Every once in a while, I come across a bond so good, with so many positives, it seems almost too obvious to recommend.

This month’s pick is one of those.

Goldman Sachs (NYSE: GS).

The Goldman Sachs Group Inc. is a global investment banking, securities and investment management company.

It generates its revenues from four operations groups: Investment Banking (21% of net revenues), Investment Management (19% of net revenues), Institutional Client Services (47% of net revenues), and Investing and Lending (13% of net revenues).

Since the 2008 debacle, this has been the company everyone loves to hate.

I lost count of how many regulators and congressional committees made their reputations by grilling and penalizing it.

But, as has always been the case, Goldman hit every pitch thrown at it out of the park.

And the recent spurt of optimism about the economy and markets will drive profits in all four of its operations groups.

Shortly after last fall’s election, the company’s investment banking group was up 18.9% year to date compared to the S&P’s 6.7% increase for the same period.

Since the election (and thanks to the expectation of fewer banking regulations), its stock has run up more than 35%.

The market appears certain big things are in the company’s future.

The Trump administration’s promises of deregulation and the potential easing of antitrust policies are also expected to drive mergers and acquisitions activity, which is a key revenue source for the investment banking group.

Goldman also expects the current flight to risk from bonds to stocks (driven by renewed confidence in the economy and expected infrastructure spending) to improve capital markets, a key driver of its investment banking and trading revenues.

The improving stock market is expected to drive a rebound in its equity underwriting revenues – IPOs – as early as the fourth quarter of 2017.

Goldman’s trading and investment management fees will benefit as well from increasing confidence in stocks.

And the company is in the right place at the right time to expand its international footprint.

Several European banks are in the process of reducing their investment banking activities, which has opened the door for a significant increase in market share in that area.

The company’s short-term fundamentals are impressive as well.

Between this year and next, Goldman expects to increase earnings from $19.90 per share to $21.80, or to a high estimate of $25.20 per share, which would be a 26% increase.

Revenues are expected to increase by 4.1% during the same period. The company’s five-year growth estimate is 12.68% per year.

For a $100 billion company, 12% growth per year is phenomenal.

Goldman currently has $380 billion in debt and $728 billion in cash. That kind of cash-to-debt ratio is unheard of in any sector or industry.

And despite the pounding every bank took in 2008, it’s retained a BBB+ rating from Standard & Poor’s.

And if the Trump-driven tailwinds and near-term estimates aren’t enough, the bond I’m recommending this month also has a “death put.”

A death put is an estate planning tool that guarantees your heirs will never receive less than par, or $1,000, for the bond.

No matter how low the price of this bond may drop, your heirs can put the bond to Goldman for $1,000.

And I’m sure you have a pretty good idea of how many people in this world would love to “put it to”
Goldman Sachs!

Before we get to the recommendation, the maturity of this bond requires a little explanation.

It matures on March 15, 2034. That’s a 17-year maturity, which is longer than the maturities of most bonds I recommend.

But the combination of the excellent short- and long-term prospects, a BBB+ rating, and the market price security the death put offers more than makes up for the extra holding time.

Plus, as deregulation drives both revenues and earnings higher, I expect the bond’s rating to be bumped up a notch or two to the A to A+ area.

And as the bond’s market price follows its improving fundamentals, I expect to be able to take a capital gain before maturity.

At 109.5, or a $1,095 price, this bond’s yield to maturity is 4.5%. This assumes the premium of $95 per bond.

I would prefer if it were priced at par or – better yet – at a discount. But for a bond of this quality, with Goldman’s prospects, in today’s market, 109.5 is a bargain.

This bond offers an enormous amount of secure income and reliability, and it’s the perfect addition to our Blue Chip Bond Portfolio.

Action to Take: Buy the Goldman Sachs 5.5% bond (CUSIP 38141ey45) that matures on March 15, 2034, for 109.5, or $1,095 per bond, and add it to the Blue Chip Bond Portfolio.

Options are one of the best ways to generate income. But you wouldn’t know that from the general public’s lack of participation.

