Joe Granville. Ah yes, his name brings back memories of the days
when I first became aware of this mystical animal called Wall
Street. Born in 1923, Granville”s mother was an heiress and his
father was a banker who had lost everything in the 1929 crash.
Little Joe went off to major in economics at Duke, where he
studied waves and cycles. During World War II he was stationed
in the Marshall Islands when the atomic bombs were dropped on
Japan and some would say this experience had something to do
with his propensity to be bearish. After leaving the service he
hosted a radio show in Kansas City and wrote two books on
stamp collecting. Later he attempted to become a stockbroker
but he failed the test, however E.F. Hutton hired him on a trial
basis to produce a market newsletter which he started in 1957.
By 1964 he was tired of the corporate world and he went off on
his own to start his own investment letter. By the early ”70s he
was broke.
[Before we get into the eccentric side of Joe Granville, it”s
important to note that Joe wrote some of the definitive papers on
technical analysis. He properly deserves his place among the
better known technicians of the later part of the 20th century. But
he won”t get it because he”s such a jerk].
After some erroneous forecasts in the early ”70s, however, by the
mid-”70s he was in sync with the market. He began to receive a
following for his market acumen and then Joe Granville, the
showman, took over.
Granville became a big fixture on the lecture circuit. Among the
many things he did was wear wild sport coats and slick hair-do”s,
once dropping his pants to read stock quotes printed on
underwear. At other times he dressed like Moses and read the
Ten Commandments of Investing, inviting the audience to “touch
me and be wealthy.”
From 1979-81 Joe called every major move in the stock market.
For example he issued a buy signal on 4/21/80 with the Dow at
759. The next day the Dow responded with its 5th biggest one-
day gain in history as it closed at 789, on its way to 974 by
9/22/80. On 9/23/81 he was in London and, appearing on a BBC
radio program, forecast big declines for markets in Europe, Japan
and the U.S. The following day markets overseas swooned and the
Dow fell 2.5%, intraday, before recovering at the close. The
Washington Post ran the headline, “One Forecaster Spurs
Hysteria.” Business Week called the one-day event, “A mindless
wave of selling that destroyed billions of dollars in stock value
from a forecaster who drops his pants in public to get attention.”
[Source: “The Bear Book,” by John Rothchild]
Granville told Newsweek around this time “Many have said I
have 4 times the power of the Federal Reserve.” He predicted he
would win the Nobel Prize.
But in the summer of ”82 stocks hit bottom, 8/12/82.to be
exact, Dow 776, and the markets began to rally, ferociously, as
Fed Chairman Paul Volcker began to cut interest rates in an
attempt to stimulate a moribund economy. Just two months later,
10/11/82, the Dow stood at 1012 for a pickup of 30%. Granville
remained bearish. At one lecture he emerged from a coffin, too
drunk to talk. He called for a crash worse than 1929. Appearing
on Wall Street Week, he called Louis Rukeyser “Crab Louis” for
making light of his predictions.
Granville remained bearish for much of the ”80s and his subscriber
base plummeted. He turned bullish in time for the ”87 crash. And
while he did well, post-crash through 1989, Mark Hulbert rated
him dead last among newsletter writers for the 12 years ending
1996.
Today, he is still bearish (and, as of this writing, probably feeling
smug again). But, to remember the “good” Granville, here are
some snippets from his early writings on technical analysis and the
markets.
“There are very few ”accidents” in the stock market. When a
stock advances or declines there is a reason behind the move. It
is not the primary concern of a market technician to determine
what the reason is, the assumption being that there is always a
reason. The technician is primarily concerned with timing, when
a stock moves rather than why it moves.”
Granville did a lot of work comparing the movement of stock
prices to movements in music, like a classical piece by Bach or
Beethoven. Unfortunately, for this forum, I would need to post
some bars of music which I am unable to do. Anyway, seeing as
the market is currently declining as he predicted, let”s close with
Chairman Joe and his thoughts on why stocks go down, or, to put
it the way Joe does, “It takes more energy to go up than down.”
“A stock can fall more quickly than it rises by merely the turning
off of the faucet of upside energy leaving nothing left except the
natural law of gravity to predominate. It was there all the time
but it took constant upside energy exerted to overcome it. Remove it
and the price would have to fall of its own accord.”
[Source: “The Book of Investing Wisdom,” edited by Peter
Krass]
Brian Trumbore
