A Letter to the Editor

Elaine Garzarelli responds to a reprint of a chapter from Mark Tier’s book, Becoming Rich – The Wealth-Building Secrets of the World’s Master Investors Buffett, Icahn, Soros in The Bull & Bear Financial Report.

       I am writing in response to an article recently reprinted in The Bull and Bear Financial Report entitled “The Seven Deadly Investment Sins” by Mark Tier. The article contains numerous inaccuracies regarding my market predictions that I would like to personally address. Over time, my calls were found to be highly accurate after undergoing two audits. When at Lehman, my calls were audited by the accounting firm of Coppers and Lybrand and, in 2002, my calls were audited by the Securities and Exchange Commission. This leaves me with a 95% accuracy rate, not the 36% rate indicated by Mr. Tier.
       First, I have been forecasting the stock market since 1982 (19 public calls through 2005) with only one call being wrong and that being in 1996. Addressing that specific call, I indicated that the S&P 500 was overvalued which came a few months before Greenspan’s “irrational exuberance” speech. S&P 500 EPS were distorted to the upside by Enron, options not being expenses, and several other factors. Therefore, the stock market should have followed income tax profits instead of shareholder profits. Stocks should have peaked and dropped because income tax profits fell from 1997 to 2001. Instead, it went into a bubble. In retrospect, the ‘wrong call’ in 1996 was not so wrong.
       Second, with respect to the claim that my fund was closed by shareholders for “lackluster performance” and that it “tanked” is, quite simply, false. Lehman and Shearson parted ways in 1993-94. Since the fund was owned by Shearson and I was employed at Lehman as a partner, the management of the funds obviously needed to be changed. The performance was in the top third of all managers in my category.
       Finally, the article incorrectly claims that my newsletter went out of business. During the newsletter’s run, I felt that my publisher did not advertise my work according to the initial representations made to me. Eventually, I parted ways with them over these disagreements. I began my own newsletter at Garzarelli Capital which, after nine years, has an extremely successful subscriber base.