Episode 384: These Are the Sectors You Should Buy Today
On this week's Stansberry Investor Hour, Dan and Corey welcome Marc Chaikin back to the show. Marc is a Wall Street veteran with 50-plus years of total market experience. He's also the founder and CEO of our corporate affiliate, Chaikin Analytics. He joins the show to share some of his vast wisdom with listeners, from the hottest sectors around to why you shouldn't get spooked by all the volatility.
Marc kicks off the show by making his bullish case for the markets. However, he notes that this rising tide has not lifted all boats equally... He lists off several sectors that are particularly attractive to him today, plus a few he's staying away from. Marc also talks a bit about JPMorgan Chase CEO Jamie Dimon's prediction for a financial hurricane, the outlook for energy stocks, what's going on in China to make stocks so volatile, the U.S.'s shift from a manufacturing economy to a service economy, and how the Federal Reserve has been doing...
I think Jerome Powell, the Fed chair, has done an absolutely great job of managing – I mean, some people will call it a soft landing. I'm going to say there's no landing. The plane stayed up in the air and somehow it has refueled mid-flight. And here we go.
Next, Marc emphasizes that the key to profiting as an investor is to avoid making broad economic predictions. He says that different sets of data can give you conflicting signals, so it's not worth your time trying to guess the unknowable future. Instead, you should pay attention only to momentum and earnings. Marc then criticizes financial reporting by the mainstream media, advises listeners to take advantage of current volatility rather than run from it, and highlights the bullish setups in nuclear and software stocks thanks to AI...
If all you know about AI is through ChatGPT, then you're not going to have a very strong vision of the future, because it feels like a gimmick. But if you think about what ChatGPT and all the enhanced versions of it can do in terms of coding... a lot of this is going to be under the hood... A lot of it is not obvious unless you dig in.
Finally, Marc urges investors to not get bearish while the S&P 500 Index is having its best year since 1997. He points out that, as the dot-com mania showed us, the bull run can continue for several more years. As long as profit margins continue to rise, you want to be invested. He also explains how he uses his Power Gauge system to avoid doomed stocks. This leads to a conversation about Marc's new upcoming newsletter that will focus on what the "smart money" is buying and allow him to spot "pockets of strength." Plus, Marc weighs in on mining stocks...
A lot of these Power Gauge ratings [for mining stocks] have turned to "neutral" now, just because price has gotten overextended... So from a technical point of view, they're making new highs, but a lot of them are experiencing what we would call mean reversion or at least [have] gotten ahead of themselves from a price point of view.
Click here or on the image below to watch the video interview with Marc right now. For the full audio episode, click here.
(Additional past episodes are located here.)
Dan Ferris: Hello, and welcome to the Stansberry Investor Hour. I'm Dan Ferris. I'm the editor of Extreme Value and The Ferris Report, both published by Stansberry Research.
Corey McLaughlin: And I'm Corey McLaughlin, Editor of the Stansberry Daily Digest. Today we talk to Chaikin Analytics founder Marc Chaikin.
Dan Ferris: Marc is a good friend and colleague of ours and someone that we have decided you just need to hear from on a regular basis and that's all there is to it. So, without any further ado, let's get to doing that right now. Let's talk with our good friend and colleague Marc Chaikin. Let's do it right now.
Marc, welcome back to the show. Always a pleasure.
Marc Chaikin: Dan, it's great to be with you.
Dan Ferris: So, every – you've been checking in with us on the regular the past couple of years. And of course we do – we should also talk about our upcoming conference. You and I are going to speak at the Stansberry Conference in Las Vegas. I feel like at this point I should just be able to say what's on your mind because we've covered almost every time you've been on the show what you do and how the Power Gauge is built and all that. And I feel like if anybody wants to learn about that they should probably just maybe look at one of those previous episodes that they can find at InvestorHour.com.
But right now especially, because I know I have thoughts about the current moment – I think it's fraught with risk in some ways, but I really – just for personal selfish reasons, I want to know what Marc Chaikin is thinking.
Marc Chaikin: You're too kind. And I'm still bullish. We've been bullish pretty much every time we've been on the show since January 17 of 2023. And the market just reached a really important milestone, the two-year birthday of the bull market on October 12, last Saturday. And there's ample evidence that bull markets just keep going at that point. So, JPMorgan Asset Management had an interesting study, and it actually was in July when it would have been more useful, that bull markets average three years and 10 months, and the average gain is 110%. As of last Friday we were up 62% in two years.
And so, I'm bullish. But I do think it's a stock picker's market. And it has been a stock picker's market really for the last year through all of 2024 with a lot of sector and group rotation going on. And looking back at the Power Gauge – the Power Gauge is just a really valuable asset in a stock picker's market because it finds stocks across market cap spectrums and value growth and different sectors and industry groups that have attractive underlying in most cases fundamentals.
Dan Ferris: For some time, we've been seeing pretty substantially good performance and for some period outperformance too by the traditionally more defensive sectors. Utilities were just on fire. Are you seeing that now? Or are you seeing just a more – everything I've been seeing in data and in just headlines, financial headlines is talking about a really broad advance here. It's... does that gibe with what you –
Marc Chaikin: Well, I think the pivot towards cyclical stocks is right here, right now. And I'm –
Dan Ferris: Cyclical.
Marc Chaikin: – not a big fan of defensive stocks, except for utilities, which have turned into a growth industry with the rise of the AI data center revolution. So, I think utilities are a special case. But consumer staples, health care, not my favorite place to be if you want to maximize returns. If you want to take a risk-averse approach, OK, but we're in this to maximize investors' returns, find the strongest stocks and the strongest industry groups. And right now, I think you have to pivot to the cyclicals.
