Trish Regan: Hi everyone, it’s Trish Regan and you know what? We’ve got a really special show today. I’d like to think of this as an opportunity for you. I mean, there’s some scary stuff out there, right? We’ve been watching the market in a very scary way and, you know, it could actually get worse before it gets better. We’ll see how this all plays out.
Some have said we’ve got a strange day that’s coming to America which is why if you have any wealth at all, you know what? You’ve got to listen up right now. You’ve got to think about how you’re going to invest in 2022. You need to be thoughtful about this because there could be lots and lots of changes coming our way that could cause big shifts in the market and perhaps a shift in your wealth if you’re not careful in 2022.
Which is why I have on today’s program a Wall Street legend, Marc Chaikin, who says, “You know what? It’s really important that you listen and you determine what your future’s going to be.” He wants you to go right now to www.strangeday2022.com. He’s got a free stock recommendation there for you, which is no small thing, believe me, considering you could’ve doubled your money four different times on various stocks he recommended last year. So do check it out – strangeday2022.com. Again, strangeday2022.com for a prediction you cannot afford to miss if you own stocks right now.
Welcome, everyone. It is Trish Regan, and this is a really, really important show because I know you’re all trying to think about what are you going to do with your portfolio – how do you maximize opportunity and reduce your downside risk in the coming years? Well, here on American Consequences, we have a way today for you to do that.
I’m so happy to have on the program a guy who’s a legend of Wall Street. I remember him from interviews back in my CNBC days, Marc Chaikin. He created the Chaikin Money Flow, which is used in all kinds of professional settings, and he has now created a very, very, very special way of researching stocks with the Chaikin Power Gauge. I am just blown away by the potential for what this set of research can do, and I’m so excited for you to hear all about it today. I mean, we’ve got a really crazy market, right? Up 500 one day, down 500 – all this volatility, what do you do with it? I recommend that you watch and use that volatility as your friend. But you think about where those opportunities are.
And so, this is the time right now, as we go into the holidays, as we go into the New Year, to sharpen your pencil and to think about what stocks, what sectors, what places you want to be to maximize your opportunity and, again, reduce your risk.
Marc Chaikin, it’s wonderful to have you on the program here today – thank you.
Marc Chaikin: Trish, it’s great to be with you.
Trish Regan: You know, I feel like I’ve been talking a lot because we’ve mentioned it a few times on the podcast, Power Gauge, and its potential. I want to start first with that and then we can get into what led you to this because I know you’ve got a terrific story about your wife, actually, losing a lot of money and wanting to recover it, and this was the vehicle which she used.
But first of all, explain to everybody listening today what is Power Gauge?
Marc Chaikin: First and foremost, the Power Gauge rating is an objective, unbiased model… a system, if you will, that looks at 20 factors, and the sum total is that these factors rate the potential of over 4,000 stocks and 2,000 exchange-traded funds either bullish, neutral, or bearish. And the reason that’s important is because these factors are what the most successful money managers and hedge funds look at every day.
So I like to say that the Power Gauge works because it’s based on how Wall Street works.
Trish Regan: All right, so, let’s back up for a minute so that we understand just exactly. So, does the Power Gauge specifically look at just these sets of – I mean, do you put in the 20, you yourself. and then you come back? And if so, how do you determine the criteria? Walk me through all that, Marc.
Marc Chaikin: Trish, that’s really a good question. I built the Power Gauge rating after the financial collapse of ’08, and the rating was basically locked down in 2010 and released as a product to the public in January of 2011. And I distilled down 200 factors, and to sort of make that process manageable, I grouped them into four categories. Now, remember, I don’t have a PhD in math or finance or quantitative, I’m just a guy who’s been in Wall Street for 55 years, and has worked with institutional investors. So, I sort of know what they do. My background was actually in technical analysis before I built the Power Gauge.
So, I grouped all of these inputs into four categories, and they make sense – financials, earnings, technicals which are only 15% of the model, and expert opinions. And really, the expert opinions are the secret sauce. You have some of the factors that other models and systems don’t look at, like what are the insiders doing? Are the short sellers aggressively hating this stock? Because they do really good research – the short sellers don’t survive very long in a bull market if their research is no good. And so, these 20 factors distilled down into a model.
Trish Regan: Wow. And when you rate them – you know, bearish, bullish, or neutral, I mean, how many different, is it just three ratings that the Power Gauge spits back? What other information would I expect to get?
