For this week's episode of Stansberry Investor Hour, Dan Ferris welcomes back powerhouse guest Marc Chaikin, the founder and CEO of Chaikin Analytics.

Marc is a 40-year Wall Street veteran who, more than a decade ago, developed a revolutionary investing tool called the Chaikin Power Gauge. It's an objective, quantitative system that simplifies the stock-picking process and levels the playing field between institutional and individual investors.

The Power Gauge uses three main metrics to help focus your portfolio on stocks that are outperforming – or are likely to outperform – the market. As Marc discusses in this interview, the first two metrics are Warren Buffett's favorites – basic fundamentals that every investor should know.

But he calls the third metric "the most critical data point" for ordinary investors who hope to swim alongside institutional investors...

Industry trends are what I call "macro trends." They're big-picture reflections of what's going on in the economy. And they also help you see when you look at the charts where the money is flowing. That's an indication that big fund managers – big investors – have bought into the macro story.

When you pay special attention to industry trends, you can sidestep the one pitfall that keeps you from unlocking huge gains in your portfolio...

If you know which sectors and groups to avoid and which industry groups to overweight in your portfolio, you're going to outperform the market and actually sleep better because you're not indulging in what I call the "most expensive sport in America," which is bottom-fishing. It's a formula that has worked for me in the 50-plus years I've been in the business... And I think it's the key to making money.

This week, Marc also shares some interesting tidbits about the Power Gauge's history, including when he showed the Nasdaq how his tool could "turbocharge" its three core indexes to yield double-digit outperformance. And at Dan's request, Marc gives his outlook on investing in technology stocks, along with a tip on the one quantitative measure that he uses to pick out the "cash-flow cows" from all the beaten-down tech stocks that litter the market.

Dan Ferris: Hello, and welcome to the Stansberry Investor Hour. I'm your host, Dan Ferris. I'm also the editor of Extreme Value published by Stansberry Research. Today we'll talk with Marc Chaikin. Marc has been around the market since the 1960s. He's seen it all, and well talk with him about his Power Gauge system today.

In the mailbag today, questions about silver, gold, stocks versus gold, U.S. dollar as a reserve currency, and a lot more. And remember, you can call our listener feedback line, 800-381-2357, tell us what's on your mind, and hear your voice on the show. For my opening rant this week, I want to talk about inflation, recession, or maybe both? That and more right now on the Stansberry Investor Hour.

So this week, and actually in the past couple of weeks, I've gotten a lot of questions and just heard people asking others lots of questions about the idea that are we in inflation, are we in recession, is it both? My wife is asking me what the heck stagflation is because she's not a finance person, and she's heard it discussed on television as I have and you probably have too. And what do these mean? And more important of course, what we're all about on this show, is what do you do about it?

And I'm going to start with the "What do you do about it?" and then talk about what inflation and recession or possibly both, stagflationary environment might mean. But ultimately, the important thing is that I don't think it matters. If you're doing it right, if you're doing investing right, I don't think it matters. For example, do you think Warren Buffett sits around going, "Hm, you know, do I need to do something different this week than I was doing last week or this month than I was doing last month because of inflation?" I don't think he worries about that at all because he's got this enormous portfolio that is loaded with well over 100 great businesses, many of them generating very high returns on the capital invested in them and with really great advantages over the competition.

And a lot of them, like insurance and his energy-related businesses, are probably going to wind up being very good inflation hedges. And I've talked about insurance as an inflation hedge before, right? Property gets insured, property values go up, insurance goes up, etc., etc. So he doesn't worry about that because his strategy was always an all-weather strategy, and that is why I have constantly talked about what I call true diversification. And if you're saying, "Oh, here he goes again," I want you to know that I'm consciously doing it again. I'm consciously repeating this because some things are worth repeating over and over again.

They're really that important. And my idea of true diversification, as I've said before, is right now holding plenty of cash, holding stocks in really good businesses that generate high returns on capital and have good advantages over their competition, holding gold and silver, and probably some bitcoin too. Bitcoin is an untried entity, but I still think it's worth holding. And that to me is a core, truly diversified portfolio.

I think it will do well over the long term whether we see inflation, recession, stagflation, war, hunger, famine, whatever horrible things happen in the world, as long as they're not too horrible, right? If we all get nuked tomorrow it's not going to matter what your portfolio is. But through just about any kind of economic calamity you can think of, I think holding this portfolio over the long term is going to do really well. And like I said, the point of this is you don't need to answer these questions about whether or not there's going to be inflation over the next couple of years or recession over the next couple of years or stagflation, which is basically – let's just talk about the difference.

Inflation and recession are seen as opposites. Inflation is rising prices. Recession is falling prices. Inflation is a hot economy, lots of economic activity. Recession is a downturn in economic activity. And sometimes you can get these things mixed together where you don't get the dramatic upturn in economic activity but you do get rising prices.

