With spring in full swing, my wife and I got outside a couple of weeks ago to do some

work around the house. One of those jobs was to fill our backyard hot tub with fresh water.

My wife used a hose connected to the water spigot in front of the house, so when she was ready to start filling, she called out to me out front to open the spigot. I did, and then went off to tend to some other things.

A few minutes passed, and she summoned me back outside. “There’s barely any water coming out of the hose, can you check that it’s on all the way?” she asked. That surprised me — I had turned it as far as it would go, and could hear and feel the water gushing from the spigot into the hose. So, after double-checking at the front, I realized what was going on — if water was going into the hose, but not coming out the other end, somewhere between the front and back of the house must be getting awfully wet.

Sure enough, as I investigated I found some huge ruptures in the hose. A small lake had quickly formed in the side yard. Just like that, the mystery was solved.

Well, just like the water in the hose, much of the money in the global financial system isn’t going where it is supposed to go right now — meaning there must be another place where money is spewing out.

The good news? I found one of those places. In this issue, I’ll highlight a high-yielding financial

company that is perfectly positioned to benefit from the torrent of money flooding the financial system. Although business is already booming for this company, the stock is still reasonably valued and it’s not too late to benefit.

But first, let’s take a closer look at the current situation, to see why this pick is such a great addition to the High Income Factor portfolios.

Easy MoneyThe Fed, and I mean the

Fed alone, is in charge of this recovery. It’s not supposed to be this way. Ideally, sound fundamental and fiscal reforms (like tax reform, deregulation, entitlement reform, etc.) are implemented by Congress

and the president. But this political class is AWOL — the two major parties are in a constant state of warfare. Having been abandoned, the central bank is forced to do all the heavy lifting.

The problem is that the Federal Reserve is designed and empowered more to tweak things, not rehabilitate the economy. There are limited tools at its disposal (see the May 2012 issue for an in-depth discussion of the Fed’s function). Basically, all it can do is increase money supply and lower the cost of borrowing. It’s similar to assigning someone to do a very complicated job, like tuning up a Lamborghini with nothing but a hammer, a screwdriver, and a pair of pliers.

In an attempt to accomplish the job anyway, the Fed is overusing the tools it does have. The

TheHigh Income Factor

Unlocking Powerful Strategies to Achieve Superior Returns

Tom Hutchinson, Editor Vol. 5, No. 6 / June 2015

A Publication of Newsmax Finance

Need an Incredible Income-Producing Alternative? Follow the Money!

“The Federal Reserve is designed

more to tweak things, not rehabilitate the

economy on its own.”

®

2 TheHighIncomeFactor.com June 2015

ability to pump money into the banking system by purchasing bonds from banks has become a massive and unprecedented six-year barrage (see Chart 1), with about $4.5 trillion printed since the recession. Via the ability to set benchmark interest rates, the Fed has kept rates near zero for longer than ever before in history.

The result has been limited success with a whole lot of excess. Most of this dough isn’t making it to the Main Street economy, its intended destination. Almost $2 trillion is still sitting in excess bank reserves. Much of it has found its way into the stock market. The S&P 500 is up about 200 percent since the recession. But this has been the weakest recovery in the post-World War II era.

Unfortunately, our dysfunctional and lopsided approach toward economic revitalization is being emulated by much of the rest of the world. Massive central bank stimulus is now a global phenomenon. Central banks in Europe and Japan greenlit bond-buying programs similar to our Fed’s quantitative easing. Countries in every corner of the globe are lowering interest rates to near zero. Money is available and cheap all over the world.

The Search for IncomeThe markets are skewed. Bonds are paying

absurdly low yields and they’re risky to boot as interest rates have almost no place to go but higher. You can’t earn any kind of return in cash. The stock

market is really the only game in town. But the bull market is getting long in the tooth and stocks prices are not cheap.

