WASHINGTON, February 20, 2013 – Wall Street legend Martin Zweig, who gained national fame for his televised prediction of a market crash just before Black Monday in 1987, has passed away according to word from his New York-based firm, Zweig-DiMenna Associates LLC. Born in Cleveland, Ohio in 1942, he slowly evolved from academia to become one of the most respected stock market analysts of the modern era. The cause of his death was not provided by his firm.
Wall Street veterans were saddened by Zweig’s death. “In an intense and competitive business, I do not ever recall a nasty comment on Marty,” said Art Cashin, a veteran investment advisor and frequent contributor on CNBC, according to Businessweek.com news. “In decades on Wall Street that’s a very rare comment on a very high profile personality. May he rest in peace.”
“He was a wonderful, kind and generous person and I will always be grateful for the opportunity to have been his friend and partner,” noted Joe DiMenna, principal in Zweig-DiMenna Partners, according to the Businessweek report.
Zweig acquired his lifelong fascination with the market when he “started buying stocks as a teenager, reputedly purchasing his first stock at age 13 and from that point on vowing to become a millionaire,” according to a short biographical entry in Wikipedia. “Following high school, he earned degrees from three of the nation’s leading business schools, including a BSE from the Wharton School of the University of Pennsylvania in 1964, an MBA degree from the University of Miami in 1967, and a Ph.D. in finance from Michigan State University in 1969. He later taught finance at Iona College and Baruch College.”
According to a biographical sketch on his own website, Zweig “started his career in the 1970s as an investment newsletter writer and contributed numerous articles to Barron’s Magazine. He went on to become a successful and influential investment advisor on Wall Street, known for his exhaustive data studies. In 1986, Zweig authored the book Winning on Wall Street (ISBN 0-446-52533-2). In it, he called Jesse Livermore one of his heroes and “one of the most fabulous traders of all time,” recommending that people read the 1923 Edwin Lefèvre book Reminiscences of a Stock Operator.”
Zweig’s investment newsletter, “The Zweig Forecast,” was published from 1971-97, and became the Number 1 ranked investment publication for risk-adjusted market returns for an astonishing fifteen straight years.
Zweig was also credited with developing what’s known as the “put-call ratio,” an options-based investing sentiment indicator that illustrates at a given point in time, the relative strength of bullish or bearish cohorts—another key indicator of which way sentiment may influence the market in the days or weeks ahead.
“’He was a pioneer in technical analysis,’ said Richard Russell, editor of the Dow Theory Letters” when interviewed by Businessweek. “Zweig was a ‘terrible worrier,’ said Russell, who [later] took over Zweig’s investment advisory service.”
“Wall $treet Week” and Zweig’s famous prediction
Zweig’s national fame began to grow exponentially when he became a regular guest on “Wall $treet Week,” an enduringly popular and long-running Friday evening feature on most PBS stations that was hosted by wryly humorous financial journalist Louis Rukeyser. Launched in 1970 and taped every Friday after the market close at the Maryland Public Television studios in Owings Mills, MD, the show ran on PBS through 2002 when the network pursued an ill-advised “youth movement” and replaced Rukeyser, who moved his show elsewhere.
During the program’s PBS run, however, it was notable for the high quality of its rotating panel of experts who opined each week on the markets motivations, bullish or bearish direction, or lack of all the above. And one of those panelists was often Marty Zweig, who soon became one of the show’s most popular figures, not only for his astute market comments, but for his almost predictable wrinkled brow and overriding sense of caution and distrust when it came to market moves.
A regular fan of the show for decades, The Prudent Man recalls always having a chuckle as Zweig would slowly ponder a provocative Rukeyser question before beginning his answer almost invariably with a cautious “I’m concerned, Lou…” or “I’m nervous, Lou…” As the decades since have borne out, however, Zweig’s habitual cautiousness was rarely unwarranted. He knew that the gremlins and the kleptocrats were always out there ready to prey upon the unwary.
