Saturday, March 02, 2013

Martin Zweig

Martin E. Zweig, who predicted the 1987 stock market crash and whose newsletters influenced U.S.investors for a quarter century, has died. He was 70.

He died yesterday, according to Zweig-DiMenna Associates LLC, his New York-based firm. No cause of death was given.

Zweig wrote “Martin Zweig’s Winning on Wall Street,” his book first published in 1986, and stock-picking newsletters such as the Zweig Forecast for 26 years, helping start his career in hedge funds and philanthropy. He co-founded Zweig-DiMenna Partners in 1984 and, according to the New York Times, bought a 16-room apartment at Manhattan’s Pierre hotel in 1999 for $21.5 million. He also had a residence in Fisher Island, Florida.

“I was on the road show with Marty for the Zweig Fund in 1986 and he was like a rock star,” Gene Glaser, a business partner with Zweig from 1989 to 1999, said today in an interview. “People would wait around to get his autograph and ask him questions about the market.”

Zweig began his career in the 1970s writing investment newsletters, which became the Zweig Forecast, published from 1971 to 1997, the company said in a statement through Business Wire. In 1984, Zweig and Joe DiMenna founded Zweig-DiMenna Partners, their first long-short hedge fund, followed by the Zweig Fund in 1986 and the Zweig Total Return Fund in 1988.

A regular guest on the PBS television show “Wall Street Week With Louis Rukeyser,” Zweig is credited with developing the technical analysis tool known as the put-call ratio, according to his firm. The indicator plots bearish versus bullish options as a way of determining investor sentiment.

Zweig’s best-known call came during Rukeyser’s program on Oct. 16, 1987, when he predicted stocks were poised for a “vicious” decline reminiscent of the crash of 1929. The Dow Jones Industrial Average plunged 508 points, or a record 23 percent, in the next session, now known as Black Monday.

“I haven’t been looking for a bear market per se, really, in my own mind I’m looking for a crash,” Zweig said in the PBS interview. “I only look for a brief decline, but a vicious one.” The Dow declined 23 percent in October 1987 and climbed 2.3 percent that year, according to data compiled by Bloomberg.

“He was a pioneer in technical analysis,” said Richard Russell, editor of the Dow Theory Letters newsletter, in a telephone interview. Zweig was a “terrible worrier,” said Russell, who took over Zweig’s investment advisory service.

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Liz Ann Sonders remembers:

On February 18, while on vacation, I received a shocking phone call. My first mentor and boss, Wall Street icon Marty Zweig, had passed away. I've been extremely blessed throughout my 27-year career to work with some of the most transformative and legendary folks in the business. Marty was one.

I worked for him (and his partner at Avatar Associates, Ned Babbitt) for 13 years, starting in 1986 after I graduated from college. Another would be Louis Rukeyser, with whom Marty and I shared the "stage" on Wall $treet Week for many years as regular panelists. And of course, I've had the great thrill of working for Chuck Schwab since 2000. It doesn't get any better than learning from these legends over the past 27 years.

After degrees from Wharton, University of Miami and Michigan State, Marty started his career in academia but ultimately became one of the most respected stock market "gurus" in the modern era. I have years' worth of memories of Marty, and hope readers will indulge me as I reminisce and share some of the most important market lessons I learned from one of the greats.

But first, the personal stuff. Marty was brilliant, there's no doubt; but he was also quirky, goofy and affable. He was the consummate worrier... but he was also the ultimate warrior. He lived, ate and breathed the markets and perpetually (and tirelessly) strived to "figure it out."

One of my greatest memories is getting to see first-hand his now-famous memorabilia collection—to which there are no comparables. Among them, there was the dress Marilyn Monroe wore while singing Happy Birthday to John F. Kennedy in 1962; the suits worn by the Beatles on the Ed Sullivan Show in 1964; the 1992 Olympics' US "Dream Team" basketball jerseys; the booking sheet from one of Al Capone's arrests; a letter from Madonna to Michigan State declining acceptance so she could pursue a music career; guitars of many rock stars, including Bruce Springsteen and Jimi Hendrix; the fedora worn by Humphrey Bogart in Casablanca; the original Terminator costume worn by Arnold Schwarzenegger; and multiple boxing championship belts, Super Bowl rings and Heisman Trophies.

Probably the coolest one, which I got to sit on at his home in Connecticut, was the Harley Davidson Hydra-Glide motorcycle ridden by Peter Fonda in Easy Rider. It was bolted to the floor in his game room. How cool is that?! Apparently, last year he also had a banana yellow 1934 Packard convertible installed in his Florida living room. Marty was loads of fun.

In Marty's book Winning on Wall Street, he called Jesse Livermore one of his heroes and "one of the most fabulous traders of all time;" recommending that people read the 1923 book about Livermore, Reminiscences of a Stock Operator by Edwin Lefevre. It was the first book about the market I read; it remains one of my favorites, and one I always recommend when people ask about the best market books.

Here's a quote from Livermore: "People don't seem to grasp easily the fundamentals of stock trading. I have often said that to buy into a rising market is the most comfortable way of buying stocks… Remember that stocks are never too high for you to begin buying or too low to begin selling." These words were quoted often by Marty, because he believed in "buying strength, selling weakness and staying in gear with the tape."

Marty is also given credit for popularizing the phrase "The trend is your friend." He was a trend follower, not a trend fighter; smart enough to realize that "a slap is easier to recover from than a beating…" He considered himself both conservative and aggressive. By nature he was conservative and risk-averse, wanting to protect himself and the people to whom he gave advice. But he also believed there were times to be aggressive. "The problem with most people who play the market is that they are not flexible."

"Summing it up, to succeed in the market you must have discipline, flexibility—and patience. You have to wait for the tape to give its message before you buy or sell." These words from Marty still ring true, and it's why I cringe when I'm asked about market tops and bottoms as if anyone can call them precisely. "…you must forget about trying to catch the exact tops or bottoms, which no one can consistently do anyhow. But success in the market doesn't require catching those tops and bottoms. Success means making profits and avoiding losses. By using [his theories] and waiting for a trend to develop, you can make money, stay in tune with the tape and interest rates, and, best of all, sleep better at night."

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