Bill Savickas has a problem. “I’m taking home significantly less money on the same amount of sales as I had a year ago,” he said.
He owns Yankee Produce, a small wholesale produce business out of Tampa, Florida.
The business landscape changed dramatically over the past year. And it’s impacting Bill’s business.
Diesel costs are up 30 cents year-over-year. That makes Bill’s transportation more expensive.
And the labor market is tightening, meaning he must pay more to find good workers.
But those aren’t the only costs going up…
According to the U.S. Labor Department, the Producer Price Index rose 2.8% in February 2018 from the year before. The index reflects wholesale prices—those paid by companies like Bill’s.
So far, Bill hasn’t passed these costs on to his customers. He said, “No one wants to be the first in the industry to raise rates and then look like the bad guy.”
If that wasn’t bad enough, Bill also faces higher borrowing costs.
Since the beginning of 2017, the Fed raised interest rates four times, totaling 1%.
While it doesn’t seem like much, the interest rate on Bill’s business line of credit has gone up the same amount.
And it’s costing him thousands of dollars per month.
Bill is facing higher inflation and higher interest rates. We call this combination “Income Extermination.”
Today, I’ll tell you what Income Extermination means for you. And I’ll show you one of our favorite strategies to protect yourself and profit in the meantime.
This “Safe” Investment Is at Risk
Income Extermination is the combination of rising rates and rising inflation (see Teeka Tiwari’s interview in the March 5 Daily for more).
Anyone holding bonds during this Income Extermination will get crushed.
You see, most people think bonds are 100% safe.
But bond prices move inversely to yields. So when yields start going up, bond prices go down.
And rates are rising. The Fed has signaled that it will raise rates another two or three times this year.
Retirees are in the greatest danger. According to the U.S. Census Bureau, those age 65 and older own the highest percentage of U.S. government and corporate debt.
If you own bonds and don’t prepare for this event, you could lose a substantial portion of your retirement savings.
So how do you protect yourself from Income Extermination and profit at the same time?
How We Escape Income Extermination
Over the last three years in The Palm Beach Letter, we’ve quietly side-stepped the ticking time bomb of Income Extermination.
Instead of buying bonds, we’ve been scooping up fundamentally sound, cheap stocks with large yields.
And we’ve been doing that with closed-end funds (CEFs).
CEFs are an investment structure with shares traded on the open market.
They’re similar to exchange-traded funds (ETFs). But there’s one main difference: CEFs do not issue shares daily. That means CEFs can trade on the market at prices different than the value of their assets, called the net asset value (NAV).
When a CEF trades for less than its NAV, you can buy it at a discount. This means you could buy $1 worth of assets for just 90 cents.
Therein lies our opportunity.
Since adding CEFs to our portfolio in 2016, we’ve averaged realized gains of 18.4%, which beats the S&P 500 during that period. Our average yields are more than 300% greater than the S&P 500’s.
But with over 500 CEFs on the market, how do you pick the right one?
How to Pick a Good Closed-End Fund
There’s no shortage of CEFs to choose from. They cover stocks and bonds, U.S. and international equities, and most industries and sectors.
With Income Extermination upon us, we’re avoiding bond CEFs and CEFs that are highly leveraged.
Next, we have a simple formula for ferreting out the best CEFs:
We only buy CEFs that trade at a discount.
We only buy CEFs that offer above-average yields.
We only buy CEFs with below-average fees.
If you’re looking to avoid Income Extermination and boost your retirement, consider adding closed-end funds to your portfolio today.
Analyst, The Palm Beach Letter
P.S. In the April issue of The Palm Beach Letter, editor Teeka Tiwari has uncovered another closed-end fund that trades at a discount and offers a 7%-plus yield. The fund also covers a sector on the verge of a boom. Subscribers can access the issue here.
From Stephanie B.: Teeka fan mail… I’m 67 and started buying a little bitcoin last year when it was under $1,000. Then I bought a bit more all the way up to the nosebleed range… And finally, last week, I was able to get my fourth full bitcoin—all on Teeka’s good advice. I now have four crypto accounts. I never thought I’d be able to do that. I’m all set for the boom to occur.
Thanks for being there and doing what you’re doing.
From Mark B.: My question is about the effect of a new family of crypto exchange-traded funds (ETFs). I’ve read that some ETFs hold only futures contracts for the securities/commodities they purport to represent and mimic in the marketplace. Will this be the real-world situation for crypto ETFs? If so, how will this generate increased demand for cryptos?
Nick’s Reply: Thanks for the feedback, Mark. I interviewed Teeka about crypto ETFs earlier this year (“Teeka Tiwari: The Biggest Event in Bitcoin’s History Will Happen in 2018”). He says crypto ETFs will drive demand because they’ll be a simple way for investors to gain exposure to the entire crypto market. As Teeka told me, “Long story short… everyone is going to try to squeeze into this market… And the price will skyrocket once it becomes easy to purchase.”
You can read the full interview right here…
If you have followed our advice to life-changing gains and would like to share your story—or if you just have a question about wealth-building in general—send us an email right here…
If you missed out on the first wave of marijuana investing… when some of the best pot stocks were gaining 3,986%, 17,300%, 69,000%… even 299,000% and 399,000%…
If you missed your chance to turn a small stake into over $1 million with marijuana stocks…
The 2018 marijuana boom is expected to be eight times bigger than the first. Check out Teeka’s message for more…