Dan Ferris: Cyclicals like what? Homebuilders? Well, I'll just was you which you like.
Marc Chaikin: Well, homebuilders have been on fire all through 2024. But I just think industrial stocks, aerospace, defense. At some point energy will come in. Financials in my view is cyclicals. And the bank earnings that have started coming out in the last week are just on fire. They even survived Jamie Dimon's typically dour comments after the JPMorgan earnings report. I don't get this guy. He's making a bloody pile of money in JPMorgan stock and the bank's doing well, but he always puts that caveat in. "Well, the market's got problems. The country has problems." I think it comes with old age. He's getting on there.
Dan Ferris: Maybe. It hasn't –
[Crosstalk]
Corey McLaughlin: He certainly makes headlines.
Dan Ferris: He does.
Corey McLaughlin: Yeah, he certainly knows how to make some headlines, yeah.
Dan Ferris: He does, yeah.
Corey McLaughlin: Yeah. Well, he was talking about a hurricane in the financial markets way back in July and I haven't seen a hurricane except in Florida.
Dan Ferris: Yep. Yeah. Those –
Corey McLaughlin: Yeah. For a while I was calling him Jamie "the Hurricane" Dimon because of that.
Marc Chaikin: Oh, I love it. I absolutely love it.
Dan Ferris: That's right. Hurricane Dimon. "And in this corner, Hurricane Dimon."
Corey McLaughlin: Coming off the top rope.
Marc Chaikin: Hurricane. Oh, you – you're almost – who was it, Rubin "Hurricane" Carter from Jersey City, New Jersey?
Dan Ferris: That's right.
Marc Chaikin: Right. Yeah.
Dan Ferris: So, yeah. I – those things do get likes and clicks and attention and stuff. Maybe he's just – maybe he's – I think he's an honest guy. I think he's just speaking his mind and he really believes that there's a crisis out there. And this was the guy who was saying in the wake of the financial crisis after all the bailouts and things to their effect that everybody – I remember the comment was something like "Everybody sees a black swan with a fat tail behind every rock." So, he was at that point very much trying to say, "Hey, invest in America. Be bullish. Don't fight the last war." But now he's, as you say, sounding quite dour every time he talks. He says, "There's a crisis out there somewhere."
Marc Chaikin: Well, if you want to have a hook to hang your prediction hat on, I guess that's the way to do it. But I'm just not into that kind of gotcha – we used to say about the permanent bears they're like a stopped clock that'll be right twice a day. So…
Dan Ferris: Right.
Marc Chaikin: But I'm going to reserve my thoughts on the ultimate market outcome for your question at the end. So, I'm ready for you this time.
Dan Ferris: Oh, OK. All right. Gosh. Now I want to ask that question.
Corey McLaughlin: We'll get there. We'll get there.
Marc Chaikin: We'll get there. Yeah –
Corey McLaughlin: The – you did mention energy as one of the cyclicals and we've seen the last couple weeks with – I think with what's going on in the Middle East and China stimulus, too, oil prices going up and then back down and energy stocks moving with that, what are your thoughts on just that kind of sector right now?
Marc Chaikin: Well, I think the Middle East is just a short-term influence. But China really is important. And China's in the – how do we say this – in the crapper. He was a British inventor, so we can use that.
Dan Ferris: We can use that.
Marc Chaikin: China's economy is not good. And that does affect the price of energy worldwide. So, I'm not advocating energy stocks right now because they are the one sector that have more bearish than bullish Power Gauge ratings. So, I just – I can't find – except for an occasional coal company, I can't find energy stocks that I'm comfortable buying right here unless you like bottom-fishing, which you know I don't.
Dan Ferris: But the mention of China –
Marc Chaikin: But there will come a time –
Dan Ferris: Go ahead.
Marc Chaikin: No. Well, there will come a time late in the cycle when demand picks up worldwide and because of the central banks around the world led by the ECB, again yesterday cutting rates, demand will pick up in Europe and then in Asia. So, I think energy is a late-stage, cyclical play and we're not there yet.
Dan Ferris: OK. The mention of China prompted a question immediately for me. I wonder – I know the Power Gauge is mostly made up of fundamental indicators and then there's momentum as well. And it makes me wonder if it spits out any kind of a signal or gives you any kind of a reading when we get this enormous reaction over just a few days after the People's Bank of China announced rate cuts and other stimulus, with two programs being directly – directly addressing the purchase of stocks, like a buyback for Chinese companies – buyback program for Chinese companies and then actual buying of Chinese stocks. So, does the Power Guage see this enormous updraft? I mean, boy, they did away with – the Chinese stocks topped out in 2021 along with a lot of other stuff and we're down – the Shanghai Index, I know, was down close to 30% recently and then, wham, after that announcement up 25% or 27% in a matter of three of four days. Did you see anything from your indicators triggered by that?
Marc Chaikin: Well, a number of the Chinese, the broadline Chinese online retailers have had bullish Power Guage ratings for nine to 12 months, like JD.com and Alibaba. So, they were the beneficiaries of that rally, but the stocks who were the fundamentals aren't as attractive, didn't really light up in Chaikin Power Guage. But any – I'm not a big fan of investing overseas. I'm pretty – what would you call it? I'm a jingoist when it comes to that. I've always felt if you can't make money in U.S. stocks, then the chance of making it overseas is not enhanced.
So – but we have had a number and they're mostly the Chinese online retailers that have had bullish ratings. But just to give you an example, we had recommended a stock called PDD Holdings, symbol PDD, and we got stopped out of it on a very, very bad earnings report, totally unexpected. We were sitting on a nice profit and then based on what happened that you described with the People's Bank of China, the stock rallied from $92 all the way up to $154. We got stopped out at about $98, just a month and a half ago, and then suddenly it's back down to $120 today.
