Every investor needs an edge... A culmination of a life's work... A tool to have at your side... Seeing the banking crisis before it happened... The postelection surprise coming to U.S. stocks...
Editor's note: Today, we're sharing an essay from Marc Chaikin, the founder of our corporate affiliate Chaikin Analytics. As we've mentioned lately, Marc – a 50-year Wall Street legend – is warning about a postelection surprise coming straight for U.S. stocks. When he makes this type of call, we certainly pay attention, because Marc has a history of making timely, lucrative predictions, like his bear market warning in 2022... his expectation for a "run on the banks" in 2023... and more. He has nailed nearly every critical market move in recent years. In this essay, which originally appeared in our Masters Series back in September, Marc explains a little bit about how he's able to keep an edge on the market and details a tool that any investor can learn to use to do the same...
 'Based on the bearish Power Gauge rating, I think the risk of a negative earnings surprise is too great'...
I said those words in 2012, as I was appearing for the first time on CNBC's Fast Money Halftime Report. On the panel next to me was Jon Najarian. I'm guessing you've heard of him... The NFL-linebacker-turned-high-profile-trader had become a household name in the financial world by then. He would go on to sell his publishing and trading platforms, optionMONSTER and tradeMONSTER, to E-Trade just a few years later for $750 million. Najarian was at the peak of his financial career. And although I'd been making the rounds on CNBC, this was the first time we had crossed paths. The stock we were talking about was online travel agency Priceline, which later changed its name to Booking Holdings (BKNG). Priceline was one of Jon's bullish trades at the time. And I had just told CNBC viewers that it looked too risky. The thing is, I didn't know anything about Priceline. But I did have the Power Gauge to guide me. And that was all I needed... As our longtime readers know, the Power Gauge is the culmination of my life's work... It combines more than five decades' worth of data-driven market research. And it packages everything I've learned about the markets into actionable information for every stock it processes. So I didn't need to know much about Priceline. I just typed in the ticker and got my report. Immediately, I saw that Priceline was set up to release disappointing earnings. The Power Gauge made it clear. Obviously, the interface for the Power Gauge has gotten more refined over the years. Here's an example of another stock that the Power Gauge turned "very bearish" on... You've probably never heard of ChampionX (CHX). But that's not important – because the Power Gauge has. Each of these sliders is backed by data that can be further explored. And the data shows us that ChampionX is in a risky spot for investors right now. That was the kind of setup I saw when I told Jon that Priceline looked like a no-go... The Power Gauge had provided me with the most important (and most relevant) information. Again, Jon was excited about the stock. But he was a professional. And he was willing to reexamine his ideas. The interview ended with Jon saying, "I'm going to take a harder look, since Marc Chaikin doesn't like it." That was Monday, August 6, 2012. On Wednesday, the day after Priceline's earnings, the Halftime Report did a highly unusual follow-up. The host started by asking Jon, "Chaikin spooked you a little bit?" "He did indeed. And I think... a lot of folks followed Mr. Chaikin. Those of us that picked up some cheap out-of-the-money puts... well, they worked out like a charm. "Those puts went from like $1.80 last night to $15, $16," Jon continued. "Again, great call by Marc Chaikin. And thanks, Marc, for helping me out." In short, the Power Gauge was right. Priceline missed earnings. And Jon listened to me, made a bet against the stock, and racked up big profits instead of taking major losses. Now, one great call is just that – a single great call... But it was only possible because I had the Power Gauge at my side. The Power Gauge uses the best data available to help individual investors make consistently great calls. And my goal is to share that power with as many investors as I can. We don't want to let the "smart money" push investments on us. And we don't want to just blindly follow others with an index-focused approach. We can do better. And if we do it well enough, our investments will outperform the broad market over the long run. That's our goal as investors. And our approach starts with the Power Gauge. That's why I shared a major prediction at a special Chaikin Analytics online event in November 2022... It probably felt like "too much" for many investors. At the time, I said that "a major shift in our financial system... could lead to a run on the banks in 2023." Now, I didn't know that this situation would involve Silicon Valley Bank. And I didn't realize that folks would rush to clean out their bank accounts. I didn't expect the situation to unfold exactly like it did... Nobody could have. But when I shared my prediction, it was clear... Rising interest rates and low-yield bank accounts were changing the landscape. I expected a lot of money to start flowing out of banks. And I expected it to start flowing into areas where investors could earn a higher rate of return. That's just basic economics. It also seemed obvious that the situation could worsen and cause market volatility. And of course, that's exactly what happened starting in November 2022. The Power Gauge was watching the banks the entire time. And it saw what many financial experts and investors didn't... Silvergate Capital was the first domino to fall. In March 2023, the crypto-focused bank announced a plan to wind down its operations. The chart below shows Silvergate's performance leading up to that point... Pay close attention to the Power Gauge rating at the bottom of this chart... The different-colored bars show the rating for Silvergate on any given day. Broadly speaking, yellow is "neutral" and red is "bearish." (And green is "bullish." But in this case, that rating doesn't apply.) You'll notice that the Power Gauge flipped to red ("bearish") for Silvergate on April 5, 2022. And it remained either "bearish" or "neutral" for an entire year. In fact, the Power Gauge warned us about all the troubled banks... Our system flashed a "bearish" sell signal on First Republic Bank on April 1, 2022. And it flashed "bearish" sell signals on Signature Bank and Silicon Valley Bank's parent company, SVB Financial, on July 11 and July 25 of that year, respectively. The Power Gauge alerted users to sell (or avoid) all these banks long before they collapsed. Folks, this is exactly why I built the Power Gauge... I've put everything I learned in my 50-year finance career into it. And now, the system can help everyday investors thrive in any environment. In the end, I don't pretend to know exactly what's coming next for the markets. But with the Power Gauge at our side, we can pinpoint major shifts like a run on the banks. And we can do it before most investors even begin to figure out what's happening.
Editor's note: As we inch closer to 2025, Marc has compiled a "road map" for investing in the new year, including a list of the best stocks to own... which ones to avoid... and why he's anticipating a postelection surprise for U.S. stocks right around the corner. Marc's outlook and recommendations account for current events, policy changes expected to happen under President-elect Donald Trump, and, as he discussed in this essay, ratings from Marc's proprietary Power Gauge system. You see, while most Americans have been distracted by the election, geopolitical turmoil, and the market surging to record highs, Marc recently watched a powerful market signal (with 93% historical accuracy) flash quietly. He calls this the "5X Signal" and believes it will shape the market in 2025. He warns that if you have any money in U.S. stocks, it's a story you can't miss... Last week, he covered all this and more in a new, free webinar. Click here to watch a replay now. Our offices are closed today as our team enjoys some holiday time off, so we'll skip our 52-week high list and mailbag. But, as always, we love to hear from you. Send your comments and questions to feedback@stansberryresearch.com. In a related housekeeping note, the next Digest issue you receive will be on Thursday, after Christmas Eve and Christmas Day. Happy holidays to you and yours. Good investing, Marc Chaikin
Roxbury, Connecticut
December 23, 2024 | 
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