If they zig every time they should zag They ’re followin ’ the news, the obvious views
And they’re caught, baby, holdin' the bag.
—from The Bagholder Blues, words by Joseph Granville
He bears an odd resemblance to Ratso, the consumptive streetwise hustler Dustin Hoffman portrayed in Midnight Cowboy. Ratso, however, did not survive the bus ride and never made it to Florida. A bit taller, a bit older, but with the same hawkish, hungry, bug-eyed look, Joseph E. Granville made it all the way from Yonkers, N.Y., to Caesars Palace, Las Vegas, via Holly Hill, Fla., and earned $6.5 million on the way, telling anyone who would listen they were losers.
Granville bounds onstage at Caesars Palace and peers solicitously into the sea of 5,000 faces. They have gathered to hear the man who is reputed to have tumbled the Dow Jones 36 points and caused a record 90 million shares to be traded on the New York Exchange on Jan. 6, when he whispered “sell” to a select few subscribers to his now-famed market letter. “Ladies and gentlemen, you’re losers,” Granville’s Satchmo-like growl is amplified through the auditorium. And everyone in the audience appears to agree. “I want to make you winners.”
Followed by cameras under the direction of Ron Smith, ex-producer for the Bible-thumping Oral Roberts, Granville starts to strut back and forth across the stage, gesticulating. “The market is a jealous god,” he says, his voice loud enough to be heard in heaven. “It rewards winners and chastises losers.” This evangelistic approach goes over well in halls like the Rev. Robert Schuller’s $16-million Crystal Cathedral where Granville recently delivered his message to a packed house of 7,000 people. But Granville appears most at home in this shrine to the darker side of the American psyche. In the past he has dressed up as everything from a chicken to the Ayatollah Khomeini to make his point, but this performance has been tailored to the nation that just elected Ronald Reagan. Granville screams, “Come in, bag-holder.” A monkey dressed in a pin-striped suit, representing bank trust officers, stockbrokers, economists or anyone who fits Granville’s definition of a bag-holder, ambles onstage. Granville’s bag-holder is anyone who holds stock, who doesn’t buy at the bottom, or sell at the top. The ape walks over to Granville and picks his pockets. Then it climbs up to the top of a ladder, grabs a bag planted there, and holds it all the way back down to the bottom. The audience roars its approval. Granville’s smile almost lops his head in half.
Since his sell call last January, Granville, at 57, has become a household word, a prophet to a panicked and increasingly impoverished middle class. He has appeared on all the major TV talk shows and in all the major media. His crusade for a national lottery to save the U.S. economy has become the fodder for cocktail party conversations. His outlandish public lobbying for the Nobel Prize in economics is equalled only by his own declaration that the economy has nothing to do with the market. And his penchant for predicting earthquakes compelled him to forecast on television that one would occur at precisely 5:31 a.m., April 10, 1981, in Southern California.
It was, as it turned out, a tranquil morning in San Bernadino, more proof that the oracle is not altogether infallible. What is perhaps more surprising than the occasional slip on the banana peel, however, is the uncanny accuracy of Granville’s market forecasts over the past seven years. Beneath the mantle of buffoonery, Granville is a serious practitioner of technical analysis, a science of market forecasting that discards the conventional wisdom that interest rates, corporate profits or political events determine the over-all direction of the market. Instead, he bases his predictions on supply and demand as seen in the volume of securities trading. That indicator, “On Balance Volume,” is a Granville discovery. In addition, he uses an analysis of about three dozen indicators inherent in the market. As Granville is very fond of saying: “When it comes to the market, I’m humble. When the market speaks, I get down on my knees and say ‘Yes master,’ because I follow only one authority—the market.” Granville has picked three out of four major market turns since 1979. And he is confident enough to boast: “I’ll never make a serious mistake in the market again.”
Granville is one of an estimated 200 self-appointed market seers who take a revenue of $25 million a year from 250,000 subscribers. This unregulated mini-industry indulges everything from crystal bailers to sophisticated computer analysts. Granville may be one of the most outrageous of the lot, but based on his contributions to technical analysis and his track record since 1974, he’s among the most credible. The credibility shows up in his swelling list of subscribers—13,000 for his $250 market letter and 3,000 who pay an extra $500 for the celebrated “early warning call.” After one of his performances, it is not uncommon for as many as 20 per cent of the gathered “losers” to sign up for at least a $250 subscription to The Granville Market Letter. Sponsoring brokerage houses will realize a similar percentage in new accounts. “After a Granville show I’ve had people come in here and write out a cheque for $50,000 or $100,000 and tell me to follow Granville,” says Frank Dembicki, the assistant manager of Bache Halsey Stuart, the brokerage firm that sponsored Granville’s recent show in Vancouver. “That’s all. They don’t want to know. Just follow Granville. Sure they make money. All my clients who follow Granville do. Lots of it. But it’s the power Granville has that’s disconcerting.”