Marc Chaikin: Well, actually, each of the 20 factors gets a rating relative to all the stocks in the Russell 3000. Then each of the four components that I described – financials, earnings, technicals, and experts – gets a rating. And then finally, everything is rated relevant to the other stocks in the Russell 3000.
So, you get the rating, but it’s a little more nuanced. It goes from very bullish to bullish to neutral to bearish to very bearish. So, what I like to look at, and what we suggest that our subscribers look at is the very bullish stocks. Because these are the ones that come up strong in a majority of those 20 factors. And we also like to say that it’s important to avoid the landmines in investing in your portfolio. And the bearish and very bearish stocks, that’s how they – an 11-year track record of identifying the stocks that are most likely to blow up and cause you real pain.
I think, you know, part of investing is being able to sleep well at night. And if you’re sitting on stocks, right now, it’s Peloton or Zoom or Shake Shack that have really decimated your portfolio, your financial well-being is being compromised and your physical well-being is compromised because you’re not sleeping very well at night.
Trish Regan: I love this because I think we all are seeking some kind of way to take the emotion out, right? Because it can be so emotional, it can be so distressing, and you’ve got to say, “All right, well, you know what? I’m committed to this because I’m committed to these certain factors and these metrics, and these metrics over time have been proven to show that they work. I mean, you point out that you started this after 2008. So, are you able to – I mean, go back sort of historically and say, OK, do these things work? Do these set of metrics that I’ve applied, if I go back and I look at it over time, there’s a consistency to the approach
Marc Chaikin: There is, and you actually raise a very good point. I call this an eclectic model as opposed to a religious model. So, what would a religious model be? It’s not about religion, it’s about a very narrow approach to the market.
So, we have value investors, growth investors, dividend investors. And when I set out to build this, I realized that there are different constituencies in the market with different styles and time horizons. So, you’ve got hedge funds who are much quicker on the trigger, you’ve got value investors like Warren Buffett who say they hold for three to five years, and I set out to build what I call an eclectic model that reflects all the different styles and time horizons. So, if value stocks were in vogue, as they may well be in the next year, the model will zero in on that. In 2000 to 2002, as the Internet bubble was bursting, interestingly, value stocks went up in that period, and the Power Gauge nailed it and also told you what to avoid – stocks like Yahoo and Exodus, a company that went bankrupt which hosted websites and so forth at home.
So, yes, in 2000 and 2008, and particularly in the energy sector in 2015, the Power Gauge just nailed the stocks to avoid. And if you were in energy stocks in 2015, you were in your own personal bear market, at a time when the market was, overall, very strong.
Trish Regan: Oh, my gosh, this is – it’s really interesting, and I want to get to what the Power Gauge is telling us right now. But even before we get to that, I know that you have a personal story here because you built this not just after the financial collapse that we were all struggling with, but your wife’s 401(k) plan, as I understand it, had been decimated. I mean, she had a professional money manager and the professional money manager didn’t get it right. So, she took back her portfolio and with your help, with Power Gauge’s help, was able to recoup some of these losses. Tell me about that.
Marc Chaikin: Well, this is a very personal story. My wife, Sandy, has been in marketing all her life and she built and launched the most successful men’s fragrance ever, Drakkar Noir, and was the vice president at L’Oréal for a while and the head of marketing. So, she ultimately went into the travel and tourism business and her business boomed. She was living in Connecticut and helping all the country inns in Vermont and New Hampshire market themselves.
And so, whereas previously at these big companies, she had had a 401(k) plan and invested in mutual funds like Peter Lynch’s Magellan Fund and Bill Miller’s Value Fund at Legg Mason. She found that she just didn’t have the time to watch it. So, a friend recommended a professional money manager – well meaning. I was retired at the time. I had sort of taken a sabbatical in 1998 that turned into a 10-year retirement up here in Connecticut. We’re having a good time, but she was working away. I mean, she was in her office working, and I was enjoying life.
And then ’08 came along, and the market started down, and she said, “Well, what do you think’s going on?” I said, “It’s not good.” And I actually spoke to an old friend of mine who you know, Bill Griffith at CNBC, the day the first money market fund broke the buck. And Sandy said, “What does that mean?” And I said, “It means we’re in deep doo-doo.”
And I called Bill and he said, “Marc, I’m just about to go on the air, what is it?” and I told him, and he said, “Oh, my God.” And so, Sandy said, “Well, I’ve got to get ahold of this adviser.” Again, she had talked to him two or three times. Then he stopped taking her calls. And he basically said, “Don’t do anything, ride it out, you’ll be fine.” She had, I don’t know, 10 mutual funds.
