Nathan Slaughter

When gold was first discovered at Sutter's Mill in the foothills of California's Sierra Nevada mountains in 1848, thousands of people dropped everything and headed west with dreams of striking it rich.

Within a year, San Francisco was transformed from a sleepy outpost with a few dozen shacks into a bustling mining hub. As gold fever spread, would-be prospectors poured in by the boatload from as far away as Chile and Hawaii.

There was plenty of gold to be had in rivers and streams, particularly in the early days. But much of it went to larger operations that utilized high-volume hydraulic recovery techniques. The average miner sifting with a simple pan or other crude device was lucky to break even and recoup expenses. Thousands went home disillusioned and broke.

But while the great gold rush was a bust for many, the huge population influx was a boon for gaming houses, saloons and brothels. Several entrepreneurs made a fortune, among them a peddler of denim pants named Levi Strauss.

In fact, the first millionaire to emerge from all of this was an enterprising retailer named Sam Brannan. Brannan famously cornered the market and bought nearly all of the available supplies of picks, shovels and pans. Then to drum up business, he ran through the streets showing everyone the newfound gold dust.

Brannan was clever. He knew that some would find gold and others wouldn't -- but they would all need tools. And he was happy to supply them, at a substantial mark-up, of course. At the peak, Brannan was reportedly raking in $5,000 a day in sales, which would be more than $140,000 today.

What does any of this have to do with income investing? Plenty...

As the chief strategist behind StreetAuthority's Energy & Income advisory, I think the easiest way to explain this is using the energy field as an example.

From small independent explorers to integrated global giants, companies that find and produce oil and gas can make a ton of money for their shareholders.

Many of these companies pay out steady dividends. For example, ExxonMobil (NYSE: XOM) has raised dividends nearly 6% annually for the past three decades.


Nathan Slaughter

Nathan Slaughter is Chief Investment Strategist of Market Advisor, Scarcity & Real Wealth, and Energy & Income at StreetAuthority.com.