The story behind the savvy 'Mystery Broker' and where he sees the market going now

Published Sat, Jul 17 20218:37 AM EDT

"So, there's this guy who emails me his market outlook every so often." That's how my Barron's column started one week nearly a dozen years ago , introducing the canny and clear-thinking financial advisor who has come to be known in print and on Twitter as the Mystery Broker, whose market color and investment calls I share on the irregular frequency with which he sends them. His predictions don't always prove prescient, but he has been more right than wrong, with a particularly impressive record of bold calls around market bottoms and ahead of corrections. As noted in that first writeup in Barron's in December 2009: "This particular guy is unique in at least two respects. He has no interest in having his name placed in print or pixels. And he is the one commentator I'm aware of who both turned aggressively bearish virtually at the all-time market peak in 2007, then in April began insisting that the March market lows would not be challenged, and that a new cyclical bull market had a long way to run." This broker's dispatch to me in April 2009 — just weeks after the ultimate low of a wrenching 18-month bear market and terrifying global credit crisis — was a 12-page single-spaced argument that the financial crisis was over. This was far from the consensus at the time. A November 2007 piece had called for a brutal bear market, a month after the S & P 500 hit a peak it wouldn't revisit until 2013 and before most investors even had a bear market on their radar. The intention of airing his views was not to create some gimmick or generate cheap intrigue, but simply to offer the well-grounded thoughts of professional free of institutional constraints or the need to sell investment products. But it did capture readers' attention and imagination, to the point that requests for updates of the Mystery Broker's market take come constantly. I continue it strictly because so many readers and viewers have followed his work for years and like to keep up And, yes, the whole exercise drives some people nuts, whether they think it's irresponsible (which makes no sense, he gets no benefit and doesn't hype small stocks that could move in his favor) or insist it's a fictional alter ego (untrue). Mystery Broker's approach He became a broker in the mid-'80s. While there's long been a guessing game about MB's identity, he is not someone who's name anyone would know, he doesn't otherwise comment publicly on investments. As noted back in 2009: "He doesn't claim any magic formulas or proprietary systems. His approach is eclectic and inclusive, ranging among economic, technical, historical, valuation and sentiment inputs." He'll cite Marty Zweig, Ned Davis and the Value Line Appreciation Potential indicators – fairly old-school inspirations – but doesn't seem rigidly attached to any one model or style. I almost never solicit Mystery Broker's take, preferring he check in only when it strikes him, often when he changes his market stance or is moved to reiterate his conviction in a prior call. Aside from the broad market commentary, he'll sometimes make the case for or against individual stocks. He loved wells Fargo to start 2021, as well as GE, for instance. Mystery Broker sometimes goes deep on a controversial emerging biotech name, the sort of thing I tend not to pass along. He was put off by CNBC's heavy coverage of the "meme stocks" early this year and let me know it. He and I both have strong views on baseball, which we exchange via email. We've never met. How he navigated the pandemic In the past few months, Mystery Broker has been cautious on stocks and has missed a bit of upside. Specifically, he went to a sell (which tends to mean raising cash for clients and himself and hedging equity holdings with index puts) at the close on April 16, with the S & P 500 at 4185. The index went sideways for two months, then lifted to last week's record up almost 5% from where he called for a correction. Still, he's playing with a lot of house money, having been deftly bullish into the teeth of the March 2020 Covid crash. (He was negative on the market from January last year, though not because he expected either a pandemic or a crash). The individual calls are viewable at the #MysteryBroker hashtag on Twitter, but to cite a few examples: He thought the March 4, 2020, low in the S & P 500 near 2900 would hold; it absolutely didn't, plunging to about 2200 by the 23 rd . But on March 26 he said the bottom was in, and within a month the S & P had recovered back to 2900. Then, this in mid-April 2020: He would normally look for 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 happen." This was right, as was his preference for riskier cyclical stocks and his update June of last year: "We are in a new bull market...every correction should be bought...every time S & P 500 falls below its 50-day moving average is an extraordinary buying opportunity." After that and before predicting a correction three months ago that has yet to occur, he pegged the peak in FAANMG days before they topped last Sept. 1; said in late December the market had "entered the last hurrah for growth and speculative stocks" that would pressure the overall market but not necessarily drive across-the-board losses; and predicted bitcoin would peak coincident with the Coinbase listing (it did). Not perfect, but not bad. His current outlook His is not a system, but a weight-of-the-evidence approach pursued with an open mind and a feel for market cadences earned over more than three decades of economic cycles. Following up on his latest update this week , I asked for a broader take on historical echoes and longer-term probabilities. Mystery Broker offers this: "I think the current recovery is most similar to the recovery in 2003-04. A big transition from hyper-growth to value. Also, valuations are already high after only one year of stock market and economic growth similar to 2003-4, although more extreme now. " He expects "muted returns for the rest of decade similar to the low returns of the first decade of the 2000s. See leadership from industrials, healthcare and to some degree financials." "Don't expect technology to be a big outperformer and semiconductors will be a disappointment especially equipment semis that have benefitted from a few big trends over the last few years. Value, foreign stocks (expect dollar to fall over the next few years) and equal-weighted indices will outperform. Inflation and interest rates will slowly rise which is different from the last decade. "The big surprise will be how old industries adapt to new technology and fight off some of the hot new entries. There will be a lot of rebounds similar to how the New York Times came back from the dead last decade." I also asked if he's interested in being identified. The answer: not now, but maybe soon.

A pedestrian wearing a face mask looks at a smartphone while passing in front of the New York Stock Exchange (NYSE) in New York, on Monday, July 20, 2020.

Michael Nagle | Bloomberg | Getty Images

"So, there's this guy who emails me his market outlook every so often."

That's how my Barron's column started one week nearly a dozen years ago, introducing the canny and clear-thinking financial advisor who has come to be known in print and on Twitter as the Mystery Broker, whose market color and investment calls I share on the irregular frequency with which he sends them.