How to Get High, Risk-Free Returns

It's a terrible time to be a saver... Inflation is moving higher... And interest rates are still close to zero. In today's essay, I want to discuss what's happening with inflation... and I want to share with you a way to earn 7.12% in a risk-free government debt instrument. Yes, I said 7.12% risk-free... Here's […] Not rendering correctly? View this e-mail as a web page [here](. [Empire Financial Daily Weekend] How to Get High, Risk-Free Returns By Bill McGilton It's a terrible time to be a saver... Inflation is moving higher... And interest rates are still close to zero. In today's essay, I want to discuss what's happening with inflation... and I want to share with you a way to earn 7.12% in a risk-free government debt instrument. Yes, I said 7.12% risk-free... Here's the deal... Inflation is here. In November, the Consumer Price Index ("CPI") – which measures the average change in prices that consumers pay for a basket of goods and services – increased by 6.8% when compared with November 2020... That's the largest 12-month increase since the period ending in June 1982. As the chart below shows, inflation started to shoot up in April. And for the past seven months, the CPI has increased by 5.6% on average...  The reasons inflation kicked into higher gear stem from the pandemic... ultra-loose monetary conditions, stimulus checks in the hands of idle, homebound consumers, and supply and labor shortages... In other words, extra money is chasing fewer goods and services. The combination has put upward pressure on prices. After months of saying otherwise, Federal Reserve Chair Jerome Powell finally admitted that inflation is no longer "transitory"... and will last "certainly through the middle of next year." Inflation is a complicated subject... In his Federal Open Market Committee comments earlier this month, Chair Powell didn't tell us anything we didn't already know... Anyone who shops at a grocery store, drives, or buys home supplies will tell you that they're seeing higher prices in real life. We all know prices for basic products go up over time. That's because the money supply expands over time... It's why a $0.45 Big Mac in 1967 now costs around $5.65. But it doesn't mean there won't be years when the price of a Big Mac falls. It just means over the long term, we should expect prices for basic products like Big Macs to rise. At the same time, technology tends to get cheaper over time thanks to human ingenuity. For instance, monthly smartphone plans – to use a powerful mini-computer – now cost less than what a mobile voice service alone cost 20 years ago... Technology is a disinflationary force. So it's not a question of whether prices are going up... In general, prices are always going up. The question is, at what rate are prices going up? Looking at the CPI since 1970, we can see that an index at 6.8% is historically very high... But we have a long way to go to reach the inflation levels we saw in the 1970s and early 1980s...  Where the rate of inflation goes from here will largely depend on how fast supply chains normalize from the pandemic... At this point, it's not anywhere near the double-digit numbers of the 1970s and 1980s. --------------------------------------------------------------- Recommended Links: [Whitney: 'This will decide your wealth in 2022']( One critical decision in the early days of 2022 could determine your financial success this year. If you want to protect and potentially grow your wealth for the next 12 months, [click here](. --------------------------------------------------------------- [World's richest man orders 100k units of radical new technology]( CNBC reports that the world's richest man has ordered 100,000 units of a technology that could soon change his business and your life. Legendary investor Whitney Tilson explains full story and his No. 1 stock to profit (including ticker symbol) [here](. --------------------------------------------------------------- But it's also not going away anytime soon... For example, the prices of normally depreciating used cars have gone ballistic over the past year and a half. Automobile-auction company Manheim has developed an index to track used-car prices... It's called the Manheim Used Vehicle Value Index. We'll spare you the details about how the calculations are made... But from April 30, 2020, to November 30, 2021, the index showed that the value of used cars increased by an average of 91%... That's almost double. The following chart shows that used-car prices continue to skyrocket.  Fed officials acknowledge that inflation has now kicked into higher gear... and that the Fed has to pull back on its ultra-easy monetary policy. That's why earlier this month it strongly signaled that it plans to raise interest rates next year. First, it will "taper," or reduce, its monthly Treasury and mortgage-backed securities purchases – stopping them altogether by early 2022... As the Fed reduces its bond purchases, a "crutch" is removed under bond markets – causing upward pressure on interest rates. Next, the Fed will start raising interest rates directly – as early as the first half of next year. When the Fed raises interest rates, it reverberates throughout the economy – increasing borrowing costs for mortgages, car loans, and credit cards. Higher interest rates tend to reduce borrowing... cooling the economy and thus the rate of inflation. Inflation is high now, but the Fed is not acting for months... The Fed's low-interest-rate policies combined with high rates of inflation makes it a terrible time to be a saver... In real terms, savers are losing money when they lend it to the government or keep it in the bank. For instance, a 10-year Treasury is yielding around 1.5% annually. And the average rate of inflation over the first 11 months of 2021 is running around 4.5% annually... At this point, savers are losing around 3% annually in real terms (4.5% inflation minus 1.5% 10-year "risk free" rate equals 3%). And that's factoring in the yield on a 10-year Treasury. Folks keeping their money in the bank aren't getting anywhere close to a 1.5% rate. The average interest rate for bank accounts was just 0.06% in the week ending