That's really hard on wage earners who are living hand-to-mouth, but investors can still do really well by holding assets and holding that diversified portfolio that I just mentioned. So that's the real point of my rant this week. If you're doing the right thing, you don't need to change it. You don't need to change what you're doing if you're truly diversified, right? Investing is not about constantly making these tactical maneuvers week after week or month after month.

If you're doing that then, you know, maybe you're the next George Soros or Stanley Druckenmiller or somebody and you don't need my advice. If you're confident enough to do that kind of thing you don't need my advice. But if you're not sure what to do and you're just saving for retirement and you don't want to get obliterated by some economic trend, I think the truly diversified path is for you. And of course everybody's different, right? I always say that too. Investing is personal.

But the core idea that I think you can tailor to your own personality is true diversification – cash, stocks, gold, silver, a little bitcoin. That's all I want to say about that. I think it's that important to repeat it every now and then, and I will be repeating it again probably sooner than you would ever believe, but that's all I have to say about that this week. Let's go ahead and talk with my old friend Marc Chaikin. Let's do it right now.

[Music]

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[Music]

All right, it's time for our interview. This week's guest is Marc Chaikin. It's great to have Marc back on the show. After 40 years on Wall Street as a trader, stockbroker, analyst, and head of the options department for a major brokerage firm, Marc founded Chaikin Analytics LLC to deliver proven stock analytics to investors and traders based on the Chaikin Power Gauge. That's a 20-factor alpha model proven effective at identifying a stock's potential.

Chaikin developed computerized stock selection models and technical indicators that have become industry standards, including Chaikin Money Flow, and pioneered the first real-time analytics workstation for portfolio managers and stock traders. Marc, it's good to see you again, and great to have you back on the show.

Marc Chaikin: Dan, it's good to be with you.

Dan Ferris: So Marc, I was thinking about you recently, as I do sometimes, I was curious about the indexes that you have created for Nasdaq. Every now and then I wind up on the Nasdaq website for some reason, and I come across – like this morning I came across Nasdaq Chaikin Power U.S. Small-Cap Index, and I was wondering – we've never talked about this stuff on the show. We always mention it. But could you tell me a little bit about how this came about?

Marc Chaikin: In 2015, I got introduced to the index people at Nasdaq. You know, just like Standard & Poor's and MCSI, Nasdaq creates indices that then used as the basis for exchange-traded funds. And Nasdaq, like the Power Gauge, wondered if we could take their three core indices – the Nasdaq large cap, which sort of mirrored the S&P 500, fewer stocks, the small-cap index, which was an alternative to the Russell 2000, and then their Dividend Achievers Index, which was the basis at that time for Vanguard's most successful income mutual fund – and what they asked me to do was to see if the Power Gauge overlaid on their preselected index components could improve the performance. And so we did a back test going all the way back to 2000, overlaying the Power Gauge rating, which as you point out is a 20-factor quantitative alpha-generating model.

And lo and behold, what we found was that just by eliminating the bearish and the neutral-rated stocks within the Nasdaq indices, we could zero in on the stocks with the best potential. And the interesting thing is that these indices are rebalanced once a year on April 1. So in essence, what we did was create a buy-and-hold portfolio using the Power Gauge as an overlay to the components that Nasdaq had put into their indices.

Dan Ferris: Interesting.

Marc Chaikin: And then demonstrated that the Power Gauge has predictive potential, even on a buy-and-hold basis 12 months out. So the indices were launched. Nasdaq liked the research, they validated it in their own testing labs, and then subsequently – and this I can't talk about because it's an investable product and we're not registered with the SEC – a major insurance company licensed two of the indices and created two exchange-traded funds, the Nasdaq Chaikin large-cap fund and the Nasdaq Chaikin small-cap fund. And of course, this is not a recommendation to buy either of those, but those funds have been in existence since 2017 and have about $600 million in them.

Dan Ferris: Wow. I didn't know about the existence of those. So I think it's really cool that you can basically turbocharge an index. I've never heard of this before. I think it's awesome.

Marc Chaikin: And it works the other way. If you looked at Cathie Wood's ETF, the ARK Innovation Fund, as an index, and you overlaid the Power Gauge rating a year ago, you wouldn't have owned any of the stocks because none of them had a bullish rating. In fact, most of them had bearish ratings. And of course, we all know what happened there where you're down over 60% from the right.

Dan Ferris: Right, right. Of course, they launched I think it was – Tuttle created the SARK, the short ARK fund within that time frame. I'm pretty sure it's less than a year old, but I could be wrong. Kind of a good time to do that, I guess. [Laughs]

Marc Chaikin: Yeah, I think it launched in October.

Dan Ferris: Oh, October? OK. There you go.

Marc Chaikin: And obviously it's been a great time to short those stocks.

Dan Ferris: Yeah. How about that? And the Power Gauge, as you say, it goes both ways. It's completely subjective. It doesn't care, right? It's just a quantitative tool that sometimes it says short, sometimes it says long, sometimes it says, what, avoid or neutral?