Even Fed Chair Janet Yellen says so. In early May, Yellen told International Monetary Fund Managing Director Christine Lagarde that “equity valuations at this point are generally quite high.” She sees the money flow going to the wrong place. Either she wants to talk down stocks in the hope that more money will flow into the Main Street economy, or she is worried that prices will continue to go higher and a bubble will form.

But regardless of her motivations, many investors are seeing the same thing. Stocks, although not unreasonably so in my opinion, are getting somewhat pricey overall. The market is flat for the year (as of this writing) because money is now flowing elsewhere.

Money has been going to foreign stocks and markets. Mutual fund money flows have been heavily skewed toward global markets, especially Europe, at least in the early part of the year. As a result, markets in Europe and China have done gangbusters so far in 2015. The Vanguard FTSE Europe ETF (VGK) has returned about 8.5 percent year to date (after a recent sell-off) and the SPDR S&P China ETF (GXC) is up about 20 percent.

Yet, there is another place where investors are flocking as well.

What’s the Alternative?Individuals aren’t the only ones hard

pressed to find a decent return without taking on too much risk. Institutional investors are under the gun to perform.

People who manage pension funds for cities, states, and unions desperately need to generate returns, oftentimes to make up for funding shortfalls. Those responsible for investing large endowment funds for universities and charities must diversify. Sovereign wealth funds, smaller institutions, and wealthy individuals are all looking beyond the standard choices of low-paying and treacherous bonds, no-return cash, and overstretched stocks.

There is an answer in the fast-growing world of alternative investments.

Char

t 1

M1 Money Supply

M1, which represents the most liquid components of the country’s money supply, skyrocketed after the 2008 financial crisis, when the Federal Reserve took unprecedented steps to revive the economy via quantitative easing. That money influx is still sloshing around the financial system today.

Billi

ons

of D

olla

rs

1970 1980 1990 2000 2010

SOURCE: Federal Reserve

3,200

2,800

2,400

2,000

1,600

1,200

800

400

0

June 2015 NewsmaxFinance.com 3

Alternative investments are essentially anything outside the realm of stocks, bonds, and cash. Common alternative investments include private equity, hedge funds, real estate, and commodities. Not only can one find solid returns in these areas, but these kinds of investments generally have low correlations to the stock and bond market, making them ideal for spreading risk.

From 2005 through 2013, global assets in these investments grew at a compound annual growth rate (CAGR) of 10.7 percent, nearly twice the rate of growth in traditional investments, according to alternative asset tracker HFR. Now, alternatives comprise 30 percent of all revenues generated in the asset management industry.

Almost a trillion dollars flowed into these assets just between 2011 and 2013. Solid growth should continue because of continuing liquidity and increasingly less attractive traditional options. For example, hedge funds, which invest in a wide array of assets in pursuit of a higher return, are experiencing historic inflows. The last quarter of 2014 marked the seventh consecutive quarter of record net-inflow growth.

Managing alternative investments is also more profitable, as these assets account for only about 12 percent of assets in the asset management industry but generate about 30 percent of the revenue.

Corporations ReignAlthough this recovery has been subpar for

Main Street, American corporations are doing just fine. In general, large companies did a very good job of cutting costs and getting lean and mean. Dirt-cheap interest rates reduced their cost of borrowing. In the past few years, profits reached

all-time record levels.Profits are also near record highs as a

percentage of GDP, meaning they represent a larger portion of the overall economy (see Chart 2). At the same time, business spending and investment — plant, equipment, and new hires — is below the level of past recoveries. So where are these profits?

For one thing, U.S. corporations are hoarding a near record amount of cash. According to Factset, quarterly cash and short-term securities (excluding financials) was around $1.4 trillion to $1.5 trillion as recently as late last year. That’s more than double the level in the years preceding the financial crisis. It’s reasonable to assume that after the financial crisis companies want an added level of security.

Then there are share buybacks and dividends, both of which have been on the rise. The amount paid out in dividends has increased substantially in the past six years. Dividends for S&P 500 companies are growing at an annual clip of over 12 percent according to Standard & Poor’s, which is more than twice the average growth rate over the past 25 years (see Chart 3).