So, this is volatility that I can't live with. I can live with volatility in US stocks that I understand and where I consume the products and where they make sense from a growth point of view like some of the AI and chip stocks, but China just is a mystery to me.
Dan Ferris: Yeah, it was – the whole episode here, it's like sort of a – it's a pretty classic emerging market dynamic, isn't it? Just the economy in the crapper, huge bubble, huge real estate bubble. Seventy percent of the country has their money in real estate and the market just falls and falls even while the rest of the world is recovering. And then, the Central Bank comes out with a bazooka, which some people are saying is not quite a bazooka even, and the market's on fire for four days. And then, we – you lose half or more of the gain in the next two or three days. So, it's – it really feels familiar.
Marc Chaikin: Yeah. And the Power Guage on the country ETFs has been really good. It's kept you out of things like Mexico and it actually was bullish on Turkey at some point. But if you want to go far afield, our ETF country Power Guage ratings are q pretty good guide. And they are a combination of fundamentals – so the underlying equities and technicals. So, you do get the benefit of momentum and money flow in the ETF market. But why don't we just try and zero in on US equities and talk about what's looking good?
Dan Ferris: Yeah. I didn't want to get off on a tangent, but it's just that interesting sort of episode we had recently. But yeah, OK. Let's do that.
Corey McLaughlin: Yeah, we talked a lot about China recently. So, yeah.
Dan Ferris: Yeah. Yeah, we did.
Marc Chaikin: So, capital markets. Just across the board, whether you're talking – and financials, whether you're talking about small investment banking firms, medium size like Evercore, whether you're talking about regional banks, money-centered banks, and now the big investment banks like Goldman Sachs and Morgan Stanley, just top notch results. This is sort of the ideal climate for the investment banks with the trading department and asset management and M&A all firing at the same time. So, I think that's another indication that the bull market has more to run because financials are now leading the market and have been for six months.
Dan Ferris: I see. So, that's a forward-looking indicator, in other words.
Marc Chaikin: It has been historically, yeah.
Dan Ferris: Right. Well, hey, everybody –
Corey McLaughlin: And you wrote something –
Dan Ferris: Nobody wants banks to fail.
Corey McLaughlin: Yeah.
Dan Ferris: Go ahead.
Corey McLaughlin: And you wrote something recently, Marc, I think just maybe a couple days ago in the Power Feed, your free newsletter, about rate cuts and what – and rate cuts in a strong economy, or in an economy that's not in recession and how that basically seems like – if the Fed is making a "mistake," that could be a good mistake for the stock market.
Marc Chaikin: Indeed. I mean, if you go back to 1980, five of the best 10 years of the S&P 500 have come when the Fed was cutting rates and there has been – or was no recession. So, it's just a potent mix. Whether it ends up being – pouring gasoline on a fire, that remains to be seen.
But I think Jerome Powell, the Fed chair, who's done an absolutely great job of managing – I mean, some people have called it a soft landing. I'm going to say there's no landing. The plane stayed up in the air and somehow it's refueled in midflight and here we go. So –
Dan Ferris: That's funny because JPMorgan's analysts were talking about a soft landing and then the boss is coming out talking about the hurricane or whatever his dour predictions are. His own analysts are saying soft landing. But you're saying no landing?
Marc Chaikin: Well, a lot of the quantitative – I'm sure you know this – a lot of the quantitative analysts on – at the major banks like Mike Wilson at Morgan Stanley and Kolanovic at JPMorgan have just been way off their mark in these markets. They – I don't know if the world has changed because I'm very leery of a "this time it's different" approach to investing because you do learn a lot from looking at the past. But I think we have a different dynamic in the market than we've ever had. And whether that's the fact that the U.S. has become basically a service economy, not a manufacturing economy, and so some of the metrics that people have used to – like the inverted yield curve and leading indicators – have not done their job this time. Remember, the biggest leading indicator in the LEI is the S&P 500. So, momentum lives in the stock market.
Dan Ferris: Yep. It's an interesting comment about the economy. Recently on Twitter, Mike Green from Simplify Asset Management, a past podcast guest for us, he says, "How much of your time do you spend using Google and Microsoft Office or whatever? And how much of your time do you spend sourcing raw copper?" It's pretty clear what we're all doing with most of our time these days, and we're not worried about sourcing copper.
Marc Chaikin: And time equals revenue if you're buying online and seeing ads and clicking through. So, it's – I'm just – when it was message boards back in 1999 and 2000 on Yahoo, that was pretty much of a waste of time, but now it's about commerce, e-commerce, and the world has changed.
Dan Ferris: Do things like rising – let's just pick on rising auto loan delinquencies bother you at all? I mean, it's been pretty substantial. We're back up to serious financial crisis level type numbers in the delinquencies.
Marc Chaikin: I'm going to – well, (a) that's above my pay grade because I'm not an economist –
Dan Ferris: OK. Don't care? OK.
Marc Chaikin: – and I wouldn't even begin to know how to correlate these things. But (b) that's the stopped clock scenario, that auto loan delinquencies have been rising for nine months, I think. And I just – for me, if you want to make money in the stock market you find the strongest stocks and the strong industries and you don't make predictions or extrapolate from bond prices, yields. I mean, even the bond market got it wrong after Powell cut the rates. The bond market went down, not up. You've got the –
Dan Ferris: Yeah, the longer-term yield – that's right. Yeah.
Marc Chaikin: Well, 10-year. You had a 40-basis-point increase in the 10-year up to 4.08 And if you believe the bond market –
Dan Ferris: And 30 bps on mortgages, yep.