So, the bottom line is, Sandy said, “There’s got to be a better way.” And I said, “There is… Close out your account,” and she actually made that decision herself. I said, “Open an account at Vanguard and you want a statutory investment in stocks, but for the time being, let’s use the S&P index fund, the SPY, to stay invested, or partially invested.”
And that’s when I started a 14-month project to build what really is my life’s dream, the sort of end result of everything I learned working with institutional money managers on Wall Street. We had an institutional brokerage firm in the early ‘90s that we sold, were fortunate enough to sell to [inaudible]. So, I basically felt that people, folks like Sandy, who didn’t have the tools and the temperament to manage their own money, and billions of dollars was being transferred in that period between late ’08 and late ’09 into self-directed accounts at full-service brokerage firms.
And based on my experience as a retail stockbroker, as a money manager, and as an adviser to institutions – just what you brought up. The emotions, the time factor – it’s going to work against people. So, I started out to build a system and a model that can help everyday investors manage their own money. And Sandy took the bit and her account is up almost 400% since she started using the Chaikin Power Gauge rating. And by the way, she had no background in Wall Street.
Trish Regan: That’s amazing. No, I think a lot of people felt that because, you know, the financial advisers and planners, they went running for the hills, you know, to your point, you can’t get your phone call through in ’08. It was such a crazy, scary time. I was on the front lines of that myself. I know that all so well.
That is, I mean, it’s really kind of an amazing story, it just is. And, you know, I’ve got to ask you this. I mean, did you have any background from a technological standpoint? I mean, you knew how you wanted to have this function. You knew that you wanted these, say, four categories of financials, earnings, expert opinion, and technical analysis. But how’d you make all that work from a technical perspective?
Marc Chaikin: Well, that’s actually my strength in life – it’s numbers and pattern recognition. And I like to think of myself as a good salesman, but that’s a different conversation, and especially when I’m selling what I believe in.
And so, the numbers part of it was very easy for me. I mean, I probably never could say that this was easy, but it’s what I did best and it’s what I like to do. I’ve been doing it for over 60 years, stock market research, using numbers and pictures, so, I’m both a left-brain and a right-brain person. So, I wanted the math to be right, and fortunately, there was a platform that gave me very instant feedback. You know, in the early days, you’d use big mainframe computers at some university and you’d have to wait a week to get back the computations.
With the Internet and cloud-based software, I was able to get virtually instant feedback along the way that helped me narrow the field down from 200 indicators to 20 and then put them together. And the secret sauce, by the way, is the ratings. As someone once said, you can make a terrific seafood stew, but only if you knew when to stop adding the cumin or the pepper or the Old Bay and so forth. So, the Power Gauge rating reflects a sort of blend, there was a scientific, mathematical underpinning. But then, everything was black. So, the Power Gauge is like the gas gauge on your car. And when you put it up on a chart, which is what we’ve done for our subscribers for over 10 years, you can see this over the past 12 months.
So, it reinforces good practices. You can see, for instance, over the last nine months that buying into stocks that have a bullish Power Gauge rating has worked.
Trish Regan: We’re all victims of this. I mean, I point out, you know, when the VIX starts climbing, that’s a time to pay attention to markets. When things are really, really beaten down – I mean, the answer in 2008? Look, I mean, I can tell you, my husband used to work at Lehman Brothers. So, when I say I was on the front lines of it, both from anchoring at CNBC and seeing what was going on at that firm, it was really, really stressful. And I know how hard that can be for people because it’s your retirement, it’s your life savings. And to see it possibly evaporate is pretty – pretty darn awful.
And yet, if you can kind of see through to the other side, and I think having – I’m going to joke, it feels kind like, almost like a bible, right? You get something with you there that you can believe in, that you can turn to, to help you sort of navigate a really, really challenging time.
But one of the things I want to point out is like, this expert opinion – how much do you think that that really actually does affect things? Especially in light of this meme environment, in this social media environment, does that cause you to weight it any differently, just given that things have changed, Marc, since 2008 and we have a very active sort of retail trading online community?
Marc Chaikin: Well, actually, the weights that I put into place in January 2011 have never changed, and the factors have never changed. So, we’re looking at the same rates that we looked at. There have been some tweaks that favor growth over value, but basically, human nature doesn’t change. And I just read an article that said that’s a crutch, don’t believe that – but the reality is, human nature doesn’t change.
