Episode #143: David Eifrig, “Most People Run Losses Into The Ground”
Guest: Dr. Eifrig went to work as an elite derivatives trader at Goldman Sachs and spent a decade on Wall Street with several major institutions, including Chase Manhattan and Yamaichi (then known as the “Goldman Sachs of Japan”). He then pursued medicine, graduating from Columbia University’s post-baccalaureate pre-med program and eventually earned his MD with clinical honors from the University of North Carolina at Chapel Hill. He also completed a research fellowship in molecular genetics at Duke University and became a board-eligible eye surgeon. Along the way, he has been published in scientific journals and helped start a small biotech company, Mirus, that was sold to Roche for $125 Million in 2008. He joined Stansberry Research in 2008 and launched his publication, Retirement Millionaire. He has gone on to launch Retirement Trader, which uses options to help people construct safe, reliable income streams, and Income Intelligence.
Date Recorded: 2/6/19
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Summary: In episode 143 we welcome Dr. David Eifrig. David begins by going through his background and pathway to finance. He first discovered his interest in investing through the occasional Barron’s issue, and understood he didn’t want to follow in his father’s footsteps in medicine, moving on to Kellogg for business school before moving on to Wall Street. He describes that while working in finance, he decided to pursue science and medical school and ultimately helped build a business that was sold to Roche. While in residency, he began writing and that launched him into newsletter writing.
Meb then asks David to describe his publications, Retirement Millionaire, Retirement Trader, Income Intelligence, and the newly launched Advanced Options.
Meb asks David about how he thinks about value and price declines. David responds with some background on how he prefers to teach investing, and provides a simple framework for thinking about price and value.
After a quick discussion of the closed-end fund space, the conversation shifts to what looks interesting right now. David discusses Altria, and their exposure to the vaping market and the marijuana industry as well as preferred shares. The pair then expands with a discussion about the current interest rate and inflationary environment after an interesting example from David. David also gets into the use of stop losses, having a plan, and the mindset of having an idea of when to sell. He mentions that he thinks about structuring portfolio positions such that losses on one single position won’t significantly impact the overall portfolio.
The conversation then shifts gears into some lifestyle suggestions, David’s experience as a winemaker, and David’s best and worst trades.
All this and more in episode 143.
Links from the Episode:
- 0:50 – Welcome and introduction to David Eifrig
- 1:32 – How he shifted from medicine to investing
- 12:20 – His investment approach as it relates to what he has published
- 13:05 – The Meb Faber Show – #60: William Bernstein, “The More Comfortable You Are Buying Something, in General, the Worse the Investment It’s Going to Be”
- 14:24 – Retirement Millionaire, Retirement Trader, Income Intelligence, and Advanced Options
- 17:49 – How David views value
- 23:09 – Discounts and premiums on closed end funds
- 29:28 – What opportunities David sees in 2019
- 34:41 – Interest rates and yields
- 39:27 – Using stop-losses
- 45:16 – David’s top lifestyle suggestions
- 54:42 – David’s interest in wine making
- 1:01:50 – eifrigcellars.com
- 1:04:35 – Stansberry Investor Hour Episode 80: A 10-Year Slump for Equities
- 1:05:07 – Most memorable investment
- 1:07:50 – Connecting with David: retirementmillionaire.com
- Income Intelligence – December 2018
- Income Intelligence – January 2019
- Retirement Millionaire – December 2018
- Retirement Millionaire – January 2019
Transcript of Episode 143:
Welcome Message: Welcome to the “Meb Faber Show” where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas. All to help you grow wealthier and wiser, better investing starts here.
Disclaimer: Meb Faber is the Cofounder and Chief Investment Officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates, for more information visit cambriainvestments.com.
Meb: Welcome podcast listeners. It is Wednesday, February 6. We have a great show for you today. Our guest has worked as a derivatives trader at Goldman Sachs, as well as some other institutions, and then pursued a career medicine as a research fellow in molecular genetics at Duke, and became a board eligible eye surgeon. And then he went totally crazy, went back to the investment side of the world, started writing, launched some publications, “Retirement Millionaire,” and “Trader” “Income Intelligence,” has authored a bunch of books. Joining us today from cold and nasty Buffalo, New York. Welcome to the show Dr. David Eifrig.
Dr. Eifrig: Thanks, Meb. Thanks for having me.
Meb: Doc, I’ve known you for a while, and I’ve been trying to get you on the show, so glad you could join us today. There’s all sorts of stuff we’re gonna get into today. But first, you know, it’s interesting as a former engineer…although I didn’t have much of a career in engineering. But as someone who studied engineering, you know, it’s always interesting to talk to the engineers and doctors that have switched careers and flipped back and forth. I’d love to hear a little bit before we get started about your path. About how you decided to get interested in medicine, and then back into the investing world.
Dr. Eifrig: Yeah, so it’s an interesting question. I can tell you that when I was in high school, I a couple of times got a hold of the “Barron’s Newspaper.” And I don’t know if I found it in a barber shop, or I don’t know, library, not really sure, and became fascinated with investing. My dad was a physician and through college really, I decided I didn’t wanna do medicine and follow in his footsteps. And I’ve always had this latent interest in investing. And coming out of undergrad, I went to a small school in southern Minnesota, Carleton College, and stayed on worked in admissions.
And during that time, I took the LSATs, and the MCATs, and the GMATs, all the entrance exams as people know. And I scored really high on the LSATs, and scored really high on the GMATS. I mean, my GMATs were off the charts, in fact, I don’t even recognise that guy. And it just so happened that a couple buddies that were both high school friends and then classmates at Carlton, had gone on to Kellogg, and they were in their first year because I stayed on, worked in admissions for a year. They said “Man, you should come check out the school, and it’s fantastic business school, it’s great to learn,” blah, blah, blah.
And Kellogg at the time was sort of this expert and growing recognition for the true concept of marketing. And that is identifying what a consumer wants, and needs, and differentiating that. You know, there is a difference between a want and a need. And then making it seamless from the point of advertising through everything through channels of distribution.
And just as a sidebar here, I was…recognising today, I get a weekly blast from the school still how beautiful their emails are. That is the contrast is perfect, the consumption, the way to get me to sign up for another thing, or look at some conference they’re doing. Still really on top of their game, in terms of recognising what the consumer prefers, and wants just in the ability to, you know, move around on a phone, on your email, truly amazing.
Anyway, I was at Kellogg and did a summer internship with Merrill Lynch. It was halftime out in New York City, halftime in Chicago, and fell in love with Wall Street. I got to know a couple guys in the Merrill Lynch office. In fact, I’m excited to revisit with a guy Bob Farrell, who’s gonna be at the Jim Grants Conference this spring. We played one of the great practical jokes on Wall Street to a Merrill Lynch guy together.
