The 10-Year Treasury Yield May Be up to 1.69%, but That's Likely a Temporary Scenario

Here's how to own the road to permanent financial security

Let's face it. This is not your father's fixed-income market.

Despite a recent rise in the 10-year treasury yield, yields have been down for the most part, and those in control of such things want to keep them that way for as long as possible.

The economies of the world are still trying to gain traction, and while the United States is doing better than much of the world, it isn't exactly shooting the lights out.

There are also signs that global weakness and the ongoing trade disputes could slow things down even further.

That's not an environment that'll inspire interest rate hikes.

So we need to continue to find high-yielding opportunities outside of the mainstream, and I have just the one...

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A Whole New Ballgame

When the Fed tried to normalize interest rates somewhat last year, the markets reacted like a toddler who wants to eat cookies before dinner.

We saw a blistering fast sell-off, and the Fed capitulated almost immediately.

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Now they've lowered rates twice so far in 2019, and most observers think they'll do so again before the year's over.

Now, when your dad wanted to invest money for income and preserve principal, he would've just called the local bank to buy a Certificate of Deposit.

When I first started in the markets as a stockbroker, our biggest competition wasn't other brokerages - it was the banks.

Back then, CD rates were as high as 10%, and even as recently as 2007, dad could have gotten as much as 7% on a longer-term CD.

Today, a one-year CD will earn you around 2.5%.

Even if you stretch out the risk curve, it doesn't get much better. Junk bonds are currently yielding somewhere around 6%, while higher-quality corporates pay far less than that right now.

For a while, buying higher-yielding blue-chip stocks was a logical solution, but with the stock market trading at more than 20 times that of earnings, I would suggest that's probably not the best place to look for income right now.

Making the Economy Happen

Right now, the best bet for income is real assets.

I've talked about REITs at length before, and you can bet I'll talk about them more in the future. Why? Simply because income-producing real estate is one of the best choices for income and total return right now, and most people don't have enough of them in their portfolio.

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Today, however, I want to talk about a different type of cash-producing real asset.

You see, infrastructure is the stuff that makes our daily lives possible. It's the pipelines that get oil and gas from the field to the market. It's the roads and highways we use to travel around town. It's the airports and railroads that we use for long-distance travel and shipping products around the country. It's water systems and electrical grids that keep the light on and clean water flowing into our homes.

Without infrastructure, it would be like living back during the Stone Age.

The thing is, infrastructure can be expensive to build, but once it's in place, it's a stable source of high cash flow.

Private equity firms have figured this out. Most of the larger firms have funds dedicated to buying existing infrastructure projects and facilities and collecting those steady streams of cash for long periods of time.

The majority of those big funds have no interest in individual investors, so we can't buy into infrastructure in that fashion. What we can do is turn to one of my favorite income hunting grounds - the closed-end fund market place.

Best of all, because of the way behavioral psychology impacts closed-end funds, we can usually buy into infrastructure projects at a discount to the actual value of the projects and companies that the fund owns.

Helping to Connect the World

Macquarie Global Infrastructure Total Return Fund Inc. (NYSE: MGU) offers us precisely that opportunity right now.

The fund is managed by Macquarie Capital Investment Management LLC, an Australian company that's one of the largest in the world and has extensive experience in infrastructure investing.

The company has been in business since 1969, so it's experienced a few economic ups and downs, and it knows how to navigate tricky markets. Plus, it's a global fund, so we not only have exposure to the United States, but also to the whole world in our search for income from stable infrastructure assets.

This fund owns pipelines all over the world in addition to water plants and electricity generation and distribution companies. When we buy this fund, we'll own airports, railroads, and toll roads around the globe. We'll also own renewable energy projects from around the world.

With all of these already in place, the big money to build them has already been spent, so we can just sit back and collect the cash flows for a very long time.

The fund is yielding 7.04% at the current price.

Best of all, the shares trade at a discount of about 10% to the actual net asset value of the assets owned by the fund, so we're buying all these high-quality income-producing assets all over the globe at bargain prices.

Finding income-producing investments that pay enough to be worthwhile can be a daunting task. However, if we look into the market for deeply discounted closed-end funds that invest in assets that the mainstream investment community doesn't ever consider, we can build a portfolio that meets our cash flow needs and offers high total return potential.

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About the Author

Tim Melvin is an unlikely investment expert by any measure. Raised in the "projects" of Baltimore by a single mother, he never attended college and started out as a door-to-door vacuum salesman. But he knew the real money was in the stock market, so he set sights on investing - and by sheer force of determination, he eventually became a financial advisor to millionaires. Today, after 30 years of managing money for some of the wealthiest people in the world, he draws on his experience to help investors find "unreasonably good" bargain stocks, multiply profits, and build their nest eggs. Tim tirelessly works to find overlooked "hidden gems" in the stock market, drawing on the research of legendary investors like Benjamin Graham, Walter Schloss, and Marty Whitman. He has written and lectured extensively on the markets, with work appearing on Benzinga, Real Money, Daily Speculations, and more. He has published several books in the "Little Book of" Investment Series and a "Junior Chamber Course" geared towards young adults that teaches Graham's principles and techniques to a new generation of investors. Today, he serves as the Special Situations Strategist at Money Morning and the editor of Peak Yield Investor.

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