The difference in the current market environment is, as you point out, retail investors are actually creating what’s known as price discovery. They’re setting the price, not just in the meme stocks, but in stocks like Tesla and some of the stocks that the younger generation thinks are going to be the future of our country and for the investment world.
So, interestingly, in the fall of 2020, insiders were accumulating AMC and GameStop. Smart money was buying it. And I created something called Chaikin Money Flow in 1982, it’s on Bloomberg Terminal, Reuters, and on everybody’s online brokerage platform including places like stockcharts.com. And Chaikin Money Flow was actually very positive on those two stocks back in the fall, before they took off. So, experts work because they’re the smartest people on Wall Street.
Now, I like to watch what they’re doing and saying. So, when an analyst raises his price target or raises his earnings estimate from a major bank like UBS, for instance, that’s factored into the model virtually the next day because we update our database every night. And this comes from Standard & Poor’s, it’s the best data on the planet.
Trish Regan: No, and I think that’s important, too, because you have to keep in mind what institutional money is doing. And if, you know, they’re upgrading a stock or really bullish on a stock, then that’s going to be communicated to their sales team, which gets communicated to the overall market.
Now, what if – like, you know, I have a different time horizon than someone else? What if I said, “OK, I want to be invested in the market for the next five years and then I want to retire and live off a fixed income,” or, what if I’ve got a 20-year time horizon? How will I use the information in different ways depending on my own risk factors?
Marc Chaikin: Well, we believe, and I personally believe, in active management as opposed to passive. And that means staying on top of your investments, sort of like planting a garden. You know, you buy stocks that you think are going to go up over a long-term three to five-year time horizon. And then, some of them will not flourish in whatever climate you’re in, you pull out the plants that aren’t doing well, you let the others breathe, you take out the weeds.
If you’re – and that’s how you manage a portfolio and the Chaikin Power Gauge rating is perfect for that. If you have a 20-year time horizon, in my view, you should just buy an index fund and ride through the various ups and downs in the market. But I’ve always said that I don’t know anybody who can look ahead three to five with any degree of reliability. There is a money manager who gets a lot of press every day down in Florida who just came out and said, “My fund is going to have a compounded return of 40% over the next three to five years, annually.” That is B.S. There’s no way to know that. It almost verges on irresponsible – in fact, it is irresponsible if people are committing money based on that.
So, I prefer to look at small bites, the next six to 12 months, which is where the Power Gauge really adds value. And sometimes, you buy a stock like Southwest Airlines in 2014 that my wife Sandy bought and she held it for 18 months because the ratings stayed bullish and the stock just kept getting more and more sponsorship on Wall Street.
Nvidia is a stock that the Power Gauge has been bullish on, going back to 2013, but more particularly in the last 18 months, Nvidia has had a bullish rating and it just keeps going higher. To me, it’s the new Intel and the semiconductor group. It’s where you have to be if you’re bullish on semiconductors. And why wouldn’t you be bullish on semiconductors? They’re in everything right now.
Trish Regan: Yeah. So, this certainly resonates with me because I’ve been a little obsessive about the metaverse. And it started in part because my kids were playing Roblox during COVID. [Laughter] And I was like – oh, my God. And, you know, Marc, at the time, everything was so crazy and we were working from home and the kids were trying to do school from home and everything. And I felt bad for them, right? They couldn’t go see a friend or whatever, so I was like this parent who was like, “No, no, no – no video games, no video games!” But I relented during COVID.
So, they started playing Roblox and they were showing me and I was blown away. I mean, blown away, and I thought, ” You know, if you could combine this with what we’re seeing in some of this virtual reality space?” I mean, I had been on that ride, Soarin’, a few years ago back at Disney. And so, I started really paying attention to this stuff and talking to a lot of people. And, you know, Nvidia keeps coming up over and over again because this company just, you know, from a fundamental perspective, seems to kind of get the power of the metaverse. And I think it’s going to be, really, a game changer in terms of how we interact online.
But it’s like, we need really high-powered semiconductors in order to do it, and Nvidia, from what I’ve seen, kind of is leading that way. So I find that very interesting that all the other data you’re looking at also supports it. What else is going on with this stock that causes the Power Gauge to say, “This might be a good one”?
Marc Chaikin: Well, first of all, they’re in a variety of businesses, from artificial intelligence to self-driving cars, to Internet of Things, to gaming chips, video chips, and they drive data centers. So the fundamental picture for Nvidia is fabulous, but that wouldn’t matter as much if the experts weren’t bullish on it. And they’re bullish on it – someone just raised, a big bank, I think it was UBS, just raised their price target yet again on Nvidia.
