Spilling Wall Street's Secrets

An interview with Marc Chaikin... A Wall Street pioneer... What drives the market to extremes... How to look over Wall Street's shoulders... Trading in a world where you can't know everything... The shortest bull market ever?... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] An interview with Marc Chaikin... A Wall Street pioneer... What drives the market to extremes... How to look over Wall Street's shoulders... Trading in a world where you can't know everything... The shortest bull market ever?... --------------------------------------------------------------- Editor's note: Today, I (Corey McLaughlin) want to bring you an interview with Marc Chaikin, the founder of our corporate affiliate Chaikin Analytics. Our company became associated with Marc back in 2021, and he quickly became one of my favorite people to listen to about the markets. Recently, Marc sat down on camera to share his take on one of the biggest questions in the markets today: Will stocks march higher the rest of the year, or is the recent spate of volatility we've seen a sign of a larger downturn afoot? If you're unfamiliar, Marc is nothing less than a true Wall Street pioneer and legend. As he explains in this interview, he got his start in finance in the 1960s. And before long, he started developing market indicators that would eventually land on the desks of major investment firms and some of the world's most prominent investors. Marc "retired" early, in the late 1990s, but after the financial crisis in 2008 and seeing how individual investors suffered through it, he decided to start his own firm designed to help everyday people. He brought his proprietary indicators, like the industry-standard "Chaikin Money Flow" and the "Power Gauge," to the public. Today, we present a lightly edited version of an interview with Marc we conducted in 2021. I think you'll find his story informative on how Wall Street goes about its business. Then we'll share a little bit more detail on Marc's latest market outlook, which you'll want to hear before his message goes offline tonight. After all, Marc was telling folks to expect a bullish "personality change" in the markets last November... He predicted a "run on the banks" five months in advance... And today, [he's preparing for one final twist before the end of 2023](... --------------------------------------------------------------- We begin with Marc's origin story... Corey McLaughlin: Marc, thanks for taking the time to talk with me today. This is a real treat for me personally, and I think it will be a great introduction to you for our subscribers as well... Let's dive in. You spent more than 30 years on Wall Street and were successful enough that you could retire "early" in 1999... Then, you started your own research firm in 2011. Why did you decide to get back into the investment business? What was the motivation? Marc Chaikin: The heart of the story starts in 1989. I was with Drexel Burnham, which was a really high-flying brokerage firm involved with financing lots of companies that weren't creditworthy. I was there until 1989, when – with a partner in Philadelphia – I formed an institutional brokerage firm called Bomar Securities. Bomar was built around a technical-analysis workstation for buy-side portfolio managers and trading desks. We had clients ranging from value investors like T. Rowe Price in Baltimore, and Delaware Management... to hedge funds in New York... to growth managers in Boston... and everything in between. And pretty quickly, I determined that just having a technical-analysis workstation was not enough. So I had our technology team build the first real-time Windows-based market-monitoring system. It was really state-of-the-art technology that enabled portfolio managers and traders to monitor the world in real time based on technical patterns and signals. We built up the following to about 50 institutional clients. And in 1992, we sold that business to Instinet, the electronic-trading arm of Reuters. We grew that business to 15,000 clients. And along the way, I started Instinet Research, which was a quantitative research department to service its 20,000 institutional clients. Then in 1998, I basically decided to take a sabbatical for a year and move up to my weekend house in Connecticut and play some tennis. And that evolved into a 10-year retirement. So I retired very young from Wall Street, and along the way, Instinet had grown from $40 million in revenue to a billion dollars in revenue. And we were a small part of that. It was a very eye-opening experience. Instinet had some of the first quantitative-trading shops for clients and did a lot of what's now known as "dark pool" investments, or trading capabilities. It really wasn't that dark, but everybody loves a buzzword. And here I was in Connecticut with my wife, Sandy, who had her own marketing business. She got so busy that she put her 401(k) plan in the hands of an adviser who had come highly recommended. He had put her into 10 mutual funds, claiming that diversification would be a healthy thing. And then 2008 came along... In September of 