Marc Chaikin: Neutral is not a bad thing. It just means – because we rank 3,000 stocks basically using the Russell 3000 as the core universe, and then we overlay another 1,000 that aren't in the Russell, as opposed to a trend-following model which could be bullish on 90% of the market if you're in a strong uptrend. There's always 14% of that universe that have very bearish ratings. 14% bearish and so forth. Everything's ranked on a relative basis.

And that's really what investing to me is all about. You know, how is the typical money manager compensated based on how he performs relative to a benchmark, which usually is the S&P 500. So it makes sense to me that you want to focus your portfolio, unless you're an absolute contrarian with a huge appetite for drawdowns, on the stocks that are outperforming the market or likely to outperform the market. The Power Gauge is not a momentum model, but it incorporates a little bit of momentum in the ratings. But just a little. It's 85% fundamental and 15% technical.

Dan Ferris: Now to me that's the most interesting thing about the Power Gauge, and I probably said this before the last time you were on. If you told me everything about the Power Gauge except for that – if you said, well, you know, it timed the short on the ARK Innovation fund brilliantly and so forth and you can lay it over an index for 12 months and it'll outperform, I would've said, "OK, this is a momentum indicator." But in fact, and I'm just looking at the Power Gauge factors – which are available on ChaikinAnaytics.com, anybody can go look at them. And it's Financials – things like price to book, return on equity, debt to equity... Earnings – involving earnings growth, earnings surprise, projected P/E, etc... and a category called Experts. So this is like short interest, insider activity, earning estimate trends, and so forth.

And that is the thing that shocks me the most, because anybody – Marc, like anybody will say, "Well, fundamentals are great and valuation is great and earnings trends are great, but you don't necessarily want to use them as timing tools," but that's mostly what this rather brilliant timing tool is made of. Am I just wrong in thinking that? Am I wrong about this? Is that all there is to it? Thinking that fundamentals are bad timing tools, is what I'm saying.

Marc Chaikin: Well, I wouldn't call these timing tools. I think you can develop a methodology for investing your money that incorporates timing into it. I think timeliness more than timing is what the Power Gauge is all about.

Dan Ferris: OK. Fair enough. Yeah.

Marc Chaikin: And none of this is easy. As Charlie Munger, Warren Buffett's longtime partner said, if investing was easy we'd all be rich.

Dan Ferris: Right.

Marc Chaikin: And investing is definitely not easy.

Dan Ferris: He also said if you think it's easy you're stupid. [Laughs] Charlie said that.

Marc Chaikin: I didn't want to go there.

Dan Ferris: Yeah. [Laughs]

Marc Chaikin: I've used that. [Laughs] I don't want to insult our audience because some people do think investing is easy, and hopefully for them it is. But there are three factors ironically that you didn't mention that I want to zero in on. The first two are in the financial category. They're price-to-sales ratio, how much you're paying per dollar of revenue, and free cash flow. And interestingly, those are Warren Buffett's two go-to metrics, and they are the most heavily weighted in that component, which is also the most heavily weighted in the model.

So I call that the sort of foundation, and it's looking at some value metrics and then some balance sheet items like debt-to-equity. But if you pay too much for per dollar of revenue eventually the market catches up to you, which is what happened to the hyped-up, overinflated growth stocks. And then free cash flow to me is de rigueur because you can doctor anything up with accounting techniques, but you can't mess with free cash flow. It is what it is.

And then the third factor I want to point out is in the expert category, industry group relative strength. It's the most critical data point for investors, and that's what our big event last night was all about... 50% of a stock's performance can be attributed to the industry group that it's in. And when you think about it, that's really a macro indicator, because when industry group trends start to gain traction, like energy is right now, like the mining stocks are, it's usually because of big macro factors. You can get an individual stock that responds to an earnings report or a news story, or a new product, new drug.

Lululemon had some very positive things to say about their newly-launched sneaker line when they reported earnings yesterday. But industry trends are what I call "macro trends." They're big-picture reflections of what's going on in the economy. And they also help you see when you look at the charts where the money is flowing. You know, is the money flowing into industry group or sector ETFs? And that's an indication that big fund managers – big investors – have bought into the macro story.

Dan Ferris: That is really cool that you've got this macro indicator baked into this, and that's it 50% of the return. Wow.

Marc Chaikin: Yeah. And by the way, I zeroed in through an introduction that was made to me when I first got registered as a stockbroker in 1966. And please don't do the math.

Dan Ferris: [Laughs]

Marc Chaikin: I got introduced to a guy named George Chestnutt, and we talked about him on our webinar events. George Chestnutt ran a mutual fund called American Investors out of Greenwich, Connecticut, and he published a newsletter that looked at industry groups. He did most of these computations by hand, because we're talking the mid-'50s when he started this. His mantra was, "Find the strongest stocks in the strongest industry groups," and that's what he populated his mutual fund with.

