“Abandon all hope”

Granville’s ‘Sell Everything’ Call


Source: @michaelbatnick



Today, we must acknowledge the turmoil in the equity markets, and do so by discussing an infamous anniversary. On the off-chance you were unaware, China’s stock markets had their shortest trading day ever, as the CSI 300 Index plunged 7 percent, triggering a full-day trading halt less than 30 minutes into the session. This follows Monday’s similar losses and market closure.

The reaction overseas was swift, as Europe fell almost 3 percent, and U.S. stock futures followed the rout. Gold bugs finally found some relief from their five-year bear market, as the shiny yellow metal rallied to $1,100.

That all of this action should occur today, Jan. 7, is a wondrous coincidence. As students of market-timing history all know, on this day in 1981, one of the world’s most-heralded market timers made one of the world’s most egregious market calls. Today is the 35th anniversary of Joseph Granville’s “sell everything” missive to clients.

The Wall Street Journal reported that the “Granville Market Letter, which thousands of investors relied on for stock-market advice” often moved markets. The result of his historic sell recommendation was a 2.4 percent decline in the Dow Jones Industrial Average on what was, at the time, record volume.  (See video here).

Granville had come to fame during the 1970s, a challenging period of no net gains in markets, when shares staged huge rallies followed by brutal selloffs. He had a run of prescient calls, and according to my colleague Josh Brown, at the peak of his popularity in 1981, he had 16,000 subscribers paying him between $250 and $3,000 a year for his advice.

Subsequent research by Ed Thorpe and others published in theJournal of Portfolio Management debunked the value of those signals. For those interested in learning more about Granville, there is a full chapter devoted to him in Brown’s book, “Clash of the Financial Pundits: How the Media Influences Your Investment Decisions for Better or Worse.”


Continues here: Be Smart. Don’t Try to Time the Market.