But I’d like to go back to something that you just referred to in terms of Roblox. Peter Lynch said, “Look, the best way to invest is to buy what you know and buy what you use.” And that’s true, unless the Power Gauge says, “Not so fast.” So everybody was enamored with Zoom and Peloton, and for a time, the Power Gauge rating was bullish. And then Wall Street soured on their stocks, reality set in, and the Power Gauge turned bearish. And no matter how much you and I might think that Zoom or Peloton is the place to invest because you’re using their treadmills or you’re doing your interactive stuff on Zoom, if the Power Gauge doesn’t agree – and this is where it really shines – then you want to take a wait and see attitude. On the other hand, something like Nvidia or some of those other metaverse stocks – and I agree with you, the metaverse has huge potential, and it’s not just for gaming, it’s for industry.
So, that’s where the Power Gauge can really shine. It can help you sort of sort out the wheat from the chaff in a concept like the metaverse, which is all encompassing and a little bit vague, but there’s some real potential there.
Trish Regan: Yeah. You know, I think it’s tough for investors because I can’t tell you how many people have said to me, like, “How do I begin? Where do I start?” And it can feel so overwhelming for people when they’re trying to figure out, “OK, which stock do I” – you know, and a lot of people turn to financial TV.
But if you had the ability to kind of go out there and use, I would call this sort of, and I say this as someone who has a huge appreciation for the Bloomberg Terminal, but also, recognizes how weird and hard the Bloomberg Terminal is for anybody who isn’t, doesn’t spend months training on the thing. I joke that I first got my – I got my first on-air job at Bloomberg TV years ago back in 2000 because they couldn’t believe I actually knew how to use the Terminal. I had come from Goldman Sachs where I was on the emerging debt market desk, and we were trading Latin American and other emerging market bonds. And so, I knew all about the Bloomberg Terminal, and they were like, “You’re kidding!” So yeah – “Boom, you’re hired.”
But it’s a pretty bizarre system, right? It’s like, you’ve got to completely train your head in a new way, and I know they’ve made some improvements, but it’s still pretty arcane. But it has tremendous power.
And what you’ve created is something that kind of makes it far more digestible and easier for people to understand all that information that’s out there that you’d have to, you know, search for hours and hours and hours and hours on something like the Bloomberg. You’ve kind of made this real or them. Is that a fair kind of characterization, to take all this stuff that’s out there and kind of distill it in a way that is understandable and user-friendly?
Marc Chaikin: I couldn’t have said it better myself. We actually got a testimonial from an adviser at Morgan Stanley who was using our terminal, our platform about five years ago. And she did her own research to supplement Morgan Stanley’s, and she gave us a testimonial that said, “Since I started using the Chaikin Power Gauge rating, I’ve gotten my weekends back.” Think about that. And I didn’t know that she had an autistic daughter, which made that all the more meaningful.
And that’s what this does for individual investors, Trish. It scales everything down. Information overload is perhaps the biggest problem that investors have, other than reigning in their emotions. And this, the Power Gauge rating solves both those problems – distills everything down, you can analyze the market the way successful institutional investors do, from the top down. We have ratings on all the sector ETFs that are part of the S&P, 11 sectors. And right now, technology is strong, health care, and consumer discretionary. But under the surface, you’ve got industry groups. So in consumer discretionary right now, home builders are very bullish, as are automobiles.
That makes it easy, as you know, that’s how successful investors work. In a very – very few successful institutional investors shoot from the hip. They’ve got a methodology. What we’ve done is to create the tools that (a) give people confidence. Because I think those are the three pillars. If you look at what gets in your way as an investor, it’s your emotions, information overload, and not having a plan. And using the Chaikin Power Gauge rating sort of solves for all those three issues.
Trish Regan: Yeah. No, I mean, the plan is so important. Let me ask you this – if I’m using the Chaikin Power Gauge, how quickly or how often would I expect to be trading my portfolio?
Marc Chaikin: Some people are what’s called swing traders and they’re having great success with Chaikin, but we built this for buy and hold investors who are looking to outperform the market, to turbocharge their portfolio with the best stocks and the strongest industry groups.
