´´ Joe Granville: He Fooled You, But I Think He Got Away With It

Thursday, April 21, 2016

Joe Granville: He Fooled You, But I Think He Got Away With It

The recovery following the Lehman shock is now going into its eighths year. Once again it proves: When it comes to stock market forecasting, style and presence in the media is paramount. Substance, on the other hand, is irrelevant. Very likely the business of market forecasting is the only one where one single good call can protect a seer from a lifetime of bad ones.

The only correct advice for almost the entire last eight years would have been being long. Especially, jumping into the market when the occasional market crashes and fierce spikes in volatility occurred. But I am not aware of any guru having made such bold calls consistently. Thus, investors following the Cassandra’s of the financial markets faced imperfection in their investment performance. And a lot of it.

Strangely though, the rather sobering forecasting performance of the seers, and the mediocre investment returns of their disciples, does not leave them bewildered. Thus, by no means will it prevent them from making confident market calls today and tomorrow. And surely will blissfully ignorant cheerleaders in the media give them a platform and foolish disciples embracing the advice wholeheartedly.

Calamity Joe: The Man Who Moved The Markets

This ludicrous spectacle in the financial community is not a new one. Take the famous, infamous market guru Joe Granville, also known as "Calamity Joe", who died on Sept. 7 2013 at the age of 90. He was certainly the most illustrious forecaster of them all.

His idea of starting his newsletter caught him up with literally his panties down. On the loo of the  E.F. Hutton men’s room in 1961, where he had been working at that time writing a daily market letter. Apparently the toilet can be one of the most enlightening location for stock market oracles.

In 1963 Granville started the newsletter "The Granville Market Letter". At the beginning business was slow and Granville only managed to get by. Though, irrespectively of mediocre forecasting performance business picked up steadily. But it was not before the late 1970's and early 80's  that Granville would hit the real groove.

To put it mildly, the financial market during that time was characterized by a painful stretch for investor sentiment, portfolio performance and economic activity as a whole. But not so for Granville's reputation as a forecaster. He started to reach out to a broader audience by correctly calling the Dow Jones industrial average’s slide in 1977 to 1978. Between 1979 and 1981 he kept on coming up with correct calls, mainly about the stock market. Eventually, those correct predictions made him so present in the investment community that his calls even enabled him to move entire markets.
"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." (Businessweek)

In Jan. 3 1981 Granvilee published a newsletter carrying the not so creative headline "Straight Up". But already at January 6 was it time to start operation twist by making a total U-turn in its predictions. In an overnight frenzy of phone calls he pleaded for "Sell everything." Apparently, many of his followers did exactly that. Trading volume in the morning session on Jan. 7 spiked significantly and Wall Street was retreating. At the end of the trading day volume set a record high with the stock market down 2,4%.

Not only did Granville and his followers push the market to the low of that day, they also made sure that Granville was up. Up on the national broadcasts where he hopped one TV show after another touting how following him or following the market were "interchangeable".  They even managed to get Granvilee on the front page of the New York Times.

The correctness of this "Sell Everything" call turned out to be extremely short lived. Nevertheless, did the demand for his newsletter and seminars sky rocket.

Joe Granville: The Man Who Could Walk On Water

To call Granvilles' personality as extroverted and his shows as entertaining would be quite of an understatement. His "investment seminars" were bizarre extravaganzas, choreographed like Las Vegas shows.

If he could not find a trained chimpanzee playing the piano, he would show up dressed as Moses, wearing a crown and carrying tablets. Or he would slid to the stage on a 100-foot-long wire wearing his standard after six tuxedo. He had a penchant for wearing garish costumes, including blinking bow ties and electrified sunglasses. Elvis costumes and chicken outfits were also a recurring theme. Exploding hand grenades and emerging from a coffin to let the audience know that the bull market was plain dead was standard repertoire.

For his diehard disciples Granville was also famous for his ability of walking on water. He pretended to do so at an investment conference in Phoenix, AZ shouting to the audience: "Now you know!".

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