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 earlier. 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, 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 her 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. The magazine also proclaimed her "the woman who called Wall Street's meltdown." And Michael Lewis, the author of Liar's Poker and Moneyball, called Whitney "a woman who moves markets" and "the closest thing Wall Street has to an oracle."
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. More from the March 2011 issue...
First, many state and local governments have legal requirements to balance their budgets... and that means facing the reality of their fiscal decisions. Sure, property taxes are down and may go lower. But municipalities generally don't shirk their moral obligations.
In many places, budgets will be cut before the governments default on their bonds. Local citizens will start taking on some of the ancillary responsibilities. That's why Whitney is wrong. We're already seeing this in places like San Diego, where private citizens have started caring for the parks and dealing with trash.
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.
Just look at a picture of a Stanley Cup-winning NHL team over the past few years... You'll see some gnarly beards. The whole thing started as a superstition. But now, it's a tradition.
The custom of the playoff beard has extended to other sports as well. Many current baseball and football players don't shave or trim their beards during the playoffs.
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 the 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.
I haven't seen anyone else come close to beating this streak. Trust me, it's hard to do. You need to be flawless. Just think about everything that can happen in two-plus years...
As you know, markets have a mind of their own.
Market corrections happen just about every year. The threat of a major market collapse looms every few years as well. And when you trade in individual stocks – which is what my team and I did for our streak of 136 winners – so much more can go wrong...
One miss on an earnings report, one negative analyst, or one controversy with the company's CEO can send even the highest-quality names plummeting.
No trader should expect perfection. It's nearly impossible. Too many things can go wrong along the way.
And yet, my bar has been set...
I won't be satisfied until I break my own streak of 136 consecutive winning trades.
Fortunately, we're well on our way...
I'm bringing up the playoff beard and the trading streak today for a simple reason...
We're getting close.
Last month, subscribers who followed our recommendations closed out for more trades for profits. The four trades totaled a minimum of $935 in profits... and more for subscribers who put in more money up front.
With these four winners today, our current streak is up to 116.
Just like in 2013, I'm growing out my beard. It has been growing for a few weeks. But I expect it to be much longer in the months ahead...
And once again, we're showing no signs of slowing down...
Four more trades are on track to close for profits later this month, too. And my team and I have a few others on track for profits the following month. At that point, if all goes well, the streak will be in the mid-120s.
In other words, we're within striking distance. That means the playoff beard is back.
Regular readers know I've traded through every market environment imaginable...
I was on the trading desk at Goldman Sachs during the historic crash known as "Black Monday." I've also traded through the dot-com bust, as well as the financial crisis.
Over those decades in the markets, I've developed strategies to make money in all kinds of environments – up markets, flat markets, and even in down markets.
And everything I learned from my time at Goldman Sachs through today, I've written about in my Retirement Trader service. I've taught these lessons to thousands of subscribers.
Since 2010, when we first launched this trading service, we've closed 643 trades... And 603 of them have been winners. That's a 94% win rate.
But the truth is, we're in an odd place in the market right now...
Inflation is raging, tech stocks have been hammered, the Federal Reserve is raising rates, and no one knows whether to buy the dip or move to cash.
There's so much fear in the market... And I couldn't be more excited.
You see, the strategy we use in Retirement Trader thrives as folks get afraid. It harnesses all the fear and anxiety swirling around and uses it to help us make more money.
That's why I'm reaching out right now...
It's easy to let all the fearmongering get the better of you. Fortunately, I understand times like these and have devoted my life to helping folks like you get through them.
Today, there's a real opportunity to make more money than at almost any point in my time at Stansberry Research. Folks who cast aside their fears and give this strategy a chance can keep steadily increasing their wealth amid all the chaos... by taking advantage of the chaos.
And the thing is... even when all these fears subside, you'll still be able to use this strategy to collect hundreds – or even thousands – of dollars in instant income each month. That's why it's critical to start learning this strategy today.
Find out how to get started right here.
What We're Reading...
- JPMorgan Chase says stock market fears are overblown.
- Something different: A helicopter caught a rocket booster falling from space.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
May 4, 2022