2008, I saw something that really spooked me. A money-market fund called the Reserve Fund was trading under a dollar. As you know, money-market funds always maintain that $1 price point, which made people comfortable parking their cash there – whether they were institutions or traders. The Reserve Fund was actually an institutional money-market fund... And when I saw this, my wife called her adviser and told him that she was really concerned about the market. He had been telling her to hang in there... and he again said, "Just hang on. We'll be fine." At that point, Sandy hung up the phone and said, "I can't take this anymore. I'm just going to close out my account, but I don't know what to do with the money." For starters, I told her to buy an S&P index fund. And she said, "I really want to do better than the average stock. There's got to be a better way." I told her there is, and that gave me the incentive to come out of retirement – because there have to be millions of people like her who are taking back control of their financial futures, but they don't have the tools or the temperament or the time to effectively manage their own money. CM: It seems you were right about that... MC: It turned out that over two years, more than a trillion dollars would end up moving from full-service brokerage firms like Merrill Lynch and Smith Barney to self-directed online accounts. So I said, "I'm going to come out of retirement and basically take my research way beyond technical analysis," which is what I was known for. Back in 1982, I introduced Chaikin Money Flow, which is on all the Bloomberg and Reuters terminals, StockCharts.com, and all the online brokerage platforms. But I thought technical analysis wasn't enough for the everyday investor... and many of them weren't going to believe that it worked. I decided I would combine everything I learned from my institutional brokerage clients, value investors, hedge funds, momentum investors... I was going to take everything I learned looking over their shoulders and create an indicator that is basically a fundamental indicator, based on how these successful investors look at the markets every day. That one-year research project ended up being the Chaikin Power Gauge rating, which has 20 factors and four components. The goal was to level the playing field for individual investors like my wife, Sandy... and it has done a great job of that. The pioneering days... CM: Let's go back again to your early days for just a moment. You were a real pioneer. I have to imagine that back in the 1980s, when you were developing technical indicators, it wasn't nearly as common or as easily accepted to do as it is now. MC: Yes, and this actually goes back into the '60s. I got registered as a stockbroker the day the bear market of 1966 ended, October 7. I was with a really good research firm on Wall Street. I got to know the analysts, and I bought into the Kool-Aid that fundamental research was the way to manage clients' money and build a book. And everything was great. Every day, the first two and a half years of my career felt like an uptick. Then 1969 happened... and I experienced the first bear market that I had ever known as a stockbroker – and as an investor. I was investing my own money, too. Pretty quickly, it became apparent that analysts fell in love with their stocks. They'd recommend a stock at $100, and on the way down, they'd say it was an even better buy. At $60, they'd say, "Load up the boat, it doesn't get any better than this." Then at $20, they'd just throw in the towel, which usually was very close to the bottom. But along the way, I was getting calls from brokerage customers. I was only 26, but they were depending on me – and I figured out pretty early on that I needed something else, another tool. There was a bookstore at 14 Wall Street, where our offices were headquartered, that specialized in financial books. I would go in there every day and talk to the manager. He pointed me to a lot of the books on fundamental analysis. They reminded me of my one college economics course, which was dry as dust. And he told me there was a whole other section on what's called "technical analysis." I started looking at it, and it was all numbers-oriented, and I'm really a numbers guy. That's what led me to charting and technical analysis, because it's really about pattern recognition. I started out with relative price strength, because someone had published a PhD thesis on it. I actually put eight years of prices for 800 stocks on the New York Stock Exchange into a research project to prove what this guy had claimed to have done. That was my start. And then along the way, when PCs came out – the first Apple II – I started doing some programming by hand and using the first technical-analysis packages. Basically, in 1969 and 1970, I was able to combine fundamentals with technicals. CM: You were way ahead of your time... MC: It enabled me to navigate the markets and sleep at night and build a career, and then eventually segue to institutional investors. 