Marc Chaikin: Yeah. Yeah. And in theory, that's not good for home builders, which is really – home builders is the engine that drives the economy, other than e-commerce. And I just find that it's distracting and something that I have never believed I could do. Someone once said, "If you put all the economists in the world end to end, they still wouldn't reach a conclusion." And that's pretty much the way I feel about it. And I'm happy to say "above my pay grade." If you ask me what are the strongest stocks and the strongest industry groups, I'm going to raise my hand and tell you what I think. But if you're asking me to extrapolate where the market's going based on numbers that, by the way, get revised – I mean, look at what happened to the employment numbers. Everybody was dour and then suddenly July and August got upgraded by 70,000 jobs and we went from worst to first with the September jobs number. It's – sometimes simpler is better.
And you've been around long enough to know that you can always pluck a bullish or a bearish statistic. And that ultimately is why I stopped going on CNBC because they'd always pair you up live on the floor with Bill Griffith, who is a good friend and on The Closing Bell, they'd pair you up with a guy who had a contrary view. So, if you were bullish, they'd find a bearish guy. And typically, he was some boisterous egomaniac and he would drown me out. And I – because you can always pick – cherry pick, if you will, numbers to validate any conclusion in the stock market. But momentum, you can't – momentum is momentum and earnings are earnings. And the S&P forward earnings are just killer. They're making new highs.
Dan Ferris: I won't name any names but I stopped doing Fox Business and other appearances for very similar reasons.
Marc Chaikin: Yeah.
Dan Ferris: It's just a bad dynamic.
Corey McLaughlin: Well, Dan, I've heard you mention that economists line, end-to-end line before as well. So –
Dan Ferris: Yeah. Yeah. Yeah. It's true. And just – I'm so pleased when Marc – Marc always says this –
Corey McLaughlin: Nobody has asked me to be on CNBC or Fox Business yet. But – yeah.
Dan Ferris: Right. Right. Marc always says, "Don't make predictions." And I've been chanting this mantra: Prepare, don't predict. If you –
Marc Chaikin: I love it.
Dan Ferris: – think you need to hold a little gold or cash, whatever, but don't sell your great companies that are compounding like crazy.
Marc Chaikin: Agreed. Agreed. There's an old For Traders mantra, which is "Make money, not predictions." And that's the same general idea. But you do have to have a plan. Now, right now we've got a lot – we've got – we didn't have a volatile year, even though some people would tell you we did, except for VIX popping up and a September decline. But we have had a lot of volatility in individual stocks. And one of the things I'm going to talk about in Las Vegas in my presentation is the fact that 2024 was a typical year for the stock market. We had two pullbacks of 5.5% and 8% and we had a 4.5% pullback, which is not strictly speaking a pullback of 5%, and we recovered from all of them. But if you read the headlines around each of those pullbacks, it looked like the world was coming to an end. And maybe it's because it's an election year and the mainstream media likes to hype the economy, but if you take volatility, particularly individual stock volatility, and turn it to your advantage, that's how you can make money in this market climate, in my view.
Dan Ferris: I'm surprised at the swiftness with which the mainstream media, especially the financial media, will bring out the "market's in crisis" banners and get really dour a couple of days of negative action.
Marc Chaikin: Well, it's the clickbait economy that we're in. That's how – nobody makes money selling – well, not nobody, but the New York Times doesn't make money selling newspapers. They make money when you click on a headline and go to their website. So, we're in a different world from that point of view, in my view.
But here – I'll give you an example of volatility. We were fortunate enough to recommend a stock called Constellation Energy I think three months ago. And this is the company that's reviving a shutdown nuclear plant, Three Mile Island, and happened to be – happens to be Baltimore-based. And the premise was that data center electricity demands need to be met. And we were fortunate enough and took a 45% gain for our clients in just, I think, seven weeks when the stock spiked up and Microsoft announced that they were buying their whole output. Well, guess what? The stock went beyond where we said to sell it, which was in the mid-60s, went to 83 and then two and a half weeks later it was 53, just a week ago. And the blame, if you will, is placed on a Reuters article that was not really bearish that included Constellation Energy.
So, these are volatile markets. And if you have a strong view about stocks – you talked about stocks that compound year in and year out – or you believe in a story, you've got to bite the bullet and take advantage of this and not be spooked by it.
Corey McLaughlin: Yeah, that brings up a –
Marc Chaikin: So, that's what we're trying to do.
Corey McLaughlin: Yeah, that brings up an interesting question to me I was actually just thinking about based off kind of these nuclear power deals that a lot of the tech company – you have Google now, Amazon, Microsoft. That's – you always hear the "Buy the rumor, sell the news" quote sometimes. But to me, what are your thoughts on this – on where you might be in that trend with nuclear energy getting linked up with AI and the tech companies? Because when I see these headlines, when I see the mainstream headlines it's like "All right, that's done. That story is done now." But what do you think? And I don't know if I think that or not, but that's one of my early reactions.
Marc Chaikin: I think if you believe as I do that AI is in the early stages of revolutionizing businesses from supply chain management to customer support and all the way down the line, then I don't think it's – I think it's early days for nuclear. I wish there was a viable small bore, small reactor nuclear stock that we could recommend because I think that's where it's headed. You've got all these Rust Belt economies. And maybe this was you, Dan, at an editor's conference, I'm not sure, but someone from Stansberry proposed this and I actually embraced it, that you've got all these Rust Belt cities with factories that are obsolete and people out of work, and companies like you just mentioned, Corey, Microsoft, Amazon particularly, and now something yesterday about building these small nuclear reactors, we could revitalize the Rust Belt towns and cities that are dying or at least from a jobs point of view are dying if we built small nuclear power plants to satisfy the data center needs of the AI revolution. So, I think it's early days. But finding the right stocks to buy, that's tougher because of what you said, Corey. There's been a lot of exaggerated moves in anticipation.