Meb: Are you now gonna tell us or is it not safe for podcast hearing what the joke was? Bob has been mentioned a few times on the podcast. We’ve had a few other guests that have spoken very highly of Bob and as a mentor and friend.
Dr. Eifrig: It’s up to you where you wanna go with this, and whether [inaudible 00:05:15] off of that track. Essentially, I delivered a live pig that I rented from a farmer out in the country to a top…actually at a two-week rotation in Minneapolis. So I did a…delivered to this guy and he was friends with Bob, and we put on pig noses, I went out, had the FedEx guy out front 20 bucks, gave him to deliver this pig. It was just hilarious because Bob called from New York and said, “Happy birthday” to this guy in Minneapolis office. Anyway, it’s just kind of…
Meb: Well, it goes back to the old Wall Street adage, bulls make money, bears make money, pigs get slaughtered. I don’t know if that was the reference but interesting, okay.
Dr. Eifrig: This pig made it. I did take him back out to the farm. And getting that pig into the cage in the back of my car was another story. Yeah, so anyway, I was on my second year at Kellogg, and I came across an offering to go to interview with Goldman Sachs in Chicago. So I did a couple times and then interviewed again out New York. And it was one of those things I turned down an offer to be a 30-year bond trader out at Bank of America in San Fran. Had a corporate finance job lined up in Wachovia out of Winston-Salem, which would have been interesting.
And this offer from Goldman was just sort of too good to be true. And I’ve always… I guess to get to your question my background. I’ve always said to myself, try to do something you’ll probably never have a chance to do again if you can. And so, that was easy, go work for Goldman. So I did that, I parlayed that into, you know, having sort of more money than I ever imagined was possible.
And along that way, while I was in New York City, and I lived and worked in London for a year, I ran across a massage therapist who would massage my lower back and tell me I was holding all these fears. And one of the fears I finally sort of decided was failing at science. So I enrolled at Columbia at night in their pre-med post-baccalaureate programme and started taking things like general chemistry, physics. And fell in love with science, you know, in my early 30s, mid 30s. Fell in love with it so much that decided to go full time, you know, taking one class of chemistry at night and trading futures and derivatives during the day was sort of a long… I would still be in medical school probably or still be in pre-med.
So I moved to Wisconsin, there was a deal there with reciprocity and tuition with the state of Minnesota, and so I got incredible discount for tuition. And Madison, Wisconsin if you’ve ever been there, it’s sort of a great, fun, lively place to be. And there I met a guy, worked in the labs, I was sort of applying and getting all my ducks lined up to get into medical school. You know, I had to work in a hospital as a clerk, I got a job in a lab. And as I was going off to medical school, the guy whose lab I was in handed me a business plan.
And the end of that story is, I stayed on and worked for a year, get the company up and running before going on to medical school. And we parlayed that business into $123 million deal. We sold to Roche, gosh, now probably eight, nine years ago. But took a long time to have that, you know, happen that was a 10, 11-year process. Meanwhile, I went to medical school, fell in love, everything I did in medical school I loved and I wanted to be everything from a paediatrician, to a psychiatrist, to a general surgeon, to you name it.
I’ll spare you the details. But eventually, I got over to Duke to do a molecular biology fellowship in the Ophthalmology Department. And then that led to me going on to ophthalmology and residency. And from there, around that time, I met Porter while I was working at Duke. And Porter started having me write…heard some of my stories and my position, you can imagine, I’m 42 years old at the time, 43, and money doesn’t matter. I’m cynical, skeptical, questioning everything. I’ve always had that problem but definitely questioning stuff.
And Porter said, “Oh my god, you gotta tell my readers this, you gotta tell them about that, tell them about this.” And so I started writing for Porter while I was in residency every other Sunday. And that launched sort of my career where I was at a conference, still in ophthalmology residency, and I was in Fort Lauderdale. Porter caught me down there. And I was running around looking at all the posters. And if anyone’s ever been to a Science Conference, you know, there’s these events in the middle of the wintertime in warm, sunny places like San Diego, and L.A. where you are.
There was one in Fort Lauderdale, and I was one of the only guys in the afternoon wandering the floors. And Porter said, “Man, what are you doing? Like, how come you’re not down at the beach? How come you’re not travelling, you’re stuck, you’re going to see patients one at a time in a cold room, in a dark room,” yadda, yadda. And he says, “Doc, people love the stuff you write about, let’s try to launch a newsletter.”
And so, that was sort of my next jump and move. I probably spent about six months still interviewing at the end of my residency, and then even after graduating. I looked at a couple possibilities to be sort what they call cataract cowboys, where you just do lots of surgery. I loved surgery. And then I was also interested in academic stuff. I love writing and Porter kind of convinced me. I went to a couple of his meetings, Alliance meetings, hung around with some of his readers, and subscribers, and I just sort of fell in love with that next thing. And again, could I do that again? And we combined my business background with my medical background into this newsletter. Okay, if I plug that, plug the newsletter?
Meb: Yeah, of course.
Dr. Eifrig: So, created this thing called “Retirement Millionaire,” where every issue is a mix of finance, personal finance, investment ideas, health ideas. And I liken it to where “Money Magazine” meets an editorial “New York Times” piece meets “Barron’s.” And you know, it was… I just fell in love with it. This idea of being able to write, and travel, and learn. And so I left the medicine thing on the table, but I’ve had many, many people write in and thank me for altering their life both on the health side and the wealth side. So that’s kind of the long-winded story.
Meb: No, it’s good, there’s a lot of jumping off points. You know, I actually went to high school I went in Winston-Salem, so in an alternate universe, we would have crossed paths at a Wake Forest basketball game. So, you know, it’s interesting, as a former engineer, it’s funny because a lot of… We often kid that a lot of the worst investors that we see are the doctors and engineers, because they’re so damn smart and so analytical that they often…or just they get in their own way too much. They think that, you know, they can, in any other field, usually can outsmart…the more intelligence, the more effort you put in is a linear, even exponential improvement in returns.
And a lot of the engineers and doctors I know get in their own way. We’ve also had William Bernstein and other famous doctor turned investor on the podcast. So I’d love to hear a little bit more about your process, and we’ll go off in a bunch of different tangents. You know, I’ve been reading your stuff for years. It almost reminds me a little bit of… I hope you take this as a compliment. I remember growing up, my mom used to subscribe to… Oh my god, what was it called? It was called something like “Bottomline.” And I don’t even know who published it.
But that was one of my early, as a young person, interests in markets, but also wellness and everything else going on. I don’t even know if it’s still publishing, but I love reading your stuff because it has a mixture of not just markets but also financial planning and health. Okay, let’s talk about, you got three different publications. What’s the general focus? You know, is it aimed at, you know, a somewhat demographic? Is it people that are already built their wealth, you know, and the title is being retirement? Is that people that are already retired? Is it people that are young, starting out how to build it? What’s the main concept and threads between the three pieces?
