This week marks one year that I met with Marc Chaikin and the team at Chaikin Analytics and started the process of transitioning to my role as their Chief Market Strategist. I had spent the previous 10 years on an institutional sales and trading desk covering large investors such as hedge funds, mutual funds, and pension funds in New York and Connecticut. I wanted a change and I wanted to focus more on research and technical analysis.
Over the past year, I have learned a lot and I want to share some thoughts on the experience.
1. Increased Sense of Ownership.
When I was on the sell side, my main role was to sell investment research. Essentially, I would take the work being done by our fundamental analysts and package it into an interesting call for my clients. Everyday there were numerous research reports that I would read and summarize for clients and which I would then send off in an email in the hopes of sparking a conversation that they would find interesting. If they found value in the content, they would show us by trading on our desk and we would earn a commission.
This was fun at first and was a great way for me to learn about companies and how professional investors think about them but ultimately, it was not my call. I was not the person doing the research and producing the content. I had no sense of ownership. If it was a good call or a bad call, it did not impact me all that much. Granted, after a series a bad calls by an analyst, there was the risk that the client would stop speaking to them, but we had plenty of analysts.
At Chaikin Analytics, I write a daily research note analysing various aspects of the market. Based on this analysis, I suggest a bullish or bearish trade for our clients. I love doing this. Do I get them all right? Of course not. Do I take full ownership of the call? Absolutely. There is nowhere to hide. The call is mine and I own it. I can no longer “blame” the analyst for a bad call, I am the analyst and I prefer it this way.
2. Writing Everyday Clarifies Your Thinking.
Writing a note everyday forces you to think logically about everything that you say. It also forces you to break your thoughts down to the simplest terms. I recognize that our clients are busy and do not want to spend their mornings reading a long, drawn out research note. If I can’t clearly and concisely get my point across in a way that articulates my view then I do not fully understand what is happening or I do not have enough conviction in the idea to warrant publishing it for our clients to read in the first place.
3. Writing Everyday is Not as Easy as I Thought it Would Be.
I should clear this up a bit by saying that writing something interesting everyday is harder than I thought it would be . . . at first. The simple fact is that despite a roller coaster of a ride in the market over the past year, there is not a lot that changes from day to day. After spending time trying to find something interesting to say everyday, I finally decided that the greatest value-add is not in the big pronouncements, but in helping investors see the mechanics of the market. I have implemented a publishing schedule where every day of the week has a specific topic: Mondays are for intermarket trends, Tuesdays are for relative strength work, Wednesdays are for sentiment, etc…By doing this I and our clients can see the changes that are taking place on the margin in real time and can better adjust their portfolios in a way that increases their odds of finding a winning trade and outperforming the market over time.
This also keeps me intellectually honest and process-driven. It would be far too easy to cherry pick ideas that fit a specific view if I did not have a publishing schedule. By writing about the same concepts week in a week out, I can’t / don’t go hunting for ideas that fit a narrative. I am left only with the evidence and the facts and when they change, I change my mind. When they don’t change, well that note might not be as interesting that day but at least I am staying true to a process.
4. I Prefer Models to Humans for Analysis.
I have written in the past about how humans are biased, especially when it comes to finance and investing. But I want to provide an example of how using a model like our’s can help to mitigate those biases. Tesla Inc. (TSLA) has not lacked for news flow over the past year. Are they going to meet or miss production numbers? Are they going to have enough cash to meet debt payments? Is Elon going to take the company private and is/was funding secured? The back and forth headlines are enough to drive any investor absolutely crazy. But using a model, you could have taken all of the emotion out of the equation. For all of the news flow, the stock has essentially traded in a wide range over the past 12 months. There were times when TSLA was leading the market and times when it was lagging but all the while, the Chaikin Power Gauge Rating was either bearish or neutral. The model didn’t care about the news flow and didn’t change it’s view based on the prevailing sentiment. Using the model, we can make emotion a non-factor in the investment process and we could have avoided a stock that went nowhere for the past year.
5. I Enjoy Teaching People.
Every week we host an open call for our clients. Many of them are not professional investors. Some are just beginning the journey of learning about the market. We discuss current trends in the market and the best way to position portfolios based on what is happening (not what we want to happen). Clients join the call every week and ask great questions as they are learning to build a disciplined investment process. I can see the progress that they are making based on their weekly questions. Often they point out a theme or an investment idea that lines up with the way that I would have seen it. Sometimes they find these ideas before I do and find me on social media to point them out to me. This gets me really excited. Seeing investors progress and learn excites me. My mother always said that she saw me as a teacher and would not be surprised if I ended up in a classroom at some point. That’s not the path I chose (but my sister did), but that doesn’t mean I am not teaching per se but I like to think that I am educating investors every day in my morning notes and every week on our calls.
But what’s also really exciting is that I am still learning myself. I talk with Marc Chaikin multiple times a day. Marc has been involved in the markets for 50 years. He has designed technical indicators that many of us use every day. He has worked with some of the most successful investors in the world over his career and he is an encyclopedia of information on market history. How can I not learn something new constantly?
My first year at Chaikin Analytics has exceeded all of my expectations. If I had not taken the call from Marc and his team last February, I would probably still be sitting on the sales desk. I would be relatively happy but not really doing what I wanted to be doing.
Looking forward to the years ahead!