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The Ultimate Supplemental Retirement Income Strategy

By Dr. Steve Sjuggerud
Thursday, February 1, 2007

"If you're looking for retirement income, it doesn't get any better than this..." I said in the December issue of my newsletter, True Wealth.

Sure enough, the things have been hot...

In the issue, which came out on November 16, I shared the story of Boardwalk Pipelines (BWP). BWP closed at less than $30 a share that day. Today, as I write, Boardwalk is more than $35 a share... a gain of nearly 20%. In addition, Boardwalk pays a dividend of roughly 5%... a dividend that has increased every quarter of its existence.

Boardwalk was just one example of the type of investment that I recommended. But I was talking about the whole category... I said, "I expect we'll make 12% to 14% a year, if things stay the way they are... But if a few things go the way I expect, we could make a total return over the next three years of 75% or more – all in a safe investment."

Here's the deal... Boardwalk's business is simple. It transports and stores natural gas. Pretty basic. But with the Tax Reform Act of 1986, the U.S. government created a tax loophole for specific businesses that are vital to our economy – for instance, ones, like Boardwalk, that that deliver oil and gas across the country in pipelines.


This is an unfair advantage. To keep their tax-free status, these businesses must pay out all their "available cash" to shareholders. So the dividend payouts are large – and they grow.The government wanted to give these businesses a big incentive to expand our energy infrastructure. So the government made these particular businesses exempt from taxes.

The world is catching on... These have been one of the hottest asset classes of 2007. Take a look at a few of these tax-free businesses, and their year-to-date gains:

Symbol

Stock

Market Cap

Div %

YTD gain

PAA

Plains All Amer.

4.355B

5.34

5.0%

EEP

Enbridge Energy Ptnrs.

4.059B

7.00

6.5%

KMR

Kinder Morgan Mgt.

3.012B

6.62

7.9%

MMP

Magellan Midstream

2.752B

4.32

7.4%

CPNO

Copano Energy

1.157B

4.47

6.5%

The one downside to these is you have to do some extra tax filing for each one you buy. But I found a way around this...

If you buy a fund that holds these stocks instead, then the fund has to handle the tax reporting, not you. So not only do you have less of a tax headache, you get a diversified portfolio of these tax-free investments... all in one purchase.

I crunched the numbers on all these funds and found that – with a conservative assumption of a 3% rise in their values this month – we may be able to buy one of these funds at a discount to the value of the stocks it holds. Here's the deal...

Generally, these funds report their "net asset values" only once a month. But they trade every day, just like a stock. Today (or tomorrow), these funds will report their net asset values for the month of January. The above table shows how well some of these stocks have performed in January.

The fund below holds all those stocks above. So with a conservative guess of a 3% rise in the net asset value over the last month, this fund should turn out to be trading at a discount when the numbers come out:

Symbol

TYY

Dividend yield

5.7%

NAV on 12/31/06

27.38

NAV Guess

28.20

Current Price

27.45

Assumed Discount

-2.7%

This fund is a way to play this great opportunity... pick up safe, high yields... without the tax hassle... at a discount to the value of the stocks...

To track it, go to http://www.tortoiseadvisors.com/tyy.cfm and then click on "NAV History" on the right to see the new January number when it comes out.

For the full story on these tax-free investments, including the specific play I've recommended for my subscribers, please see the December 2006 issue ofTrue Wealth... this is easily one of the best opportunities for safe income this year.

Good investing,

Steve





Market Notes


THE QUIET BULL MARKET IN MINING STOCKS: PART TWO

As we saw in yesterday's Market Notes, you don't need soaring metals prices to make a killing in the miners that produce base metals, like copper, tin, and zinc. The same goes for precious metals.

Take Silver Standard Resources (SSRI), for example. Controlling the largest (and growing) silver resource of any publicly traded silver company, SSRI is another huge winner for readers of Matt Badiali's S&A Gold Report.

Although the price of silver remained essentially unchanged for the past 10 months, SSRI stock is soaring right now... and has gained 79% since Matt's recommendation last year. With gold at $650 and silver at $13, many mining firms are earning terrific margins... and their rising stock prices reflect the situation.



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