Update on Selected Income Investments

2005-04-30T18:35:00.000-07:00

New Tax Free Income Recommendations

Income Planners have made massive profits from double tax free bond funds over the past five years. Now, for the first time, we are issuing a SELL recommendation on leveraged funds such as EVM, IIC, MUC, NKL, NKX and other leveraged funds.

Some traders are even selling these funds SHORT, although we do NOT recommend doing so.

Instead, we are recommending NON-leveraged funds such as NCA, which invests in high-quality investment grade bonds, is tax-free for the residents of 8 states (otherwise you will owe only state taxes) and pays 4.7% tax-free. In addition to this handsome yield--which beats fixed annuities, many equity-indexed annuities and CDs--we think you may also enjoy price appreciation!

NCA has a tax-equivalent yield of about 7.2% for many investors. HOW MANY ANNUITIES OR CDs DO YOU KNOW OF THAT CAN MATCH A 7.2% TAX-EQUIVALENT YIELD AND PROVIDE LIQUIDITY WITH NO SURRENDER CHARGES?

Another outstanding tax-free fund to consider is ICS, which has a high tax-free yield and contains a large percentage of AAA-rated insured bonds. The yield for ICS and NCA is tax free for residents of California, Florida, Nevada, Texas and any other states with no income taxes. Otherwise, only a small state tax will be owed.

ICS and NCA far exceed the after-tax yields of CDs or money market accounts and they are totally liquid. There are no early withdrawal penalties. You can get to your money any day the stock market is open.

Charles Schwab, Ameritrade, ETrade or any other brokerage firm account enables you to buy tax-free funds such as ICS and NCA at extremely low commission rates. For as little as a $10 commission, you could buy $100,000 or even $1 million of NCA or ICS.

Another great benefit of many of these closed-end bond funds is that they sell for below the value of their extremely high-quality bonds. This is something that nomutual fund or annuity can say.

Many very successful Income Planners start their clients out in liquid tax-free bond funds such as NCA or ICS. Later, when their clients want no volatility and absolute safety of principal, they move them to equity indexed annuities or variable annuities. A number of Income Planners have built multi-million dollar practices by doing so. Most importantly, they have helped their clients reach their financial goals.

Income Planners are attracting many high net worth clients and multi-millionaires with NCA and other similar offerings such as ICS. Many of these wealthy investors will later buy annuities from you and will bring you much additional money to manage. In addition, they are providing Income Planners with a great number of referrals.

Sophisticated investors are placing their short term cash into funds such as ICS and NCA. They are earning an after-tax yield that is 100% more than many money market accounts and CDs!

New Income Recommendation

A new income recommendation is the Lehman 20 Year Treasury Bond Fund. The symbol is TLT. There is a worldwide hunger for these long-term totally safe bonds. These Treasury bonds are based by the full faith and credit of the United States government.

Major corporations buy billions of dollars worth of these bonds to fund pension plans. For example, if you need to pay your retirees $50 million in benefits in 20 years, you can figure out exactly how many of these bonds you need to buy to TOTALLY FUND that obligation.

This powerful concept is called "pension immunization" and it can prevent the serious problem of pension underfunding.

These long term bonds are also a favorite of governments around the world. The 20 year US Treasury Bond is the new gold standard in income investments.

TLT currently pays more than 4.50% interest each year. Plus, these bonds may have appreciation potential (there are no guarantees).

It can be a hassle to buy individual Treasury bonds. Now, you have a convenient and easy way to buy just the amount of Treasury bonds you want. The yield is higher than CDs and most fixed annuities and the TLT is totally liquid.

You can buy and sell TLT any day the market is open.

TLT is highly liquid. The average trading volume is more than 1.38 million shares!

For ultra-conservative quality minded investors, we recommend buying TLT. For sophisticated advisors who would like to get an even higher yield, we recommend buying TLT and using the options strategy.

The goal of all of our options strategies is to lower risk and generate even more income. All by itself, TLT is a wonderful investment at these low prices.

Many people were recommending Treasury bonds when they were at 97 earlier this year. We did not recommend them then. Now that TLT has dropped so much in price, we think it makes an outstanding investment--especially since it is backed by the full faith and credit of the US government and yields 4.5%, totally free of state tax!

Countries such as China, Japan and others buy tens of billiions of dollars in US Treasuries. They do not buy annuities. THIS OFFERS SIGNIFICANT PRICE SUPPORT FOR US TREASURIES. Especially now that the price has dropped, this makes TLT a compelling investment.

With options, TLT can be made even better. With conservative covered calls you can actually earn 10% or more per year from a US Treasury Bond obligation. This is a strategy you will only learn about in the Certified Income Planners Program. Not even China or Japan know how to earn 10% per year with US Treasuries.

Time to Move Out of Leveraged Bond Funds

Update: October, 2005

Leveraged tax-free bond funds have been wonderful investments for Income Investors and Income Planners. Over the past year, some of these funds, invested largely in AAA-rated municipal bonds, have returned more than 15%. They have significantly out-performed CDs, annuities and most bond funds.

Of that 15% or so yield, in some cases, more than 1/3 was tax-free. The remaining 2/3 was taxed at only the 15% rate if you held it for one year. All in all, these were outstanding income investments.