In a way, I’m glad. A crowded market is the last thing an income investor wants to see.

Much like when too many people buy a bond and the yield falls, in the options income market, too much volume can reduce your returns.

I’ve been investing in stocks, bonds, precious metals, currencies and options for decades. Back in the ’90s, you could actually make money holding cash since CDs were paying out 6% or more. I put my ex-wife’s money into a bunch of CDs throughout the ’90s and early 2000s, and she sailed through the crashes in fine fashion.

But in the past decade, it’s been nearly impossible to generate income from cash. You’re lucky to get an account that pays more than 1% today.

Yet there’s a place where income generation occurs on a daily basis... A corner of the market where you can make hundreds or even thousands of dollars at a time just by understanding a few simple strategies... techniques the professional investment world wants to keep secret from you.

It is, of course, the options market.

Options are just contracts, between buyers and sellers, entitling buyers to shares of stock at an agreed-upon future price.

But to understand the options market, you have to go back more than a hundred years to when French mathematician Louis Bachelier laid the groundwork for pricing options.

It was all about trying to measure and calculate risk. Insurers like Lloyd’s of London wanted to know how much to charge merchant ships crossing the world’s oceans. For that, they needed to know how to mathematically measure risk. Bachelier’s work was the beginning of the race to price risk.

In the early 1970s, the Black-Scholes model for options pricing was developed. The creators later won the 1997 Nobel Prize in economics. Today, all the options price quotes you see are based on the Black-Scholes model.

But the Black-Scholes model doesn’t tell you one very important thing. So allow me...

Money in the options market is not made by those who trade short-term “call” options to cash in on where they think a stock’s price will go. It’s made by those who sell options – those who collect a premium for the risk.

And option sellers win the vast majority of the time – if they execute the strategy properly.

Why? Because, in my experience, it’s a heck of a lot easier to predict where a company’s share price won’t go than to predict where it will go.

For example, during the financial crisis, I sold options on General Electric. Its price had plummeted from the $40s down to the single digits. (You remember those sleepless nights, don’t you, when the entire market collapsed in a span of less than 18 months?)

Well, I was pretty darn sure that GE, then trading at $11, was not going out of business. Warren Buffett had just lent it billions of dollars as a show of confidence.

So I scoured the options markets to try to identify the trade with the highest probability of success.

And I found one of the best income-producing trades available.

With this special low-risk option trade, I could collect $3,000 instantly. And in return, I would promise to buy GE if it dropped to $2.50 or lower.

With the shares trading at $11, this represented a discount of almost 80%. Or to put it another way, I had close to 80% downside protection.

So I crunched some numbers using a proprietary probability measure based on the Black-Scholes model and a few other inputs. I calculated that my risk was less than 5%.

In other words, I was more than 95% sure I’d simply collect my $3,000 premium without having to buy any GE stock.

On one hand, it’s too bad, because I would have loved to buy the shares at such a dirt-cheap price! But it worked out very nicely as GE never saw single digits again.

Options Primer

Call Option: An investment contract used to bet on the upward direction of a stock

Put Option: An investment contract used to bet on the downward direction of a stock.

Contract: An agreement between the buyer and seller equal to controlling 100 shares.

Strike Price: The price at which you’re obligated to, or have the right to, buy or sell shares (depending on your strategy).

Expiration Date: Future date (usually the third Friday of a given month) when your option contract expires.

Here’s a sample ticker symbol for a put option. You’ll want to study it and familiarize yourself with all of its key components before placing your first trade.

*This is an example, not a recommended trade.

And the best part? I collected $3,000 from the trade, instantly upfront. And I kept it... all in exchange for the chance to buy GE at an incredible discount.

In the weeks ahead, I’ll be sharing more about the safest ways to collect income in the options markets.

So if collecting thousands of dollars in income while potentially snatching up stocks at a huge discount sounds good to you... then you’re in the right place.

Keep in mind that most people don’t understand that the options market was created by professionals to hedge risk. It’s where the real money is made.

