The Untapped Power of “Chicago Income Rights”

Yesterday, I sounded so confident when telling you about contract income opportunities, or what I also call “Chicago Income Rights.”

But when I originally got off the plane at Chicago’s Midway airport in late March, I didn’t know what to expect…

I was on the hunt for one of the largest income opportunities I had ever heard of. If the stories I had read were true, “Chicago Income Rights” had led some investors to lock in legally guaranteed profits totaling more than 10 times their initial investment.

Would I figure out how? Or would I go home empty-handed and discouraged?

I was about to find out.

Moments later, my colleague Matt Insley met me at baggage claim, and we snagged a taxi to take us downtown.

First order of business? Go to the Tribune Tower. If you’ve ever been to Chicago, you know that the Tribune Tower is an iconic landmark. Home of the historic Chicago Tribune newspaper, as well as Tribune Media and Tribune Publishing, the building’s architecture is breathtaking.

I was particularly amazed by the masonry, which included historic artifacts inset within the walls of this building. Walking through downtown Chicago, you can actually see rocks from the Taj Mahal, the Palace of Westminster, the Great Pyramid and many, many more.

But Matt and I weren’t there to be tourists. We had our eye set on a much bigger prize…

You see, the Tribune Tower is ground zero for “Chicago Income Rights.”

The research that we uncovered was extensive. And some of it was tedious and technical. But when we finished compiling all the data and crunching the numbers, we noticed something…

We knew that “Chicago Income Rights” were extremely lucrative (it’s reasonable to double, triple or even make more than 10 times your investment using them), but we didn’t know just how accessible they were to individual investors like you.

Typically, lucrative niche investments like “Chicago Income Rights” are the domains of men in suits with special permissions, advanced educations or trading licenses. But not so in this case. Most people — probably you — can take advantage of these “income rights” through a regular brokerage account.

Now, I know that you’ve probably invested in stocks… and maybe you’ve dabbled in buying or selling options. Those strategies have their place. But I want to be clear that these Chicago Income Rights” are neither of those things.

In fact, I bet not one in 100 individual investors knows what these income rights are or how to trade them. But they’re easy… potentially very lucrative… and, best of all, safe, once you learn how.

Today, I show you real-life examples of just how lucrative these “Chicago Income Rights” can be. Doesn’t matter if you’re Warren Buffett or an average Joe.

As I was researching “Chicago Income Rights” opportunities, I was introduced to two investors — each of whom has made huge family fortunes from investing in them.

To protect their privacy, I changed their names. But I wanted to share their stories with you to show just how powerful these “rights” can be for building wealth.

Dave is a Chicago native with white hair and a trim beard. His family immigrated to the U.S. from Poland, just before the Germans invaded. As the father of three, Dave has a soft and friendly side. He’s given generously to several charities that are near and dear to his heart. And Dave is an avid baseball fan.

But in business, Dave is passionate and ruthless, always looking for the best angle to grow his family’s wealth, and committing his hard-earned money only to situations in which he believes he has an overwhelming advantage.

This need for an advantage is what caused Dave to start investing in “Chicago Income Rights” early on in his career. These “rights” are another name for corporate bonds trading at a significant discount. Whenever Dave buys these bonds at a discount, the company who issued the bonds is required to pay him back — with interest.

But it gets even better than that!

Even though Dave buys these bonds at a discount, nothing changes in terms of how much money the company is required to pay. So Dave can spend $5,000 to buy a bond at a 50% discount, and the company he is investing with is legally required to pay him $10,000. (Today, with Dave’s extraordinary wealth, he’s placing much bigger investments. But I wanted to use a smaller example so you could see just how powerful this strategy is even for regular everyday investors.)

Harvey is a bit older than Dave, and was born in New York City instead of Chicago. But he too learned to take advantage of discounted corporate bonds early in his career to build a fortune for his family.

Early in his career, Harvey realized the power of “Chicago Income Rights” and founded his own investment company to take advantage of these opportunities. His first big trade multiplied his money by more than fivefold, netting him and his clients more than $400,000 in profits.

