It is perhaps poignant that with many people looking for a market correction and much talk of elevated sentiment measures bringing back memories of 1987, that we learned today of the death of Marty Zweig, widely known not only for the put-call ratio, and ‘Don’t fight the Fed’, but also his prescient call in October 1987 just before the crash.
Marty Zweig calls the Crash of ’87 (The whole thing is worth watching but Marty comes in around the 6:40 mark)
Watching that piece of history again there’s much that modern business networks could learn from it. Notice the easy-going style of Louis Rukeyser, the complete lack of confrontation with his panelists, no raised voices, no sound effects, no gotchas. This is after one of the most wretched weeks in Wall St, (worse was to come obviously), but you would barely know it from the calm civility which permeates their discussion.
What I particularly like and admire however, is in making his observations Marty Zweig is almost apologetic about it. He fears we’re on the verge of something severe but rather than take the opportunity for grandstanding as many of today’s pundits would, he’s almost scared to tell everyone. He says:
“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… and there’s other ways to play it, you just tilt your strategy negatively and you shut your mouth…”
Throughout the discussion he is modest and respectful, demonstrating that rare but crucial attribute for an analyst – humility.
It reminded me of a speech Ned Davis gave at the 2012 MTA Symposium where he spoke about humility in forecasting, and his friendship with Marty Zweig. Ned, along with Marty, and Steve Leuthold, were recipients that year of the MTA Annual Award for their lifelong outstanding contribution to the development and widespread acceptance of technical analysis by institutional practitioners and individual investors.
Despite having been in this business for over 25 years I know I am always learning, and I believe to be successful at something it usually pays to listen to those who have already done it. So as someone who had only recently begun producing his own research, I was keenly aware when Ned Davis rose to speak I could be about to learn something. And I wasn’t disappointed. There are so many nuggets in here, I will just let you enjoy the whole thing:-
“First I want to thank the MTA for this award. I am particularly honored due to the company I keep today. I would call Steve Leuthold perhaps my #1 competitor which I consider a big compliment. Marty Zweig and I have been friends for nearly 40 years and have shared much research due to our joint love of objectively testing indicators.
If I had to list my number one reason for my long-term success in selling technical research to institutions, I think it would be the word ‘humility.’ I tried not to promise more than I could deliver, and I downplayed my ability to forecast or give targets. I believe it was technician Alan Shaw who first said, ‘The stock market is man’s invention that has humbled him the most.’ If you are not humbled in this business, you haven’t been around for long or you are delusional.
I love to quote technician George Chestnut, a pioneer in the use of technical analysis. Chestnut said, ‘We are in the business of making mistakes. The only difference between the winners and the losers is that the winners make small mistakes, while the losers make big mistakes.” I try to sell my clients on the idea that technical analysis can help them keep their mistakes small. It has done that for me.
On a different subject, but still suggesting a need for a touch of humility, technician Bob Farrell warned, “When all the experts and forecasts agree – something else is going to happen.” Or as technician Joe Granville put it, “If it’s obvious, it’s obviously wrong.” My opinion is that this is just as applicable to widely publicized, obvious chart formations as to obvious fundamentals.
But there is another reason I believe in humility. As technician Marty Zweig wrote in ‘Winning on Wall St’, “The problem with most people who play the market is that they are not flexible.” A number of times in the past, Marty and I have joked to each other about forecasters who get wed to their set-in-stone forecasts. We say “Live by the forecast, die by the forecast.” If one is humble in this business, it is easier to be flexible.
When I give my opinions, I usually start by saying they are my ‘two-cents’ worth opinions. This is not false modesty – I do believe in calling them like I see them, but this is not an easy business, and nobody has all the answers. So I strive to remain open-minded so I can go where the evidence takes me.
So my advice today is be humble, have a sense of humor about yourself, and remain flexible.”
- Ned Davis, MTA Symposium 4/20/12
Ned Davis Research (www.ndr.com)