It is now time to sell leveraged tax-free bond funds. Due to rising short-term interest rates, these funds could lose 10% or even more of their value. In addition, the yields could fall.

If you own any funds such as EVM, IIC, NKX, NKL or other similar funds, you should probably sell them now. You have made a huge profit and have had to pay only minimal taxes.

Instead, for this part of your diversified portfolio, consider non-leveraged municipal bond funds.

We believe these non-leveraged bond funds will outperform fixed annuities and CDs over the next year.

We recommend closed end bond funds that are exchange-traded. You can buy or sell these funds any day the market is open.

The one-year return on some of these funds has been over 10%. These non-leveraged funds are MUCH SAFER than leveraged funds in rising interest rate environment.

In addition to containing very high-quality bonds and paying a high yield (that beats certificates of deposit and most annuities in addition to offering more liquidity), many of these funds are selling at a more than 4% DISCOUNT to net asset value.

This discount is something that no muni bond mutual fund can offer. Only closed end bond funds enable you to buy high-quality tax-free bonds at a discount.

Update on Frontline (FRO)

Update in July: Frontline, a NYSE stock, has been an extremely profitable investment for Certified Income Planners. With the huge dividends (more than 20%), many financial advisors and their clients have made more than 40% this year on the stock.

UPDATE October, 2005. A few months ago, we issued a SELL on FRO. Frontline has fallen from $45 to less than $40. Our call was accurate.

At $40 a share or below, FRO may be a BUY. One trade that has been profitable for income investors every single month this year is to buy Frontline and is then to immediately sell an in-the money call option. It has been possible to make up to 5% per month by doing so.

While this trade has been profitable every single month in 2005, there is no guarantee that it will continue to make money every month.

In addition to offering outstanding upside profit potential, this trade offers downside protection. It has been a very profitable money maker for income investors.

So far, 100% of our recommendations on Frontline have been profitable. We cannot guarantee that in the future, but we will do our absolute best to help you make money with Frontline and all of your other income investments.

This stock, FRO, the largest oil tanker company in the world, has performed very well over the past 1 1/2 years. Last year, between earnings and dividends, it was up more than 100%. FRO paid dividends of more than 20% in 2004. The price appreciated more than 80%.

At the time, the dividend alone was the equivalent of about ten years of bank interest on 1 year CDs. Income investors have loved Frontline.

This year, the price is down, giving FRO a P/E ratio of about 4 (that is not a misprint).

The reason some investors took positions in June was to capture the June dividend. It was $3.10. There were also large cash dividends in March and September.

Needless to say, we CANNOT promise super-high returns in the future to Certified Income Planners. However, this should give you some idea of the uniqueness and depth of our analysis.

NEW INFORMATION ON FRONTLINE

The largest shareholder of Frontline (FRO) , a billionaire, owns more than 40% of the stock. Reported to be the richest man in Norway, he appears to support the payment of very high dividends. As long as the company is making enough money, it seems to make sense to pay these big dividends.

All investments have risk. Do your own research. No investment is right for everyone.

If some of your clients have wanted exposure to the energy sector and a way to simultaneously generate income, FRO may make sense for a portion of their portfolio.

Frontline is about a $2.5 billion company and is the largest company in its line of business, the shipment of oil, which is an essential business the world needs in order to function. TK is of similar size and ships more than oil.

Needless to say, the investments and/or investment strategies discussed here are not investment advice to any individual. All investments have risk and nothing is guaranteed.

You will not find this kind of Income Investment information, including coverage of great annuity strategies, anywhere else.

We wish you and all income investors great success.

Summary: As of mid-October, 2005, consider buying ICS and NCA for high TAX-FREE INCOME and complete liquidity.

Consider offering only the highest quality EIAs and VAs. Only offer the top 5% of all EIAs. Use an honest, truthful and accurate software program such as that offered by Mitch Maynard before recommending or selling any EIA.

Avoid legal problems with annuities, which could be deadly for your career. You have been selling annuities based on "safety" and "protection." Protect your career.

If you or your clients want more income and can handle some volatility, consider Frontline, FRO. Frontline has one of the best dividend histories of any stock for 2004 and 2005.

If your clients want absolute safety, totally backed by the US government, consider buying TLT. US government Treasuries are the gold standard. TLT is the best way to buy them. TLT is one of the most liquid income securities in the world and pays a significant solid dividend.

Disclosures and Warnings

2005-04-30T12:00:00.000-07:00

All investing involves risk. Nothing on this site is a recommendation to any individual investor. Always conduct your own due diligence and do your own research. Consult with your investment advisor, legal advisor and/or tax advisor before making investment decisions.

Always check the timeliness of an investment before you make an investment decision.

We believe in income choice. No income investment is right for everyone.

Positions and recommendations can change at any time without warning or notice. The author may hold positions, either long or short, in securities, options, mutual funds, exchange traded funds (ETFs) or indexes mentioned on this site. Dr. Moine may also hold positions, either long or short, in investments not mentioned on this site.

Dr. Moine is not responsible for the investment decisions made by any individual or any financial advisor.

Information shared on this site is believed to be from accurate and reliable sources. However, this information cannot be guaranteed.

Income Choice

Update on Selected Income Investments

Disclosures and Warnings