Fitbit and Gold Dear Mr. Berko: Fitbit Inc. makes those wristbands that track your pulse, track your heart rate, count the number of steps you take and measure the distance you go. Several people who are in the stock business tell me that this stock could run to $…Read more. What Will the Market Do When Interest Rates Go Up? Dear Mr. Berko: I just retired at age 67, and my certified public accountant, who is a friend, insists that I hire a money manager to run my $680,000 individual retirement account. Do you have any idea how difficult it is to find a money manager to …Read more. An Energy ETF Dear Mr. Berko: I was looking at the Yorkville High Income MLP ETF, which is an energy-related issue that has fallen almost 50 percent in value from its high price but yields a very good 14.2 percent. Though the value of this exchange-traded fund is …Read more. Investing in Cincinnati Bell Dear Mr. Berko: My broker is touting a low-priced telephone company called Cincinnati Bell and seems to have an inside track on the company. He thinks that changes in the direction of the company's business to a fiber-optic cable communications …Read more.more articles
Protecting Against Inflation
Dear Mr. Berko: We have a huge amount of cash coming due from a mortgage ($104,000) that is paying off early. The mortgage was left to us by my dad's estate and was paying us 5 percent, which we saved. We know that we can't get that interest on U.S. government bonds, but we would like to get at least 2 percent (which is what 10-year U.S. government bonds pay) and keep this money safe, especially to protect it from inflation for 10 years, which is when our children will be ready to go to college.
We are really concerned about the value of the dollar in the coming decade because of the trillions of dollars of debt our country keeps piling up. Our parents, who all passed early last year, drummed this into our heads. They knew from experience how terrible it is to save money for 10 years and then have to spend $75 or more to buy something that $50 would have bought when you first put the money in savings. So I figure that if this $104,000 will buy the same amount of things in 10 years as it would today, we will be very pleased and ahead of the game. So what would you recommend we do with this money?
Also in Dad's estate were 333 shares (there were 1,000 shares, but my two cousins also got equal shares) of Bed Bath and Beyond. They sold their stocks because they needed the money. We don't because my wife and I have good county jobs (Cook County) with a good retirement plan, and we have worked there since before we got married in 1996. We don't put charges on credit cards unless we already have the money to pay the bill. Our parents drummed that into us, too.
Please tell me whether we should hold this stock or sell it. I don't know anything about stocks, but we buy things there, and they have a good merchandise return policy, pretty good prices and a very big selection of household items to choose from. And if you want us to sell the Bed Bath and Beyond stocks, please tell us what to do with the $20,000 we would get. — DS in Chicago, Ill.
Dear DS: Did you know that Cook County has one of the largest number of morbidly "obese police" in the nation? And, darn, did you know that if most Americans managed their finances as you two do our economy would be in great shape? For a couple of average working Americans, as you claim to be, both of you (thanks to your parents' parenting) have an above average understanding of economics.
But you are right as a tall root beer float with double scoops of vanilla ice cream. Congress and the administration, believing America is basically a population of stupids, tell us that inflation is under 2.5 percent. Fortunately, you know better, and I can only give you five recommendations:
1. Consider prepaying the fees for your children's college expenses so that you lock in the costs today. And if your kids go to college, don't let them take those soapy, wishy-washy liberal arts courses, because they may never find an employer willing and dumb enough to hire them at a living wage.
2. Purchase SPDR GOLD SHARES (GLD-$161), an ETF that owns $71.2 billion in gold bullion. GLD doesn't pay dividends, but its market price reflects the daily change in the value of the metal. And unlike real estate, gold is supposed to be a nearly perfect hedge against inflation. That could change, too, although since going public in 2004, its market value has nearly tripled.
3. Consider the 10-year Norwegian government bonds yielding 2.5 percent and rated AAA compared to 1.9 percent for U.S. treasuries only rated AA. Norway's assets exceed its liabilities by about $1 trillion, or 175 percent of the country's GDP. Energy independent Norway, sitting on its North Sea oil reserves, expects a $60 billion budget surplus in 2012 versus a projected $1.3 trillion deficit for the U.S. There is, of course, a risk that foreign exchange rates could reduce your return. But I think the Norwegian currency will appreciate against the U.S. dollar in the coming decade.
4. Consider pre-paying some of your children's college costs, investing some money in GLD and buying some Norwegian government bonds.
5. Finally, in my opinion, most American college degrees aren't worth a tuppence. Tell your kids to enlist in the armed services when they finish high school. This will put employable experience under their belts and allow them to save some money, and when their hitch is up, Uncle Sam will pay their college tuition.
Another reader asked me about Bed Bath and Beyond, as well as Sears. So I'll answer your Bed Bath and Beyond question in next week's column.
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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