Corey McLaughlin: OK.
Dan Ferris: Well, I didn't say that, but I sure wish I had.
Marc Chaikin: Well, I perked up. I was on the phone and dialed in and I did hear someone say it. I can't tell you who it was, though.
Corey McLaughlin: Well, good, yeah, because I was just thinking about – I was thinking similarly, with a small cap nuclear company that nobody's heard of right now that actually could be the next company that links up with one of these big tech companies or whatever it may be. I don't know. But yeah, that's kind of where my head was at with nuclear, too.
Marc Chaikin: Yeah, there's a couple of bitcoin mining companies that are now getting into data center electricity projects, one particularly down in Texas, because they do have the expertise at figuring out how to satisfy high energy needs because they were pioneers in Bitcoin mining. So, there's – but these are mostly private companies.
Dan Ferris: What – as soon as you said, "I'm not an economist, I don't know this, I don't know that, but when you ask me what companies I like and what sectors, then I light up," so let's keep you lit up. What else you got?
Marc Chaikin: Lighting up with aerospace. Software always. Chip stocks are still hanging in there, although it's mostly Nvidia right now.
Dan Ferris: Marc –
Marc Chaikin: Taiwan sent me today a great report.
Dan Ferris: You just said, "Software always," did you not?
Marc Chaikin: Yeah.
Dan Ferris: What – that comment intrigues me.
Marc Chaikin: Well, this is – who's the guy from Silicon Valley that – I think it was one of the venture capitalists – who said "Software –" this is 2016 or 2018 – "Software is eating the world." Software is –
Dan Ferris: Andreessen. Yeah.
Corey McLaughlin: Andreessen.
Marc Chaikin: Yeah, it was Marc Andreessen. Yeah. Can you get overextended? Yeah, you look at Adobe, which is basically a software company, and it had a huge run in anticipation of AI integration into their products, then it came back down to earth. But long term, if I had to bet on one industry, it would be software because that's the whole key to maximizing the technology revolution that is faster chips, AI, the whole cycle of bigger, faster, longer. So, to me, if I'm the software company and you believe in their products and the market agrees with you, that's where you want to be.
Dan Ferris: Have you ever owned – I was trying to remember the name, and so I just had to type it in real quick – have you ever owned Constellation Software, the Canadian company?
Marc Chaikin: No. What do they do?
Dan Ferris: It's – they roll up software companies. They're like the Warren Buffett of software. And you can – if you're me and you want to buy something cheap, you can never buy it because it's just – they keep rolling up and they –
Marc Chaikin: They keep buying.
Dan Ferris: Earnings keep rising and people keep discounting that going on and on and on. I think a friend of mine, Chris Mayer, I think he bought them some time ago and is still holding it. And it's – if you look at the 10-plus-year record it's like "Whoa!" It's pretty stellar. But it's –
Marc Chaikin: Yeah, it's not in our system so I haven't looked at it. It's – that company doesn't trade in the US, is my guess.
Dan Ferris: Right. Yeah, it's like – it's got a pink sheet symbol but that's –
Marc Chaikin: Yeah. But the other sort of synergy that makes software attractive to me, software stocks, is that AI and software are now converging. So, you have companies like Adobe, you have threat detection companies that are software-based as opposed to hardware based – so, we're talking cybersecurity stocks. And suddenly, with the ability to integrate AI and real time updates of their threat detection databases you have what I consider to be supercharged opportunities long term because AI – you look at airport security and they're now using AI to update the threat protection software that they have in their walkthrough – what would you call them – the security protection. And I think that's long term the real synergy in software, companies that are using AI to enhance their software, whether it's Adobe, threat detection, customer support software. It's everywhere.
Now, are we going to get a bear market in stocks? Sure. Are we going to get pullbacks in these companies? Yeah. But that's the life cycle of technology innovation in the stock market. It's always been that way.
Dan Ferris: Right. And –
Corey McLaughlin: Man, I feel like I'm still not giving AI enough credit, the potential. I think part of the reason is it's – I use technology all the time, too, but to me it's still hard to see it in front of you. I know it's – I know things are happening, like you just said, but it's still – I still feel like maybe I'm not giving enough credit. And maybe that's why it's got a lot more room to run for growth-wise, investment-wise.
Marc Chaikin: Well, you raise a good point –
Dan Ferris: It probably does –
Marc Chaikin: Yeah. I mean, that's a really good point. If all you know about AI is through ChatGPT, then you're not going to have a very strong vision of the future because it feels like a gimmick. But if you think about what ChatGPT and all of the enhanced versions of it can do in terms of coding, Google coder, software coder replacements – I think it was Amazon who said they can – they were going to replace 400 software developers because of the enhanced AI capability for building code, for writing code, and updating it.
So, a lot of this is going to be under the hood and I agree with you on that, Corey. It's – you've got to believe. I think last time I was on I compared where we were – and when was that, probably six months ago? I compared where we were in AI and the Nvidia chips to the introduction of the Netscape browser in 1996. And that really set off five years of productivity enhancements, profit margins through the peak in 2000 of the internet boom. And I really believe that's what's going on today. Now, the Netscape browser would democratize the internet and I think AI and ChatGPT has democratized AI models and machine learning.
So – well, you're right. A lot of it is not obvious unless you dig in. and that's what our team does. If a stock looks attractive in the Power Guage, we'll try and dig in and see where they're using AI, if it's in the software sector. And that does lead you to some great opportunities.
