The Best CEFs for Rising Interest Rates

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Thank you to our 1,578 Contrarian Income Report subscribers who attended our Q1 webcast last week! We received 114 questions during our one-hour call, plus several dozen more beforehand. Amazing.

Thank you for the thoughtful questions. I’ve read each and every one. Let’s chat about popular closed-end fund (CEF) topics today. (Next week, we’ll circle back with your equity-focused dividend questions.)

Q: Brett, what are your thoughts about Calamos Convertible Funds (such as CCD, CHI and CHY), which are currently yielding about 8%? Thank you.

Convertible bonds are a big beneficiary of Jay Powell’s money printing activity. Convertibles pay regular interest.… Read more

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My friends and I couldn’t have been more excited about our college commencement speaker. Fresh off an electrifying cameo in the 2003 comedy movie Old School, James Carville’s next act was Cornell University.

At 21 years old, we had no idea what Carville actually did for a living. (Answer: Political consultant.) And though he was an engaging and entertaining speaker, I don’t remember a single word the “Ragin’ Cajun” said. Too bad, because he has had some major wisdom to impart.

Ten years earlier, Carville made an observation that is more prescient now than ever. After watching bond investors rebuff President Clinton’s economic stimulus proposals because they demanded a higher interest rate for US Treasuries, Carville coined this gem:

“I used to think that if there was reincarnation, I wanted to come back as a president or the pope or as a .400 baseball hitter.

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The last time we had this Fed setup, these safe 6%+ paying bonds jumped 20% in the year ahead!

The setup? The likelihood that short-term interest rates (as set by the Federal Reserve) will go nowhere over the next 12 months. To see this we’ll turn to the Fed funds futures, which are contracts that reflect real money being bet on the Fed’s upcoming action (or lack thereof). Collectively they comprise the smartest crystal ball available this side of Jay Powell.

Right now, the smart money is giving “no hike” a 75% probability between now and January 2020. And when we add in the bets on a rate cut or two, we’re looking at a 92% chance that rates will either be unchanged or lower this time next year:

Smart Money Bets 75% “No Hike” for 12 Months

This is bullish for – you’ll never guess – floating rate bond funds.… Read more

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The IRS already allows REITs (real estate investment trusts) to avoid paying income taxes if they pay out most of their earnings to shareholders. As a result these firms tend to collect rent checks, pay their bills and send most of the rest of the cash to us as dividends.

But the IRS considers the dividends you and I receive from our REITs “nonqualified” dividends. This means they are taxed at our regular income rate.

Until now, that is. REIT investors will benefit from the tax breaks that “pass through” businesses will receive in the 2018 tax code. Investors will be allowed deduct 20% of their REIT dividend income (per U.S.Read more

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The overheating yield on the 10-Year Treasury note has investors scrambling for interest-rate (and inflation) insurance.

So today I’m going to give you 4 proven strategies—and 9 terrific investments—that will give you just that. Plus we’ll grab massive dividend yields (up to 9.6%!) and upside too.

More on all of this shortly. First, we need to talk about the one move you don’t want to make right now.

The Worst Mistake You Can Make When Rates Climb

When rates rise, folks holding long-duration bonds take a double hit, because their bonds drop in value as newer, higher-yielding ones come on the market—causing them to miss out on a shot at a bigger income stream, too!…
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