Today, the fund Harvey started is now worth roughly $3.1 billion. Harvey is still listed as the manager, although he’s turned over the day-to-day research responsibilities to his younger protégé. This gives Harvey more time to devote to teaching Yale students more about his investment strategies.

I’m jealous of those students getting to hear Harvey’s stories of how he made fortunes over and over again by investing in “Chicago Income Rights.”

When I heard how much money Dave and Harvey made investing in corporate bonds, I was initially skeptical. Maybe you feel the same way. After all, can you really expect to make so much money without taking on significant risks?

What I found out is that this investment approach is actually very safe, thanks to ironclad legal contracts that require companies to pay investors a lucrative return. In fact, with the corporate bonds I’ll be recommending in Contract Income Alert, the company must pay investors as long as it stays in business.

Only a bankruptcy would allow the company to skirt its obligation (and as you’ll see shortly, even in this circumstance, investors are still likely to make money).

I also found that in many cases, investing in these corporate bonds is actually safer than the way most people trade stocks.

And this safety all ties back to the fact that companies are legally obligated to repay their debts. And since a corporate bond is literally debt held by individual investors, the legal contracts give investors an extra measure of safety that most stock investors can only dream about.

One of the most important questions investors have about bonds is: What happens if a company can’t repay its debt? The answer proves just how safe these investments can be.

Suppose a company manages its debt poorly and doesn’t have enough cash to make an interest payment or pay back its debt on time. That company would ultimately be forced into bankruptcy — which sounds like a scary thing.

Indeed, if you owned shares of that company’s stock, a bankruptcy would probably mean that you get nothing. Your entire investment could easily be wiped out.

But if you own the bonds of this company, even a bankruptcy doesn’t necessarily mean that you lose money. In this event, all of the company’s assets are typically sold and the proceeds are given to the company’s creditors.

So even in the case of bankruptcy, a company’s bondholders go to the front of the line to collect whatever assets the company has. In this scenario, it’s unlikely you’ll receive the full $1,000 per bond that you are owed, but you’ll likely still receive a meaningful amount of cash back.

And since I only recommend bonds trading at a discount to the $1,000 debt amount, it’s likely that even if one of these companies goes bankrupt, my readers will still make money on the trade.

One bond that paid investors more than 10 times their investment was actually from a company that went bankrupt. It’s true!

Even though the company declared bankruptcy, the corporate bond owners were still paid based on the value of the bankrupt company’s assets. They were paid so well, in fact, that some investors made a 12-fold return on their investment.

Now, I don’t expect the companies I recommend to go bankrupt. I have a rigorous research process that I use to identify companies that do have the means to repay their debt. But it’s helpful to know that even in the worst-case scenario, my readers still walk away with money in their pockets.

It’s important to realize that “Chicago Income Rights” aren’t available to only a few select buyers. In fact, investors ranging from individuals with retirement accounts all the way up to hedge fund managers and other professionals have tapped into the power of these high-income securities.

I’m sure you’ve heard of Warren Buffett and the success of his Berkshire Hathaway investment company. But did you know that Buffett himself invests in corporate bonds like the ones that I track in Contract Income Alert?

That’s right, Buffett uses these special opportunities to not only pad his results, but also to minimize the risks from his other more traditional investments. (Remember, corporate bondholders often get paid even if the underlying company goes bankrupt!)

One of my favorite “Chicago Income Rights” investors is a well-known hedge fund manager named Howard Marks. Howard founded Oaktree Capital Management, an investment firm that actively buys corporate bonds at discount prices, locking in profits that are ultimately realized when these companies repay their debts.

Marks has made himself and his clients very rich. Today, Forbes estimates Marks’ net worth to be around $1.92 billion. But you don’t have to be a billionaire like Marks to take advantage of these corporate bonds.

In fact, you can even participate in “Chicago Income Rights” using your 401(k) or IRA account.

Here’s to growing your income!

Zach Scheidt
for The Daily Reckoning

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