New York — Joseph Granville makes phone calls in the middle of the night. Henry Kaufman makes luncheon speeches. Edson Gould writes long reports.
All three of these men, at various times, have had the ability to make the stock and bond markets act like their own personal yo-yos.
Mr. Gould, a market analyst with Anametrics Inc., is famous for his predictions.
Mr. Kaufman, a partner and economist at Salomon Brothers, often berates the government for its policies -- noting that only higher interest rates will cure the spendthrift federal urges that drive interest rates higher.
Or Mr. Granville, as he did on Jan. 17, will phone some of his clients and tell them to completely sell out their stock holdings. They did. their selling , combined with profit taking from the previous day when the Dow Jones industrial average closed at 1,004.69, its highest level in four years, brought the Dow average crashing to 980.89, down 23.80 points. At one point, the Dow was down more than 32 points. Volume reached 92,890,000 shares, the highest level ever.
"The fact that these seers have such power," says Larry Wachtel, an anlyst with Bache Halsey Stuart Shields Inc., a brokerage house, "proves to me that 95 percent of Wall Street are followers who want to follow the 5 percent who have strong convictions."
Granville, who publishes "The Granville Market Letter," is widely acknowledged as a man of strong convictions. One of his convictions, in fact, is that he is not wrong about the direction of the stock market. In a June interview in Financial World, a Wall Street magazine, Granville stated, "I don't think that I will ever make a serious mistake on the stock market for the rest of my life. People think that that's ego, but the market bestows that degree of authority. When it comes to the market I'm humble -- I get down on my knees and say 'Yes, Master.' . . . If you follow me, you follow the market -- we're interchangeable."
Recently, the market has been agreeing with Granville. On the evening of April 21, 1980, he told his 11,000 subscribers that the time to buy stocks had come. The next day the market roared off of its lows, picking up 31 points. Again on Jan. 3, 1981, he told his clients, "buy stocks aggressively." Just two days later, he reversed himself, causing the big market slide.
Granville is not unique in his ability to gather a following. Mr. Gould of Anametrics became popular with investors after he successfully picked the bull market top in 1972 and again the bottom in 1974.
Mr. Kaufman has the ability to influence investors with his pronouncements about interest rates. Although his clients tend to be institutional investors, such as banks and insurance companies, they are equally as devoted. One broker at Salomon Brothers recalls how the brokerage house last year sent out invitations for Kaufman speech to 50 major financial institutions in the Detroit area and got 49 positive replies. When Kaufman decides that interest rates will rise, his predictions can send shivers through the stock and bond markets.
There are lesser gurus on Wall Street as well. Richard Russell, who espouses a theory concerning the Dow Jones average, has attracted a faithful throng of investors, as has Stanley Burge at Tucker Anthony, a brokerage house.
Most of these market forecasters are "technicians." They look at the internal dynamics of the stock market, not the fundamental reasons why stocks are going up or down. For example, technicians often use the advance/decline ratios -- the number of stocks going up compared with those going down -- as well as the volume characteristics and number of new highs to determine the future trend of the market. However, there are countless methods of examining the market.
Once Granville made up his mind on the future direction of the market, he and his staff began making some 3,000 phone calls, giving some of his clients "an early warning." They had paid $500 extra for the phone service. The rest of his customers pay $250 per year to get Granville's market letter in the mail.
Investors began to get nervous even before the market opened Jan. 7. Mr. Wachtel says he was called at 2 a.m. by one Bache client and again at 6 a.m. by customers in London.
One broker, Richard Cohen, a vice-president at the Boston office of L. F. Rothschild, Unterberg, Towbin, got calls from some of his clients who are regular subscribers of Granville's newsletter asking him to sell their stocks on the Wednesday morning opening. "I have been a broker for 20 years," he comments , "and I've never seen anything like this. Everyone is looking for a great sage . . . but I've been around long enough to know there are no magicians."
Some investors viewed the decline from a different perspective. Noted Monte Gordon, director of research at the Dreyfus Corporation, a mutual fund controlling billions of dollars of assets: "We can almost thank Mr. Granville because he's created a great buying opportunity." Mr. Gordon notes that none of the fundamental elements affecting the market has changed. "Interest rates are still coming down, Mr. Reagan is still going to be president, and he will still implement programs that may be good for business," comments the analyst.
Still, Gordon says the large institutions have a respect for the impact some of the market seers have on the market. "When something like this happens," he says, "you try to get out of the way, if you can."