Dear Friend Passed Away Dear Mr. Berko: A dear friend of mine passed away after an extended illness, and I agreed, pursuant to his wishes, to help his wife, Alice, with the new responsibilities of her financial affairs. My first duty was to convince the funeral home that $…Read more. 529 Plans Dear Mr. Berko: How does one define "middle class"? Both my wife and I work. We are college-educated, and we have 529 plans for our children, who are 11, 13 and 16. We've been told that the government wants to tax future withdrawals from 529 plans …Read more. Health Stocks for Investment Club Dear Mr. Berko: In late 2010, three of us did some research and recommended our investment club buy 200 shares of Medivation at $19. We did, and in September 2012, it went to $100 a share and split 2-for-1. Now we own 400 shares, and the stock is …Read more. Shake It Up Dear Mr. Berko: I don't want to miss out on the next Chipotle or Panera Bread. So I decided to buy 500 shares of Shake Shack in my individual retirement account at $51 right after it came public at $21 in January. Its restaurants make great …Read more.more articles
The Other Side of Tenopah
Dear Mr. Berko: We have two questions: You suggested a reader watch your columns for high-yield convertible bonds and preferred stocks. Our paper stopped printing your column, so we don't have access to investments paying 9 percent or better. We have $400,000 in a conservative stock trust fund yielding 3 percent or $12,000 in dividends. And until next month, we are earning $20,000 annually from a 5 percent, $400,000 CD (also in our trust) for a total income of $32,000, which pays our mortgage, taxes, cable, insurance, auto and utilities. We also have a fine income from business interests that cover our other living and entertainment costs.
We would like to invest $220,000 of our $400,000 CD in high-yield bonds and preferreds at 9 percent to earn $20,000 so we'll have the $32,000 to cover our above expenses. Please recommend 10 to 15 issues we could buy.
Our next question concerns another solar boondoggle. Our neighbor, a former Illinois legislator with Washington connections, told us that Nancy Pelosi caused the Energy Department to loan $1.3 billion for a solar energy project in her home state that will employ 300 people including her husband's brother, Ronald Pelosi. Is this true? My sister and I would appreciate your comment. — SH in Waukegan, Ill.
Dear SH: My dad used to say, "Ninety-five percent of the rumors we hear about political influence and graft gives the remaining 5 percent of political rumors a bad rap!" That's why I defined politics years ago as two words: "poli," a large number, and "tics," bloodsucking parasites. Your neighbor doesn't have his innuendos straight, and his spoutings are pure balderdash, according to one of the few members of Congress whom I trust.
Here's the other side: This solar project is in Sen. Harry Reid's state of Nevada, and the amount of money is $737 million. And this is not a loan but a federal guarantee to investors putting up the money. It's called the Tonopah Solar Project and won't cost taxpayers a penny unless Tonopah defaults, at which time the Department of Energy makes the investors whole.
Nancy Pelosi has nothing to do with Tonopah, which was approved by the DOE in September of 2011. The group that proposed the project is Pacific Corporate Group (PCG). It seems to me pure happenstance that Nancy's brother-in-law, who doesn't know bupkis about solar power, joined PCG's board in April of 2011 as a "special" consultant. Tonopah's $737 million will employ 45 people permanently, while the remaining 255 people will be employed temporarily to build the facilities. And PCG tells us, "We expect to create more than 600 direct jobs on the project site." The operative word here, of course, is "expect." But there are no politics involved, so everything is transparent and above board. However, $737 million is lot of dough to build a windmill in the Nevada desert.
It's sad that the Fed's low interest rate policies are forcing so many retired folks to invest large portions of their assets in risky, high-yield securities to maintain their standard of living. But I don't see you and Sis in that class. Perhaps Congress will consider a "Senior CD Program" to help needy retired folks increase their CD incomes. This could be financed by eliminating some corporate welfare programs, reducing oil, gas, farm and export subsidies, cutting back on various business and foreign loans plus a few billion dollars in pork spending.
But I won't recommend various high-yield investments because I'm not comfortable with the responsibility of replacing 50 percent of your CDs with high-risk investments. You need the assistance of a knowledgeable and experienced money manager. That professional can help you safely improve your 3 percent portfolio yield to 5.5 percent, producing $22,000 in annual dividend income rather than $12,000, which still leaves you $10,000 short for your home expenses.
This professional might also recommend investing just $110,000 of your $400,000 CD in a dozen high-yield issues with a 9 percent return. Now you and Sis will have enough to cover your housing expenses, and you won't have to touch the income from your business interests. Isn't that just ducky?
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at email@example.com. 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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