And I subscribed to this service after meeting him once, and when my sons were born in the late '60s I actually invested for them in his mutual fund, which over a 10-year period was up over 300%. So George Chestnutt was really a major influence on me, and to this day I'm a firm believer that if you know which sectors and groups to avoid and which industry groups to overweight in your portfolio, you're going to outperform the market and actually sleep better because you're not indulging in what I call the "most expensive sport in America," which is bottom-fishing. It's a formula that's worked for me for the 50-plus years I've been in the business, and I think it's going to work ad infinitum. I really do. I think it's the key to making money.

Dan Ferris: Marc, you mentioned energy, mining. I saw within the past day or two here, one of the folks I watch who puts out a really good service actually – it's all about sentiment indicators – he's saying that he's back in risk-on mode. His risk-on, risk-off indicator is back in risk-on mode. I know at least one other guy that I can think of who's got a risk-on, risk-off, and they're getting back in risk-on. I wonder if you are in that mode as well, looking at tech stocks, for example, which have gotten really treated badly this year. [Laughs] You know, we mentioned ARK. Is it time to buy those again, do you think, or no?

Marc Chaikin: No. Actually I don't think so. And tech is broadly defined these days, so a company like Chewy, which is basically an online retailer of pet products, as you probably know, in my mind falls into tech because it's digital retailing. But I think there's still a wide gap between valuations and reality in these tech stocks, particularly the ones with no free cash flow and no earnings. And they're all over the place. I do think it's time to take a look at some of the more beaten down cash-flow machines like Alphabet, like Microsoft, like Apple.

But I think that we're still going to see major downside over time in the beaten down tech stocks that are just sitting there with nothing. I'll just give you one example. Fiverr, which enables independent contractors to find work online, is still not earning any money. Now if you can't earn money after a two-year lockdown when everybody was looking for talent, when are you going to earn money? Same thing with a company called Teladoc. At the Stansberry Conference, that was my number one short.

Teladoc is down over 60% since then. Teladoc has been around for 20 years. They've never made a penny. During the lockdown, the stock skyrocketed, and then the Power Gauge turned bearish and they're still not making any money. So I think you have to define what you mean by tech.

If you mean cash-flow cows like Adobe and Alphabet – and by the way, Adobe had a disappointing quarter, so not really a buy just yet in my view until shake out some of the weak holders, as we used to say on Wall Street. You have to differentiate between the cash cow tech stocks with – and here's a really important point – pricing power, because we are in a deep hole in terms of inflation and I don't see that going away any time soon. So why are the energy and the mining stocks going up? That's sort of obvious.

But some of these big-cap tech stocks like Microsoft and Apple have pricing power, meaning that they can either raise prices or maintain prices and profit margins won't suffer as opposed to some of the manufacturing companies where they have to pass on the price increases. So I think there are some real opportunities, but there's still some landmines in the market. I call them rolling crashes, by the way.

Dan Ferris: Rolling crashes. I've seen that term recently in the – what was it? There was a Stansberry Digest about this idea recently, and I didn't use the term rolling crashes but we've seen this since like, I want to say, February/March of 2021 last year. So just over the past year, it seems like all the really crazy stuff, including ARK, peaked around February and March, and cannabis and clean energy and just all the crazy risk-on stuff, even SPACs, and since then it's been a series of, as you put it brilliantly, rolling crashes. Love that term. So let me ask you this, Marc – is there a rolling crash you think that lies ahead of us? What's the next crash?

Marc Chaikin: Well, 60% of the industry groups that we monitor, we monitor 21 industry groups that have Power Gauge ratings, by the way. We've combined fundamentals with technical. The Power Gauge rating for the individual components represents the fundamental view, and then the actual price action of the ETF, the industry group ETF, is factored in. So there we are combining fundamentals with technical in a big way. Sixty percent have experienced these rolling crashes, including energy starting from the peak that you identified for tech. The energy ETFs dropped over 20% from that January/February peak in 2021, and then the Power Gauge turned bullish in October of 2021, about six months ahead of this major spike up in oil prices and in energy stocks.

So I think there are going to be rolling crashes. I think retail is pretty vulnerable based on what inflation is going to do to the consumer's pocket, and so I think there's some weakness ahead in retail. But 40% of the stocks haven't had a rolling crash of the industry groups, and I think there are going to be some of those that roll over as we go into what is going to be a very difficult time for the economy based on where interest rates are going and where inflation is.

Dan Ferris: You know, the Power Gauge is interesting to me in a number of ways. I already said one of them, which is it's mostly fundamental factors. And I was just thinking it's interesting to me that this system could have worked anytime in the past decade given the fact that – and you still hear this today, that people just seem to not care about fundamentals so terribly much, or at least until maybe the last several months maybe. But for a long, long time, fundamentals, as you say, some of these companies – many of these companies – they don't earn any money. They haven't made money.

