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Long-term Interest Rates and Merrill Lynch
Dear Mr. Berko: As you can see from this stationary, I own a large company and we have a pension plan with a market value of $86 million. The current manager has done moderately well in the past year (up 8.2 percent) but was down 26 percent last …Read more.
Utility Stocks
Dear Mr. Berko: I'm thinking of buying 150 Progress Energy and 100 FPL Corporation, two Florida utility stocks. What do you think of them? Also, I bought 1,000 shares of Prestige Brands last July at $11.23 and I'm now down 4 points. I know what …Read more.
Tips on TIPS
Dear Mr. Berko: My brother-in-law told me that you recommended he put 20 percent of his $505,000 ROTH IRA into TIPS. We are the same age, have identical ROTH IRAs, earn the same income with the same firm and have the same debts and in fact, our …Read more.
Golden Rules
Dear Mr. Berko: I want to buy $6,000 worth of gold and have listened to and read about some of the exchanges that sell gold to the public like The National Gold Exchange that will sell me gold at wholesale. They said gold will go to $2,000 an ounce …Read more.
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Big Three No Longer Rate Our TrustDear Mr. Berko: I lost a lot of money in the preferred stocks of Fannie Mae, Freddie Mac and four banks because I relied on their AA ratings when I bought them. I lost a bundle in collateralized debt obligations that my broker told me were Triple-A rated. I lost more on insurance company stocks from MetLife, Hartford and AXA, which I had believed were solid. I blame Standard & Poor's and Moody's because of their high ratings on these investments. Those rating companies should be sued for misfeasance, malfeasance and for sloppiness in doing a shameful job. They have a fiduciary responsibility to investors and they violated it. Enough, though, of sour grapes. I want to buy some bonds and preferred issues. But I am reluctant to use Moody's, Standard & Poor's or Fitch because I don't trust the bums. How can I get an honest rating, and from whom can I get it? I'm even willing to pay for it. — H.W., Wilmington, N.C. Dear H.W.: A lot of us would have lost a lot less money if ratings agencies like Standard & Poor's, Moody's and Fitch had not painted triple-A and double-A ratings on hundreds of billions of preferred stocks and collateralized debt obligations. There is no way on this green earth that 1,000 sophisticated bond managers or I could have had the X-ray vision needed to evaluate the credit worthiness of the mortgages that were cleverly camouflaged in those murky securities. Some folks suggest that a significant reason for the blanket triple-A ratings, derive from the fact that the issuers of those collateralized debt obligations buy that rating from Standard & Poor's, Moody's and Fitch and pay them quite generously. Since 1975, the Securities and Exchange Commission endorsed only those Big Three ratings agencies as nationally recognized statistical rating organizations. In other words, the Big Three had a monopoly on bond ratings, securities, collateralized debt obligations, preferred stocks, insurance companies, money market funds, banks, etc. The Big Three ratings agencies gave Fannie Mae, Freddie Mac and myriad other failed securities triple-A and double-A ratings like they were passing out free candy. Then the mud hit the fan. I think it's time to get rid of the Big Three. Certainly, during the past few years, their assigned ratings have made a mockery of the system. Despite recent egregious failures that have cost hundreds of billions of dollars, some believe that the SEC and the Fed's imprimatur will remain solid because of generous Big Three political contributions. What other reason makes sense? However, I'm a fan of Weiss Ratings located in West Palm Beach, Fla., the nation's only independent provider of ratings and analysis covering the financial services industry. They pegged the Fannie Mae, Freddie Mac and collateralized debt obligations debacle before the crisis became a crisis. Weiss tracks the financial safety of 1,693 life, health and annuity insurance companies every quarter. If you're concerned about the safety of your bank, Weiss monitors 9,381 commercial banks, savings banks and savings and loans across the nation each quarter. Weiss also ranks nearly 20,000 stocks and mutual funds each quarter. Weiss' ratings have won acclaim from the U.S. General Accountability Office for their accuracy, which has shamed the competition. I'm told that the Fed and the SEC won't use Weiss because the ratings are inflexible and the results can be too negative. You can check him out online at www.weissratings.com. If we had depended on Weiss when making investment decisions, we would have missed a few opportunities because Weiss won't compromise. But as my dad used to say, "Losing an opportunity is a much less regrettable alternative than losing money." Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, FL 33429 or e-mail him at malber@comcast.net. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com. COPYRIGHT 2009 CREATORS SYNDICATE INC. ?? ?? ?? ?? 2
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