Fed Rate Hikes and Marty Zweig

January 8, 2016

DJIA 16,528

S&P 500 1949

I had the pleasure of speaking with legendary deceased investor Marty Zweig on several occasions. Marty’s motto was “Don’t fight the Fed.” In his book, ‘Winning on Wall Street’ he discussed a market sell signal comes on the 2nd Prime Rate hike, or a full 1% jump in the Prime Rate.

I spoke with Marty Zweig on May 11, 2005. At the time, the Fed Funds rate was 3%. The current rate is 0.36%. Here are my notes in regards to Marty’s response to if Fed Fund Rates increased, and if he thought the fighting the fed theory was still valid. I asked him about his “Fed Indicator” and how in his book, he was very clear on grading rate hikes in his book. His response was that short term rates are so low, probably caused by the fed over doing it, that the rise is not immediately concerning. He mentioned he would be concerned, very concerned, if federal funds rate went to 6%.

I wrote this on January 10, 2005. “I recently read Martin Zweig’s book, “Winning on Wall Street”. I wanted to try and get clarity of what his investment techniques would be in a rising interest rate environment. We certainly have a rising short term rate environment. Yet, the 10 year treasuries are not that far off of their recent lows. As I write this, the 10 year is at 4.26%. In October the 10 year treasury broke 4.00%, and went as high as 4.40% recently. Zweig writes that he is generally not too concerned with rates that are under 8%. Yet, we have had 5 rate hikes and more expected, so it is certainly difficult to interpret his written views from the book, which my copy is 1994, to today’s environment.””

Here are several notes I have taken over the years during meetings I attended or readings of Marty Zweig.

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Respectfully submitted,

Ron Redfield