Teladoc hasn't made money in 20 years. But at some point, people are just getting used to stocks going up so much that they don't seem to care about that anymore. And then they start saying, "Well, it's a new era, it doesn't matter. High growth, you don't need profits." All this stuff that we hear every 10 or 20 years. And yet, you have a system based on fundamentals that works anyway. How is that?

Marc Chaikin: Well, first of all, the sort of syndrome you just detailed we used to call the greater fool theory.

Dan Ferris: Right. [Laughs]

Marc Chaikin: You know, you buy a stock under the assumption you could sell it to a greater fool at a higher price. The reason that fundamentals work in the Power Gauge is because we're not just looking at conventional fundamentals. So we look at earnings surprise. That's a fundamental factor. How does a company do when they report earnings relative to Wall Street expectations?

If they outperform that starts a virtuous circle of analysts upgrading their opinions and raising their earnings estimates. I noted that 50 years ago, 40 years ago. When I was at Drexel Burnham in the mid-'80s, I was able to use their quantitative database to validate that. The guy who ran that database, George Douglas, actually did the original research on earnings surprise and earnings estimate revisions and how they are big, short-term drivers of stock price movements. And those are two of the 20 factors in the model.

We also look, as you pointed out, at insider transactions, particularly valuable in small-cap stocks, because in a small-cap stock typically management owns a bigger percentage than they do on a large-cap name, and when they take out their checkbook and buy their own stock they can't trade that stock unless they want to run afoul of the SEC, so they're making a long-term bet on the strength of their business, and nobody better in small-cap stocks to follow than insiders who are buying their own stock. We also looked at short selling. I consider that a fundamental indicator. The shorts do good research, and you've been on the short side in your career and you do really good research.

You have to as a short seller to survive in an irrational market particularly. So I think if you just looked at price to book and P/E ratio, which we don't look at – we look at projected P/E ratio, and PEG ratio, price to growth – that might not work as well in the current market environment. But when you put together this stew of 20 factors, many of which are not in fundamental or quantitative models, then you really get something that's robust. I call them all-weather factors. They work in stormy weather and sunny times, and we're very pleased – we've been public with this for 10 years. We launched in January of 2011.

So not only did we have the back-tested results all the way back into the late 1990s, but we've had 10 years of real-time performance of the Power Gauge in, as you point out, some pretty unusual times.

Dan Ferris: Yeah. And I think it's cool – I don't know. I just really think it's cool that you mentioned price to sales and free cash flow, and as fundamental factors go they are really super important. For me, I looked at price to sales in all kinds of situations for individual stocks and industry groups and the entire market, but price to sales is kind of the no B.S., right? It's the top line.

It's before all the nonsense has come in on the income statement. And then free cash flow is at the other end where you've removed, you've backed out all the non-cash stuff, right?

Marc Chaikin: Yep. I hadn't thought of it that way. I like that way to look at it. You know, in the short term, price to sales can put you on the wrong side of a stock, but over the long term, if you pay – I don't know. There's a dividing line I've done in my back testing, and every industry group, by the way, is different, as you know. So banks and price to sales is not quite as meaningful.

But in industrial stocks and software and so forth, it really does make a difference. You pay more than seven times revenue, you're going to get a hurt put on you, as they say on the street.

Dan Ferris: Eventually.

Marc Chaikin: A hurt on me so bad. Yeah. Eventually. But that's where momentum comes in. You don't want to be on the wrong side of momentum if you're thinking about going short. But certainly avoiding those stocks keeps you out of the kind of pain that people have experienced. I mean, take Peloton. Perfect example.

Dan Ferris: Yes.

Marc Chaikin: Peloton, a very, very high-priced exercise bike with a subscription bolted onto it, most people didn't realize doesn't go away otherwise the bike doesn't work. And then suddenly reality set in. But if you look at the price-to-sales ratio on Peloton right now, I think you'll see it's still not something that you'd be comfortable with. And I'm going to give you another stock that I think could be the next Peloton.

So Peloton right now has – yeah, I'm just looking at the price to sales here because I don't have this one. Peloton is trading at 136 times revenue.

Dan Ferris: [Laughs] Still? Wow.

Marc Chaikin: I've got the right symbol in there. Sorry.

Dan Ferris: OK. [Laughs] I was going to say.

Marc Chaikin: Yeah. We don't want to go on record with that one.

Dan Ferris: OK.

Marc Chaikin: Let me just see. It's not that egregious. Sorry. It's still trading at 2.2 times revenue, and that's a problem.

Dan Ferris: That is a problem for them.

Marc Chaikin: It's a problem for a stock that's not making any money.

Dan Ferris: Right.

Marc Chaikin: And it's down, you know, 80%. So here's the next one, I think. DoorDash.

Dan Ferris: Oh, DoorDash. Yeah.