'Fundamentals drive the market, but emotions drive the market to extremes'... CM: My experience was similar when I got into this business. I was reading fundamental reports or different newsletters. And then, three weeks after the recommendation, the stock could be down whatever percent. I thought, "There needs to be a better way to do this." So pretty quickly, I too caught on to technical analysis... MC: Absolutely. My whole mantra has been that fundamentals drive the market, but that emotions drive the market to extremes. You use technicals to rein in your emotions and also see when things change. The bottom line is, no matter how good your fundamental research is or your qualitative research is – in the case of the Power Gauge, I call it a "quantamental rating" – no matter how good your rating is, if the market disagrees with you, guess who wins? CM: The market doesn't care what you think, right? MC: The market doesn't care, and nobody's bigger than the market. Looking over Wall Street's shoulders... CM: If I understand correctly, when you built your workstation and platform for Wall Street clients, you were then able to see how these firms made trades and used data. And then you were able to use that information to create your own indicators and share those patterns with clients... and now readers. Is that right? That is brilliant. MC: That's right. In 1989, we put the workstation on a client's desk, and then we got to know them really well. And to be successful in that institutional brokerage business, I had to understand what these different market participants were doing and looking at in order to help them integrate technical analysis into their decision making. What I learned was, they all looked at different things. That's the great thing about the stock market. You've got value investors... You've got momentum investors... dividend investors... and they all look at different factors, but there was a common thread. They all had a disciplined approach. That's big. You have to know what you're doing and why you're doing it. The Power Gauge basically does what no individual could ever do. It does the fundamental heavy lifting on over 4,000 U.S. equities and exchange-traded funds. And it works because it's based on how Wall Street works. This is what the "smart money," the successful institutional investors, are looking at. And I've distilled it down to 20 factors in four components. The magic is, it's not a religious model, either. It can work if you're a Warren Buffett acolyte, and you only do it that way... or if you're a Jim Cramer and you're a growth investor... or a hedge fund that specializes in industry groups, strengths, and so forth. The magic in our model, the Power Gauge, is that it is eclectic. It looks at factors across different styles and time horizons. And that's why I think it has been very successful. The Power Gauge at work... CM: I want to talk now about how people actually use it, and maybe show a couple of examples. So first, how do most people use your product? MC: That's an interesting question. People use it in a lot of different ways. We have advisers who filter their firm's buy recommendations through the lens of the Power Gauge. Some clients use it that way. Other clients use it to pick stocks from the bottom up or the top down. My wife, Sandy, works with strong industry groups based on the Power Gauge and then looks at the best stocks in those industry groups. And then some people like to use our screeners. The Power Gauge can be used in a number of ways. But at the end of the day, it points you in the right direction. Not every bullish Power Gauge-rated stock is going to be a winner, but if you eliminate the bears from your radar screen – if all it did was help people avoid one or two disasters in a year – it would pay its freight. CM: What's a past example of that? MC: There's a classic example where you are in Baltimore. Everybody owned Under Armour (UAA) in 2015. It was a hot stock. Its leisurewear was big, and it was getting into the footwear business. The Power Gauge rating turned bearish on Under Armour at around $42. And I know this could have helped people, because as I went around to advisers showing them our product, I would show them the stocks that were already bullish and they would ask, "What about Under Armour?" We'd bring up a chart and it had a bearish rating, and they'd say, "Oh my God, I own that myself." These weren't just advisers in Baltimore. Under Armour eventually dropped over 80%, down below $10. As I said, if all the Power Gauge did for a subscriber was help someone avoid that one stock every year that just destroys your portfolio and causes you to lose sleep every night, it would be worth every penny and more. CM: If you're talking about something that will help you avoid losses, that's a great thing... MC: Playing offense is easy, or relatively easy. The stock market is never easy, but there are always strong industry groups and stocks. On the other hand, I like to say, "Bad things happen to stocks with bearish Power Gauge ratings." Why? Well, as you know, there can be leakage in the market. Maybe management knew that it was worse, or were talking to their friends and they were selling stock. CM: I liked what you've said in previous interviews – and I'm paraphrasing – that with the Power Gauge, you might not be able to say exactly why Wall Street investors are buying or selling a stock... but with your indicators, you can see they are at least buying and selling. You don't know exactly what they know, but you know Wall Street is buying or selling for whatever reason. MC: Exactly, and then turn that on its head. Nobody knows everything. If you're an investor, you shouldn't expect that you'll know everything. Sometimes we get the question, "How does the Power Gauge know that inflation is on the rise or interest rates are falling?" And my answer is the Power Gauge doesn't know, but three of the factors in the model are related to analysts. And so, when they raise their earnings estimates, that's based on the way they're looking at the world and that company in that industry. When they raise their ratings or lower their ratings for a stock, that's an important factor. "Chaikin Money Flow" basically monitors the "smart money" moving in and out of a stock. And it has done an extraordinary job of that for the last 40 years. A classic example goes back to the 1980s with Coca-Cola (KO), which was a mundane stock back then. It had consistently bullish Chaikin Money Flow for over nine months. We didn't know what was going on, but based on the fact that the stock was stronger than the market and Chaikin Money Flow was strong, we were telling our institutional clients... "This is a stock you want to be overweight." It turned out Warren Buffett was accumulating a 10% position and nobody knew. Every day, the stock was closing strong on balance. And that's just a classic example of not needing to know why, just following the breadcrumbs. CM: We're just about out of time. Anything else you want to add? MC: Investing is all about putting the odds in your favor and managing risk. If you point yourself toward the big winners, you're going to skew the odds in your favor. And if you can avoid a couple of losers, you're just going to dramatically improve your bottom line. I think there is nothing better than the Power Gauge to separate the wheat from the chaff. It has consistently done that over a 10-year period, pointing people in the right direction. CM: Marc, I'll let you go now... I can't tell you how thankful I am to you for your time and the opportunity to soak up your wisdom. MC: Thanks, Corey. This has been great. At my age, I'm doing this to help people. And if we can get the message out, I really think we're going to do a lot of good for Stansberry Research subscribers. Editor's note: As I mentioned at the start of today's essay, Marc is one of my favorite people to listen to about the markets. You may be able to see why... based on his background, experience, and investing strategies that he shared in this interview. If you want to hear Marc's latest take on the markets – and how the Power Gauge can help you navigate them – [click here to watch his latest message](. Don't delay. His message goes offline at midnight Eastern time tonight. Specifically, Marc covers whether we may be seeing the end of the "shortest bull market ever." He also explains how today's market presents a fantastic opportunity to harness volatility for "asymmetric results," meaning the potential for unlimited upside with fixed risk to the downside at the beginning of each trade. For years, Marc used to charge his former hedge-fund clients – multibillionaire investors like Paul Tudor Jones, Steve Cohen, and George Soros – $5,000 a month to access his findings. But these days, he has turned his back on Wall Street... providing access at prices that individual investors can afford. And folks who get in right now can even claim a further 50% discount. [Click here to get all the details now](. --------------------------------------------------------------- Recommended Links: [Until Midnight TONIGHT: The Most Important Stock Warning of 2023]( A powerful indicator triggered that has only appeared a handful of times since 1950... and every time, it has predicted the stock market's next move with a 100% success rate. One Wall Street insider sounded the alarm... and explained why ignoring this signal could spell disaster for your money in the final months of 2023. Until midnight tonight, [click here for details (includes a free recommendation)](. --------------------------------------------------------------- ['The Perfect Transaction' (94% Success Rate)]( Since 2010, one little-known trading strategy has booked a 94% success rate and is as close to a Holy Grail as anything we've seen. It's a way to target the best companies in the market and instantly collect payouts of hundreds of dollars at a time, without ever touching a single stock up front. By tomorrow, [click here to learn more (includes a free recommendation)](. --------------------------------------------------------------- New 52-week highs (as of 8/29/23): Array Technologies (ARRY), Brown & Brown (BRO), Comfort Systems USA (FIX), Alphabet (GOOGL), Intercontinental Exchange (ICE), ICON (ICLR), Innodata (INOD), Intuit (INTU), Ingersoll Rand (IR), Iron Mountain (IRM), Novo Nordisk (NVO), Sprouts Farmers Market (SFM), TFI International (TFII), Visa (V), VMware (VMW), Verisk Analytics (VRSK), West Pharmaceutical Services (WST), and Zoetis (ZTS). In today's mailbag, feedback on [yesterday's Digest]( about bad news – a weakening jobs market – being good news for stocks... and more thoughts about Federal Reserve Chair Jerome Powell, [the centuries-old sailor](... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "It's sad to think that bad news for Main Street is good news for Wall Street. "60% of Americans are living paycheck to paycheck and cannot afford the necessities to live. Now people who have jobs and are making a low wage or people trying to find a better or decent job won't be able to find one. "This is good for the stock market and Wall Street. Big banks and the Federal Reserve are pretty good at causing most disasters and Main Streeters are the ones that suffer. Bad news is good news for the ones that weather thru it." – Subscriber Chris P. "Corey, you do a great job! Thanks for keeping us informed about the great astrologer and seafarer JEROME and his infinite wisdom! You and Dan make a great team! You both keep me laughing and well-informed! Thank you!" – Subscriber Larry N. Corey McLaughlin comment: Thanks, Larry... Yes, I can't stop thinking about the analogy that Jerome Powell dropped the other day, either. Which one of these does not belong: Columbus, Magellan, Ponce de León, Powell. All the best, Corey McLaughlin with Marc Chaikin Baltimore, Maryland August 30, 2023 --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open positions across all Stansberry Research portfolios Stock Buy Date Return Publication Analyst MSFT Microsoft 11/11/10 1,197.0% Retirement Millionaire Doc MSFT Microsoft 02/10/12 1,031.9% Stansberry's Investment Advisory Porter ADP Automatic Data Processing 10/09/08 906.8% Extreme Value Ferris wstETH Wrapped Staked Ethereum 02/21/20 683.4% Stansberry Innovations Report Wade WRB W.R. Berkley 03/16/12 545.1% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 535.3% Retirement Millionaire Doc HSY Hershey 12/07/07 528.3% Stansberry's Investment Advisory Porter AFG American Financial 10/12/12 401.1% Stansberry's Investment Advisory Porter TTD The Trade Desk 10/17/19 327.7% Stansberry Innovations Report Engel FSMEX Fidelity Sel Med 09/03/08 299.6% Retirement Millionaire Doc Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. --------------------------------------------------------------- Top 10 Totals 4 Stansberry's Investment Advisory Porter 3 Retirement Millionaire Doc 2 Stansberry Innovations Report Engel/Wade 1 Extreme Value Ferris --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Stock Buy Date Return Publication Analyst wstETH Wrapped Staked Ethereum 12/07/18 1,572.4% Crypto Capital Wade ONE-USD Harmony 12/16/19 1,053.6% Crypto Capital Wade POLY/USD Polymath 05/19/20 1,031.1% Crypto Capital Wade MATIC/USD Polygon 02/25/21 779.8% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 630.7% Crypto Capital Wade Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. --------------------------------------------------------------- Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment Symbol Duration Gain Publication Analyst Nvidia^* NVDA 5.96 years 1,466% Venture Tech. Lashmet Microsoft^ MSFT 12.74 years 1,185% Retirement Millionaire Doc Band Protocol crypto 0.32 years 1,169% Crypto Capital Wade Terra crypto 0.41 years 1,164% Crypto Capital Wade Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud Frontier crypto 0.08 years 978% Crypto Capital Wade Binance Coin crypto 1.78 years 963% Crypto Capital Wade Nvidia^* NVDA 4.12 years 777% Venture Tech. Lashmet Intellia Therapeutics NTLA 1.95 years 775% Amer. Moonshots Root ^ These gains occurred with a partial position in the respective stocks. * The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You're receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. For questions about your account or to speak with customer service, call 888-261-2693 (U.S.) or 443-839-0986 (international) Monday-Friday, 9 a.m.-5 p.m. Eastern time. Or e-mail info@stansberryresearch.com. Please note: The law prohibits us from giving personalized investment advice. © 2023 Stansberry Research. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Stansberry Research, 1125 N Charles St, Baltimore, MD 21201 or [www.stansberryresearch.com](. Any brokers mentioned constitute a partial list of available brokers and is for your information only. Stansberry Research does not recommend or endorse any brokers, dealers, or investment advisors. Stansberry Research forbids its writers from having a financial interest in any security they recommend to our subscribers. All employees of Stansberry Research (and affiliated companies) must wait 24 hours after an investment recommendation is published online – or 72 hours after a direct mail publication is sent – before acting on that recommendation. This work is based on SEC filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. It may contain errors, and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.