Granville’s flamboyant style and his send-ups of the shibboleths of Wall Street have never made him a favorite in that staid fraternity. Even those who admire his analytical techniques find his showmanship embarrassing. Says Ian McAvity, a Toronto-based technical analyst: “He’s bad for technical analysis. It’s taken so long for it to become respectable.” Others deplore the enormous influence of one man over the market demonstrated in the devastating January sell-off. Dr. Morton Shulman, the multimillionaire physician, market adviser and television host,calls him “a dangerous man.” Supporters, however, blame not Granville but jittery and confused investors for the debacle. “It’s incomprehensible to me that little Joe Granville who wears rayon suits could make the stock market give up $28 billion in one day,” said veteran analyst Robert Stovall of Dean, Witter, Reynolds, Inc., a friend of Granville’s for 20 years. “The market response is a manifestation of severe confusion.”
4Ladies and gentlemen, you ’re losers. I want to make you winners. ’
Granville has been a thorn in Wall Street’s side since he made Walter Winchell’s daily column in 1957 with an article he wrote for E.F. Hutton’s market letter entitled Are the Russians in the U.S. Market. In his scenario the Russians take three to five per cent of their enormous defence budget and over a five-year period systematically accumulate shares of the Dow Jones leading 30 industrials. Then, at the appropriate moment, they press the button and sell everything, sending the market into the greatest tailspin ever, and collapsing the American economy. Recalls Granville: “I had only been at Hutton a few months. I was a freak. I was somebody who read the entrails in his coffee cup. I was a guru. I was a magician. That was how technicians were viewed in those days. People who looked at the hen scratchings on a piece of paper and read the market. And then the next thing they knew I was in Walter Winchell’s column and being investigated by the CIA.”
Granville got to Wall Street by way of stamps. Born in Yonkers in 1923, his mother was a debutante who dabbled in the occult. When Granville was 16 his mother had the famous psychic, Edgar Cayce, do his life reading. His father, on the other hand, came up the hard way, started as a runner on Wall Street, went into banking, then lost everything in the 1929 crash.
At the age of 15 Granville was sent to Todd, a private school in Woodstock, 111. During his term he published his first book,A Schoolboy's Faith, in which he wrote: “Bless yourself, Joseph Granville/Next to God you know yourself/Better than any other mortal /Your ego craves to be understood intelligently.”
From Todd he joined a travelling theatrical company called the Valdes Players and performed Ibsen and other classics. “I was born a ham,” Granville declares. “I always had the lead in every school play.” In Grade 4 he played the prince in the Nutcracker Suite. “I was always the prince,” he says, grandly.
At 20, he enrolled in parapsychology at Duke University but switched to chemistry and a pre-med option. Two years later he joined the navy and was sent to a South Pacific island where he wrote two books on price prediction covering all U.S. commemorative stamps listed in the prestigious Scott catalogue.
After the navy he returned to Columbia and took economics, but it was the stamp books that ultimately got him a job on Wall Street. Merrill Lynch rejected him on the basis of a test he took that told them he would never be adept at anything to do with the market, but the stamp books were sufficient recommendation for E.F. Hutton, which was in desperate need of a market letter writer. “I was launched the same day as Sputnik,” exclaims Granville, who joined Hutton in October of 1957.
Five years later, in 1962, he left Wall Street, moved to Holly Hill and founded the Granville Market Letter. The rest has not been entirely smooth sailing.
When Granville calls his audience losers he knows whereof he speaks. In 1974, after he missed the drastic market turns both up and down, he was a big loser. His life virtually fell apart. After 20 years of marriage and eight children, his wife, Paulina (from whom he is now divorced), had thrown him out of the house. He slept on the floor of his tiny office, which could only be maintained through the good graces of an 83-yearold widow with whom he was friendly.
Without a phone or a business to go with it, he revised Granville's New Strategy of Daily Stock Market Timing for Maximum Profit, the book considered by many to be the bible of technical analysis, and kept looking for clues to explain the crime of his failure, which theory was fallacious, which indicator let him down. Ultimately, he blames the whole thing on golf. “I was playing golf at the time. I had my eye on the ball, not the dot. I took my eye off that dot, the Dow Jones Industrial Average. I was playing great golf, though.”
How did he recover? Like Elmer Gantry, he confessed. “The first chance I got to speak in public again I got up and confessed. I admitted my mistakes. Apparently I’ve been forgiven because I haven’t made a serious mistake since.”
That, of course, depends on what one considers serious. In Vancouver he told a standing-room-only crowd at the Hyatt Regency that the market would go down 16 points the next day. The next day it went up eight. Particularly unreliable are his predictions on individual stocks. Although Granville scored superbly in predicting the boom in gambling stocks in 1978, his record in 1980 was uninspired. Chief among his bloopers was a buy recommendation on troubled Chrysler Corp. Ultimately, Granville stakes his reputation not on stocks but on forecasting major turning points in the market as a whole, but even here he is under attack. After the Granville-inspired sell-off on Jan. 6, he forecast a steady decline from the Dow Jones peak of 1004 reached on the same day. Instead, however, the New York market has recovered to its previous high. If it begins climbing to significant new highs of 1500 or 2000, as some are predicting, Granville will have struck out as badly as he did in 1974. If it takes a nose dive first, he will be vindicated.
As the market moves, so does Granville’s reputation, and yet he seems to thrive on the precarious state of dependence. Like the god he worships, it appears that Granville would bounce back from any disaster. As he said of his erroneous earthquake prediction: “Who cares if I’m wrong? I’ll be off the southern coast of Australia fishing and they’ll never find me. You don’t think it’s going to stop my fun?”
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