As well, the amount of money going into share buybacks has more than doubled since 2010 and

About Tom HutchinsonI’ve worked in finance my entire career, from the back office of a Wall Street firm to the floor of the New York Mercantile Exchange learning how markets work. Eventually, I became a financial adviser where I met with thousands of investors and managed the portfolios of hundreds over the course of about 15 years. I left my career as a financial adviser, writing for The Motley Fool as well as StreetAuthority LLC, researching companies, industries, and markets. In The High Income Factor, I can bring you the full benefit of my years of investing experience.

Char

t 2

Corporate Profits: A Bigger Piece of the Pie

This ratio captures how rising corporate profits are representing a larger chunk of the U.S. Gross Domestic Product.

Corp. Profits after tax (billions of $)/U.S. GDP (billions of $)

1950 1960 1970 1980 1990 2000 2010

SOURCE: Federal Reserve Economic Data

0.11

0.10

0.09

0.08

0.07

0.06

0.05

0.04

0.03

4 TheHighIncomeFactor.com June 2015

roughly $2 trillion in share buybacks have been announced since 2009. Recently, corporations have rediscovered another use for all that money — buying other companies.

Mergers and AcquisitionsThe idea behind mergers and acquisitions is

synergy. It’s a two-plus-two-equals-five situation, where the whole is greater than the sum of the parts. Companies can gain efficiencies, cost savings, and get into another business line in one fell swoop.

Also, while the terms “merger” and “acquisition” are usually combined into one type of activity, they’re different. An acquisition is one company buying, or gobbling up, another. A merger is the combining of two equal partners into one entity.

M&A activity had been conspicuously weak during this recovery. In fact, M&A deals as a percentage of overall market capitalization in the past 12 months have been only a little better than half of the average level of the past five bull markets, according to data compiled by Bloomberg and Credit Suisse.

But things are picking up fast, with $558 billion in announced deals this past March and April, according to Bloomberg — the best two-month volume in 12 years. It is also the first time the two-month number exceeded $400 billion since before the recession.

Given the fact that corporations are

still loaded and there appears to be some pent-up demand, the higher level of activity could last for a while (see Chart 4).

Who Benefits?The primary beneficiaries of increased

M&A activity, aside from potentially the companies that engage in them, are large financial institutions that provide merger advisory services and stock underwriting.

Some of the most notable of these have been in the news lately. Several are the largest U.S. banks, which reported higher revenues and profits in the first quarter than they have in many years. Big profits from banks that still maintain large trading desks benefited

from the higher level of market volatility in the quarter. They also benefited from the increase in M&A activity. Morgan Stanley (MS) reported the highest quarterly profit since 2007 and its second-best quarter ever in terms of revenue. Goldman Sachs (GS) reported an increase of 40 percent in profits from last year’s first quarter. JPMorgan Chase (JPM) also had a strong quarter, with profits rising 12 percent year over year.

The financial crisis hammered these banks during and after the financial crisis. Several problems hit them, such as a boatload of new regulations, low interest rates (and smaller spreads on loans), a high level of write-downs of bad loans from the crisis, and increased capital requirements.

These days, several factors are turning around for the big banks, like higher loan demand, a

Char

t 3

Corporate Dividends and Share Buybacks 2009–2013

Dividends are growing at more than 12 percent a year, according to Standard & Poor’s, and the amount of money going into share buybacks has more than doubled since 2010.

Q1 ’09 Q1 ’10 Q1 ’11 Q1 ’12 Q1 ’13

SOURCE: Source: S&P

$900

$800

$700

$600

$500

$400

$300

$200

$100

$-

Dividends ($ bill.)Buybacks ($ bill.)

Char

t 4

Global M&A Volume and Deal Value

Mergers and acquisitions activity has been rising in terms of dollar value, and pent-up demand may send the numbers higher in 2015 and beyond.