November 24, according to consumer financial company Bankrate. At this point, savers have awful options... They can either keep their money safely in the bank or in cash and gradually lose purchasing power... or they can try their luck in generating positive returns and hope to beat the rate of inflation. In other words, they can gamble their savings in their favorite asset class – stocks, real estate, or cryptocurrencies. For the most part, investing in risky assets has been working out great since market lows in March 2020. But when sentiment inevitably turns... losses can get big. It's not an easy choice. Of course, it's up to each individual to decide the best balance of cash and investments based on their risk tolerance. So today, I share a way to use inflation to your advantage... And to earn up to 7.12% annually with no repayment risk... I'm talking about inflation-adjusted Series I savings bonds issued by the U.S. Treasury. Because of the spike in inflation, Series I bonds are now yielding 7.12%... This rate will apply from November of this year through April 2022. Then it will be adjusted again (every May and November) for another six-month period based on the rate of inflation at that time as measured by the CPI. To take advantage of I bonds, you will have to go to [TreasuryDirect's website]( and set up an account... Under the tab "BuyDirect," you will see an option to purchase Series I savings bonds. From there, it's easy enough to complete the purchase. Please note... the website is a bit clunky – so it's best to set up an account when you're in a good mood and have time... But after using it a few times, you'll get accustomed to how it works. Besides I bonds, TreasuryDirect provides access to other government offerings – like bills (maturing in one year or less), notes (maturing in two to 10 years), bonds (maturing in 10 years or more)... among other options. As an investor or a saver, it's worth becoming familiar with the site to have additional options to manage your cash. The Series I savings bonds with the 7.12% rate we're discussing are an accrual-type security – meaning interest is added to the principal, and subsequent interest is paid on the accrued, or growing, principal... It will earn interest for up to 30 years if you don't cash them out sooner. There are some nice tax features to these bonds as well... You have the option of waiting until you cash them in to pay federal taxes on the interest. It's also possible to reduce federal income taxes further if the interest is used for higher educational purposes. And finally... there are no state or local taxes. Series I bonds do have some drawbacks... There is a $10,000 per-person, per-year limit on purchases of Series I bonds through TreasuryDirect... However, if you make a purchase using a tax refund, you can buy an additional $5,000 worth of bonds per year, per person... And if you're married, you and your spouse can each buy up to $10,000... Additionally, you can buy up to $10,000 worth for each child. An important note... You should buy I bonds with money you don't need access to in a hurry... You can't sell them for a year. And if you sell them before five years, you will lose the last three months in interest as a penalty. Still, if you can park your cash for at least a year, I bonds are a good alternative. By comparison, the average interest rate for a certificate of deposit with a one-year duration is 0.14%, according to Bankrate. These Series I savings bonds are good... But now I want to talk about something even better if you're interested in fixed-income investments... Stansberry's Credit Opportunities. Instead of focusing on government bonds, Stansberry's Credit Opportunities goes where the real action is... corporate bonds. That's where billionaires like Warren Buffett, John Paulson, Paul Singer, and Sam Zell look to scoop up opportunities in times of distress. Each month, my colleague Mike DiBiase and I scour the corporate-bond universe for the best opportunities we can find. And let me tell you... it hasn't been easy. The same forces pushing investors to speculate in stocks, real estate, and cryptos have pushed them to speculate in corporate-debt markets as well. We only make recommendations when we're confident that we have a winner... In recent months, we've made fewer recommendations because the risk-reward setups don't compensate for the froth in the markets. Our preference is corporate bonds, but we won't recommend buying them when they're overpriced... We also cover hybrid securities – like preferred stock and tangible equity units. These are equities with fixed-income features. The good news for our subscribers is that when the Fed raises interest rates to fight inflation, it creates volatility in the corporate-bond market... and quickly. In fact, we're already seeing it. And that creates opportunities for our subscribers to profit as good corporate bonds get thrown into huge clearance sales. In times of panic, we move fast... Between March and May 2020, we recommended eight bonds in investment-grade or near-investment-grade companies that produced an average annualized return of 59%. In other words, an average annualized return of 59% with virtually no risk of not getting paid back... It's hard to find investments like that. With that in mind, don't miss this brand-new presentation from one of our loyal subscribers. In it, he explains how, thanks in part to our bond-investing strategy, he was able to retire at age 52. After he shares his story, stay tuned to find out more about Stansberry's Credit Opportunities... including how to gain immediate access to our full research for a dramatically low price. [Click here for all the details](. Regards, Bill McGilton January 1, 2022 If someone forwarded you this e-mail and you would like to be added to my e-mail list to receive e-mails like this every weekday, simply [sign up here](. © 2021 Empire Financial Research. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Empire Financial Research, 601 Lexington Ave., 20th Floor, New York, NY 10022 [www.empirefinancialresearch.com.]( You received this e-mail because you are subscribed to Empire Financial Daily. [Unsubscribe from all future e-mails](