Building Wealth I went on national TV to talk about municipal bonds – but the chat soon shifted to my grooming habits...
In March 2013, Fox Business asked me to join their midday program Markets Now.
They wanted me to explain why I had publicly disagreed with the "Oracle of Wall Street" Meredith Whitney a couple years prior. And they wanted me to walk through how my call was ultimately proved right.
Whitney became famous in the fall of 2007, when she made a bearish call on Citigroup (C)... Specifically, she predicted that the banking giant would need to raise capital, sell assets, or cut its dividend due to capital concerns. If not, Whitney said that Citigroup's stock could plunge.
It might not seem like it today, but that was a gutsy call at the time. Keep in mind that this was before the 2008 financial crisis. The markets were still near all-time highs at that point.
Of course, as we now know, Whitney was spot on...
Just a few days after Whitney's research report, Citigroup CEO Charles Prince resigned. The bank later slashed its dividend. And the stock plunged 95% over the next year and a half.
Because of her foresight, Fortune named Whitney one of the "50 Most Powerful Women in Business" in 2008. The magazine also proclaimed her "the woman who called Wall Street's meltdown."
In short, Whitney was a rock star.
Still, even with her larger-than-life status, I had to call out Whitney for one of her next big market calls...
On the TV show 60 Minutes in December 2010, Whitney predicted 50 to 100 "significant" municipal-bond defaults that would add up to "hundreds of billions of dollars."
It was a truly frightening prospect...
If you're not familiar, municipal bonds – or "muni bonds," for short – represent promises from local and state governments to pay back money they borrow.
In exchange for the borrowed money, governments pay interest every six months, plus the original money (known as "principal") back when the bonds mature, typically about two to 30 years later. The income that muni-bond holders receive is exempt from federal income tax – and, in many cases, state and local income taxes as well.
Since 1970, only 0.1% of investment-grade muni bonds have defaulted. That's because these issuers have the power to raise taxes and fees to cover their payments. When you compare that with the 2.3% rate for investment-grade corporate bonds, you can understand why Whitney's prediction was truly shocking.
In normal times, muni bonds are priced as nearly risk-free investments...
But nothing was normal back then, of course. We had just lived through one of the worst financial crises of all time.
Many folks were still scarred from what happened. So to them, it made sense that a wave of muni-bond defaults could sweep across the country.
However, with all due respect to Whitney... I believed she was flat-out wrong.
I first called Whitney's claim "outlandish" in the March 2011 issue of Retirement Millionaire. That was just a few months after her initial prediction.
By that time, the U.S. economy had started to regain steam in the wake of the financial crisis. A wave of defaults made no sense. Here's what I told Retirement Millionaire subscribers back then...
Since Whitney's call three months ago, more than $30 billion has exited municipal bond funds. The pace is slowing a bit... But this is exactly the thing the herd does at exactly the wrong time. Everyone's been running for the exits just as things are turning up for municipalities.
For example, in the third quarter of 2010, state tax revenues rose 4.5% from the prior year. Fourth-quarter revenues jumped 7% – a strong sign (although still below the peak levels of 2007).
But give it time. The economy is chugging along slowly. As it improves, states and localities will collect more revenue.
At the time, some folks believed that the overall amount of municipal debt (around $3 trillion) was unimaginably large and far too great to ever pay off. Some people thought it was too large for states and localities to even cover the interest payments.
That simply wasn't the case, though. I was already seeing evidence to the contrary.
In fact, I believed Whitney's bearish call on muni bonds actually presented a rare buying opportunity. So that's exactly what we did in Retirement Millionaire... We recommended a muni-bond fund in the March 2011 issue.
And in short, we were right...
Our muni-bond recommendation was up about 36% by the time of my Fox Business interview in March 2013. That type of gain isn't supposed to be possible in something so safe. But because of elevated fear at the time, my subscribers profited in a big way.
The thing is, though... Fox Business didn't want me to do the segment to relive my former glory. The producers called me to appear because Whitney had just doubled down on her bearish call.
I tried to be the voice of reason. I explained to viewers that it was still total nonsense.
However, most folks who saw that interview don't remember it because of muni bonds...
As we were wrapping up, the host said that he had to ask me about my "lumberjack beard."
And it was true... My beard had grown quite long. I wasn't grooming it like I normally did.
You don't see a market analyst on TV with a long beard every day. Almost everyone views "Wall Streeters" as people with clean-shaven faces, who wear vests and button-down shirts.
But I couldn't shave or trim my beard – even for a national-TV interview. That's because my team and I were on one of the greatest streaks in the markets that you'll ever find...
If you're a sports fan, you likely know about the "playoff beard"...
Hockey players first started the tradition of not shaving their beards during the playoffs until the team lost.
In 2013, I was growing my own playoff beard...
It was for good fun. But it was also to bring attention to something truly special...
It had been roughly three years since my team and I had taken a loss in our trading service.
I started growing my beard when we hit 100 straight winning positions.
At the time of my Fox Business interview, the streak had reached 118. And we showed no signs of slowing down... As I told the host, my beard was "starting to get a little scruffy."
The streak did eventually end...
It lasted nearly 43 months. And it stretched to 136 consecutive winning trades. Finally, in the fall of 2013, we took our first loss on a trade involving energy provider Exelon (EXC).
I certainly wasn't happy to book a loss. But I was happy to trim my beard. (My family was happy, too.)
Over the years, I've tried to beat my own streak. And I've come close...
From February 2016 to November 2017, we booked nearly 110 consecutive winning trades. We came up a few months short of beating the record, though.
No trader should expect perfection. It's nearly impossible. Too many things can go wrong along the way.
And yet, we're currently on an even greater streak in my Retirement Trader service... We haven't taken a loss since March of 2020.
Since March 2020, we've booked 188 consecutive winning positions. We've shattered our previous record.
We don't plan on ending our streak anytime soon, either...
Several trades we hold will likely close for profits in January 2024. The streak should, at a minimum, hit 190 by January. And we'll look to close out even more trades in the months to follow.
We're confident that our winning streak will hit 200 early next year, and we don't see any reason why we can't pass 210, or even 225, winning positions in 2024.
The strategy we use at Retirement Trader can be successful in just about all economic environments. We're prepared to keep booking profits if stocks rise, if they stay flat, and even if stocks do cool off in the months to come.
If you're not taking advantage of our current win streak, I hope you'll join us in 2024 to start your own winning streak.
Since we don't know of any winning streak like this in our industry, our publisher is helping us celebrate... And that means we're offering one of our lowest prices ever to join Retirement Trader.
Please click here to get all the details.
I hope I can teach you this strategy – which I first developed as a derivatives trader at Goldman Sachs – in 2024.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
December 27, 2023