Billi

ons

of D

olla

rs

Deals

2010 2011 2012 2013 2014 2015

SOURCE: Dealogic

1,000

800

600

400

200

0

12,500

10,000

7,500

5,000

2,500

0

Less than 100m 100m to 1bn 1bn to 10bn Over 10bn Deals

June 2015 NewsmaxFinance.com 5

stabilizing legal and regulatory environment, fewer write-downs, and a pickup in client activity. Recent M&A activity also has been a strong positive.

In the first quarter, merger advisory fees increased 42 percent at JPMorgan, 41 percent at Goldman Sachs, and 40 percent at Morgan Stanley. The next quarter looks strong as well. But these banks face other challenges among their various business lines, with competitors and regulators making life difficult in many respects.

Meanwhile, the company I’m about to present should benefit more, not only from the higher level of M&A activity, but also from the increased appetite for alternative investments.

A High Yielder in the Sweet SpotYou’re familiar, of course, with the

aforementioned big banks. But some firms are off the radar for most people. For example, legendary venture capital firm Carlyle caters to institutions and the ultrawealthy like Saudi royalty, ex-presidents, and billionaires.

The company I’m about to highlight is similar. Unless you’re a multimillionaire or you represent a large institution, you might not have heard of it. But this company is positioned exactly where the “hose” in this low interest rate landscape is leaking a lot of money.

The Blackstone Group L.P. (BX) is one of the largest alternative asset managers in the world. It serves many of the world’s top institutional clients managing $310 billion of assets in pension funds, academic, and charitable organizations, and others.

Its diverse range of investments includes private equity, hedge funds, real estate, and credit investments across the globe. Blackstone also has a large financial advisory business that handles M&A services, fund placement, and other strategic advisory services. The company was established in 1985 and went public in 2007.

In short, the company is a powerhouse in a variety of investments outside the realm of stocks and bonds. This is huge because there are a ton of pension funds and institutions that are desperate to find decent returns in this zero interest rate world, and they can’t put everything in stocks. Many of the world’s top institutions are seeking the investment expertise of Blackstone.

A Blowout First QuarterBX’s profits more than doubled in the first

quarter from a year earlier to $1.01 per share from $0.44. In fact, distributable earnings spiked up 163 percent for the quarter versus last year and 96 percent in the last 12 months as sales of real estate assets and company stakes rolled in. It was the best quarter ever and Blackstone declared its highest distribution ever.

In the quarter, the company raised its total assets under management (AUM) to $310 million. This makes Blackstone the first alternative asset manager ever to surpass $300 million in AUM. Its closest competitor has less than $200 million under management. Blackstone raised $30 million in the first quarter alone. No other competitor has

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pick at a glance

positives• Large pensions and

institutions desperate for return are creating great demand.

• BX sells below market valuation and pays a high yield.

• Business is booming and will likely stay good for at least several quarters.

risks• The stock doesn’t provide

down-market protection and will likely be a poor performer when the bull market ends.

• BX will have a strong downside if the current appetite for risk assets reverses.

blackstone group l.p. (bx)security type: Master Limited Partnershipindustry: Asset Managementprice: $42.54 (as of May 12, 2015)52-week range: $26.56–$43.05yield: 8.40%profile: Blackstone is one of the largest alternative asset managers in the world and offers a host of advisory services.

6 TheHighIncomeFactor.com June 2015

raised that much in the last 12 months.Not only does this reflect the company’s

prominence in the industry, but the money also gives it unparalleled scale, which is a huge advantage. That muscle was on display earlier this year when Blackstone teamed up with Wells Fargo (WFC) to buy $23 billion in real estate assets from General Electric (GE).

GE is in the process of restructuring and spinning off some of its noncore assets. By purchasing such a large chunk, Blackstone can get a better deal than just about any other company. It offers great value to GE to have someone take such a huge amount of assets off its hands so quickly. It saves considerable time and expense from selling those assets in small chunks over a long period. As a result, GE is more able and willing to offer the real estate at an advantageous price.