Dan Ferris: I see. So, you let the Power Guage guide you and then you sort of take a more bottom-up discretionary kind of approach and say, "What are they doing that's got this thing on our radar screen?"
Marc Chaikin: Well, in some of our newsletters and our core newsletter, Chaikin Power Guage Investor, we're top-down. We start with the best industry groups, best sectors, industry groups, and then the best stocks. But in our Power Profits newsletter we're bottom-up. We're looking for just what you described, stocks that look attractive or have a story, in the case of Constellation Energy, where fortunately the Power Guage was bullish as the story was getting press. And by the way, at the Stansberry Conference I'm going to have a really exciting pick from my expert panel that –
Dan Ferris: I have no doubt.
Marc Chaikin: – quite honestly I've never heard of before, but boy, is it exciting.
Dan Ferris: Oh, man. Now I can't wait – so, I can't wait for that. I can't wait to get to the final question. You're just firing on all cylinders today, Marc.
Marc Chaikin: That's because I'm hyped up on amphetamines. Or, not amphetamines but whatever you take to mitigate a cold.
Dan Ferris: Right. Antihistamines, yes.
Marc Chaikin: Antihistamines.
Dan Ferris: Yeah, they make me jittery too. So –
Marc Chaikin: Yeah. That's – and the coffee. The combo.
Dan Ferris: All right. So, we know that we – when we schedule a Marc Chaikin interview we need to get the antihistamines and coffee into him.
Marc Chaikin: Right.
Dan Ferris: We need to feed those into him.
Marc Chaikin: A lot of energy.
Dan Ferris: Or get somebody to sneak it into his coffee.
Corey McLaughlin: Me too. Yeah. Yeah. Me too.
Dan Ferris: All right.
Corey McLaughlin: Going back to that Netscape comparison or Netscape Navigator comparison and AI, I was just looking the other day – this year so far – and I'm sure you've seen this too – the best year for S&P 500 since 1997, which would be the year after Netscape Navigator came out in the early internet boom and everything. And I was looking at that and saying, "You know what? Maybe it makes a whole lot of sense that this crazy market behavior, you have valuations where they are, you have central banks thinking they need to juice economies, you have AI still in the early stages, are we just headed for something similar to post-1997?" Which means good times and then you know what happened with the dot-com bubble.
Marc Chaikin: Well, there was – anybody who shorted tech stocks in 1996 to '97 got carried out on a stretcher. So, there's a lot of room and now you're getting close to my closing comment.
[Crosstalk]
Corey McLaughlin: Oh. Sorry. All right. All right, man.
Marc Chaikin: No, it's – there's nothing new in there. But I just think there's a lot of room to grow. When you look at what the stock market's all about, it's about earnings and it's about momentum. And at the end of the day it's about profit margins because profit margins affect P/E ratios. Interest rates in the tech sector, obviously high rates, lower valuation. But in general, if profit margins are going up, then you'll see analysts raising their estimates and more comfortable with the valuations where they historically look high. And profit margins are going up. And that's what happened between 1996 and 2000. It wasn't just the internet boom, but the browser basically enabled companies to maximize the internet to the benefit of profit margins.
So, if profit margins are in fact going to do what I think they're going to do, which is to rise for the next four or five years, then X, the normal cyclical swings and maybe a bear market in there somewhere, I think we're higher on balance for the rest of the decade.
Dan Ferris: Oh. Bullish for the rest of the decade.
Corey McLaughlin: Oh. All right.
Dan Ferris: OK.
Marc Chaikin: Yeah. But I mean, there's going to be a bear market in there. I don't know when. Maybe '97, maybe '96 – 2026 or 2027. Inevitable.
Dan Ferris: '26 or '27. Yeah.
Marc Chaikin: Yeah. But –
Dan Ferris: Yeah.
Marc Chaikin: But – and I'm not a buy-and-hold-forever kind of guy, so along the way we're going to try and guide investors in our newsletters in terms of what we think is playing out in the stock market. But in general, if you said, "Marc, I have two choices; I can try and time the market over the next five years for my grandkids or I can buy an S&P Index fund and hold it for five years," I'd say buy the index fund and hold it.
Dan Ferris: All right. Does the Power Gauge – do you ever short stocks based on Power Gauge signals? Put it that way.
Marc Chaikin: We don't have a newsletter that goes short. We have in almost every new rollout put together a list of stocks that should be sold or avoided. And ironically, those lists have been like gold. There must be a couple of hedge funds who subscribe just to get those lists. But the first time in May of 2021 we had a 10 stock list, as we usually do, and they were down an average of 69%. All 10 of them were down. And that's what the Power Gauge can do because I get together with our copy team and our editors and they say, "OK, Marc, here's one of the bonuses that we want to offer with this new newsletter. Can you come up with a list of stocks to avoid?" And it really is not hard at all.
A good example recently last time has been Charter Communications, which by the way the Power Gauge just turned bullish on Charter after being bearish for a year and a half, and it made sense. Cable cutting and streaming and how it's impacted the traditional cable companies has been brutal. And so, you do have the Power Gauge to tell you when the fundamentals and the momentum is so bad that you've got to step aside. And that's actually the fun part. But we don't write about it just because short-selling is obviously unlimited risk, fraught with danger in a bull market. But if someone's running a hedge fund and they're not taking advantage of the Power Gauge, they're missing something.
Dan Ferris: Yeah. Sounds like it. So, at some point – I mean, at some point, if there's a bear market, though, you're going to be getting a lot fewer buy signals, right?
Marc Chaikin: That's correct. And we'll try and focus on shorter-term opportunities. So, we have a new newsletter coming out the end of the month, which is near and dear to my heart. It's called the Chaikin Smart Money Trader. And it's taking Chaikin Money Flow, which I developed in 1982 and put into the public domain and going back to basics, which is how do you see what the smart money is buying? And Chaikin Money Flow turns out – we developed the concept called persistency of money flow, the tendency of strong stocks with good fundamentals to close high up in their range day in and day out, even on pullbacks.