And so, in an ideal world, you wouldn’t have to do anything for six to nine months. The problem is that, as you pointed out, when VIX is up, that’s challenging for investors, and we’ve sort of compressed time horizons in the last two or three years. So we accomplished, on the downside in March of ’01 or March of 2000, what might have taken 24 months we did in 24 days. That was a bear market, down 33% in 24 days.
So, I think people have to get used to the fact that time horizons have shrunk because of how fast information flows, and because of computers. You know, that’s a whole other conversation, the sort of algorithmic computers.
Trish Regan: Yeah, no, I know, the algorithmic trading, which some people know, some people don’t. My actual very first job, I count Goldman as sort of the first official one. But I was, I summered at D. E. Shaw, a division of theirs, out of Cambridge, Massachusetts. And, you know that was on the cutting edge of some of these algorithms – still is.
But anyway, let me get just sort of a bigger sense of how it performs. Because you mentioned this, that it depends upon, like, what was it telling us during those really scary days of March 2020? Which, by the way, I was furious from the standpoint that I felt like fear had gotten so out of whack. And I say that understanding and wanting to be extremely sympathetic to what this country has been through, and I’ve lost loved ones. It’s awful, we’re now upwards of 800,000 people that have died.
But one of the things that really annoyed me was that the market, in my estimation, completely overreacted. And maybe it’s just that I had faith, having been in 2008 and on the frontlines of that, I had faith in the Fed, and I had faith that government would come through with some stimulus plans, which they did. But yet, we were down, as you point out, in such a short time, so much.
What was the Power Gauge saying then?
Marc Chaikin: Well, that’s interesting that the Power Gauge turned bearish in late February on a lot of the stocks that really took it on the chin – travel stocks like Marriott, conventional stocks like Chevron and Tiffany. And so, the Power Gauge was either neutral or bearish on a whole host of stocks. But interestingly, as we came out of the bottom, the Power Gauge identified some stocks that actually shocked me. A company like Overstock.com and Wayfair saw the Power Gauge rating turn bullish even before the bottom because smart investors were looking ahead.
And we actually have an anecdote. I moved from downtown Philadelphia, by pure chance, in January of 2000, back up to rural Connecticut, just for the lifestyle change after 15 years. And we were actually furnishing our screened-in porch using Wayfair. And I said to Sandy, “You know, the Power Gauge has turned bullish on both Wayfair and Overstock. I don’t get it.” And she said, “Well, look at us. We’re buying furniture. We’re not going out to a physical location. We can’t do that.” And so, the Power Gauge picked up on that. Why? Because institutional investors and analysts were picking up on emerging trends.
So the Power Gauge helped people navigate – look, nothing is perfect. Stocks were going to do what they’re going to do, but the Power Gauge immediately zeroed in on areas of the market that were bullish. In fact, there were stocks like Regeneron where the Power Gauge turned bullish in October of ’19 and stayed bullish all through the bear market. And Regeneron was the only stock in the S&P 500 that had a bullish rating at the bottom. And of course, we now know that some of their therapeutics are very powerful antidotes to COVID.
So with Power Gauge, it’s not perfect, I don’t want to overhype it. I started out by saying I’m a pretty good salesman for my own product, but we eat our own cooking, here. Sandy manages our retirement portfolio using the Power Gauge, and she earned some cash as the market was going down, but then she quickly put that cash back to work, and she actually owned Regeneron, and then the market turned.
But I’d like to say one other thing in response to the very sort of perceptive comment that you made. To be successful in the market, you’ve got to avoid the headlines. I watch CNBC with the sound off, if I’m watching it because when the market’s going down, even if it’s for two days, three days like it’s been now, they trot out, as you know, all the bearish – I call them the talking heads, but that’s in sort of jovial approach. But they’re not [inaudible] when the market’s down because they’re trying to get viewers. You’ve been there.
And so, if you, the headlines will just lead you into a deep hole, and that’s part of the reason the market overreacted. I mean, people get their information from the Internet and from cable. And if you turned on CNBC in mid-March or early March, you didn’t see any bulls there. Maybe there was David Einhorn or Bill Ackman buying junk bonds that nobody really understood, but you’re absolutely right. People overreacted, and part of that was the people that they were listening to.
Trish Regan: Yeah, you know, and look – I mean, coming from that world, I know what goes on sort of behind the scenes. And you’re right, you know, you’re booking bears at a time like that because you know what? It’s – don’t forget, there’s a financial incentive in the news media business, I try and remind people of that. And they need ratings. And what gives you ratings? A huge plunge in the market. Like, it just happened – we had our best ratings we ever had at CNBC during 2008. That’s just the reality of it because everybody was tuning in. It was that, you know, horrible – you know, if it bleeds, it leads kind of thing.