Dr. Eifrig: Yeah, sure. So, I’m gonna not answer the question quite as fast maybe as you want me to. And say that ironically, I just didn’t realise it till just now across my screen popped up, today is the 10th year anniversary of the launch of “Retirement Millionaire.” So that’s kind of how ironic. I know.
Meb: Awesome, awesome.
Dr. Eifrig: I’m getting goosebumps. Yeah. So, the other letters one, we launched “Retirement Trader,” which was this real simple notion, and that’s about eight years old now, eight and a half years old. Of using options and really selling puts and calls to take in the advantage of theta, and this time decay piece of it, something that I used a lot of. An old buddy of mine…actually two old buddies of mine from my Goldman days have both accused me of changing the whole world of options, and really decreasing volatility
I’m not sure I believe that, but you probably have seen this. There’s not anyone out here that isn’t selling a marketing… You know, if you click on any personal finance or financial ad, you’re gonna get hit up with option services, selling options services. So, that was one I recall that’s called “Retirement Trader.” And then we did a more “Income Intelligence,” which is a little more intellectual, and I would say where “Barron’s” meets me in a little purely more analytical kind of modelling.
And then we just launched…you probably don’t know this. But December, I’ve been training two guys in my group and they launched an advanced options service which kind of is more internal for subscribers at Stansberry. And it takes all of Stansberry’s picks and uses any kind of spread and anything you might imagine to trade those picks. And we do stuff like let’s say Porter’s team recommends going along Microsoft, we might not agree with that pick and so then we’ll soften that, or if we really agree that’s a great pick, we’ll do a different kind of option positioning.
So anyway, that’s been kind of fun, so really four services. And I would say, you know, my model is a mix of macro… I really look down on stuff from above, and then I really get down in the numbers as well. And then we have a couple of little mini black boxes that sort of use… Oh gosh, everything from sort of what’s working, like, it’s changed from having just simple…something like priced book be heavier weighted to now return on invested capital, heavier weighted. We’ve used shareholder yield in there, probably 10 years ago I started writing about wanna sleep well at night knowing that this company wants to give us their money, pay us back in either stocks or dividends.
And not that that’s unique to the world of finance. But I mean, that’s just really… I’m a believer in…and there’s very few times I’m not investing in something where I don’t have a very clear idea how I’m gonna get my capital out. And it’s usually not from capital gains, it’s usually from income. In fact, I would say I’m probably terrible if you were a subscriber to mine, and you saw me start to… The picks I get killed on are the ones that really aren’t buying back shares, and/or paying a dividend, and are purely where I’m thinking, wow, this is a great speculation. So, I don’t know if that answers your question of kind of how I [crosstalk 00:17:45].
Meb: No, it’s good. I mean, I think it’s a good starting point for a lot of things to talk about. You know, I was reading one of your pieces and, you know, you mentioned there’s a couple different threads whether its value, or income, or macro. And recently you were talking about…and this is kind of timely with what’s going on over the past four or five months. Talking about investors concerned about dollar price movements of a recommendation you made.
And you took the opportunity to talk about expectations. You said, “If you do get worried about the clients like this one, I’ve got a simple way to free you to become a more successful investor. That’s one asset every great investor has, and it’s nothing you can buy on Etrade. The asset is this, reasonable expectations.” Talk to me a little bit about how you think about the concept of value as well as price declines. You know, it’s something we talk a lot about that a lot of particularly young investors often get a little bit backwards.
Dr. Eifrig: I’m not sure if quantify it may be enough for your engineering mind. But I will say that to me, on the surface, I really start with macro stuff. And if you look in this past year, probably almost to the day and within a couple days, twice on those drawdowns, the one in January and then the one in the fall, I wrote and talked about publicly in Vegas at our Alliance meeting. I think essentially my last slide in the Alliance meeting was, go to all cash. And I say it tongue in cheek, you’d have to see the rest of the talk. You’d have to have been there to appreciate that I’m really not… I would never suggest that.
But what I would say is, you wanna invest in… For me, let’s just go back to what is investing? What are you doing? And to me, you’re taking your hard earned money, or in the case of professionals, investors that are institutional, you’re taking someone else’s hard earned money, hopefully you’ve got a fiduciary attitude that’s driven deep into you, and that’s my biggest worry right now that’s not the case. But you look and you say, “Okay, what do I wanna do with my money?”
And a simple example is a buddy of mine, he and his wife, I went to residency with her, they need a quick bridge loan for a house that they wanted blah, blah, blah. And they wanna pay me 7% over two months, and I’m gonna do that. Like, that’s a simple, easy investment. But I really started at, if my brother in law comes to me, wants to open up a restaurant, the money, I’ve got it, I wanna invest, I wanna get a return from it. I’ve got a plan. I’ve got an end where I get my money back and the surety of that, and that’s really important to me.
So, that’s kind of my basic fundamental teaching point is you’ve earned that capital, how do you want to share that? How would you wanna put that with? Who do you want to steward it to give you money back that you can live off of? Because the alternative, of course, is just keeping your savings account and live off of that in addition to whatever income you might be making from your job. And speaking to a younger person, let’s say a 30-year-old. So, you’ve got savings, you’re either gonna consume the savings and live a little fancier, or you’re gonna save and invest it and try to get money back over a period of time.
My next step… And again, this would be just a teaching thing to anyone that works with me, to our copywriters, to our customer service team. I would say, let’s talk about the basic thing called earnings, and then the price to earnings multiple. Which you and I can talk about till the cows come home about whether it has any predictive ability. We know it really doesn’t. But let’s just look and contemplate what if nothing else changes in the earnings, and the company pays out 100% of the money they make, there’s no competitive threats, there’s no other barrier to entry, is a good breach, things just keeps going.
And they paid 100% of that money back to you. Then I tell people, what is the PE ratio? And it’s real simple. It’s the number of years it’s gonna take you to get back your initial investment. So, when I see stocks, whether it’s on a CAPE, or a straight PE, or whatever stat that has a P and an E at the bottom and the top, getting into the 20s, I’m like, holy mackerel, that’s a long time to wait. Again, I had to wait 11, 12 years for a biotech, and I thought that was crazy.
Meb: It’s funny, there’s a quote from… I think it was… Man, it was the Sun Microsystems’ CEO back during the bubble, the OG bubble, the 2000 bubble when their stock was trading at like 7 or 10 times revenue. And he had made a comment like, in the press he’s like “What are you people thinking? Like, for you to return your money, like, we would have to pay out every single cent of our revenue to you for a decade. And that’s not paying any employees, you know, not paying for any electricity bills, not paying, you know, all the million things.” He’s like, “How could you ever possibly expect to get a return on this investment?”
