It probably started right next to that buttonwood tree.
For as long as there have been markets, there’s been market commentary.
Flash forward a couple of hundred years. As investors trying to stay informed and make good decisions, we are assailed by expert opinions night and day, no matter where we turn.
Joshua M. Brown and Jeff Macke have told the story of the commentators themselves in their new book, “Clash of the Financial Pundits: How the Media Influences Your Investment Decisions for Better or Worse” ($25, McGraw-Hill).
One of the most riveting stories is about late analyst Martin Zweig, a regular guest on PBS’ popular “Wall $treet Week With Louis Rukeyser,” where he made what the book calls “the biggest market call of all time.”
Brown and Macke pick up the story:
Before CNBC and before Bloomberg or the Fox Business Network, there was “Wall $treet Week,” or what everyone called “The Louis Rukeyser Show,” on PBS, a weekly roundtable looking at the market week that was and the outlook for the week to come. It featured some of the most famous and brilliant investing minds of the era and aired across the country on Friday nights. There was nothing on the air like it, and both sophisticated investors and professionals never missed an episode.
On the Friday night of Oct. 16, 1987, a sallow, visibly rattled Martin Zweig appeared on the Rukeyser show, and he looked “physically ill,” in the words of one journalist. You can see him uncomfortably leaning forward throughout the segment with downcast eyes, the reluctant bearer of bad news.
By that night, the market had already been reeling, the Dow Jones having dropped 235 points that week to below 2,300, eras- ing months’ worth of gains. To many, who had been conditioned to buy every dip over the prior five years, it looked like a buying opportunity. But not to Marty Zweig. As a pioneer in the burgeoning field of technical analysis, Zweig had been looking at his put-to-call ratio, a measure of bearish versus bullish bets indicative of the nerves of the crowd, and had seen the signs of a potential panic. He had placed his bets accordingly using options.
When Rukeyser finishes his monologue, he sits down at the table and turns to Zweig at his right elbow and asks him what he feels about the statement “The bull is dead.”
Zweig then shocks the viewing audience — all of them watching it live and concurrently in a time before YouTube and DVRs — with the following: “I haven’t been looking for a bear market per se. 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.” Zweig can barely meet Rukeyser’s eyes and certainly isn’t looking to the camera. Despite the fact that he is positioned to benefit from the disaster scenario he is espousing, he appears to be anything but thrilled about the prospects for it.
Zweig continued, “I think we’re in the middle of something reminiscent of 1946 or 1962 and to some extent ’29, but it won’t be as bad. And I think we’re in the middle to somewhat beyond the middle of this break.”
[He went on,] “I don’t look for a long bear market here; I only look for a brief decline, but a vicious one. In 1962 the damage was done in two months, in 1929 it was done in mostly ten weeks, and I don’t think it’s gonna drag on here any longer than that.”
To say that Martin Zweig’s prediction that night was accurate would be an enormous understatement. It was note-perfect; the exactitude with which he had correctly forecast the events and the timing were indistinguishable from magic. Three days later, when the markets opened in New York, the Dow Jones dropped a mind-boggling 23 percent, just as the man had said it would. In hindsight, it was perhaps the greatest piece of market punditry of all time — the prescient call, delivered with the perfect amount of humility and proven to have been shockingly correct almost immediately. Nothing like it had ever been seen before, and we have yet to witness anything on a par with it since.