The following video clip from that famous October show opens with one of Lou Rukeyser’s typical market recap monologues before proceeding to Zweig’s observations. One interesting aspect of the video are the allusions to computerized trading, then, in the late 1980s, in its relative infancy as opposed to the disruptive monstrosity it has become in 2013. Zweig’s comments begin approximately six minutes into the video.
Zweig’s own investment methodology was a proprietary marriage of what are still the two dominant methodologies for uncovering the timing and the value of investments: technical analysis (aka, charting), and fundamental analysis (balance sheet analysis of a stock’s earnings power with an emphasis on the price-earnings, or PE Ratio). Fundamental analysis would uncover a basket of stocks worth investing in, while technical analysis would determine when the time for investing in such companies was optimal. Or not.
Zweig had been unabashedly “nervous” about the market through the summer and early fall of 1987. But he really earned his stripes when he zeroed in on the specifics of his concerns on the October 16, 1987 edition of “Wall $treet Week.”
The market had already been looking very bad from at least September onward, and had already begun to tank in the month of October. While he didn’t want to worry the average investor unduly, however, he decided he could no longer hold back on that fateful “Wall $treet Week” edition. “I haven’t been looking for a bear market per se,” he opined to Rukeyser. “I’ve been really in my own mind looking for a crash,” … [but] I didn’t want to talk about it publicly because it’s like shouting ‘fire’ in a crowded theater.”
The following Monday, the market was savagely hammered, with the Dow Jones Industrials plunging 508 points and losing nearly 23% of its value in one day—actually a worse Crash than the one that launched the Great Depression of the 1930s. When trying to judge the effect of the 1987 Crash from today’s vantage point, it’s helpful to realize that the Dow Jones average had peaked in August, 1987, at 2722, a mere fraction of its (alleged) value today.
Zweig actually felt the market would recover from the Crash, as bad as it was, and he was correct on that account as well, as the market closed modestly up for the year by the last closing trade in December—although disaster was also arguably diverted by a massive and timely injection of liquidity by the Federal Reserve—perhaps a distant prediction of what might unfold in 2008-2009.
Life after the Crash
As a result of his famous prediction, sales of Zweig’s already popular book on investments, “Martin Zweig’s Winning on Wall Street” (1986), picked up as did subscriptions to his stable of newsletters. “I was on the road show with Marty for the Zweig Fund in 1986 and he was like a rock star,” remembers Gene Glaser, a longtime Zweig associate, according to Businessweek. “People would wait around to get his autograph and ask him questions about the market.” Now his fame only became more intense, drawing attention to his funds as well.
He was soon an extraordinarily wealthy man, deploying his wealth lavishly but somehow relatively unobtrusively. A key investment was what is still said to be the most expensive apartment dwelling in Manhattan, a 16-room penthouse located in the Pierre Hotel. It cost him $21.5 million in 1999, but is said to be worth some $70 million today, a huge sum when considering the real estate debacle that kicked off Great Depression II.
Zweig owned an additional home in Florida.
After the decade of the 1990s, however, Zweig assumed a much lower profile. His closed-end funds were acquired by another firm and, while they still bore his name, he was no longer directly involved in them, becoming more interested in philanthrophy.
His quiet passing earlier this week in a way marks the end of an era when the right combination of fundamental and technical analysis, when blended with key proprietary indicators, could enable a skilled stock picker like Zweig to consistently beat the market.
Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.
Any positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.
Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.
References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any ar500ticle under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.
Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington Times Communities. For Terry’s investing and political insights, visit his Communities columns, The Prudent Man and Morning Market Maven, in Business.
Follow Terry on Twitter @terryp17
This article is the copyrighted property of the writer and Communities @ WashingtonTimes.com. Written permission must be obtained before reprint in online or print media. REPRINTING TWTC CONTENT WITHOUT PERMISSION AND/OR PAYMENT IS THEFT AND PUNISHABLE BY LAW.