Dear Mr. Berko: Please tell me what is a 10.5 percent Steepener certificate of deposit. My broker wants me to buy a $25,000 piece and tells me it is insured by the Federal Deposit Insurance Corp. He says I can probably get a much better yield on Steepener CDs than conventional CDs. He thinks it can average 7.5 percent over the next 10 years. Please explain this to me. He also recommends that I buy 400 shares of Ralcorp that makes all sorts of food products for grocery stores, restaurants and institutions. Would you buy this? — S.M., Ann Arbor, Mich.

Dear SM: I have a simple philosophy about investing. No matter how attractive it appears, no matter how good the rate or strong the guarantee, if I don't understand how it works or if its moving parts are difficult to explain, I kick it in the shins (or some other body part) and scoot away. I've heard of a Stepford wife but not a Steepener CD. So I called my favorite source of esoterica, Guru Bob, who runs a multibillion hedge fund from his Boston office tower and in one word he said: "forgetaboutit!"

"In order to understand this thing," he told me, "you need an engineering degree from Georgia Tech, a law degree from Harvard, a PhD in theology from Yale Divinity School and a masters in statistical analysis from MIT." Holy Moses, Mary and Moe, I've got a fever already.

Anyhow, Guru Bob said Steepener CDs are like Rube Goldberg contraptions with more moving parts than Rubik's Cube. For instance, the CD about which you asked has a one-year 10.5 percent guaranteed interest rate. After the first year, the interest rate is based on 10 times the difference between the 10-year CMS, or constant maturity swap rate, and the two-year CMS rate, or positive yield curve, as observed two business days before the start of the quarter. But, if the two-year CMS rate on the observation date is greater than the 30-year CMS rate, or negative yield curve, no interest is paid for the entire quarter.

And while this thing is FDIC insured, there are some complicated risks including, but not limited to: loss of interest for a significant period of time, credit risks and market risks, because if you need to sell this contraption before maturity, you're going to have a hard time locating another sucker. Frankly you'll need a superpowered Cray computer to figure out what this abomination is really worth.

And, by the way, that FDIC guarantee is only valid if you hold this quirky CD to maturity. The usual commission costs for a $25,000 Steepener CD ranges between 2 percent and 4 percent. So if I were you, I'd tell your broker, "stuff it."

But I do like his Ralcorp Holdings (RAH-$65.45) recommendation. In fact RAH is the company that I'd like most to be stranded on a deserted island with. RAH, which just bought Kraft's Post cereal, produces private-label cookies, nuts, cracker, snacks, dressings, jellies, syrups, sauces, bakery goods, frozen foods, griddle products plus ready to eat hot and cold cereals. RAH is Nutcracker, RyKrisp, Bremner, Carriage House, Medallion, Ralston, Post and other brands that have grown revenues in 1998 from $580 million to $2.6 billion this year, net income from $31 million to $90 million, tripled book value and improved return on equity by more than 50 percent in the past 10 years. Proof of this good pudding is the stock price, which was $18 in 1998 and $63 today, a point away from its 12-month high of $64.

RAH is a magnificently managed with only 26 million shares out and good prospects for the future. The trailing 12 months share earnings are $5.30 so it trades at a very reasonable price-to-earnings ratio of 11.7. Meanwhile Credit Suisse, Lehman Brothers, Stifel Nicolaus, Argus and Reuters have had a "buy" rating on RAH and Value Line believes the shares could trade in the mid-$90s in the coming few years. I like this $2 billion market cap company that surprisingly has a low institutional ownership. It's held up well in this stinky market and I suspect it will respond rather nicely when the Dow begins to gain strength again. Even though it doesn't pay a dividend, I'd buy 400 shares in a Michigan minute. By the way, I know your broker. We competed against each other in handball tournaments during the mid-1960s and I never beat the guy.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, FL 33429 or e-mail him at [email protected]. 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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