And so, in a bear market we're going to rely more on the shorter term opportunities that you can take advantage of in using Chaikin Money Flow and particularly what we call persistency of money flow. And by the way, not all – bear markets, as you know, are not monolithic. So, in – as the internet bubble burst and was unfolding, small caps were up in 2021 into 2022. And just recently, in 2022 energy stocks were on fire in the middle of a bear market. So, I don't want to be a Pollyanna and say that you can make money hand over fist in a bear market by buying stocks, but intelligently applied, the Power Gauge can be your friend.
Dan Ferris: OK. Fair enough. Yeah. But – and still on the long side, though. That's what is interesting to me.
Marc Chaikin: Yeah.
Dan Ferris: You just look at it differently and use those shorter-term opportunities. That's interesting to me.
Marc Chaikin: Well, back in the '70s when I cut my teeth and bear markets were long, brutal affairs, gold mining stocks, mining stocks did extremely well in '73 to '74 because people were concerned about inflation. And so, there are always pockets of strength. But yeah, I mean, I've seen bear markets with – they take everything out. But –
Dan Ferris: Speaking – yeah.
Marc Chaikin: – more recently, because of ETFs and stuff, there are typically pockets of strength that you can identify and take advantage of.
Dan Ferris: Speaking of gold mining stocks, I was about to say, you must be getting some buy signals there, no?
Marc Chaikin: The mining stocks have shown some interesting bullish ratings in the Power Gauge. Newmont had a very bullish for about four months with the Power Gauge and is making new highs. Yeah, there's been a number of mining stocks. Sort of not my thing, so I don't focus on it, but we have an analyst who really does a good job with that. And now, with the price of gold up at – where – is it still above $2,600 or is that –?
Corey McLaughlin: Yep. Making a new high as we speak. $2,690.
Marc Chaikin: There you go. So, a lot of these Power Gauge ratings have turned to neutral now just because the price has gotten overextended and we've got some mean reversion factors in the Power Gauge. So, from a technical point of view, they're making new highs but a lot of them are experiencing what we would call mean reversion or at least gotten ahead of themselves from a price point of view. But again, not my thing.
One that's been consistently bullish since last April was Kinross, KGC.
Dan Ferris: Oh, Kinross.
Marc Chaikin: And that's still bullish in the Power Gauge. It's gone from – the Power Gauge turned bullish when it was trading about $6.50 and it's $10.22 this morning. So – and it's stayed – and smart money has been buying it all the way. The Chaikin Money Flow has been strong since March, day in and day out.
Dan Ferris: Interesting. That's interesting. If you look at just, I guess, the biggest ETF is GDX, the trip up here and this leg up has been really volatile. I mean, it's jagged. It looks like jagged mountain peaks. You get a rally and a sharp correction but not as low. And then, a higher high and then a lower low just about – and it's really been – I can see where it would be difficult for folks to hang onto them frankly this whole trip up here. It's been –
Marc Chaikin: Well, interestingly, the Power Gauge for VanEck, which is what you're talking about, turned bullish on April 1 at $32. And you're right, there have been four corrections down to our lower volatility band or our long-term trend line starting in June, then again in late July and September. And they were actually – and then in October. It actually hasn't been that hard a ride because it's been a stairstep up since April 1. Again, gold is not my thing. But if you were watching the Power Gauge rating for GDX, you would have been in in April and understood what the price action looked like. Pure pendulum swings to an upper volatility band, back down to the lower. And interestingly, they seem to have coincided with some broad market declines, those pullbacks.
Dan Ferris: Yeah.
Marc Chaikin: It's just – they get exaggerated in gold, I guess.
Dan Ferris: They do. And lately, it's just sort of – I feel like you could almost buy everything right now and it doesn't surprise me at all that gold might be performing pretty much right along with the overall market just in a more exaggerated fashion, given the nature of the commodity.
Marc Chaikin: Yeah. That seems to be what's happening. Although, "buy everything" typically gets us in trouble, doesn't it?
Dan Ferris: Sure. Sure. But I just – "buy everything" of course doesn't mean literally buy everything, I should say for our listeners. But it just feels like this is a – people are excited to take risks. I mean, junk bond spreads are tiny, the markets are up, the valuations are high, and yet people are buying and loving it. And there are – global GDP growth and other things – you can point to all these things that everything looks kind of normal, so of course people are buying. Unemployment is really low. It's –
Marc Chaikin: Well, how about the over $5 trillion in money market funds that still hasn't dipped their toe in the stock market. I don't know if we'll ever see that because people are using money market funds as surrogates for bank accounts these days. But if some round of Fed rate cuts makes people leery about staying in short-term Treasuries, the money's got to go somewhere.
Dan Ferris: Right. We know historically that there has been a strong dynamic of looking elsewhere when the yields were nonexistent or way too low. So, if this cycle, if this is a full-blown cutting cycle, it would make a lot of sense to see that at some point. I don't know. When the money market goes from 5.5 to 5.0 or 4.8 or wherever it is right now, maybe not. But when they start making less than 3.0 or something –
Marc Chaikin: Yeah. Then they wake up. By the way, I'm not totally convinced that the Fed's going to cut again in the November meeting, but I don't think it matters to the stock market.
Dan Ferris: No.
Marc Chaikin: Just – yeah.
Dan Ferris: Yeah.
Marc Chaikin: A little bit of a short term –
Corey McLaughlin: You don't even think November. You don't...