Blackstone seems to know what it’s doing. In 2007, the firm took over the hotel chain Hilton Worldwide for $26 billion. After doing what it does so well, identifying underperforming assets and companies and fixing them, Blackstone took Hilton public in 2013 and netted $14.8 billion on the deal.

Strength in NumbersAs a master limited partnership, BX pays no

income taxes at the corporate level provided it pays out the bulk of earnings in the form of distributions. This structure enables it to pay out more than an ordinary corporation. The profit bonanza led to a dividend hike of over 150 percent last quarter to $0.89 per share from $0.35 a year ago.

The current quarterly payout translates to a whopping 8.4 percent yield. That said, distributions vary by quarter and this was a very good quarter. A more accurate gauge of yield is the trailing yield (for the past four quarters), which translates to a 6.2 percent yield at the current price. But management has suggested that, given the firm’s current backlog and strong environment, the payout should continue to be around the high end of where it’s been.

At about 16 times trailing earnings, BX is selling at a valuation well below the S&P 500 average. Given the recent earnings growth, that is a significant discount. It also sells at just 11 times

forward earnings, compared to 18.5 times for the overall market. The company also has a rock-solid balance sheet and enjoys high investment-grade ratings of A+ from Standard & Poor’s and Fitch.

Conclusion: Blackstone is the best of an unusual breed. The company has proven it can bring in massive amounts of assets and provide a scale, and accompanying advantages, that can’t be found among its peers. Blackstone appears to be in the midst of boom times for its industry and should be able to churn out sizable distributions in the quarters ahead. An investment in BX also provides diversification to alternative asset class for a portfolio. However, given the high likelihood of market volatility in the months ahead, we will target the stock at a low price in hopes of scooping it up on an overall S&P 500 downturn. I recommend buying Blackstone Group L.P. (BX) at or under $40 for the High Income Portfolio.

Best Buys of the Month“Best Buys” highlight what I think are

especially good values among the current holdings in our portfolio as we go to press. They’re the answer to the question, “If I were just starting to invest in the High Income Factor Portfolio or I have new capital to put to work, which securities should I buy first?”

JUNE BEST BUYS

Security Price* 52-Week Range Yield

Kinder Morgan (KMI) $42.70 $32.10–$44.71 4.50%

Altria (MO) $51.15 $39.96–$56.70 4.07%

* As of May 12, 2015

KINDER MORGAN (KMI)Kinder Morgan is one of the largest energy-

focused companies in the country. Yet, unlike most firms in the energy sector, Kinder is not highly exposed to volatile oil and gas prices. It simply collects a fee to pipe and store oil and gas. As long as there’s a lot of the stuff slogging around the country, KMI will likely do very well. And despite the recent troubles in the oil industry, the U.S. will surely continue to produce and move a far higher

Continued on page 8

June 2015 NewsmaxFinance.com 7

Notes on all portfolios: In order to receive the dividend payment, you will need to own the stock several weeks before the pay date. The “Total Return” column includes all reinvested dividends at concurrent recommended buy prices. Returns calculated based on a purchase of $1,000 of the security on the listed entry date and price. The “Effective Yield” column reflects the yield investors receive assuming they bought at the entry price and followed all subsequent recommendations. #Denotes recommendation not yet purchased. To see the chart of previous “sold” positions, subscribers can log onto www.highincomefactor.com (under the “Portfolio” tab). All chart data is as of close May 12, 2015.