So then you start to get groupthink because you know, the TV networks are doing their thing only because that’s what the audience is sort of craving and then the audience kind of doubles down on this fear. And I think that’s where people really have to have a clear head. So I’d love to see more people just say, “OK, here’s my data set, and this is what I’m going to focus on.”
And I think, you know, the Power Gauge, this is where you come in. Because if even – and I understand, not everything is always right. Like, period, that’s just – you know, there’s chance in anything. But if you can help focus investors, right, so it’s not information overload? And you can say, “These are the things.” You know, if it’s spitting out Wayfair – great company, by the way, I love it – if it’s spitting out Wayfair, then what do I do with that? Now, I can go and do more research on that, and it’s not like this infinite universe of thousands and thousands and thousands of stocks.
Marc Chaikin: And you also see a pattern. I mean, you see all the stuff in Wayfair and Restoration Hardware turn up with a bullet – or RH Corp., now – turn up with bullets raining, you still have to see a pattern. People are pretty good with patterns. I mean, our brain is the best AI pattern recognition engine in the world. And that helps, it reinforces it.
By the way, going back to 2008, I’m sure you remember that Mark Haines, who sadly is no longer with us, called the bottom on March 10th.
Trish Regan: Yeah. What a great man, yeah. He used to – I was pregnant with twins during that time, and I used to work down at the New York, I used to anchor my show from the stock exchange and my show was on right after his. And I used to climb this ladder because we had this really old, rickety set – they’ve improved it dramatically – down at the stock exchange. And he was so upset, he was so upset, he was like, “Trish, you’ve got” – and I’m like, “Mark, you’re climbing it,” you know? [Laughter]
Anyway, he was such a great guy. That was unfortunate. But, you know – right, to say, yeah, “This is the bottom,” he got that. But I think he also, you know, people that are in that day in and day out and understand the media cycle are sort of tuned in, in ways that, if you’re just tuning in as a viewer, you’re not going to be.
So this expert opinion, I’m intrigued by that. Are there certain – do you say, “OK, I’m going to take all the investment banks” or, “I’m going to take certain newsletters”? How do you drill down on that one? And what is the weighting?
Marc Chaikin: Expert opinions are 30% of our model, financial is the 35%, and that’s where the value metrics reside. The individual weightings for each of the factors is our secret sauce. So, we disclose the factors, which, in expert opinions include analysts’ earnings estimate revisions. So the trend of analyst estimates over the last 13 weeks. Insider buying and selling – we’re looking for insiders buying, and that’s particularly helpful in small-cap stocks. Short selling – we view every short selling as bearish because as I said earlier, these guys do their research and their homework. They’re not 100% correct, but they – you know, someone like Jim Chanos has been around for 25 years because he does his homework. And whether he’s bearish on China or bearish on a stock, that gets factored into the model.
And then we look at two other things. We look at owners’ opinion changes. Do they go from neutral to bullish or bearish to neutral? And then finally, something that’s not normally considered expert, but I think it’s really important – industry-group relevance term. And the reason I call that an expert is because experts, successful investors, if you will, do a much bigger kind of macro analysis. Ultimately, it distills down to what industry groups do they think are going to give them the best bang for their buck. So we rate all the industry groups, 80 or 100 industry groups, based on price performance. And it’s important because you get a tailwind if you’re a stock in a strong industry group, whereas, if you’re a stock in a weak industry group, and right now, that would be Internet marketing or travel and leisure, you’ve got a headwind. Pretty tough to buck that headwind.
So, those are the five factors that make up the expert opinions slice, and it’s 30% of our model because we think it’s our secret sauce.
Trish Regan: What is it telling us now in terms of overall direction?
Marc Chaikin: It identifies sectors that are attractive right now. When I look at the market, I do technical analysis, and I write a monthly market letter. But right now, I’m looking at the sectors that the Power Gauge is bullish on. So, technology continues to be strong in the industry groups like software and semiconductors. But we also have bullish ratings on the defensive sectors because the market is picking up on some of the uncertainties going forward. So, health care, utility stakeholders, and utilities now have bullish ratings, whereas a monthly [inaudible] that had bearish ratings because people were looking for growth stocks.
