What Clients can Learn from the Four Worst Market Calls Ever

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives. Dan Richards

Bad investment advice can come from many sources, but perhaps none has been worse than what was offered by four experts whose media profile exceeded their investment acumen:  Irving Fisher, Joe Granville, Robert Prechter and Henry Blodget. 

Here’s some historical context and practical advice to help clients avoid the trap of listening to the gurus who dominate newspaper headlines.

Four sad stories

In the 1920’s, Yale’s Irving Fisher was a household name in America and by far its best known economist; his pronouncements regularly made front-page headlines. Three days before the crash of 1929, he famously announced that “stock prices have reached what appears to be a permanently high plateau” – and for months after the crash, maintained that a recovery in stock prices was imminent.

In 1980 and 1981, Joe Granville’s investment seminars drew packed audiences and his predictions caused major one-day moves in the market.  He even predicted that he would win the Nobel Prize in economics and on one occasion literally walked on water, as he made his entrance strolling across a swimming pool that he’d had filled with concrete.

But according to Hulbert Report that tracks the performance of investment newsletters, from 1980 to 2005 The Granville Letter was dead last among American newsletters, with investors who followed its advice losing 95% of their capital.

In 1987, Elliott Wave proponent Robert Prechter told clients to sell in advance of “Black Monday.” He’s been dining out on that call ever since, in the process told his readers to stay on the sidelines throughout the record bull market of the 1990s.

And in 2000, Merrill Lynch tech guru Henry Blodget predicted that tech valuations would continue to climb – and backed up his words by putting his personal net worth on the line, most of which quickly evaporated.