THE HIGH INCOME PORTFOLIO

Recommendation Ticker Entry Date Entry Price Recent PriceBuy at or

Under Current

YieldEffective

YieldDividend Pay Date

Total Return

Navios Maritime Partners NMM 01-Mar-12 $16.37 $10.98 $17.50 16.12% 10.81% 5/13/15 -3.74%

Terra Nitrogen TNH 01-Apr-12 $249.75 $133.22 $150.00 7.51% 4.00% 6/3/15 -26.13%

Williams Partners WPZ 01-May-12 $57.30 $47.40 $58.00 7.83% 6.47% 8/12/15 11.28%

FLY Leasing Limited FLY 27-Nov-12 $11.97 $15.17 $14.00 6.59% 8.35% 5/20/15 47.73%

Teekay LNG Partners LP TGP 20-Dec-12 $38.30 $36.90 $42.00 7.59% 7.31% 6/12/15 13.76%

Prospect Capital PSEC 26-Feb-13 $11.06 $8.05 $11.50 12.37% 9.01% 5/27/15 -7.39%

Main Street Capital MAIN 21-Aug-13 $29.21 $30.66 $32.00 6.85% 7.19% 5/20/15 18.56%

LinnCo LNCO 27-Oct-14 $23.25 $12.26 $25.00 10.18% 5.37% 5/20/15 -43.95%

Blackstone Group LP BX — — $42.54 $40.00 8.40% — — —

INCOME STRATEGIES PORTFOLIO

Recommendation Ticker Entry Date Entry Price Recent PriceBuy at or

Under Current

YieldEffective

YieldDividend Pay Date

Total Return

Blackrock Enhanced Cap Fund CII 01-Jan-12 $12.50 $15.56 $13.00 7.71% 9.60% 5/27/15 60.83%

PowerShares Preferred PGX 24-Oct-12 $14.84 $14.63 Hold 5.99% 5.90% 5/13/15 12.71%

PowerShares Sr Loan Port BKLN 25-Sep-13 $24.77 $24.18 $25.00 3.62% 3.54% 5/13/15 6.38%

People’s United Financial PBCT 25-Aug-14 $14.90 $15.31 $16.00 4.39% 4.51% 6/17/15 7.40%

Duke Energy DUK 06-Mar-15 $75.00 $76.30 $75.00 4.17% 4.24% 6/16/15 1.73%

HSBC Adj Rate Pref D HUSI-PD 24-Apr-15 $25.46 $25.74 $27.50 4.37% 4.42% 7/1/15 1.10%

THE WEALTH BUILDER PORTFOLIO

Recommendation Ticker Entry Date Entry Price Recent PriceBuy at or

Under Current

YieldEffective

YieldDividend Pay Date

Total Return

PepsiCo PEP 01-Apr-12 $66.74 $96.20 $85.00 2.72% 3.93% 7/30/15 56.05%

Eli Lilly LLY 01-Apr-12 $40.48 $72.44 $65.00 2.76% 4.94% 7/9/15 101.19%

Vodafone VOD 27-Sep-12 $28.72 $36.47 $34.00 4.99% 6.34% 6/11/15 27.43%

Intel INTC 27-Nov-12 $19.98 $32.25 $30.00 2.98% 4.80% 6/3/15 73.37%

Riocan REIT REI-UN.TO 20-Mar-13 $26.97 $24.03 $29.00 5.89% 5.25% 5/18/15 23.90%

General Mills GIS 19-Apr-13 $49.94 $56.40 $50.00 3.12% 3.52% 6/3/15 19.30%

Kinder Morgan KMI 22-May-13 $35.62 $42.70 $44.00 4.50% 5.39% 5/18/15 32.52%

Brookfield Infrastr Ptnrs BIP 03-Jun-13 $36.00 $44.50 $42.00 4.67% 5.78% 7/28/15 34.12%

