Wall Street lost one of the greats yesterday. Martin Zweig died at the age of 70. He started off as a finance professor and newsletter editor, and ended up an incredibly powerful mutual fund and hedge fund giant.
He is probably best known for calling the ’87 crash and as a regular on “Wall Street Week”, which ran each Friday evening. Using rather arcane indicators (at the time) like the ratio of puts to calls and other indicators of investor sentiment well ahead of their time, he correctly called the greatest one day crash in generations – three days before it happened.
After reading a lot more about him the past 24 hours, it is clear he was one of the first to use data and statistics in his trading. Although everyone does this now, he was one of the first back in the ’70s and it gave him a huge advantage. While most back then didn’t think it was possible to ‘beat the market’ as they were well versed in academics versus real world trading, he was a trailblazer and left academics for a world of empirical statistics to consistently beat the market.
He wrote a best seller in ’86 called “Winning on Wall Street” that shows just how he used his data to derive his market calls.
His methodology can best be described here, as he mentioned in his best seller. “People somehow think you must buy at the bottom and sell at the top to be successful in the market. That’s nonsense, the idea is to buy when the probability is greatest that the market is going to advance.”
Two of his other favorite slogans were “Don’t fight the Fed” and “The trend is your friend.” Think about those two for a second. How many investors have missed out on this multi-year rally because it was “Fed manipulated” or simply stashed a huge portion of their investments in under performing assets like gold or bonds?
The market is smarter than all of us, Zweig knew this. His word of wisdom are well worth following. Read all you can about him or check out his book, it’ll be well worth you time.