Martin Zweig, Who Predicted 1987 Market Crash, Dies at 70

Tuesday, 19 Feb 2013 10:05 AM

 

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

Zweig wrote “Winning on Wall Street” and published 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 Post, 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.

“He was a very fine technical analyst, also a very fine money manager, and he put those two together in a profitable manner,” Kenneth Safian, the founder of Safian Investment Research Inc. in New York, who worked on technical analysis with Zweig, said in a telephone interview. “He’s a very hard-working gentleman. He was obviously deserving of the successes he had.”

Zweig began his career in the 1970s writing investment newsletters, which became the Zweig Forecast that was published from 1971 to 1997, the company said in a statement through Business Wire without disclosing his date of birth. 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.

Predicting Crash

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.

Crash Profit

Zweig bought bearish options and advised readers of the Zweig Forecast to do the same prior to the 1987 crash. The strategy generated an 8.7 percent profit for the month and helped push his picks up 50 percent in 2007, according to a profile published on the website of his alma mater, the University of Pennsylvania’s Wharton School.

“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.

Dow Theory, which stems from observations made by Wall Street Journal founder Charles Dow during the late 1800s, holds that moves by the transportation average must be “confirmed” by the industrial measure, and vice versa, to be sustained.

A patron of The Wharton School, who helped fund its Locust Walk lobby, Zweig played poker and collected pop-culture items, according to the 2007 profile. He owned the sequined dress Marilyn Monroe wore when she sang “Happy Birthday” to President John F. Kennedy and a baseball jersey worn by Brooklyn Dodger star Jackie Robinson in 1947, it said.

Cleveland Native

“Marty was viewed very favorably as an investor,” Geoff Bobroff, a fund consultant in East Greenwich, Rhode Island, said in an interview. “He was one of the first to do closed-end funds in the equity markets.”

Zweig was born in Cleveland in July 1942, according to New York and Florida voter-registration records. His father died when he was 9, and the family moved to Florida a year later following his mother’s remarriage, Zweig wrote in “Martin Zweig’s Winning on Wall Street,” first published in 1986. His interest in the stock market began at 13, when he received a gift of six shares of General Motors Co. from an uncle.

Zweig graduated from Wharton in 1964 with a B.A. in economics. He later received an MBA from the University of Miami and a Ph.D. in finance from Michigan State University.

“Marty became a mentor and close friend shortly after he hired me in 1977 while I was still in college,” said DiMenna in the statement. “He was a wonderful, kind and generous person and I will always be grateful for the opportunity to have been his friend and partner. Marty was one of a kind.”

He is survived by his wife Barbara and sons Zack and Alex.

© Copyright 2014 Bloomberg News. All rights reserved.

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