Stop the presses, folks: Marty Zweig isn't worried any more. For years, there has been one constant on the ever-volatile investment scene. Bulls might come and bears might go - but Marty was worried.
A long time ago, before he became such a household name among the financial crowd, I wrote about Dr. Martin E. Zweig in this column, noting that his two inviolate rules for investment success were "Don't fight the Fed" (in other words, the interest-rate trend is likely to be decisive for stocks) and "Don't fight the tape" (in other words, the market always has the last word itself - and sitting around complaining that it's "wrong" is an excellent way to keep losing money).To these openly announced rules, I noted, Zweig seemed to have added a third, for himself: "Never relax." (Once, while greeting him on "Wall Street Week," I said: "Marty Zweig, let me take a wild guess - you're worried, right?" He did not deny it.)
Constant fretting seemed to work for Zweig. A 1964 graduate of the University of Pennsylvania's Wharton School, he went on to take graduate degrees at Miami and Michigan State, and then to construct some of the most impressive models of market history and behavior of the computer age. He appeared driven by the conviction that if he could just find one more indicator, he would never be wrong.
That final indicator has proved elusive, for Marty as for everyone else, but his overall record has been remarkably impressive both as a money manager and as editor of The Zweig Forecast, which has been rated the most consistently profitable newsletter in the business.
So Marty's mood change becomes significant, particularly since it occurs at a moment when mass opinion appears, in contrast, to be consumed with worry. Despite the market's recent run-up, Zweig is convinced that stocks will be up another 10 percent to 15 percent - in other words, in the range of 300 or more points on the Dow Jones industrials - before the end of the year.
This is quite a switch from Zweig's ultra-gloomy mood last fall, when stocks dived precipitously in the wake of Mideast crisis and rising oil prices. Instead of sticking to his indicators, Zweig got trapped by the perennially pessimistic (and perennially wrong) economic sensationalists. The country was heading for a very severe recession "if we're lucky," he told me on television, and even outright depression was not out of the question. People should sell stocks.
It was uncharacteristically bad advice from Zweig, but one of the traits that distinguish him from the here-today, gone-tomorrow charlatans of the business is his ability to admit error and readjust quickly to reality. Hence he turned bullish in time to score major profits for his subscribers this year.
What is most unusual, at a time when prevailing opinion is as temporarily worried as Zweig habitually has been, is that his own current mood is virtually buoyant.
Asked how the market can keep going up when corporate earnings are so rotten, Zweig notes cheerfully that stocks are "a discounting mechanism," trying to look roughly six months ahead - at which time, thanks to such factors as an expanding money supply, he expects an unmistakably healthier economy.
"That's why stocks bottom during recessions and generally enjoy their most explosive gains in the latter parts of recession, such as in early 1975, late 1982 and recently," he says.
Indeed, Zweig's records actually show that, barring depression cases, "the worse the earnings, the better the stock performances; the better the earnings, the worse the stock market performed." Earnings declines of 5 percent to 25 percent (the first-quarter 1991 fall is estimated around 9 percent) have led to average annualized stock gains of 16.1 percent in the next three months.
A true 1930s-style depression could clobber such optimism, of course, but Zweig is now abandoning the worrywarts on that one, too. "Despite all the hysteria about the banking system," he says, "there just is not enough evidence to project such a disaster now."
Will the new, sunnier Zweig be right? And if he is, what eternal certainties will there be left to cling to, in a world where Communists embrace capitalism, Ronald Reagan endorses gun control, and Marty Zweig is smiling?