So right now, the Power Gauge rating on sectors in the S&P 500 are continuing to be bullish on technology, but also saying you should be a little bit defensive. And that reflects some of the uncertainty about what the Fed’s going to do in terms of interest rate hikes in 2022 and when they’re going to do it. What’s inflation going to look like, and less so, I think, how is the Omicron variant going to affect the economy going forward.
Trish Regan: Wow. You know, I think it’s really neat. And not to be totally tacky, but can you give me a sense of what it costs to get this research and to be able to access the Power Gauge? I know that the Bloomberg Terminal, it used to be $1,500, I think it’s up to two grand. But give us a sense of what somebody would pay to access the research.
Marc Chaikin: Well, we have a monthly newsletter called the Power Gauge Investor, and that newsletter, along with access to the platform, the Power Gauge and the other tools, we actually have something called the Discovery Engine, which is pretty cool, it’s the way that Netflix tells you, “Because you liked this, you might like that.” That product retails for $3,000 a year. It’s almost like one month of the Bloomberg Terminal would pay for the Power Gauge Investor for a year.
Trish Regan: You know, look, I think for people that are putting so much money to work in the markets, having more information but information that’s synthesized is just really important. Because otherwise, you know – look, we’re not full-time traders, right? Like, in life, you want to be out there enjoying your life, to your point about the Morgan Stanley woman who wanted her weekends back. I mean, to have that kind of tool to help, I think, is really worthwhile.
Well, this is really interesting, Marc. And, you know, I think you and I have spoken before over the years. I’m pretty certain you were on CNBC at one point with me, and I think at that point, it was back when there was a lot of “look at the money flow and the Chaikin Money Flow.” But this is just, this is incredible, what you’ve built. And I’m excited for you and I’m excited you’re part of the Stansberry family. And I’m excited that your wife got her retirement back, right? [Laughter]
Marc Chaikin: I mean, she follows this regularly. I mean, she looks at the market maybe 15 to 30 minutes a day and spends an hour on the weekends, and that’s pretty manageable. She gets such good feedback from women who say, you know, “Wall Street has sort of left me behind and this jargon, I don’t understand it.” And the Internet really felt empowered, Sandy had a specific outreach to women, and it really created a whole generation of empowered women who are using this methodology.
Trish Regan: I’ve got to tell my mom about it. [Laughter]
Marc Chaikin: [Laughter]
Trish Regan: I think she would love it, I really do. I think, you know, that’s important, and Sandy should continue that message. I certainly try to as well because too often, women – you know, they’re like, “Oh, whatever” because it feels like a man’s world, so to speak, right? And all these guys on TV talking stocks all the time, you know, “That’s not for me.” And it can be for you, absolutely. It not only can, it needs to be. I feel that so strongly.
And a lot of women are the CFOs of their households and they are out there doing a lot of panning for their family for the future, and this is something that I think people should embrace. So I appreciate what you’re doing, I appreciate what Sandy’s doing, and I’m going to start watching this very carefully.
Marc Chaikin: Trish, this has been an absolute treat for me. You’re so knowledgeable about the markets, and we’ve walked some of the same paths, so, it’s sort of – it’s been a hoot, it’s been great. And hopefully, it’s been useful for you and our listeners.
Trish Regan: They should check it out. By the way, I’m clearly not a good salesperson because I totally forgot to mention the URL that they should go to. I think it’s – oh, we’ve got a few. One is strangeday2022, www.strangeday2022.com. They gave me that to help make it a little bit more memorable. But if they want to go directly to the site, can you give us the URL?
Marc Chaikin: Yeah, it’s chaikinanalytics.com.
Trish Regan: Thank you so much, Marc, I appreciate it.
Marc Chaikin: Trish, stay safe, be well, and have a Happy New Year.
Trish Regan: Really interesting conversation with Marc Chaikin. It’s worth checking out. You can go to strangeday2022.com, strangeday2022.com for more, and a special offer for viewers and listeners of this podcast, strangeday2022.com.
On a personal note, I just want to wish everybody a wonderful, very merry Christmas. I hope you have a great, great time with your family and friends this holiday season. I know it’s challenging, it’s like déjà vu – I mean, here we are again, right, now worried about how we interact with others given the onset of Omicron. But stay strong, stay healthy, and remember what really matters in life. That’s an important thing to, you know, just keep everything in perspective as we go into this new year, a little bit of advice for all of you. And don’t forget to invest – don’t forget to invest. That’s another bit of advice. [Laughter]
Anyway, I will see you right back here as we welcome in 2022. We have Doc Eifrig coming on the program next week. I’ll see you then.
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