I hadn’t come there for sightseeing… But the view was something I’ll never forget.

I’d just flown into New York City, where I was scheduled to meet back-to-back with multiple investment firms. The first one was Apollo Management.

Apollo is a Wall Street financial titan. It manages $500 billion. Its all-glass conference room wall at the top of the company’s headquarters – with a direct view of Central Park – was breathtaking. 

And I was there to grill the investment team.

You see, I’ve been to many meetings, conference rooms, and office buildings over my decade-long career on Wall Street.

As a due diligence officer, I met with financial heavyweights frequently. All to find the best opportunities in real estate, private credit, infrastructure, hedge funds, and energy.

In other words, what we insiders call “alternative investments.”

Considering the last fund I worked for now has over $450 billion in client assets… There was a simple reason these firms were talking to me: money.

If the investment manager didn’t answer every one of my questions, they knew I wasn’t going to approve their fund. And if I didn’t do that? No money.

That’s why these Wall Street giants told me their secrets, but almost no one else.

Now, naturally, regular investors were never allowed in deals like this. Aside from the minimum investments being in the multimillions… They were deemed too complicated for “unsophisticated” retail investors.

But that changes today.

I’ve learned how these managers think. And most importantly: I know how they prepare for market downturns. What they buy. What they sell. And why.

Today, I’m sharing one of the best-kept secrets on Wall Street with you. This alternative investment can ensure you make income through market booms and busts – safely.

Learning about it today will put you ahead of 99% of investors. And if you’re interested in getting started with it today, I’ll tell you how to access my top three recommendations right now.

The Contractually Obligated Payout

We call it “contractually obligated money” or COMs.

That’s because there’s a legal obligation tied to this investment vehicle… One that means investors are nearly guaranteed to make money.

What are COMs? You may have heard of them by another name: corporate bonds.

Now, before your eyes glaze over or you assume bonds are too complicated and only offer peanuts when it comes to returns… Let me explain how Wall Street uses these bonds. And how you can learn to, too. 

A bond is an obligation, like an “IOU.”

When a bond is first issued, the buyer is lending money to the borrower. It doesn’t matter if it’s a small oil company in Texas or the U.S. government.

The borrower (issuer) has a legal obligation to pay back the borrower (bond owner) by the due date (also called its maturity date). If that business is still operating, it must pay back the borrower when the bond matures. It’s that simple.

They also tend to have a coupon, or annual interest payment, attached. Meaning income investors have an incentive to hold them.

Most bonds are rated on an investment-safety scale by one or more of the major rating agencies: S&P, Moody’s, and Fitch.

Chart

You don’t need to worry about the details. Just know this much: Companies rated near the top are considered the safest. Companies in bankruptcy are at the bottom.

The bonds of some companies at the top are considered safer than the bonds of most countries – including the U.S.

This is great news for those bondholders. However, they rarely change in value or trade at a sizable discount. So there isn’t much opportunity for us with these bonds.

At the bottom of the rating scale are companies with poor finances. They’re usually small and have too much debt and not much cash.

For our purposes, these bonds carry too much risk. So these aren’t the kinds you’ll want to look at, either.

Where the real opportunity lies is around bonds rated toward the bottom of investment grade (Lower Medium Grade) and the top of non-investment grade (Non-Investment-Grade Speculative). This is the “sweet” spot.

Oftentimes, the market will misprice the bonds of these companies.

But not all companies at this level are equal. And it’s all a matter of researching which are risky and which are just overlooked. That’s where there’s an opportunity to correct the market’s mistakes.

It’s the same strategy that Wall Street uses. When everyone else is panicking, they’re shopping for deals.

How to Make Income From Discounted COMs

Let’s walk through how this works in practice…

Bonds are usually priced at $100 and trade in $1,000 blocks. If someone buys 10 bonds, that usually means $10,000 in par value.

Let’s say Company A gets hit with some negative headlines and its investment rating drops into BBB territory.

Now, those bonds are priced at $80. Meaning it’ll cost $8,000 instead of $10,000.

But here’s the thing… When the bond matures, Company A must pay back the full $100 to bond holders – regardless of how much you actually paid for them.

That’s why you want to purchase bonds at a significant discount to par value. That way, you automatically profit as the bond nears maturity.

For example, if you buy bonds at $75, you’d have a 33.3% capital gain at the par value of $100.

At an entry point of $60, that gain increases to 66.7%.

And that’s before we consider interest payments.

If the bond has a coupon rate of 5%, that means you’ll earn $5 per $100 in par value. But remember: You’re not buying any bonds at par value.

If this example bond is trading at $75, that 5% coupon becomes a 6.7% annual yield. That’s 33.3% more income than the original bond holders received.

And if you buy the bond at $60, the 5% coupon is now an 8.3% yield.

This is one example of how Wall Street creates above-average income while also seeking significant upside… with a safe, contractually backed investment.

And today’s volatile environment only enhances the opportunity with COMs.

Luckily for the top firms on Wall Street, it’s not bull markets that determine their fates. Or ours. It’s the downturns.

So it’s the perfect time for us to take this knowledge and use it to our advantage.

That’s why we’re excited to be launching a brand-new service, High-Yield Advisor.

We’re using proven strategies – and little-known investments – to profit from the next downturn.

By tapping into our deep understanding of fundamental analysis, we’ll target the best discounted opportunities. And earn market-beating yields through it all.

COMs are a primary part of our strategy, but not the only part. To learn more about this service, get details on our first three COM recommendations, and get the name of a recession-proof pick – for free – tune into this special presentation that will tell you all about it.

Happy investing,

Stephen Hester
Analyst, Intelligent Income Daily