Realty Income O 18-Dec-13 $39.14 $46.88 $40.00 4.86% 5.83% 5/26/15 28.51%

Verizon VZ 21-Feb-14 $47.27 $49.62 HOLD 4.43% 4.65% 8/4/15 9.71%

Northern Tier Energy NTI 26-Mar-14 $26.00 $25.29 $28.00 7.75% 7.54% 6/2/15 9.68%

Ventas, Inc. VTR 23-Apr-14 $64.42 $68.07 $65.00 3.40% 3.60% 6/2/15 10.44%

Textainer TGH 25-Sep-14 $33.04 $30.12 $40.00 6.24% 5.69% 6/2/15 -7.51%

Deere & Company DE 07-Oct-14 $80.00 $90.41 $80.00 2.65% 3.00% 8/4/15 14.51%

General Motors GM 23-Dec-14 $33.43 $34.74 $36.00 3.45% 3.59% 6/23/15 7.73%

BHP Billiton BBL 10-Mar-15 $46.00 $49.27 $46.00 5.03% 5.39% 9/30/15 7.11%

Altria Group MO 26-Mar-15 $50.00 $51.15 $50.00 4.07% 4.16% 7/10/15 2.30%

The High Income Factor Portfolio

buy

8 TheHighIncomeFactor.com June 2015

Continued from page 6

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level of oil and gas than it has in the past 40 years.Kinder is massive and has deep pockets. That

should prove to be a very good thing, because the industry is in need of a player capable of making big investments. For Kinder, such investments will deliver fantastic cash flow to stockholders well into the future. The stock pays 4.5 percent now, with great prospects for dividend growth and capital appreciation. Current industry stumbles may present the last opportunity for a while to get this one at such a good price.

ALTRIA (MO)Altria is the largest cigarette maker in the

country. It’s the domestic part of the old Philip Morris that spun off its international business in 2008. The old Philip Morris was one of the most successful large-company investments and income stocks in the history of the market. Since the spinoff, the stock has behaved like the old company, providing an average annual return of 23.6 percent over the past five years.

I know its product is controversial, but it performs. Despite the fact that cigarette smoking is shrinking in the U.S. at a rate of about 3 to 4 percent per year, Altria has been able to grow earnings at an annual rate of about 8 percent

since the spinoff thanks to Marlboro’s growing market share and pricing power, as well as growing revenue from ancillary businesses.

Rarely in the past several years has the stock price hiccupped. But it recently fell about 10 percent as of this writing and is near its target price of $50 or under. Picking MO up below $50, with a better than 4 percent yield that is sure to grow, should make for an outstanding long-term investment and a stalwart of any income portfolio.

Actions to Take NowAction No. 1: Put Blackstone Group L.P. (BX)

on your watch list, to be added at or under $40 to the High Income Portfolio.

Action No. 2: As I mentioned in my May 13 weekly update, Williams Partners (WPZ) will be purchased by parent company Williams Companies (WMB). I’m recommending we keep our shares through the transition, as WMB will offer us further potential for price appreciation and dividend growth.

Sincerely,

Tom Hutchinson

DISCLAIMER: This publication is intended solely for informational purposes and as a source of data and other information for you to evaluate in making investment decisions. We suggest that you consult with your financial adviser or other financial professional before making any investment. The information in this publication is not to be construed, under any circum-stances, by implication or otherwise, as an offer to sell or a solicitation to buy, sell, or trade in any commodities, securities, or other financial instruments discussed. Information is obtained from public sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. In no event should the content of this letter be construed as an express or implied promise, guarantee or implication by or from The High Income Factor, or any of its officers, directors, employees, affiliates, or other agents that you will profit or that losses can or will be limited in any manner whatsoever. Some recommended trades may (and probably will) involve commodities, securities, or other instruments held by our officers, affiliates, editors, writers, or employees, and investment decisions by such persons may be inconsistent with or even contradictory to the discussion or recommendation in The High Income Factor. Past results are no indication of future performance. All investments are subject to risk, including the possibility of the complete loss of any money invested. You should consider such risks prior to making any investment decisions. See our Disclaimer, as well as a list of stocks that the Senior Financial Editor owns by going to highincomefactor.com.

The High Income Factor® is a monthly publication of Newsmax Media, Inc., and Newsmax.com. It is published at a charge of $109.95 for print delivery ($99.95 for digital/online version) per year through Newsmax.com and NewsmaxFinance.com.

The owner, publisher, and editor are not responsible for errors and omissions. Rights to reproduction and distribution of this newsletter are reserved.

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