Only a handful of mere mortals can move entire markets with a few words. Bernanke, Buffett, Monti: In this era, you pretty much have to be of that import to single-handedly turn the screen all red or green.
But there was a time—before the Internet and CNBC, when trading volumes were much lighter, a broker had to take your order, and newspaper stock tables truly mattered—that a newsletter writer with a carnival barker’s shtick could send the Dow Jones industrial average tanking. That figure, longtime stock forecaster Joseph Granville, died on Sept. 7 at the age of 90. The heyday of his craft predeceased him by several decades.
Granville had been hawking his Market Letter since 1963, after six years at E.F. Hutton, where he fixated on trading and price patterns. He thought he had it all down to a science and coined such metrics as “on-balance volume” and “net field trend.” “The idea,” he wrote, “caught me, quite literally, with my pants down. One August morning in 1961, I sat on the toilet in the E.F. Hutton men’s room, away from the hubbub of the research department, musing about the stock market.”
Granville would take that show on the road, where he sold himself as the little man’s friend in taking on a rigged Wall Street. Wrote Yale professor Robert Shiller in his book Irrational Exuberance: “His investment seminars were bizarre extravaganzas, sometimes featuring a trained chimpanzee on the piano. He once showed up at an investment seminar dressed as Moses, wearing a crown and carrying tablets. Granville made extravagant claims about his forecasting ability. He said he could predict earthquakes, and once claimed to have predicted six of the past seven major world quakes. He was quoted by Time Magazine as saying ‘I don’t think that I will ever make a serious mistake in the stock market for the rest of my life,’ and he predicted that he would win the Nobel Prize in economics.”
Granville hit his groove in the late ’70s and early ’80s, a dreary stretch for investor sentiment and the broader economy. He correctly called the Dow Jones industrial average’s slide in 1977 to 1978, and in January 1981 prompted a one-day decline of 2.4 percent by urging, “Sell everything!” That feat got him on the front page of the New York Times and spiked demand for his newsletter and seminars.
“Joe was extremely powerful a generation ago,” says Robert Stovall, an equity strategist who worked with Granville at E.F. Hutton. “If he gave the thumbs down to a market, it was like the emperor in the coliseum. The market would go down.”
Enter the epic bull market that started in 1982, which the still-bearish Granville, like the old BusinessWeek, completely whiffed on. He went bullish by the crash of 1987, and incorrectly called for a fall in October 1995—changing his mind the following summer after shares had jumped 20 percent. In one last hurrah, Granville wrote that investors in tech stocks “will soon be burned”—one day after the Nasdaq hit its fateful March 2000 record; it would crash 78 percent by late 2002.
According to the newsletter-tracking Hulbert Financial Digest, from 1980 through January 2005, Mr. Granville’s stock tips for investors lost them 0.5 percent on an annualized basis—woefully behind the 11.9 percent average yearly gain for a basic stock index fund. (Granville data after 2005 was spotty.)
Writes Mark Hulbert: “He was often quick to throw in the towel whenever his indicators weren’t working. When his technical indicators seemed problematic, he would with great fanfare announce the revelation that he now realized that he should have been paying more attention to fundamental indicators as well. Yet when those fundamental indicators subsequently stopped working, he’d announce yet another road-to-Damascus-conversion back to being a pure technician. … Whatever else might be said about Granville, there’s no doubt he had a good time.”
“Joe was one of the great characters on Wall Street—part Roger Babson and part P.T. Barnum,” says Eddy Elfenbein, author of the newsletter Crossing Wall Street. “He was often wrong, but never in doubt.”
“When I make a prediction or a statement, it’s coming from somebody who’s gone through 50 years of markets,” Granville said. “It’s not like one of these 28-year-old or 30-year-old or 31-year-old kids that come in and think they know all of the answers. They don’t. They have to live through their mistakes. I had to live through my mistakes.”
Granville also (barely) lived through a sea change in the behavior of individual investors, who’ve yanked hundreds of billions of dollars from actively managed equity mutual funds since the onset of the financial crisis. The era of the celebrity stockpicker—Granville, Peter Lynch, Jim Cramer—has been eclipsed by one of decidedly passive investing in exchange-traded and index funds. “Be the market” has overtaken “beat the market.”
Nevertheless, Granville’s website, still up, solicits $800 newsletter subscriptions with an almost old-school defiance: “GRANVILLE FAX SERVICE FOR BREAKFAST: Why wait until Monday each week to read The Granville Market Letter when you can have it with your Thursday breakfast four days earlier via your Fax Machine? In these markets, getting a jump on the Thursday and Friday markets can pay for this service many times over.”