But to hedge risk, you need two parties: a buyer and a seller. In today’s market, the buyer is the guy who speculates on prices going higher. The seller is the guy who says, “go ahead, take that gamble”... and collects income at the gambler’s expense.

You can guess who comes out ahead the vast majority of the time. The seller of the option (and of the risk) is guaranteed to collect income. And if he does it right, he almost never has to pay out on the risk.

Don’t believe me? Consider this... when’s the last time your insurance company sent you a check?

If you’re interested in learning more about my proprietary options strategy, stay tuned. I’ll reveal more details in the coming weeks.

We believe it's helpful to share questions and clarifications of dividend-investment strategies with all our subscribers. Keep in mind, Marc and Steve can answer your general strategy and service questions, but they cannot give personalized advice.

As always, feel free to send us your questions at mailbag@oxfordclub.com.

Lazard’s dividend is a “qualified” dividend, which makes it eligible for the lower 15% tax rate. A nonqualified (or “ordinary”) dividend is taxed at the investor’s ordinary income tax rate.

I spoke to Lazard’s head of investor relations. He told me, “We do not generate any UBTI. Never have, and never will under our current structure.”

I can’t give personal advice as far as which stocks from the portfolio you should choose. A good idea for anyone in your situation is to see which stocks fill a hole in their portfolio.

For example, if your portfolio doesn’t have any financial stocks, you could consider Lazard or Apollo Global Management (NYSE: APO).

If you’re missing media, you could add this month’s recommendation – National CineMedia (Nasdaq: NCMI). Lacking exposure to consumers? Buy Gap (NYSE: GPS) or Mattel (Nasdaq: MAT).

You should also read each recommendation and consider your tolerance for risk. Some stocks are quite low risk, while others, which have very high yields, are higher risk.

As far as Summit Midstream Partners, I haven’t studied the company, so I can’t comment on its prospects. I will say that the fact that it brings in $1.25 in distributable cash flow for every $1 it pays to shareholders is a good start.

Jie is referring to my article on peer-to-peer lending in the September 2016 issue of The Oxford Income Letter. I talked about how you can earn 8% lending money through platforms like Prosper and Lending Club.

Most peer-to-peer lending companies publish data on their websites about default rates for the various risk categories, sometimes updated monthly. Typically, lower-rated loans carry a higher risk of default and a higher yield. Higher-rated loans tend to have lower yields and lower rates of default.

If default is a big concern, stick with only the highest-rated loans. There’s still no guarantee you won’t have a loan go bad, but the odds are much better.

The return of capital component of Omega Healthcare Investors’ dividend is small. Only $0.32 (13%) of the total $2.36 dividend paid in 2016 was a return of capital.

On the other hand, $1.97, or 83%, was an ordinary dividend, taxed at the ordinary income tax rate.

As a result, I suggest you shield that $1.97 (plus another $0.07 in capital gain distributions) from taxes by keeping the stock in a tax-deferred account.

Yes, I still like Mattel.

Remember, when we entered the position, we knew Hasbro was eating Mattel’s lunch. At the time, Mattel was about to lose the Disney Princess license to Hasbro. Since then, Hasbro has acquired the license, and that’s what led to Hasbro’s big fourth quarter.

But that’s why Mattel had and continues to have a much higher yield than Hasbro. And despite a weak fourth quarter, I do see signs of life for Mattel.

It has proven that its Barbie franchise is not dead. Sales grew in the fourth quarter.

I’m excited about Mattel’s new CEO, who came from Google. She should bring some fresh ideas that will move the company forward.

Mattel is a turnaround story. We knew that going in. Sometimes these turnarounds take a bit longer than we expect. I’m seeing signs of life, so I’m sticking with the stock.

And we get a 6.0% yield on the current price to wait for it to turn around.

Lastly, Mattel is in our Compound Income Portfolio, which means it’s an optimal stock for dividend reinvestment. If the stock stays low for a while, you can buy more shares with your dividend.

Of course, we don’t want the stock to stay low forever. But in the near term, having a stock stay low allows you to accumulate more shares, which generate more dividends.