But it’s funny because people, they tend to think of only the upside rather than potentially the downside. And that’s what usually gets people into trouble, sure. So talk to me a little bit about, you know, one of the nice things you do thinking about income. I saw a nice piece where you guys talked about an area that I think some people are still interested in. There’s still a lot of money there, but it’s less talked about these days, which is closed-end funds. And you guys had a nice discussion of discounts, but also premiums, maybe touch on that for our listeners. It’s not something we’ve talked a lot about on this podcast so far.
Dr. Eifrig: Mab, it’s funny, I can go back to the first time I learned about closed-end funds. We wrote about this recently, but I was driving my 1963 Buick Electra. I’d just left the steakhouse where I had advanced from dishwasher to baked potatoes chef, and I was somewhere between baked potatoes chef and actual steak chef in Minneapolis. And I was driving to the bank to deposit my check. And, you know, this was back in the day where you drove up in your car and you put it in those tubes that flew from, you know, the outer thing to the interim. Got a little smile from the person, waved, you waved at each other and the tube came back.
And on the radio, had to have been an NPR kind of thing, was this discussion of closed-end funds. And this idea that they issued shares, but unlike the other funds, they weren’t beholden to having to invest more money that came in, or having to pay and sell assets, stocks, bonds, that they had to redeem people wanting their money back. And so it was a great opportunity and these closed-end funds meant they issued shares, but then the shares traded freely on an exchange, the stock exchange.
And that led to irrational premiums and discounts. And gosh, I’d be lying when this was, but I wanna say it was like ’78, ’79, when stocks were just getting killed, and things like Coca Cola were trading at five, six times earnings. And I remember hearing there are these couple funds and I don’t remember what they were, and I didn’t have much money to invest. But I remember that, you know, they were trading something like 25% discount to NAV, and immediately figured out how to… I think it was Pane Weber was my first broker.
You know, they’d have you drive over there and, you know, they had a ticker, literally a ticker tape. They had value line paper and folders stuck there in the waiting room you could look at. And that’s where my first fascination with stocks, but also closed-end funds, this idea that there were these…call them arbitrage if you want. Clearly, they were not fast arbitrages and you’d have to get the owners of the fund to the decide to pass some kind of policy that says, if a fund trades at a discount, that we’ll invest our cash flow into buying our shares up until it trades at par or even to a premium.
So, that’s just been with me forever. And I’ve done it probably four or five times where there are these huge swings, and you get these discounts. And early in Stansberry, one of my great trades was the municipal bond market was falling out of bed. And I came out and recommended and said, listen, this is a great opportunity. Here’s a closed-end funds where the assets are being priced way below by people who have sold this stuff way below what the paper is worth. And gosh, we had discounts of 18%, 19%. So that’s kind of my love affair of closed-end funds.
The more important part though is…and we write about this every other month in the “Income Intelligence Letter,” is there all these funds out there that trade at premiums. And that makes no sense to me why I would own or buy a fund that’s trading at let’s say $1.35 when the assets are really only worth $1. And especially when they’re very liquid assets too, and there’s not a technique of any kind that I know of where that makes sense. So I don’t know if that answered your question but…
Meb: It does. I mean, I was just looking at a list from republication of a number of these closed-end funds. And for listeners, you know, the challenge and this is one of my favourite examples of efficient markets is these closed-end funds regularly will trade 10% even 20%, 30% away from their net asset value both above and below. And so, on the upside, you’ve seen a lot of these PIMCO funds traditionally will trade higher. But also the famous example was the Bitcoin trust which was trading I think at one point like 100% NAV. And I think it’s now down to par or close to it.
And then on the flip side, you have funds that will often trade at very large discounts. Traditionally, when a particular asset class is just getting slaughtered, you have these big discounts, people just, you know, puke them out. Because remember, closed-end funds, listeners, are sold where the brokers get a big fat commission on the way in, it’s really kind of questionable practice.
But the challenge, of course, is they are also pretty high fee and tax inefficient. So, even if you only have a 10% discount, it may never get realised. But there are some like the CUBA fund is probably the best example that will regularly go back and forth between a 30% discount and premium. But it’s a really fun area, but one that’s really wonderful for the managers because they get paid off capital forever. All right, I’m rambling.
Dr. Eifrig: No, no, that’s okay. I have a question, do you trade that yourself? Do you…
Meb: I did back in my early days as a kind of active trader. Everything we do now is quant, I love the closed-end fund space. Well, I mean, back on the blog, congrats on the 10 years. I mean, I think I started blogging a little over 10 years ago as well. And so, looking back, I used to write about closed-end funds, and CUBA was usually my poster child. But it’s not something we actively trade mainly because for someone like us, you have to be able to scale and do quite a bit of size. And it’s harder in the closed-end fund space to necessarily do that. But I love it, I think it’s a great area for inefficiencies.
So it seems like you guys particularly in “Income Intelligence,” you got a pretty wide opportunity set. As you look around the world today 2019, it’s still hard to say that. Where are you kind of seeing opportunities, or are you seeing pockets that you think are still pretty interesting? Are you seeing areas where actually you’re more concerned than anything else? What’s the world look like to you today?
Dr. Eifrig: Yeah, I would say I’m not giving away too much of the shop because we did give this to our readers a couple of weeks ago. But we just went back into Altria really mainly because of such an incredible dividend play, and then there sort of seemed to be an intelligent purchaser of things I’d be interested in to generate income off of. One is the vaping market and the other is the marijuana market.
And I don’t know if they’ll be successful with it, but they certainly been, you know, long time generators of cash, and whatever you think about addiction. So that’s kind of a play an area, but I don’t know if you’re looking for specific ideas.
Meb: Well, that’s an interesting one because I think it’s a good comment on sentiment of that space is that…of the tobacco industry. Again, from a from a North Carolina guy who’s high school was literally named RJ Reynolds High School, a name of a cigarette company. My grandfather worked in the old RJR building which now I think is a Kimpton Hotel. But a pretty nice one if you guys are ever in Winston. But what is interesting, you know, ignoring the morality of tobacco in general, it’s the number one performing industry in the stock market in history.
And did you know there’s no ETF focused on that industry, which is a bit surprising given there’s 2,000 plus ETFs now, nothing’s focused specifically on this space. Anyway, just a random factoid. Yeah. Any other areas? That’s one that, you know, is a classic example of major cash flow generating firm. And I read through your report that, you know, had a nice, really strong run up a few years ago that has just kind of backed off over the past couple years. But interesting opportunity. What else? See anything else out there that you think is particularly interesting?
Dr. Eifrig: You know, I’m always interested in preferred shares. People ask me why, and I just say, you know, they always pay more than my savings account. They’re ahead of shareholders in most companies. So we can find a business that wants cheap capital, their preferred shares are the way that they do that. They do have some, you know, problems when interest rates go up and down a whole lot. But as we know, the Fed right now is not interested in letting interest rates on the short end go wherever they want.
