causing a wild commotion and the arrival of the fire brigade," 

On October 29th, 1929, the Dow dropped 69 points to 230. And bad as that day was for the market, it got worse; it didn't bottom until August 1932 when the Dow hit a low of just 63-- all the way down to where the Dow had begun in 1896-- a total wipeout. 

But will history repeat? Could this be the dawn of a new, and even more prolonged bear market-- yet another total wipe out?

A wise man once said. "a fool and his money are soon parted."

Throughout the years, any "smart money" trader in the market knows that the "little man" (small investor) invariably buys in at the "top"; and whenever that occurs, it's time to SELL.

And ever since the1920's, experienced traders (like Joe Kennedy) have played hapless small investors for the fools they did not intend to be. And along those lines, we recall yet another relevant quote: "When a person with experience meets a fool with money; the man with the experience walks away with the money; and the fool with the money walks away with the experience" (origin unknown).

So now let us introduce the one, well-practiced hypothesis of investing that has led many an unsuspecting lamb (the small investor) to the slaughter-- the "Greater Fool Theory." 

This "theory" basically suggests that one can pay much more for an asset than it's actually worth, and can be explained rather succinctly in Wall Street parlance:

The Greater Fool theory is best described as... someone who buys something at a certain price, for no other reason than the belief that they will-- in time-- be able to sell it to some other sucker for an even HIGHER price.

And besides stocks, (like any bubble) the theory could also apply to the real estate market (such as the recent housing fiasco).

One will readily invest in anything, as long as he (she) knows they can sell it at an even higher price-- to an even greater fool.

Question: what is a stock (or property) really worth? Answer- whatever someone else (a greater fool) is willing to pay for it at that time.

The point remains: stocks are not only priced on their earnings; they are priced on what people believe they can sell them for. Hence the "Greater Fool" theory always prevails.

The internet bubble of the late 90's is a prime example of just how many small investors (sheep) had "over-invested" their entire life savings, only to lose it all, and thus, fulfilling the "scriptures" of the greater fool theory-- which is timeless.

There were hundreds of high-tech enterprises, all introducing new technologies in computers, software, and information services. NASDAQ companies with big prospects saw the price of their shares run up thousands of percent in just a couple of years. Some stocks would double in only a week; a few were up 5,000%.

But this bumper crop of greater fools couldn't see the possibility that one day, the bubble had to burst. The bear market of the early 2000's, having wiped out the many thousands of new "paper millionaires," left them feeling indeed, like greater (and greedy) fools. 

But now, after the calamity of Autumn '08 on Wall Street, the "little guys" are again creeping back into the market with "toe in water", yet to be the next wave of greater fools. 

Small investors-- who nervously sold stocks last fall (or otherwise avoided the market)-- have been "lured" back by a two-month rally, beginning in mid March, carrying the Standard & Poor 500 index 37 percent higher.

But if you were to ask any truly experienced trader their "gut" feeling, the recent upward move from 6800 to 8600 is..."nothing but a bear market rally."

The question remains:is this most recent recovery (from the March lows) the beginning of the next big leg up? Is this the "real one"-- marking the true end of the bear market of '08-- or just another very large, and deceptive-looking bear market rally?

Some of the largest and most intense bear market rallies in Wall Street history occurred after the crash of 1929. And given the outlook for the next few years, it portends the making of yet another sucker play, where experienced traders buy in for the short term, and then sellout their positions to the ready crop of greater fools who now "sheepishly" have returned to the market.

Bear market rallies can be brief, intense, and explosive to the upside. But they tend to be especially vicious, after having lured everyone back in, and then cruelly dashing them on the rocks of despair.

The Dow Jones Industrial Average has bounced an astounding 30% from its March 9 low of 6547. But there are mighty big hurdles to clear. You can have a "jobless recovery", which can spark a bear rally; but a profitless recovery always ends bad-- or perhaps in disaster.

No matter the propaganda from the Department of Labor, or the so-called "professional economists," or the stock-market TV pundits, corporate earnings are either sub-par, or non-existent.

And given the intense anti-business policies of  Barack Obama-- which mimic those of Franklin D. Roosevelt 80 years ago-- the stimulus has been an anti-stimulant, Congress' latest budget projects a $1.84 trillion deficit, and the current administration has fabricated the most tax-happy, anti-investor climate since the 1930's.

California is dead broke, health care may be nationalized, cap and trade will bump up electric bills and gasoline prices by 30%-- not to mention that GM and Chrysler are bankrupt.