Folks, when I started on Wall Street, we hadn’t yet landed on the moon…
That was a long time ago. I’ve learned a lot during my decadeslong career.
But the most important lesson I ever learned happened early on… And with the tech-heavy Nasdaq Composite Index hovering around correction territory for the first time in almost two years, it’s critical to keep this idea in mind today.
Let me explain…
I joined Shearson, Hammill in 1966.
At the Wall Street firm, I learned the ropes as a broker. I wasn’t an analyst yet… But I spent as much time as I could with those folks.
And as an up-and-comer with a mind for finance, the stock market was the most interesting thing in the world to me… I wanted to understand everything about how it worked.
More importantly, I wanted to know how to use it to make money. And frankly, I picked the right time to get into the business with that as my goal…
I earned my license on October 7, 1966 – the exact day the bear market ended. And for the first two and a half years of my career, it felt like every day was an “up day.”
Life was good back then. I was 23 years old, bringing on new clients, and generating great returns for them as a broker. It felt like I had life – and the markets – all figured out.
Everything went great until early 1969…
That’s when the first bear market of my career reared its ugly head. It lasted nearly two years… The benchmark S&P 500 Index plunged roughly 35% over that span.
It was brutal. Instead of every day being an “up day”… they were almost all “down days.”
As tough as that time was, though, it quickly taught me the most pivotal lesson of my career… I wouldn’t be able to survive in this business without “something else.”
I just wasn’t sure what “something else” was yet.
You see, until then, I had focused on “fundamental analysis”… It’s what everyone used.
Analysts and brokers spent their days diving into the ins and outs of companies. We came up with estimations of future business prospects and earnings… Then, we would decide if a company was cheap or expensive compared with those future prospects.
It all made sense to me at first. And as I said, it worked extremely well for the first couple of years… It was a bull market, after all.
But when that bear market hit, I realized I wouldn’t be able to protect my clients, stay sane, or even go to sleep at night without that “something else.” I needed to find something to supplement my firm’s fundamental research…
This awakening began my lifelong journey toward creating the Power Gauge. From that point forward, I focused on analyzing the best data I could get my hands on.
In the following years, I built proprietary models using that data. Those models led to a darn fruitful career on Wall Street. And ultimately, in the wake of the financial crisis, I left retirement with the mission of sharing my quantitative work with “mom and pop” investors.
Simply put, at the start of my career, I learned the most valuable lesson of all…
You don’t want to go it alone in the markets. That was true in 1969, and it’s still true today.
Good investing,
Marc Chaikin