So, you know, I’ve played in the preferred space, I’m eyeballing preferreds right now. You can get into that by doing something like JPS which has a…it’s a mutual fund or ETF rather that’s got preferreds in there. You can also buy individual preferreds. I play in that space myself. And for people who don’t know what preferred shares are, it’s essentially in the middle of the capital structure. They’re not stocks, and they’re not bonds, but they’re right in between. And they’ll issue them oftentimes for a really long time, sometimes even in perpetuity.
And sometimes they’re callable. Right now you can find them 5%, 6%, which again, to me, if I’ve got extra cash sitting in my savings account, that’s been a fun way for me to, you know, lock up long term cash flow stream on my savings.
In the income space, I go back and forth wondering what I might…where I could find value. And the worry I have right now is…and if you’ve looked at or were you in Vegas when we did our Alliance this year? I don’t think so.
Meb: Not this year, I was there the year prior.
Dr. Eifrig: Yeah. And there’s just lots of things that suggest to me interest rates aren’t done going back up, and I’m starting to feel inflation pressures in kind of everywhere I go. Like, the other day… I often get a McDonald’s coffee because it’s a buck, and it’s a large coffee, and it’s quick if there’s no line. So, if I’m driving by one. And the other day, they’re out of the creamers, the little packets of creamers. And I’m like, “What’s the matter?” And they’re like, “Well, you know, we’re just having trouble keeping them stocked and the inventory… The manager there is like…” I’m like, what? You’re talking about the cost of creamers for McDonald’s to keep them in stock as an inventory item, man, that’s interesting. So, I don’t know, what do you think of interest rates here because if you’d told me… If you knew where interest rates were going, I could tell you how far out on the curb I’d wanna go or what kind of…
Meb: I’ll tell you a different perspective is that, you know, as a quant, I love telling people, I say, “Look, I’m happy to gossip about this, but it’s not gonna affect anything we do.” One of the things that I think is really interesting that you mentioned in one of your pieces and you guys talk about. You know, we did a… And this applies, think about income. You know, we did a poll on Twitter where I asked people, I said, where are you invested in your safe money savings account? And how much are you returning? And it was like, over a third of people said they had no idea. And another third was, you know, essentially they were getting probably nothing or less than 1%.
And that’s a simple example of something that’s not that hard to do basic blocking and tackling to get… As you look around the world today, plenty of savings account that yield north of I think 2% right now, or CDs, certainly. But that’s something that, you know, the vast majority of people they just don’t think about or they just don’t pay attention to. And along those same sort of way of thinking, as you look about global sovereign bonds, you know, you have a situation where the largest asset class in the world being foreign bonds. The G5 is yielding less than 100 basis points. And the big outlier there ironically, is the U.S. which is almost a high yielding market as you look around globally.
And so, we wrote a paper many years ago talking about global sovereigns and saying, in the same way that you think about value or income investing and stocks around the world, you can think about a similar situation where historically, tilting towards yield, which is carry, of course. But maybe thinking about certainly just avoiding the negative-yielding sovereigns, which has been one of the biggest surprises in my career can add some yield.
So it’s something… I don’t know where interest rates are necessarily going. I wish I did. But my thought is, rather that there are some simple hacks you can do to increase your yield for probably no, additional bump in risk, particularly in the U.S. with savings accounts. Anyway, but you talk a lot about that too in kind of a lot of your lifestyle part…
Dr. Eifrig: Yeah, just to… I guess what I could tell you what I like to do, one of the phrases I think Porter always loved when I say it is, do what I do, if you wanna know what I recommend to people in the newsletters you’d have to subscribe. But for me when, you know, yields popped up back in the fall, November, December, where I think two years, we’re approaching two and a half, three, I mean, that was like an easy trade for me to buy seven figures of U.S. treasuries. Like, I just… Let me lock it up, I didn’t like stocks.
And so I’ve done that, and I’m now locked up into this weird space, but I feel good about it because I’m not gonna trade two years. I did trade a one-year T-Bills. Very funny, one of the guys on my team was $100,000 T-Bill face, and I was showing off to the junior analyst whose brother, by the way, plays on the Los Angeles Rams as a lineman. And there’s not a whole lot of safe places to go. I guess I would tell you… I’ll give me another pick in our letter, we recently talked about Blackstone and really just because they’ve been really good allocators of capital. And joining them, the ticker there I think is VX, you’re almost becoming a partner with those guys, they’ve been super savvy, investing in a bunch of different things, the yield on it is crazy, crazy, higher relative to other things
And there’s not a whole lot of places I’m feeling safe going to sleep at night. I mean, imagine, you know, what Apple… Apple suddenly went from… You know, if anyone was trading Apple based on volatility, then they got stopped out, and then it bounced back up from 150. I mean, even stocks like Apple which are just grinding out cash are becoming volatile. When you look at… If the Fed really does stop their, you know, quantitative tightening, you know, where they were peeling back which looks like they have, man, I start to really get nervous.
And like you said, the sovereign debt at negative numbers, I mean, where’s that in a textbook other than in homers history of interest rates, it’s a rare, rare, rare time. And for me, when it’s a rare time, I kind of hunker down. I dig a hole and try to sort of sit it out. And maybe that’s stupid over the long term, but who [inaudible 00:39:25] was canes [SP] in long term, we’re all dead, so.
Meb: Well, you mentioned a phrase… And this is one more investing question, then I wanna move on to a couple of the lifestyle concepts. But there’s a phrase we haven’t talked a whole lot about on the podcast which is stop loss. So, talk to me a little bit as this as a risk management tools, is this something you use? You don’t use? You love, you hate? What’s your perspective on it?
Dr. Eifrig: If you haven’t gotten a sense to me already, I have a bunch of views on it. My first macro view is how emotional are you and how bad do you feel when you lose money. And you only know that if you honestly tell yourself, okay, you’ve been investing and if you’re a new investor forget about this for a moment. But you’ve been investing for a while, how did you feel when you first had to close out that position for a loss, because you’re either taking it as a tax hit, you wanted to cash out the three grand and you had a tax loss carry forward. How did you truly feel? If you didn’t give a darn and you can manage that emotion, but most people run losses into the ground.
And we’re talking… I know physicians that have run stocks in their portfolio, in the retirement portfolios, where you don’t even get a tax benefit if you sell out, down to 98% of what they initially invested in. I wrote about a friend of mine, I changed her name and called her Sue. Like, you’ve got to have this mindset, when you go in what’s your exit strategy is. I started talking about that today. So, I really… My rule of thumb and I say invest… I mean, we know this from portfolio theory, what is it, 18 to 20 was the original paper on capital asset pricing model.
You have 18 to 20 stocks, let’s say that’s a 20 stocks, that’s 5% equals 100, if each of them are 5% in portfolio, so you can have 20. And I don’t have… I’ve never had an all stocked portfolio. So, I tell people, don’t put more than 4% to 5%. I lean towards four. And then Meb, I just do something simple so people can grasp it. I say, if you have 4% in a stock, then if it goes down 25%, and you sell it, you’ve only lost 1 % in your overall portfolio from that one position. So, that’s my simple stop rule is don’t lose more than 1% on any position.
