How Wall Street Crystal Gazers Fared This Time
Will all those who predicted Friday’s stock market dive please step forward?
Say it ain’t so. Joe Granville? Joltin’ Joe?
Joseph Granville, the eccentric market timer, touched off a one-day selling panic in 1981 by advising investors to “sell everything.” He later lost favor with investors after he missed the bull market that began in August, 1982. And he didn’t exactly call the stock market crash in 1987.
Two months ago, after having been a raging bull since early 1988, Granville pulled in his horns and extended his bear claws. His Oct. 5 Granville Market Letter reeked of doom.
“Obviously something is wrong,” he wrote of disturbing technical factors in the market. “The thing that is wrong is that this latest rally in the Dow has set the market up for a massacre.”
Sure enough. Granville was looking pretty good Friday, much as Elaine Garzarelli of Shearson Lehman Hutton emerged as the crystal ball gazer to beat when bears mangled the market in 1987.
“I got people out in August at the true top,” Granville boasted in a telephone interview Friday from his home base in Kansas City, Mo. “The last 132 points was a sucker rally with a capital S.”
Otherwise, Friday’s market collapse appears largely to have gone unforeseen by most other well-known prognosticators. That, however, probably won’t stop people from trying to claim credit, just as they did after the October, 1987, crash.
“You’re going to find on your desk Monday or Tuesday letters from everybody and their brother who will tell you they did predict this,” said Steve Janachowski, chief executive of Brouwer & Janachowski, a San Francisco investment advisory firm. “I think it’s ridiculous. I don’t think this is anything more than the correction we’ve been waiting for.”
R. Earl Hadady, publisher of a Pasadena-based newsletter called Bullish Consensus, agreed.
“I’m sure you’ll find somebody who claims they did,” said Hadady, whose company polls 100 top investment advisers each week. “But our polls didn’t show any such thing. Nobody that we polled . . . was predicting this.”
To be sure, plenty of newsletter writers, market timers and advisers had turned bearish. But most of them have been that way a while, noted Mark J. Hulbert, publisher of Hulbert Financial Digest in Alexandria, Va. Granville, he said, was one who changed his tune only recently, in August, after having been bullish since early 1988.
“Would you say that somebody who turned bearish three to four years ago predicted it?” Hulbert said. “No.”
Although not as visible as Garzarelli, who made her 1987 prediction on a cable-TV program, market timer Richard Russell of La Jolla did turn bearish shortly before the crash two years ago. Early this year, his Dow Theory Letters advised investors to get back in the market as the Dow Jones industrial index was pushing to new highs.
“Technically, I called it a bull market but a nervous bull market based on stocks being overvalued,” he said.
Did he call Friday’s downturn? “I’ve been in this business 30 years,” Russell said. “I let other people decide for themselves.”
Meanwhile, Garzarelli will have a tough time recapturing the 1987 glory days. In the Oct. 16 U.S. News & World Report, she could scarcely contain her enthusiasm for the market, forecasting a 3,100 Dow by early 1990 and saying, “I expect to see a lot of money pouring into this market soon.”
Staff writer Jim Schachter contributed to this story.
