Customer Reviews

Winning On Wall Street

5 star:		(23)
4 star:		(7)
3 star:		(5)
2 star:		(1)
1 star:		(2)

 

 

Winning on Wall Street is the first book I ever read about investing (back in 1990). Marty Zweig may not be the most glamorous or charismatic guru, but his disciplined and unemotional approach to the markets is what makes him my most revered market player. Famous for calling the 1987 crash (forever captured on the archives of Wall Street Week), Zweig has receded from public view considerably. He discontinued his valuable Zweig Market Letter about 5 years ago and ever since Rukeyser disbanded his elves, Marty rarely shows up on the show. So, this is your best opportunity to tap the mind of an investor whose success has lasted for decades.

Admittedly, Zweig's writing style is fairly academic (he's a PhD). The book is different from many in that much of it works to set forth a model which will allow you to be on the right side of the general market for its major moves. When you boil it down, the primary influences on the model are interest rates, and measuring the underlying strength of the averages. I can now attest firsthand to the durability of this model - I have been dutifully running it myself since 1990 and it has performed admirably. Major BUY signals came in 12/90, 1/96, and 1/01. SELL signals came in 5/94 and 9/99. Again, those were not perfect bottoms and tops, but allowed you to participate in the major upmoves and avoid significant stretches of downward activity. Other useful discussions include those on sentiment and seasonal indicators. The fundamental portion of the book leaves something to be desired - stock picking is not Zweig's strong suit. By the way, opinions suggesting that Zweig is a speculator are off the mark. In fact, his approach is designed to 1) minimize risk, and 2) catch the majority (middle portion) of a market move. (...) Winning on Wall Street has become one of my best reference tools. If you are serious about building your understanding of the markets and improving your investment results, this is a book that you must own.

Zweig made his reputation as a market timer, and 2/3 of this book presents a detailed market timing model that incorporates both "money indicators" (e.g. prime rate, fed funds rate, consumer debt) and a basic momentum indicator. The model is relatively simple and the method is clearly explained. According to Zweig's data, the system produced remarkable results up through the final revision of this book (in 1996).

But, of course, you have to wonder... The book has been revised four times since its initial publication in 1986...and yet not a single revision in the past ten years. Hmmmm...wonder why?

Unfortunately, the obvious answer is the correct one. Zweig's "Super Model", which he touts as "The Only Investment Model You Will Ever Need" (yes, that's an actual chapter title), utterly failed after 1996. Some other reviewers claim to have followed the model successfully since the last edition of the book. I don't know what numbers they're working with, but I've done the very tedious work to recreate the signals the model would have given since 1996, using only actual data available as of the date it became available, following Zweig's methodology precisely, and applying it to the Value Line Arithmetic Index (a very close substitute for the proprietary benchmark he uses in the book). From March 1996 (the last data point in the book) through June 28, 2006, the Value Line Index produced a gain of 222.8% (buy & hold, excluding dividends). Following the Zweig "Super Model" long-only generated a gain of 95.5% (not including interest income while in cash), and following the model long/short produced a gain of only 18.4% (yes, that's total, not annualized...). So much for the "Super Model".

As for Zweig's stock picking method, it's a pretty straightforward approach blending GARP and momentum and is very capably summarized on AAII's excellent web site. Save yourself the time and money and just go there if you want a starting point for stock screening ideas.

A basic work that every investor should read. The best source for simple explanations of the mechinisms that drive bull and bear markets. "Outdated and misleading" says one reviewer who did not find it applicable for trading the .com mania in Feb 2000, but why that market crashed a month after the review was written can be found in Mr. Zweig's work. The fact is the theories and applications found in this book have correctly called every major market move since the mid 1980's. You can find books that can help you make more money during bull markets, but if you want to KEEP the money you make this is the best place to start.

I almost hate to tell you how good this book is, for fear that Zweig's Stock Screen will quit working for me if too many people know about it. I read the book, and in early 2005 I started using Zweig's stock screen (US stock market). The S&P500 made less than 5% in 2005, but I made 36% in 2005 on my portfolio using Zweig's screen! Here's how I did it.

First, I got an account at Scottrade, where each trade costs only $7. Then I joined the American Association of Individual Investors, which sells a computer program called "Stock Investor Pro". Stock Investor Pro has Zweig's screen (and a bunch of others) already programmed in, and you can download fresh stock data each week. Each week, somewhere between 10 and 25 stocks pass the screen. I base my buy/sell decisions on those results.

AAII also independently rates all those stock screens, and the long term perfomance of the Zweig screen topped all the others for cumulative gain from 1998 through 2005. In any given year, another screen may top Zweig's performance, but his screen is the overall winner by far. Even during the tech bubble collapse of 2000, Zweig's annual return was positive. It's annualized rate of return was over 40% over that 8 year period. That's an ANNUALIZED rate of return, not the cumulative rate of return. Don't believe those people who tell you that you can't do better than the S&P500 over the long term because the market is "efficient". I don't know what they're smoking, but it can't be too healthy.