And I really encourage people to modify that and apply it however they want. If they wanna sign up for, you know, Stansberry with Richard Smith, you’re aware of that trade stops product, if you wanna use volatility, if you wanna use other things. That’s fine. I just have never micromanaged it that much. I’ve said when I go in… For example, we did a pick Sea Trip which was this Chinese… And this was a loss. But I was in China with Steve Sjuggerud and a bunch of subscribers last summer, and I got super excited about the Sea Trip which was this travel app, and I had it on my phone, just fantastically easy and simple, and looked great.
But I tell people, look, this is very speculative. China’s really, really risky right now, there’s parts about China I don’t understand, the building, these facades, I’m not sure. I know there’s a billion people running around that are gonna be consumers, I just don’t know this is a risky stock. And I told people don’t, you know, cut it in half. Go, I think I said 1% to 3% or 1% to 2% of your money. And then I was prepared if you go with my argument, then you could lose it all, right. And we didn’t do that, but we didn’t get stopped out of it because people usually do a 20%, 25%. At a minimum, I tell people we should have a 25% hard stop on stuff just so you don’t get tangled up in your emotions.
But it’s really about setting your priority when you start on your individual pick of what your plan is for that. And if you’re thinking like, I’m gonna get a double, then how much are you willing to risk to get a double and over what period of time? I very rarely tighten up my stops, I probably should be better about that. But I don’t want to putz around with it too much. And I am so conservative, I think in general with my picking, that I just don’t think I have to fine tune it that much. You know, like I said, Sea Trip is one of the rare ones that there wasn’t paying any dividend, and they weren’t buying back shares, and I got stopped out of it.
Meb: Yeah. I mean, I think one of the big takeaways too is, you know, so many investors just from the get-go, just don’t have a plan. And one of the nice benefits of stops is that at least it gives you… I mean, and I think it’s probably added into performance, most of the research I’ve seen shows it helps. But just from the standpoint of having a plan because what happens is, you know, people buy something and then it goes down 10, 20, 40, 50, and it’s an emotional stress ball for them. You know, should I buy more? Should I sell? What do I do? And it creates this huge effect with it just continues on and on with every position everything they do, and it’s just such a mess.
I mean, I can’t tell you how many people call us and say, “You know, what should I do about this position?” I said, the time that you should have decided that is before you bought it. You should have a full expectation of what you’re gonna do with this before you buy it, otherwise, it’s just gambling. All right, so I wanna move on to a couple more things or otherwise we’ll keep here all day. You also write a lot about lifestyle and everything from… I loved reading your top 12 actions for 2019, as well as other hacks, and ideas, and suggestions. Is anything that bubbles to the top of your head that having done this for years that you think are some of the most important suggestions?
I mean, one I was looking at it’s kind of investment-related that I didn’t put together until last year. So, in my 40s, was the percentage of people that have zero estate planning documents. Which is kind of crazy, you think about. Anything comes to mind, what are some of the top things that you think that either people think about wrong, they don’t think about and really should. What comes to mind?
Dr. Eifrig: From my perspective, what I have noticed…and what I really picked up when I was in medical school was that we learn ways of storing and holding on to information. And in medicine, once passed on through Latin, it was… And then in Chinese medicine through Chinese. But it was kept away from the average person, kept away from people. And people memorise stuff to pass tests. People never went back and studied, if they did they…even now, they go off to conferences that are sponsored by drug companies.
One of the biggest, most amazing things to me…and I’m gonna come around to I think what you want me to answer. But the whole cholesterol model for example, I was arguing in 1999 with one of the senior residents and I was in medical school, that the cholesterol role model didn’t make any sense. That is this drug, these Statins that everyone is getting put on. And a buddy of mine who’s now…well, he’s 10 years younger than I am, but he used to play golf, he’s professional, his doctor’s telling him his cholesterol level is high and he should start on Statin.
It’s absolute nonsense from so many angles because your body makes cholesterol, your liver produces cholesterol. So, I’ve never understood these popular health beliefs. And when I started this letter, it was really an offshoot. I mean, I jokingly tell Porter and others who really, you know, have a chance to have a glass of wine with me, I say, you know, “Look, this is exactly what I would be doing if I was an ophthalmologist, if I was in admissions. I read about health, I read about stocks, I love them both, I study it, I dive into it.”
And the research is pretty clear and I’m gonna say this tongue in cheek. But what defines being alive is the fact that you have movement. Now, if you’re on your deathbed, and your last gasp of breath, and you die, that’s your last movement, is your lungs, your diaphragm, maybe your heart beating. So I don’t wanna be morose, but I do like, movement is key. And for anyone who’s getting up in their 50s and 60s, I’m telling you what, you’ve got to be doing things probably daily, and as simple as walking 10, 12, 15 minutes, go around the block.
Park your car if you’re going to a mall or something, park it as far away as you can, go in the mall and walk an extra loop in the mall, just movement in of itself. There’s things in our hips and our shoulders, these big joints that triggers chemical reactions and hormonal reactions that lead to benefit. Something as simple as yoga, 10, 15, 20 minutes of yoga, biking. I can’t emphasise how critical moving is to being alive.
Now, having said that, there are a whole bunch of other things you can do. I don’t wanna dive into diet too much, because diet is one of these things that again, the models if you look at and studies show low cholesterol… I mean, low fat, low carb, those diets kind of have the same effects on cardiovascular disease and heart effects. So you know it can’t be diet as a problem. What happens is the gut tube, so from your mouth to your anus, is filled with these receptors that produces a drug called serotonin. And serotonin is the drug that’s given to people who classically go to get help and want an antidepressant drug, usually those are serotonin reuptake inhibitors.
So they prevent the body from reusing or consuming or metabolising, and keep it floating around the bloodstream and it’s a feel-good chemical. We learned very early in life if you eat foods and eat certain foods, they release the serotonin. And so it’s a natural connection between feeling that buzz of serotonin. Well, guess what? Carbohydrates, processed foods help trigger and release those things faster than fats and proteins do. So what do we get used to doing? Consuming carbs. And you know this, you and I, we can go to a McDonald’s right now, and we can get a Big Mac and a large french fry and consume enough calories for two days, in seconds, we can consume that.
And so, that’s not a natural thing. So if you’re gonna control diet or think about diet, I would just say try to eat more fats, these so-called omega three fats like olive oil. That’s really good and then stay away from as much processed carbohydrates as you can do. Again, this buddy of mine who’s a golfer, he goes, “Man, I gotta stop eating my pop tarts.” And I’m like, “Dude, you’re 50 years old, what are you doing eating pop tarts?”
