Joseph Granville, an investment guru who has been forecasting the imminent collapse for the stock market over the past 30 years, is beating the drum again.
He says technical chart patterns point to losses for stocks through the end of the year, with the Dow Jones Industrial Average dropping to 9,000 at that point, down 27 percent from 12,394 as of Tuesday’s close.
"There’s been a technical downturn in the market since April 2007,” the 84-year-old publisher of The Granville Market Letter told Bloomberg.
"I’m the only person I know of who called the top in the Dow on Oct. 9 at 14,164. We’re down 2,200 points since then,” says Granville.
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A nearly perpetual bear, Granville has ranked at the bottom of the Hulbert Financial Digest's 2005 rankings for performance over the prior 25 years, with an average annualized loss of more than 20 percent.
Granville told Bloomberg the reason why he got it right last October was "the market was telling me it was at an extremely overbought level.”
On Oct. 9, he says, "my indicators showed the most overbought readings ever. There was only one conclusion: The Dow is ready to go down and in a continuous bear market.”
Granville says investors are foolish to think the stock market will rebound quickly.
"Bear markets last a lot longer than three to four months, even though people think otherwise. We’re in for a major bear market according to my indicators. The advance/decline line is plunging.”
The Dow will drop 1,000 points each quarter this year, Granville predicts. "We’ve done it in the first quarter to 12,000. It will go to 11,000 between April and June and then to 10,000 between July and October. It will end the year around 9,000.”
Van Kampen Chief Investment Strategist Rob Schumacher, whom Bloomberg interviewed in tandem with Granville, disagrees vehemently with the grizzled veteran.
Schumacher says the S&P 500 Stock Index can reach 1,600 by year-end, up 20 percent from Tuesday’s close of 1,331.
"The financial services sector led us to this downfall and will take us back out the other way,” he told Bloomberg.
"We have a crisis in confidence, and the solution is a combination of Federal Reserve and fiscal policy response. Underestimating those responses is not a wise thing for investors to do if history is any guide.”
Granville, of course, thinks differently.
He said that while he can’t predict how many financial institutions will go bankrupt, "I do know we go short on individual stocks,” Granville said.
"We don’t play indexes, like most people do, because indexes can be manipulated. Individual stocks are almost impossible to manipulate.”
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