To avoid confusion about whether or not the Zweig method has been rewarding over the past decade (one reviewer says it has not and another says it hasn't), simply look at the two close-end funds on the New York Stock Exchange managed by Zweig based on his philosophy:
1) Zweig Fund: lost about 70% between January 2000 and now (November 2009)
2) Zweig Total Return Fund: lost about 40% between January 2000 and November 2009

If you know that the S&P with dividends included lost about 13% over the period, we can only conclude that the funds substantially underperformed the market averages. Even worse, over the 20 years ending in December 2009, the average annual return of the Zweig Total Return Fund including dividends was only 5.6% - way below the return of the S&P. This is not what one should expect of "the only system you should ever need," and probably explains why Zweig's investment letter has silently disappeared through the back door (as mentioned by another reviewer).

The big flaw in his method, as far as I can tell, is that he used a timeframe that was way too small to make meaningful conclusions. For instance, the idea that interest rates are a driver behind stock markets (which was also proclaimed by Kenneth Fisher, who, by the way, also was taken completely aback by the bear market of 2007-2008) is based on a 50 year period up until 2005 or so. But anyone who would take the trouble to look beyond that time frame, would have seen that the relationship between stock markets and interest rates falls apart before 1950. So why trust on such an indicator?

As a matter of fact Martin Zweig is one of the few Phds who's "able" to explain even somewhat complicated subjects in plain words. The same thing can't be said about the contemporary authors of various market, finance or economics books published over the last years.

Hands down, this is one of the best and one of the most (again) simple books ever written on Wall Street. It provided me with new insights on different aspects of trading and economics in general, like the Four percent model indicator, the Monetary model, the Mutual Funds cash/assets ratio, the three crucial conditions for bear markets. There were also other brief and concise ideas which seem to stand the test of time, like "It's ok to monitor the crowd and go against it, but you only want to do so when the crowd is extremely one-sided", "Recognizing the relationship between trends and the industries that might benefit from them can lead to above normal returns", "If you could just eliminate the worst 10% of all stocks and choose even randomly from the rest, you would certainly beat the market". And the most surprising of them all (at least to me): "There seems to be some inborn reasoning in Wall Street that better profits mean higher stock prices, but this simply is not true in aggregate. The best gains made in bull markets tend to come in the first six months of a fresh bull market, when profits are usually declining".

But when it comes to the brass tacks of his methodology, I think the best part of this book is the one about scanning the financial section. His method of picking the winners by simply checking the latest quarterly figures in company sales and earnings in the daily financial section of The Wall Street Journal or The New York Times and the process he goes through afterwards, until deciding in the end which ones to buy is simple, yet very powerful.

I don't know why, but almost every single page of this book reminded me of the legendary Jesse Livermore and his valuable and immortal lessons. After reading M. Zweig's book you'll never invest the same way as before. "Winning on Wall Street" is an intelligent and insightful investing book, yet simple to understand. Rather than trying to razzle-dazzle the reader, this book explains why it is so important to stick to simple concepts and rules such as " buy strength and sell weakness, stay in gear with the tape, the trend is your friend, etc"; rules you have read and heard about a gazillion times before, but which are so easy to violate! As a trader once said: "The market is the train, so be the caboose".

This is a seductive book since it appears to provide useful guides that will enable the investor to time the market. It is by no means a simple scheme, and based on the information provided, seems pretty foolproof. Trouble is, the data stops at 1990, just when things got interesting in the market, and has not been updated. The other troubling and puzzling thing is that Zweig's own mutual funds have not been star performers and his market letter was discontinued years ago.

I purchased this book because the AAII 8 year study of different strategies showed Zwieg's returning 1,659.3% from 1998-2005. He was #1 out of 56 others, including Buffett, Lynch, Fisher, O'Neal's CAN SLIM, Motley fools, and using ROE, P/E's etc. Second place was O'Neal's CAN SLIM with a 860% return, which is the strategy I use. This study got my attention.
Zweig is a rare mix, he was previously a finance professor, (He holds many degrees in finance). He is a successful trader in his own right. He is the chairman of a very successful closed end fund and a mutual fund, and publishes one of the most successful newsletters the Zwieg Forecast.
His super model for stock market timing focuses in on timiming for entries and exits based on monetary policy and market momentum. He uses the prime rate, Fed rate, and installment debt as factors to judge the markets performance. He also uses market momentum indicators like advance decline ratios being greter than 2 to 1, up volume being at a 9-1 ratio. He also discusses simplyfing into entering on a 4% advance and selling after a 4% decline. He puts these factors together to create a point valued timing system that was close to perfect during the past 30 years predicting the trend. He shows the performance of each factor in real historical data.
He favors value combined with growth and to stay away from huge P/E ratios, and diversifying your portifolio across at least 5 stocks in different industries. Which is great advice for investors. (I am a stock trader so I play the market differently, but use this in my 401K).
He does believe in using a trailing stop loss on your stocks to limit losses to 10-20%. He also does the best job I have seen explaining short selling and how it is the same amount of risk as going long. Excellent book I put it at the top of the list in my library of 75 trading books. A must have for all serious investors/traders.

Although you don't hear too much about Marty Zweig anymore, in the late 80's and early 90's he was the authoritive voice in investing and in my book, still is.

This book was my first investment book. Showed me how to make money in any market and how to do it on my own without listening to pitched from brokers and other commissioned financial people.

This book is still a winner. Highly recommended.

This is a great book.

Zweig tells you what to look for and what not to get distracted by.

I keep his 4% rule (Buy when the market closes up 4% and sell when it closes down 4% on weekly closes) as one of the indicators to look at when thinking of buying and selling a stock.

That rule alone should make one more money than a buy and hold approach.

Fine book.