So, those are the two tips I would give you, is just kind of pay attention, stay away from those carbs. And the reason the carbs are they pop your blood sugar up. And humans, our genetics are just not meant for high spikes in blood sugar, and other than it feels good, we know that our body, we develop a habit of experiencing that, and that’s why it’s so hard to get away from carbs. I’m a music lover. I’d say any chance you can get and work around music or be around music. Finally, the only other tip I give to people is…and it’s becoming super popular, but couldn’t emphasise it enough is sleep, and trying to manage sleep.
And we know that sleeping like a baby, those phrases, sleeping seven and a half hours, eight hours a day is probably the best for everybody. Now, whether you get that in a six-hour night, and then two 45 minute naps or however you get it. I tend to use the morning now when I wake up if I get… Let’s say I for whatever reason only got seven hours of sleep. I’ll meditate on those days for about 12 minutes, 30 minutes in bed right when I wake up. And some of the brain waves that get generated in meditation, I’m gonna estimate and say it’s kind of like worth… For every minute I meditate, I get about three minutes, four minutes maybe of sleep equivalent brainwave reprocessing.
So, meditation, sleeping, making sure that you’re rested. And I wrote about this long time ago, one of my early “Retirement Millionaire” pieces. I said you can test your sleep latency by taking a cookie pan and put it on the side of the bed, lie down on bed and hold a fork in your hand with your hand over the edge and just sit there and just breathe relax, close your eyes. This is at night when you normally go to bed. But start your stopwatch when you do it and see how long it takes before you drop the fork.
And most people have about a two and a half, three minutes sleep latency, so if you get to that, you’re normal. But, I mean, people have done this when I first recommended it, you know, people were writing in and saying, “Oh my god, I didn’t know I was so sleep deprived, it fell out of my hand in like 20 seconds, 25, 35, 40 seconds.” And so that’s a sign you’re not managing your sleep properly. Anyway, that’s… I’ve gone on probably too much.
Meb: No, it’s great. I mean, it’s interesting there’s a lot of analytics. The Oura Ring is one that a lot of people started to use. I bought it but then it just kind of said, “Meb, you sleep fine every night.” I’m an easy sleeper. But I love the Jeff Bezos hack now where he talks about… He says his morning routine, he says, “You know, I take no meetings before 10 a.m.” So I’m trying to implement that and it makes life so much less chaotic in the morning just by saying, you know, let me deal with my morning, and kind of enjoy it rather than just like, crashing into the day.
Obviously, you can’t always control that, but it’s been a nicer way for me to do it for sure. I wanna talk about one more thing before we have to let you go. You’ve had like, the most varied career ever, I love it, and there’s always one new thing on your horizon. I wanna talk about your experience getting started, as a winemaker. I got an email a few years ago from you and said, you know, “Hey, we have these new Eifrig wines out, friends and family.” And so I ordered a few as any good friend would expecting it to taste fairly terrible. And at a total blind taste test with my wife, we both actually loved it, which was a big surprise to me.
Not a comment on your winemaking ability, but just in general, my experience drinking my brother’s microbrews in the 90s and anyone else who’s ever made alcohol. And my friends in North Carolina where they come up with a bunch of moonshine that like, will make you go blind. What was the inspiration there? And tell me a little bit about how that whole process has been?
Dr. Eifrig: Yeah, sure. So I think you bought… I checked this before I called you. I think you bought three bottles of my 2009 vintage, and three of the 12. Porter had claimed the 12, he gave the 12 out to friends of Stansberry one year. And said he thought it was certainly the best wine he’d tasted that year, and maybe one of the best red wines he’s ever had. I had a bottle of 12 the other night and because of that, I have not been going through many of my 12s.
My 9 was my first vintage I ever did. And the way I got into that, Meb, is 1976, my buddy and I graduated from high school, drove in that same 1963 Electra deuce and a quarter, out west to California to visit my cousins. An aunt and uncle who lived in Napa right near Joseph Heitz. So kind of on Zinfandel lane on the west side of Napa. And I fell in love with the wine country, man. We were tasting wines with Joe Heitz in his barn. He had these Italian varietals, Green Mulino, Charbono, just an absolute blast.
And always… And that’s one of the reasons I interviewed in Bank of America in San Fran with that trading job. I kind of always had in my mind I wanted to get out there and do something in the wine space. But through business school, Wall Street, well, I can go back and tell you that in college, I came home one summer and started working in the municipal liquor store. And the wine guy quit one day, he got into a huge fight with the manager. And I happen to know that the guy who quit was making… I’m not making this up. I think we were making like $2.60 an hour, and this guy was making $3.60 an hour, it was an incredible difference.
And I went to the library that weekend… And this was, gosh, ’79, ’80. Went to the library, read every book I could. And back then, there were probably only four books. But read everything I could, wrote down the names of the wines we carried in the store. And back then, just the foreign section was maybe a couple of Chianti Classico and maybe seven or eight Bordeaux’s. Learned everything I could about it. And on Monday or Tuesday of my next shift, I pitch to Larry the manager that I should be the wine guy.
And he says, “What the hell do you know about wine? You’re doing your summer between college years.” And I said, “Well, come back and ask me any questions about this thing.” So I snowballed the guy into a raise instantly because I knew everything there was to know about it, and started in the same year that Wine Spectator started their newsletter. I started a newsletter, a wine newsletter. But I had to sell it to my friends and my parents because none of my buddies were, you know, they were drinking beer and shots of Southern Comfort.
And so I had a newsletter that went out, it was $12 bucks a year, once a month was called “Simple Wine Newsletter.” So I’ve been in love with it since the 70s. And I started about maybe 15 years ago, so that going out and working the crush with some friends of mine that had been in the wine business. Like, one guy, a classmate for business school, he and his wife had been with Gallo, they still have a small winery and they’re in Calistoga. Their winery or wine’s Mutt Lynch. But he was working for some big brand names.
Anyway, I start working the crush for Brenda his wife who was the winemaker in the family, and then another friend of hers, Phyllis, who’s this older woman now in her early 70s. And I started shovelling stems with them for the crush. And then one year, and it was probably 2009, the crush came in, you know, people were having problems moving wine, the markets, economy, all that. And they asked did I want to buy some of the juice, you know, some of the grapes and the barrels. And I was like, holy crap, I love this.
And I’d been to the Sonoma County Fair with both the winemaker, and Phyllis, and she’s kind of a rock star over on Sonoma side. And for people who know the valleys up there, there’s Napa, which is kind of still higher end, and Sonoma sort of the value play. And people know me, I’m a value play guy. So, you know, I feel like I was a rockstar with this Phyllis. I had a chance to buy this wine that this grower had been trying to grow make wine, sell it. And, you know, I don’t wanna say it’s easy to make wine, but it’s easy to make wine. It’s really hard to make really good wine, and it’s really hard to sell wine, that’s the key.