Marc Chaikin: DoorDash. It's a company that should be making money. The whole takeout industry blossomed during the lockdown. But if you look at DoorDash and you look at price to sales, you're not going to be in a good place. You're at 8.3 times revenue.

And here again, the company makes 34 cents a share and it's trading at $120. So no matter how you look at it, this is a stock that has downside written all over it to me. Can it rally 10% or 20%? Well, yeah, it just did. It just did off the March bottom.

But these are the kinds of stocks that you have to avoid in my view. I used to say when I'd get pitched a stock when I was on Wall Street by another broker or analyst, I'd say, "Let someone else make money on that stock. I'll pass." Because if they make it they deserve it.

Dan Ferris: That's right. [Laughs] And they better know when to sell. So Marc, last week you did a really interesting event that was free of charge to anybody who wants to go check it out. And they can check it out at 2022MarketWarning.com. And I wonder if you could just give us a flavor of it and tell us basically what you did during that event.

Marc Chaikin: We've actually touched on some of it already, Dan. Basically, I laid out the case for rolling crashes or rolling corrections and the idea that the market is not the S&P 500 Index. You have to drill down on a more granular level to sectors, but more preferred, industry groups because that's where you pick up these macro trends. So we highlighted how industry group strength is so important in doing your stock picking because it does represent 50% of a stock's price movement, which can be attributed to the industry group. We also laid out the case that it's not just the Power Gauge.

The Power Gauge is part of our industry group ratings and the Power Gauge is great for determining if you've got a stock in your portfolio that might be vulnerable, like a DoorDash or a Peloton, or attractive like almost any name in the energy complex right now, but that once you take it up a notch to the industry group level you could really supercharge your portfolio. And the second thing we highlighted was the fact that there's a major buying opportunity coming in the market, and it's based on the research I've done surrounding the presidential cycle, the four-year presidential cycle, and the idea that in the midterm election year, which we're in right now, the market makes a low and then rallies 30% to 50%.

We took the research all the way back to 1914 and determined that in almost every year – interestingly, the midterm, 20 out of 27 of those instances was either in a bear market or coming out of a bear market. And I would suggest that we've been in a bear market if you look at things from the industry group level. If you look at things in terms of the S&P 500, which is what most people do, you've had a correction. But in 20 of 27 of those midterm election years, you were in a bear market or had just come out of one, and then you rallied, and in the other seven you rallied.

So it's like 25 out of 27 times you had a major upswing to some point in the following year, which would be 2023. So I think there's big opportunities coming, but I also think it's important to be in the right industry groups and take advantage of that broader swing in the market.

Dan Ferris: Wow. I am really curious. I'm going to be watching you, man, for when you're telling me that the time is right to anticipate that rally. But it sounds like you're not there yet though.

Marc Chaikin: We might have made a low in March at the 4,100 level on the S&P. We're certainly seeing some real strength coming into the market now, but my sense is whether we go to a lower low or whether we just test that low, that the low could come sometime in the fall, which is very typical, as you know, for the market to make a bottom in the September/October time framework. But if you were thinking that OK, the bottom's going to be in October you'd miss this whole move in energy and in the mining stocks and the chemical stocks, the food stocks. So that's why industry strength is so important.

I think we do ourselves a disservice as investors to talk about the market. You know, I know Warren Buffett likes to talk about Mr. Market, but Mr. Market is schizophrenic, if you will. He's going in a lot of different directions at one time.

Dan Ferris: All right. So just for our listeners again, if you want to take a look at last week's event, it's a replay of a really great webinar where Marc talks about the rolling crashes and some other topics. 2022MarketWarning.com. 2022MarketWarning.com. You should check it out. Marc, we actually have been talking for a little while now.

Time flies with you and I. So I wonder if I could throw my traditional last question, which is the same for every guest at you and see what you come up with. And the answer should be something besides going to 2022MarketWarning.com. The question is, if you could leave our listeners with just one thought today, what might that be?

Marc Chaikin: Ignore the headlines. Do your homework, have a game plan, and make sure you know the right industries to invest in.

Dan Ferris: Boom. Sounds so simple. There's a lot of work baked in there, but it's simple and powerful. Thank you for that. All right, Marc. Well, always a pleasure to talk with you. I'm sure and I hope we'll do it again soon. You'll have to come back and – as soon as you're ready to tell me that that bottom is in, maybe we should have you back just so you can talk about that.

Marc Chaikin: That's a deal. It's always great being on the show with you, Dan, because you have so much knowledge and you sort of lay it out in a very laidback way. Love being with you.

Dan Ferris: Oh, thanks. You hear that, everybody? That was the one and only Marc Chaikin. I mean, it wasn't just anybody saying that. [Laughs] All right, it's obviously become a mutual admiration society. It's probably time to say goodbye. [Laughs]

Marc Chaikin: Yeah. Exactly. [Laughs]

Dan Ferris: All right. Good to talk to you, Marc.

