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The Ultimate Supplemental Retirement Income Strategy
By Dr. Steve Sjuggerud
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.

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.

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 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 of True Wealth... this is easily one of the best opportunities for safe income this year.

Good investing,

Steve

Editor's note: Steve Sjuggerud is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.

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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.

Worldwide, there are now more than 9,000 hedge funds, which are loosely regulated pools of capital that enable managers to participate substantially in investment returns. So many hedge funds have crowded into the markets that the industry is struggling to generate standout profits.

The average hedge fund gained 13 percent in 2006, according to Hedge Fund Research. Investors would have made more money buying a mutual fund that tracks the S&P 500, which returned 15.8 percent.

-Bloomberg

Americans are well on their way to becoming the top tipplers in the world when it comes to wine, and by 2010 look set to topple the French and Italians and make the U.S. the world's largest wine market, a study predicted Tuesday.

The fastest rate of growth in the next few years is likely to come from China, which is expected to see consumption jump by 36 per cent between 2005 and 2010, according to a study released at VinExpo conducted by the International Wine and Spirits Record.

-Globe and Mail

Here's to alcohol: the cause of, and solution to, all of life's problems.

-Homer Simpson

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