And the old adage in the business is how do you make a small fortune in the wine business is start with a big fortune. So I didn’t make a 10, and I didn’t make an 11 intentionally, I only made about 120 cases of the 9. And then I made about 100 of the 12. I’ve since done… We’ve had great vintages. I’ve done a 13, 14, 15. I’m about to go out and barrel down and bottle my 16 in March. Yeah, so what you tasted was the first vintage, the 9. I’ve had the 9 recently in a blind tasting up against a triple 100 point Bordeaux’s and I honestly can’t tell a difference between my wine and those for about an hour, after about an hour and 20 minutes and a glass sitting around. I definitely prefer the Bordeaux’s. But, you know, it’s really those guys have got 150 years of experience on me. But I’m very, very happy with that, and if you had it, you know how good it is.
Meb: What’s the ultimate vision as you look out in the future, is you just gonna kind of keep this as, you know, a little hobby or is it something you might divert a little more attention to and the entrepreneur in you try to expand it? And by the way, I don’t even know the answer to this. Can people actually buy some if they wanted to, the listeners, or this is only for internal use only?
Dr. Eifrig: Yeah, so that’s a great question. So, the first three vintages 9, 12, and 13, I only took check or cash. I do have a website, it’s eifrigsellers.com that people could go to and check it out. What you’ll see there now is I’ve sold out of my 15, I still have some 14 left. And the only reason I have sold out of 15 is because I only made 50 cases. I went through a terrible accident and error in the winery. The 14, I only have about 20 cases of that left.
I make about 150 cases now. I just made a little bit of Chardonnay, which in fact while we were sitting here on the phone, I got my first reorder of a case of chard, it’s high end. You know, it’s like $100 to $125 bucks a bottle, so it’s a limited market place. And like I said… And then the other thing, so I released a Merlot. I just did in 16, I didn’t do and 17, same strategy, and I don’t wanna stuck with wine I can’t sell. My real dream is to make one of the world’s greatest Merlots. I don’t know if you’re a Merlot guy. But I made… Sixteen was the first vintage, I did native fermentation, so whatever was in the air, I let it ferment.
And then skipped 17, just did the 18 again, got the same fermentation kinetics. And I’m telling you, the 16 sold out in two days. People have written back, “Absolutely love it.” If you’re a Merlot lover, it’s fantastic wine. I think the 18 is gonna be as good. Yeah, I kind of… That’s my dream. I mean, you can do the math. If I’m selling, you know, 100 cases a year of stuff. And like I said, I’m starting to do a little Merlot, I only made 40 cases of the Chard. I did 50 about cases of the Merlot.
I pay the people that help me. So, the winemaker, the grower, I’m in the midst of finalising buying land out there from the grower’s uncle and his brother, so we’ll be fifty-fifty partners in that. Yeah, it’s a love of mine. But I tell you what, right now the way it is where I can go out a couple times a year, I go out for the crush. I stay out there usually for about six weeks, seven weeks. You know, on the wines and the barrels. I do longer… You know, Chardonnay becomes a problem because it has to remain fresh and I don’t really know if there’s a market for age-able Chard. You know, the great Burgundy’s. I don’t know if you’re a Chablis or a Burgundy guy, but I’ve had some 20-year-old white wines, and I’m like, holy mackerel, those are probably some of the best wines I’ve ever had.
But I don’t know how to make them, and I don’t even know if I could, and I don’t even know if I wanna concentrate on whites because, you know, how many buyers of $150 bottles of white wine are there? I’ve probably gone on way too long, but I love it, it’s absolute blast, it’s a high honour to have friends and family and new people… I was on Porter’s podcast with Dan Ferris, and I mentioned… And I got a whole bunch of single orders of the Merlot. It was really cute because now they’re all like writing back and saying, “Can I get three more bottles?” I’m like, “I am sold out people, I’m sorry.” Yeah, that’s my story. I love it. I don’t have a vision of it being a huge thing. And again, here we are late in a bull market, I’m probably intending to not build inventory and stock like I might.
Meb: I love it. As we wind down, we always ask people, man, you’ve had a gazillion different choices for this question. So, think about it for a second. But we always ask people what’s been their most memorable investment? And so it could be a great trade, it could be a terrible trade that was painful, and you remember. But usually, it’s the first thing that pops in your head, anything come to mind?
Dr. Eifrig: Well, I followed along your voice, I just listened to you, I didn’t let my mind… My best trade, I can tell you that and I can tell you my worst trade. My best trade was right before I went to medical school, I didn’t wanna be bothered with stocks or mutual funds or any of that. So I put a whole bunch of money up…really put up all my money into probably like a 20, 25-year treasury. And, you know, you could buy in, at least at fidelity at the time, you could leverage yourself up pretty good on treasuries. And I think I levered 3 to 1, bought a ton.
And then I just can’t explain medical school to anybody other than to say, it’s really, really difficult your first two years. And essentially, I sold out and then forgot several things. One, I really didn’t have much income. I reported the interest but I forgot that I had made this huge capital gain on this until I got a letter from the IRS reminding me of that fact that I hadn’t reported the capital gain. And it was big, I mean, like, I was like, holy crap.
So that was really fun to have put on this levered long treasury trade and forgotten about it, only to find out the IRS is like, “Excuse me, you didn’t report that.” My worst trade was the second trade I ever made in my life, which is I parlayed my money that I had everything I invested into a solar panel, solar industry stock in Denver, Colorado. The ticker symbol was S-O-L-A, and I put all of my life savings into that because back then, you know, the world is coming to an end, the oil prices were going to the moon, and solar was the future. And I rolled everything into it only to lose everything from my dishwashing baked potato, wine stuff. It was I think my junior year in college, senior year in college. So, yeah, those are my two best and worst.
Meb: Yeah, man. Well, it’s good to learn that lesson when you’re young too. I can’t tell you how many people we’ve talked to, the wealthy, older professional traders that have a similar story. It’s good to learn that lesson early. Doc, it’s been a blast, where can people find more info on you if they wanna track your writing, what you’re up to, what’s going on?
Dr. Eifrig: You can go to retirementmillionaire.com. And that’s my first letter that’s this mix of health and wealth. And from there, you could find out anything else and more about the other letters I have if they are of interest to you. Thanks for having me on. And thanks for letting me pitch my crazy life which is writing for living, waiting for someone to pinch me, and then my wine and all that. I appreciate it, Meb.
Meb: I love it, Doc. Well, we’ll toast a glass of wine next time you come to Los Angeles. Thanks again for joining us.
Dr. Eifrig: All right, thanks, Meb.
Meb: Listeners, you can find show notes mebfaber.com/podcast. We love to hear your feedback, shoot us an email firstname.lastname@example.org. You can always subscribe to the show on iTunes, Breaker, or Stitcher, RadioPublic, anywhere good fine podcasts are sold. Thanks for listening friends and good investing.