Social Security Blunder, JPMorgan Chase and Puerto Rican Bonds Dear Mr. Berko: You made a big mistake in your column about Social Security last January. You said that a man who gets $2,300 a month at age 66 would get $3,300 a month if he waited till age 70 to collect his benefits. You also said that his wife, …Read more. Retirement Accounts Dear Mr. Berko: My company just established a 401(k) plan, and a small group of us who are buds can't figure out the investment choices. Our human resources department won't give us any investment advice or explain the mutual funds in the plan that …Read more. Trinity Industries Dear Mr. Berko: I have $120,000 to invest. Our new broker has recommended nine different stocks (list enclosed), and the only stock I never heard of is Trinity Industries Inc. What do you know about it, and what is your opinion? This broker says he …Read more. The $2 Bill Dear Mr. Berko: I've sent you a World Reserve Monetary Exchange advertisement that appeared in the Tampa Bay Times. Our 77-year-old uncle, who lives on Social Security and a modest pension, sent WRME a lot of money over a dozen years to purchase …Read more.more articles
GM: Buy the Cars, Skip the Stock
Dear Mr. Berko: Back in 2010, you told me not to buy 200 shares of General Motors at the initial offering price. And I didn't, even though it went higher in price. I now have $100,000 to invest in a growth portfolio that I hope can produce some modest dividend income. At my age, this money will have to do well for me, and I hope it grows to a bigger pile so I can leave it to my grandchildren and future grandchildren.
My broker has recommended that I buy five stocks and invest $20,000 in each issue. I am 57 and need some growth as well as some income from these stocks, which are not in an IRA. And one of the issues that this broker has recommended is 700 shares of General Motors. Please let me know whether your thoughts on this stock have changed before I follow this advice. And if you still do not like General Motors, would you please recommend a couple of alternative issues. I don't want to speculate. Please advise. — LD in Phoenix, Ariz.
Dear LD: General Motors (GM-$26.22) has been selling cars perhaps for a century. And during that time, GM stuck us with some classic clunkers and a few darned good, high-class models, too. But don't concern yourself with leaving your grandkids a sixpence. Rather, worry about making sure that you will have enough income to live with modest comfort in a certain to be difficult economic future for most Americans.
As I told you in October of 2010, prior to GM's IPO, I wouldn't touch the stock with a pitchfork, a stun gun or a cruise missile. GM recently reported the largest annual profit in its 103-year history. Customers are paying record prices for cars and trucks, which has helped revenues rise 62 percent from last year and pushed earnings to $7.9 billion.
Of course, that profit was aided by a free $50 billion no-interest lifeline from U.S. taxpayers, plus $39 billion in liquidity and a bankruptcy that wiped out 75 percent of its debt.
Meanwhile, GM's troubles in Europe today exceed, by orders of magnitude, its troubles in the U.S. four years ago, and the European unions are aggressively resisting GM's efforts, nail and tooth, to lower worker costs and benefits. So far, GM has done some "caving," agreeing not to close any plants until 2016. Last year, GM lost nearly $900 million in Europe, and this year looks just as bad.
However, GM's biggest problem is its net profit margins that really stink. Then, I suspect it won't be long till the UAW begins to agitate for higher wages and demand that the company make significant contributions to its huge pension plan deficit. That's going to be a bear, especially in light of the fact that last January, GM quietly attempted to borrow $14.4 billion from the government for retooling costs (what a mess), and the Treasury said: "No."
Today's GM is the same old wine in a new bottle. This is not an investment quality stock, its revenues are cyclical, its earnings are cyclical, and management is dependent on a powerful union workforce to deliver its product. Sounds like an airline stock to me! I like their cars, but I do not like the stock.
Finally, I think your portfolio should have more than five issues and recommend that you diversify with at least a dozen issues. So have a confab with your broker, and suggest that he include PepsiCo, Yum Brands, Aflac, Hormel Foods, United Health Care, Walgreens, Magna International and Colgate Palmolive. If he gives you any trouble, find another broker.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at firstname.lastname@example.org. 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.
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