When Elaine Garzarelli arrived at A.G. Becker as an assistant economist, having graduated from Drexel University with a BS in economics and statistics in 1969, her boss gave her an assignment that would define her career. “He said, ‘Figure out a way to figure out what makes the stock market go up and down,’” she recalls. At first using an IBM mainframe “as big as my bedroom,” she jokes, it took her seven or eight years to develop a model. Her system incorporated everything from company valuations to the economic cycle and monetary policy to investor sentiment. Bullishness and peaks in the cycle were bad signs, explains Garzarelli, who says she was able to predict market tops and bottoms within a margin of 4 to 7 percent. That skill came in handy in 1987, when Garzarelli, then at Shearson Lehman/American Express, was one of the few analysts to sound a warning before the historic crash that saw the Dow Jones industrial average plunge nearly 23 percent on October 19 of that year. “In a field that prides itself on clairvoyance, Elaine Garzarelli . . . stands out,” wrote Institutional Investor in October 1988, when she made first team in Quantitative Analysis for a fifth straight year. Clients that heeded the bearishness in her September 9, 1987, monthly report and her gloomy pronouncements in television and newspaper interviews on October 12 and 13 were understandably grateful, II continued. Garzarelli was also praised for choosing the right sectors, including financials, household products and entertainment, to enter after Black Monday.
Garzarelli prides herself on her objectivity. At A.G. Becker and at Shearson, sector analysts used her numbers to refine their earnings forecasts. “Analysts used to fall in love with their industries,” she recalls, so she avoided speaking with the analysts’ contacts. To keep her own research pure, she spoke with economists rather than corporate leaders.
In 1994, right after being ranked No. 1 on the All-America Research Team for the 11th time, Garzarelli, then director of sector analysis at Lehman Brothers, left to start her own firm. Today she is still doing research at Garzarelli Capital in New York and giving interviews — Garzarelli tells II there is a 50-50 chance of recession. Although she is living a quieter life, she is still gung ho on equity analysis. “It’s the best career anybody could have,” she says. “You get to travel, write and have mathematical models to see if you’re being lied to. There are a lot more tools today.”