Marc Chaikin: Well, I think that the unemployment numbers came in so strong right after the rate cut in early October that there were enough hawks – hawks? Doves? Yeah, hawks on the open market committee that they could have a solid debate after the election of the Fed open market committee meeting and say, "OK, we don't really have to cut because we cut 50 basis points last time. Maybe that was overkill. And so, we can rest for a bit."
So – but again, I don't – it only matters because it's in the headlines and some Wall Street analysts are bearish because they don't think the Fed's going to cut again. So, you just want to counter – you need an antidote to that bearish outlook, if you're me.
Dan Ferris: Right. All right.
Corey McLaughlin: Yeah, interesting, because you – yes, sorry, Dan. Go ahead.
Dan Ferris: No, no, no. I think we are finally at the point where we can now – where we can ask Marc to do a bit of – I've been on the edge of my seat since early in the show here to ask the final question because Marc said he's got a great answer for us. And we are finally here. Marc Chaikin, the final –
Marc Chaikin: Well, I'm prepared. I don't know if it's great but I'm prepared.
Dan Ferris: All right. Well, that's – I think that's rare. That's very rare. Most people say, "Oh, I wasn't prepared for this." In fact, I can't name – I can't remember a guest mentioning the final question at all before getting it. So, this could be unprecedented.
Marc Chaikin: Well, maybe this is because my son Andrew has been on Jeopardy twice, and I'm keyed in on the final question.
Dan Ferris: OK, there you go.
Corey McLaughlin: Jeez. Burying the lede here. Oh, my. OK.
Dan Ferris: Yeah. So, the final question is the same for every guest no matter what the topic. And I won't go through the usual caveats because you have your answer all sussed out, so I'll just ask it. Marc, if you could leave our listeners with one final thought today, what would it be?
Marc Chaikin: Sir John Templeton: "Markets mature on optimism and die on euphoria." And we're not anywhere near the euphoria stage yet. And then I'll add John Maynard Keynes who said that – who said "Markets can stay irrational longer than you can stay solvent." So, go with the flow and listen to the market and enjoy the ride.
Dan Ferris: All right. That's a great message. Listen, Marc, thanks for being with us. It's always a pleasure. The time always flies by when we're talking with you. And I look forward to shaking your hand in Las Vegas and having a chat and maybe a drink.
Marc Chaikin: For me as well. And Corey, what a great duo you guys are. Really enjoyed it. Thank you.
Corey McLaughlin: Thank you. Look forward to seeing you.
Marc Chaikin: Yep. Be well.
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Dan Ferris: Well, I can't say I'm surprised by Marc's – his bullishness and his general takes on things, but especially his bullishness. He's not a perma-bull but he always seems to stay bullish when people like me are saying, "Eh, be careful." So, that was not a surprise.
Corey McLaughlin: Yeah. His game plan that he mentioned going back a year or two and then where we're at now, he's obviously sticking with that based on what he's seeing. And yeah, the AI and internet comparisons, I don't know, ring pretty true to me. But – so, I'll be – I'm curious. It's – that's both positive – it's a positive thing but also be careful as well. And yeah, I just – whenever we get done talking with him I feel like, to myself, I need to use the Power Gauge a little bit more. I need to look at it more often because it is useful.
Dan Ferris: I know. It is. Yeah. He makes a compelling case. When you hear him talk about the Power Gauge you go "Really? Really? Really?" It's just – it sounds like this – it sounds like the Holy Grail of investing. It just – it works, I guess. There's no other way to say it but that. But yeah, Marc's – obviously he's been around the block. Anybody who can say "I cut my teeth in the '70s, I've seen this before," he's been there and done that, and if he says, "Don't waste your time being too bearish," that's been true – it's been true for decades. Don't waste your time being too bearish for too long. And the idea that you're going to time that bearishness well and make a whole lot of money is not a good one. That's extremely rare. It's extremely risky. And it's extremely unlikely to happen.
So, Marc is – I think Marc is an ideal voice for most people to listen to the overwhelming majority of the time. So, it probably makes a lot of sense that we have him on the program fairly frequently compared with other guests. It's like you need your Marc Chaikin inputs. If you listen to – Dan expressed too many concerns about this or that, we need to counter it with enough Marc Chaikin. So –
Corey McLaughlin: Yeah. If you read too much Fed discussion from me, you can get some different views on it from Marc. Which is interesting. He said the Fed might not even cut again. I figure that they at least boxed themselves into one or two more, but maybe not.
Dan Ferris: Right. Yeah. I mean, the – there's substantial commentary in the Fed minutes about the amount of cutting that markets are discounting or were certainly discounting at that moment. And other people – Bob Elliott has commented on that and others have commented. I think we gave up because we kept checking the CME Fed Watch or whatever it's called and we didn't like the fact that it was – it would discount something and then two months later it would be proven completely wrong. So, I think we got tired of that. I know I did. So – but we'll see. We'll see what – we'll see if Marc's right and the bond market is wrong by jacking up mortgages and 10-years and stuff in the wake of the Fed 50 bps cut. But in the meantime, stay bullish. Don't sell out and head for the hills. Listen to Marc. In the meantime, just listen to Marc. All right.
Well, that's another interview and that's another episode of the Stansberry Investor Hour. I hope you enjoyed at much as we truly 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 else who might like it, tell them to check it out on their podcast app or at investorhour.com, please. And also do me a favor, subscribe to the show on iTunes, Google Play, or wherever you listen to podcasts. 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 us to interview? Drop us a note at feedback@ investorhour.com or call our listener feedback line, 800-381-2357. Tell us what's on your mind and hear your voice on the show. For my co-host, Corey McLaughlin, until next week, I'm Dan Ferris. Thanks for listening.
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