Marc Chaikin: And you, Dan. Be well.

Dan Ferris: All right. Bye-bye.

[Music]

Well, when two oldish guys get together and start talking about things, you know, you can learn a thing or two I think, especially from Marc. I won't even say from me. But from Marc for sure. I mean, he's been around a long time, he's been there, done that, seen it all, and he's created this system that is, as he put it, really robust, loaded with fundamental factors, which of course I love. I'm a fundamental investor. But there's also some momentum in there, so it's a pretty decent way to pick timely stocks, not just something that you might expect to do well over the long term, which is more my bag.

And you should check the webinar out. The idea of the rolling crashes is something that you should know about, because as Marc laid out, you don't just want to pay attention to the big indexes – Nasdaq, S&P 500, Russell 2000. They're good as far as they go, but they only go so far. And Marc's work into industries can give you a real advantage. I mean, great traders, some of the all-time greatest traders do this. Stanley Druckenmiller I know pays attention to which industries are strong and which ones are weak.

So it's a really powerful thing, that if you don't know about it you should study it. And Marc's tools are a great way to do that. So go to 2022MarketWarning.com. Check out the webinar. All right. Time to take a look at the mailbag. Let's do it right now.

[Music]

One of the biggest fears I'm seeing right now from readers and podcast listeners is that there is no money left to be made in the U.S. stock market, that the extraordinary gains of the past decade are gone for good, and that anyone over the age of 50 who's depending on stocks for their dream retirement is out of luck, destined for pain ahead. Look, I'm about as bearish as they come right now. You know that. But with the right information and recommendations, it simply does not have to be that way for you.

This week, you have a very rare opportunity to get a free stock recommendation from one of the greatest investors of the past century, Marc Chaikin. When Marc issues a big, new prediction or a free stock recommendation, it pays to listen. He says that while things are about to get much worse for many stocks in the market right now – and I agree with him – you also have an extraordinary chance to double your money from here on a very specific group of stocks that have barely even faltered during the recent volatility. No matter what's happening in the broader market, I always pound the table on the unique stocks that protect and even grow your wealth in times of trouble.

They're rare, but they're out there. And that is exactly the kind of stock my friend Marc Chaikin just gave away. This is a simple, free way to put a little money to work for your future. So don't delay. Head to 2022MarketWarning.com and get your free stock recommendation from Marc. Again, you can access everything at 2022MarketWarning.com.

[Music]

In the mailbag each week, you and I have an honest conversation about investing or whatever's on your mind. Send questions, comments, and politely-worded criticisms to feedback@investorhour.com. I read as many e-mails as time allows and I respond to as many as possible. You can also call our listener feedback line, 800-381-2357, tell us what's on your mind and hear your voice on the show. Well last week we had a light mailbag, and I told you about it and you responded and you fixed it.

[Laughs] So I appreciate it. All right, let's dive in with Lodewijk H., our frequent correspondent and faithful listener. And Lodewijk says, "What do you think about investing in Russian real estate with proper management and so on? It is the most contrarian thing I can come up with. As most real estate does, it could generate income. I'm thinking about it. Need to put the inheritance to work on a smart method."

Well, Lodewijk, I'm not sure about Russian real estate. I have thought Russia to be uninvestable for some time, and that was confirmed by a guest we had on quite a while ago, in fact, named Bill Browder who ran the biggest investment firm in Russia for some time until the government killed his lawyer and threw him out of the country and tried to seize his business. So I've thought that the country was uninvestable. It's just too – the government is too capricious, to say the least, and we've learned that in a big way, haven't we?

And all governments are capricious, right? They can all just suddenly decide to do something that affects a whole lot of people really badly. So if you invest in Russian real estate, you're on your own, buddy. I can't help you. Next is Ken C., and Ken C. says, "reading Buffett shareholder letters, he and Mr. Munger, the two people who run Berkshire Hathaway – Warren Buffett and Charlie Munger – he and Mr. Munger are big on Berkshire not paying any sort of dividend.

One year, 2012, he said shareholders by a large margin supported this. I can understand why on Mr. Buffett's side of the table, but my side has a question, to wit. Before I can profit for retiring, I must sell one or more shares of stock. To me, this is like selling a business to profit when all I want is the steady income dividend. This is analogous to Buffett having to encourage the selling of Geico for Buffett's old age." I'm not sure what you mean by that, Ken.

"I get why he likes Berkshire to retain dividends, etc., but not for individual investors who could use some dividends in old age. Thank you." Ken C. Ken, think of it this way. Either way, you are taking money out of the business, right? You say from your side of the table, meaning you're a shareholder and you want to take money out of the business in such a way to provide you with income in your old age.

He's not going to pay a dividend. Just get that idea out of your head. It's not going to happen. And I doubt if anybody who comes after him will pay a dividend either. So yeah, just think of it – and Buffett has said that. He said, "You know, if you need the income you just sell a small portion of stock every year, and if you have A shares you can get them divided into B shares so you can sell smaller increments."

