In case you missed it, Porter published Part I of our annual Report Card last Friday. Every year, Porter reviews all of our advisory services and assigns a letter grade.
Our editors love the Report Card – at least, those who receive good grades do – because they can brag about their accomplishments for a year. Our readers love it because it shows we have nothing to hide... and we hold our editors accountable for subpar performance. Many view it as an important tool for choosing which advisories they should read.
Based on last week's Report Card, you need to read Dr. David Eifrig's Retirement Millionaire. Porter gave "Doc" the highest grade possible: an A+.
In Retirement Millionaire, Doc made 26 recommendations in 2011... 22 of them (84%) were winners. He produced an average return of 11.5% for his readers. Here's what Porter wrote about Doc…
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What more can you say about Dr. David Eifrig's performance except "outstanding"? Doc, as we call him, was far more bullish than I was. And he has done a world-class job getting his subscribers into top-quality blue-chip stocks, like VF Corp. (up more than 63%), McDonald's (up more than 42%), and Coke (up 27%). He's also avoided almost any significant losses. Only two of Doc's recommendations ended up being significantly down (Google and Cisco). In a mostly flat market, Doc's formula of buying conservative, high-yielding stocks that are safe has worked very, very well. |
You often hear us praise "contrarian" investing, or taking the opposite of the popular view. Going against the majority often produces the greatest investment results. But it's never easy being a contrarian, as there's comfort in consensus. It's especially difficult being a contrarian when the guy who coined the phrase "the End of America" signs your paychecks… and he thinks you're wrong.
But it worked out for Doc this year. He was skeptical of Porter's End of America thesis. While Porter was making his readers money on the short side, Doc urged his subscribers to pile into blue chips. He also directed them to invest in municipal bonds... And subscribers who followed his advice enjoyed huge returns. For example, among the bond funds he recommended, Invesco Insured Municipal Income fund (IIM) is up 33% since he wrote about it in March 2011…
Municipal bonds were one of Porter's least favorite asset classes of the year. We dedicated many issues of the Digest to the problems of the municipal bond market. (You can read some of our commentary here and here.) And after the mayor of Harrisburg, Pennsylvania decided she didn't want to pay the city's debt, Porter wrote a Digest, titled "A Serious Warning About Muni Bonds."
We still believe our long-term bearish thesis on munis is correct. But today, we cede to the market. And the market still loves muni bonds. According to fund tracker Lipper, U.S. mutual funds and exchange-traded funds (ETFs) that buy munis saw net inflows of $1.1 billion in the week ended last Wednesday – the largest weekly inflow since March 2010. Muni funds had inflows of $523 million the previous week. And this is after munis returned more than 10% last year, beating even U.S. Treasurys.
But the inflow of capital means one thing – lower yields. Last Friday, the yield on 10-year Treasurys hit 1.71%, the lowest level since at least 1981. And the lower Treasury yields are bringing down bond yields across the board.
Yields on 20-year municipal bonds with an average Moody's rating of Aa2, the third-highest, fell to 3.62% in the week ended January 12. That's the lowest since April 1967... "We're in the middle right now of just a powerful rally," said Joe Deane, who manages $16 billion as head of municipal bonds at money-management firm PIMCO. "You have to let the new-issue market begin to put supply back into the marketplace because, at the moment, the market is on the tight side."
Despite the low yields, Doc is still bullish. In his latest Retirement Millionaire, he wrote…
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[T]he municipal bond market should continue to perform well. The default rate in this and the high-yield sectors remain very low. And most of the bonds are priced as if they're expecting 10%-14% default rates. For now, we'll continue to collect our income and plan for capital gains as the economy slowly improves through the presidential elections next year. |
In that same issue, Doc lays out exactly how you should construct your portfolio for 2012. To learn more about Retirement Millionaire and access Doc's favorite names for this year, click here...
While we'd like to think our annual Report Card was the biggest thing to "hit the wire" last Friday, those greedy Europeans once again stole our spotlight… On Friday, Standard & Poor's downgraded the credit rating of nine European nations… including knocking France down to double-A-plus from triple-A. And Greece warned it could fail in efforts to get its creditors to take a 50% haircut on Greek debt. If these talks do break down, Greece would likely default.
But as we explained in the December 8 Digest, no bad news out of Europe can keep markets down for long (thanks in large part to the European Central Bank's continual bond purchases). The recent bad news was no different – the whipsaw continues.
The euro fell below 97 yen for the first time in 11 years on Friday, but recovered to above 97.25 yen today. Against the dollar, the euro hit a 17-month low of $1.2677 on Friday, then inched up to $1.2683 today. After a weak opening today, the FTSE 300 (an index comprised of the 300 largest publicly traded companies in the euro zone) rose 0.8%.
And today, France auctioned $11 billion in bills at a yield of 0.406%, down from 0.454% at an auction on January 9. The lower yield means there's higher demand for French bills today than last week.
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New 52-week highs (as of 1/13/12): ProShares UltraShort Euro (EUO), Invesco Insured Municipal Income (IIM).
In today's mailbag… subscribers respond to Friday's Part I of our annual Report Card. Watch for the second part this week. And send your thoughts on Porter's grades to feedback@stansberryresearch.com.
"Thank you for grading your service. I love the honesty. Maybe I should sign-up for Retirement Millionaire. I am retired and I am a millionaire, already. Part of my success is listening to your advice. Most of my success is having the capital to invest and not trusting anyone completely." – Paid-up subscriber Charles McDonald
"I still have to hone my investing tools, i.e. become ruthlessly consistent when following your, and your colleagues (mainly D. Iffrig's) advice, but regardless of my own report-card, yours reminds my why I've subscribed to your services in the first place.
"To sum it up: The respect with which you treat us, your subscribers, is hard to find, if at all. That adds something that, as you yourself mentioned, can't be bought. Shall we call it honesty? trust?... 'for everything else there is mastercard' as the commercial says. Thank you!" – Paid-up subscriber O.T.
"We are German subscribers to several of your newsletters. I want to tell you how much we admire your courage and your respect toward your subscribers. Thank you for not treating us like headless sheep. Thank you for your report card. You are absolutely the only newsletter we have ever had that is willing to show your errors and the real percent that has been won or lost in this last year. We are used to hearing 100 to 2000 percent and more on gains!!!
"We know this is bullsh*t but we can't prove it. We ask ourselves why these figures don't come anywhere near to what we have (absolutely following the same advice) which has been usually minus in 2011. We also realize that you will lose subscribers for being honest and open. We want you to know that you will not lose us... the opposite being true. I'm sure we'll be around for quite a while. We love reading your Friday columns.
"Just one more question. We have also subscribed to Jeff Clark. It has not started well but I feel a strong resonance to his work. Is there a reason why he is not on your report card?? I'm referring to the S&A Short Report.
"Thank you for your good work. Last night, we were informed that 9 Euro Countries have been downrated. We have a large portion of our retirement investment in gold and silver and mining stocks but our real estate is in Germany and in Euro. That means we can sell our property but we can't move out of the Eurozone because we can't buy the equivalent in other currencies (at least not where we want to go). Interesting times we are living in." – Paid-up subscriber Bingen
Goldsmith comment: As for the S&A Short Report's grade... Porter divided the Report Card into two installments and reserved his commentary on trading services like the S&A Short Report for Part II (due out Friday).
Regards,
Sean Goldsmith
New York, New York
January 16, 2012
More on Doc's munis... Where to invest in 2012... France is downgraded... New lows for the euro... The yo-yo continues... Police are now tracking everyone on the roads...