So the column of my Barron began almost a dozen years ago one week, presenting the clever and clear-sighted financial adviser who came to be recognized in print and the Mystery Broker on Twitter, the market color and investment call of which I share the unregular regularity with which it delivers them.
His forecasts aren’t always correct, but he’s been more right than wrong, with a particularly impressive track record of making bold calls near market bottoms and ahead of corrections.
This broker’s message to me in April 2009, just weeks after the end of a wrenching 18-month bear market and terrifying global credit crisis, was a 12-page single-spaced argument that the financial crisis had ended. This was not the general consensus at the time. A brutal bear market was predicted in a November 2007 piece, a month after the S&P500 reached a peak it would not revisit until 2013, and before most investors even considered a bear market.
The goal of airing his views was not to create a gimmick or to generate cheap intrigue, but rather to provide the well-founded thoughts of a professional who was not bound by institutional constraints or the need to sell investment products.
It did, however, capture readers’ attention and imagination to the point where requests for updates on the Mystery Broker’s market come in on a regular basis. I keep it strictly because so many readers and viewers have been following his work for years and want to stay up to date.
And, yes, some people are irritated by the whole thing, whether they think it’s irresponsible (which makes no sense because he receives no benefit and doesn’t hype small stocks that could move in his favor) or insist it’s a fictitious alter ego (untrue).
The approach of the Mystery Broker
In the mid-1980s, he became a broker. While there has long been speculation about MB’s identity, he is not someone whose name anyone would recognize, and he does not publicly comment on investments.
As stated in 2009, “he makes no claims to any magical formulas or proprietary systems. He will cite Marty Zweig, Ned Davis, and the Value Line Appreciation Potential indicators as inspirations, but he does not appear to be rigidly attached to any one model or style.
I almost never solicit Mystery Broker’s opinion, preferring that he check in only when it strikes him, which is usually when he changes his market stance or is moved to reiterate his conviction in a previous call. Aside from broad market commentary, he will occasionally make a case for or against individual stocks. He favored Wells Fargo, as well as GE, to begin in 2021.
Mystery Broker occasionally goes in depth on a contentious emerging biotech name, which I don’t usually share. He was turned off by its extensive coverage of “meme stocks” earlier this year and let me know. He and I both have strong opinions about baseball, which we discuss via email. We’ve never met before.
How he dealt with the pandemic
Mystery Broker has been cautious on stocks in recent months, missing out on some upside. At the close on April 16, the S&P500 was at 4185, and he went to a sell (which usually means raising cash for clients and himself and hedging equity holdings with index puts). The index was sideways for two months before rising to a new high last week, up nearly 5% from where he predicted a correction.
Nonetheless, he is playing with a lot of house money, having been deftly bullish into the March 2020 Covid crash. (He was bearish on the market since January of last year, but not because he expected a pandemic or a crash.)
Individual calls can be viewed on Twitter using the hashtag #MysteryBroker, but here are a few examples: He expected the March 4, 2020, low in the S&P500 near 2900 to hold; it didn’t, plummeting to around 2200 by the 23rd. But on March 26, he declared that the bottom had been reached, and that the S&P500 would be back to 2900 within a month.
Then, in mid-April 2020, he would normally expect a retest of the major low, but not then: “Because for the first time in stock market history, the consensus is for a retest, a normal retest is not likely to occur.”
This was correct, as was his preference for riskier cyclical stocks, as well as his June update: “We are in a new bull market…every correction should be bought…every time the S&P500 falls below its 50-day moving average is an extraordinary buying opportunity.”
Following that, and prior to predicting a three-month-ago correction that has yet to occur, he pegged the peak in FAANMG days before they topped last September 1.
His current situation
His is not a system, but rather a weight-of-evidence approach pursued with an open mind and a sense for market cadences gained over more than three decades of economic cycles.
Following up on his most recent update this week, I requested a broader perspective on historical echoes and long-term probabilities. This is what Mystery Broker has to offer:
“I believe the current recovery is most similar to the 2003-04 recovery. A significant shift from hyper-growth to value. Furthermore, valuations are already high after just one year of stock market and economic growth comparable to 2003-4, albeit more extreme now. He anticipates “muted returns for the remainder of the decade, similar to the low returns of the first decade of the 2000s.” Seek leadership from the industrials, healthcare, and, to a lesser extent, finance.”
“Don’t expect technology to be a big outperformer, and semiconductors will be a disappointment, particularly equipment semis that have benefited from a few big trends in recent years.” Value, foreign stocks (the dollar is expected to fall in the coming years), and equal-weighted indices will outperform. Inflation and interest rates will rise gradually, in contrast to the previous decade.
“The big surprise will be how old industries adapt to new technology and compete against some of the hottest new entrants. There will be many comebacks, similar to how the New York Times came back from the brink of extinction last decade.”
I also asked if he wanted to be identified. The answer is no, not right now, but possibly soon.