But that's the thing to do. That's the only way to handle this. If you have Berkshire and you want income from it, you're going to have to sell a little bit on a regular basis to simulate an income. And either way, as a shareholder you're taking money out of the business either way. Next is David P., and David wrote a rather long e-mail to say that he heard someone say that stocks have outperformed gold over the long term, and I had recently said on the program that gold has, in fact, doubled the return of the S&P 500 this century, in the 21st century.

So how could they say that? Well David, they can say it easily. It's true over a longer period of time than that. It's true over the very long term over decades and several decades, 100 years, something like that. But I want to reiterate something. If you recall, every time I talk about gold outperforming stocks I try to add that, but that's not the point. That's not the point of holding gold. Gold is not a substitute for investing in a business that generates excess cash flows.

They're two completely different things. Gold is a form of savings that gets your money outside of the currency and keeps it there for as long as you hold your gold. They're two completely different propositions. I don't care how gold seems to perform relative to stocks. I know over the long term it's going to protect me from the natural degradation of all fiat currencies. But I'm glad you asked.

Next is Steve M., and Steve M. says, "Suppose one were to employ second-order thinking to understand the rationale for the invasion of Ukraine, which seems much more brutal than would be the case if the objective was to gain control of territory. Suppose one were to employ second-order thinking to understand the rationale for the invasion of Ukraine, which seems much more brutal than would be the case if the objective was to gain control of the territory. Suppose Russia fully expected the West to employ the most Draconian economic sanctions imaginable. What if one were to consider the invasion as a catalyst to accelerate the decline of the U.S. dollar as the medium of international trade settlement?

Beyond holding precious metals, commodities and companies that generate dollars faster than inflation, what more can an investor concerned about such issues do? Thanks." Steve M. As far as what to do, I covered it – I mean, you got it. Precious metals, commodities, companies that generate dollars faster than inflation. Little bitcoin – boom – maybe a little real estate, you're done. And some people are into collectibles too, and they can do other things that I'm personally not comfortable doing because I don't do them.

I mentioned a guy one time who invests in whisky stored in casks in Scotland. [Laughs] You know? And you better believe there's always going to be a demand for that, right? So the price will go up during inflation. But your idea that the invasion of Ukraine is too brutal if the case was to gain control of the territory, I agree. It's just – I mean, if Western media is to be trusted in the reporting of this, it's brutal.

They're executing civilians. They're finding bodies with people's hands tied behind their backs, and they show pictures of the devastation. It looks just absolutely – they've just laid waste to cities, and it's not habitable anymore. You can't live there. So I don't know what they're doing. I suppose that could be the case.

They could have had some idea that they would affect the U.S. dollar as the reserve currency, and we know the history of this just in broad strokes. We know that the history is that every century or so the reserve currency changes hands, and it's been a little over a century since the world reserve currency changed from the British pound to the U.S. dollar. So it make sense what you're saying. And like I said, as for what to do about it, I think you've got it covered.

And let's finish on a happy note this week with John A. John A. says, "Dan, just wanted to congratulate you on a superb episode, Taking a Bullish Stance on Human Progress on March 28 with Kevin Duffy. It was one of the most thought-provoking and unbridled discussions I've heard in a long time. Long live free speech. Please keep bringing Mr. Duffy back.

He is great and he brings out the best in you as well. His statement, "It's held together by stimulus checks, nuclear threats, and gender pronouns," was simply awesome. Ending the episode on a positive note was much appreciated also especially by old worrywarts like me. Keep them coming, Dan. Your loyal listener and subscriber," John A.

Thank you very much, John. And just for the other listeners, I think that was Kevin's idea about what the U.S. dollar is held together with, [laughs] stimulus checks, nuclear threats, and gender pronouns. I think that's what it was. But yeah, I agree. Kevin and I always enjoy interacting with each other, and you can bet your bottom dollar, John, he will be back.

We'll have him back at least once a year if I have anything to say about it. [Laughs] So thank you, John, and thank you all. That's another episode of the Stansberry Investor Hour. I hope you enjoyed it as much as I did. We do provide a transcript for every episode.

Just go to www.InvestorHour.com, click on the episode you want, scroll all the way down, click on the word "transcript," and enjoy. If you liked this episode and know anybody who might enjoy it also, tell them to check it out on their podcast app or at InvestorHour.com. And do me a favor, subscribe to the show on iTunes, Google Play, or wherever you listen to podcast. And while you're there, help us grow with a rate and a review.

Follow us on Facebook and Instagram. Our handle is @investorhour. On Twitter, our handle is @investor_hour. Have a guest you want me to interview? Drop me a note, feedback@investorhour.com. Or call the listener feedback line, 800-381-2357. Tell us what's on your mind and hear your voice on the show. Till next week, I'm Dan Ferris, thanks for listening.

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