How 40-Year Wall Street Veteran Marc Chaikin Came Out Of Retirement To Help You Find Your Next Trading Idea
Marc Chaikin didn't have to come out of retirement.
In 2007, after a 40-year career on Wall Street that included time as a broker, hedge fund manager and technical indicator developer, Chaikin moved to rural Connecticut with his wife and was preparing to live the quiet life of a retiree.
But as the subprime mortgage crisis and subsequent recession unfolded around him, and with Wall Street distrust at an all-time high, the career researcher saw that many people were pulling their money out of financial institutions. This concerned him.
“After the financial collapse of '08 I read an article that said that $300 billion was being transferred from full-service brokerage accounts like Merrill Lynch and Smith Barney to self-directed accounts and online brokers," Chaikin said. "I immediately thought ‘Wow these people don’t have either the tools or the temperament to manage that kind of money. Obviously people were disenchanted with their advisors...but you still have to have the resources to effectively manage that kind of money.”
Chaikin thought this presented a unique opportunity to level the playing field between all these individuals suddenly managing their own money, and the career Wall Street-ers like him. But he still needed a technological solution.
Then his son showed him the latest Apple Inc. (NASDAQ: AAPL) product: the iPhone. The new gadget piqued his interest significantly, and the entrepreneur—who didn’t even own a cell phone at the time—began imagining the impact this little device would have on the whole Wall Street ecosystem.
“When I saw the potential of the iPhone and noticed that firms like E*TRADE Financial Corp (NASDAQ: ETFC) and TD Ameritrade Holding Corp. (NASDAQ: AMTD) were starting to use mobile to deliver financial information– and more importantly the ability to execute on a mobile device—I got very excited about the confluence of the capabilities that mobile was starting to offer.”
So Chaikin set to work on developing a 20-factor quantitative model to generate investing ideas that he hoped would make managing money easy for retail investors (Chaikin is no stranger to developing indicators, having created two technical indicators that are used across Wall Street: the Chaikin Money Flow and Chaikin Oscillator).
By the fall of 2009 the Chaikin Power Gauge, an 85 percent fundamental and 15 percent technical model—made its debut on the iPhone app store. Today, he’s made that model the core of an entire platform and a second career he never saw coming.
An unfortunate consequence of smartphones and having the wealth of human knowledge at our fingertips is analysis paralysis. We have too much at our disposal, and this information overload can quickly overcomplicate things.
Chaikin hopes his power gauge and broader platform can help solve that problem.
“You read a lot about the concept of big data, but big data is both a blessing and a curse because it creates information overload," he said. "So we made the output of this very complex mathematical model very simple to understand. Individual investors don’t have the time or the knowledge to research stocks thoroughly.”
His latest tool, launched in December, doubles down on that idea. Borrowing from services like Netflix, Inc. (NASDAQ: NFLX) and Spotify, the stock discovery engine within Chaikin Analytics provides users with investment ideas based on stocks they already like.
“What we’ve done is to take our proprietary Power Gauge Rating and other factors that we think are important, like relative strength and group strength, and applied the same type of technology that Spotify uses to find the music that you’re going to like and Netflix uses to find movies that are based on your preferences," Chaikin said.
"Almost everybody across all age categories is using services like Netflix, like Spotify, Pandora Media Inc (NYSE: P), obviously Amazon.com, Inc. (NASDAQ: AMZN), and Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) for search, and all of them are based on the concept of a relevance-based search engine. And that’s what the Discovery Engine is.”
New Tools For Old Information
Though he eventually went on to develop technical indicators, Chaikin actually began his career in fundamental research—specifically analyst earnings estimates.
He recalled at his first job in 1966, the only way to get that information was a weekly Standard & Poor’s booklet that was delivered by mail. Even though that information gets distributed much faster today, analyst research is still one of the biggest drivers of short-term price action.
Chaikin concluded, "I think a big difference is everything was slow and sort of glacial in terms of information availability. Now it’s instantaneous. Again, that’s good and bad, but in general the playing field has been leveled. The big institutions always had access to this information, and the computer power to analyze it. Now it’s available to everybody.”
Chaikin Analytics is a sponsored partner with Benzinga. This article was written in conjunction with Chaikin Analytics, and may have been subject to their approval.
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