by Rick Ackerman
RickAckerman.com
Investors who feared muni-bond defaults when the pandemic first hit created unusual opportunity for those willing to buck the tide. One of the winners was Doug Behnfield, a Boulder-based financial adviser at Morgan Stanley whose ideas have been featured here many times over the years. Doug is not only one of the savviest investors I know, he is one of the savviest guys. Now, he is quite bullish on municipal bonds for reasons spelled out in a report that went out to clients in April. He also thinks Fed Chairman Jerome Powell’s confidence that the inflationary effects of stimulus and fiscal spending will be “transitory” is well founded and that this has already been discounted by stocks and bonds.
Doug and his clients enjoyed an exceptional year in munis because he started buying them when others were dumping them. Prices subsequently recovered and then some, yielding excellent gains for anyone who’d faded the panic. Doug is a canny contrarian who shares your editor’s view that deflation poses a greater threat to the U.S. economy than inflation. More immediately, he expects pent-up demand to produce a subdued recovery rather than boom times. It will take years for growth to recover, he says, in part because consumers have learned beneficial lessons of frugality.