Q-I’m 79 and may die before my wife, who is 66. I have four similar accounts with four different brokers, so if I pass on first, she will be able to compare advice from four professionals. I have enclosed my statements (value $430,000) and would appreciate your thoughts on my investments.
A-You’ve got to be dumber than a one-eyed Arctic camel. Four brokers means four headaches for your wife if you are thoughtful enough to die before she does. You wife doesn’t know borscht about the market. So what’s she to do when Broker Bob suggests a $15,000 investment in the Danish Strudel Fund and Broker Bill says it’s rotten and suggests Jon Simpleton’s Mexican Taco Fund?
Too often, a broker’s advice can conflict with the client’s best interest, especially if she is a widow. And that lovely lady you leave behind will have to juggle conflicting opinions of four eager commission salesmen. That’s not good!
Meanwhile, your four inchoate portfolios are really a disparate hodgepodge. At 79 years young, I wouldn’t order a two-minute egg for breakfast nor own cyclical stocks. Economic cycles always take longer to complete than one expects, and your $88,000 positions in the steel and housing industries don’t float my boat.
If you must own these issues, lighten the load and consider some of their convertible preferreds, which have current yields between 8 and 9 percent. Earn an attractive yield while waiting for a those industries to recover.
Your sizable investment in that high-income government fund is second in stupidity only to your larger investment in that lifetime government mortgage fund. I can’t believe you’ve owned those torpid funds since 1987 and watched your principal erode and your income decrease every year. This doesn’t speak well of the four brokers upon whom you rely.
Your investments in electronics, computer and capital goods issues, some of which are well chosen, make my molars itch. These are aggressive growth issues, and in my opinion, their volatility exceeds your risk tolerance. At 79, you cannot depend upon principal growth to produce spendable funds.
Your portfolios must be considerably more conservative. They must have considerably stronger emphasis on income growth and considerably less emphasis on principal growth. Your mix and meld of investments must change and be replaced with dividend growth issues that aim to triple your portfolio income in a dozen years.
Q-Your article on Pacific Telesis was well done. While I can’t disagree with your facts, I can put them in a different perspective that might lessen your enthusiasm. I have a successful manufacturing business in Taxifornia employing 68 people and will relocate to New Mexico in March because my business costs will decrease by 31 percent.
Unfortunately, 59 people will lose their jobs, but I won’t have to put up with the countless, idiotic regulations devised by funky public interest groups and pocket-padding politicians that make my business life miserable.
You indicate Pacific Telesis (PAC-$56) will, by January, split into two companies: PAC Cellular and PAC Wireline. I strongly doubt this will occur because of two public interest groups called Toward Utility Rate Normalization (TURN) and Public Advocates Inc.
A-Thanks for your eight-page letter. I verified your comments, and I’m sorry to say they are true.
TURN is a huge, aggressive paperwork machine that cranks out myriad of letters each month to the Public Utility Commission, legislators and ratepayers. TURN is run by spirited citizens, lawyers, union leaders, social workers, college students, teachers, etc., who persuaded the commission to throw cold water on the Pacific Telesis split.
TURN demands that 9 percent of the spinoff proceeds be given to ratepayers because their monthly phone bills contained the seed money that developed Pacific Telesis’ cellular system. And unless Pacific Telesis agrees to a 9 percent giveup figure, TURN will keep the split in the courts for as long as it takes.
Public Advocates Inc. is another silly group of activists with too much time on their hands. Public Advocates has petitioned the Public Utility Commission requesting that Pacific Telesis double its commitment to provide low- or zero-cost phone facilities for low-income groups who can’t afford private phone service.
Public Advocates also wants Pacific Telesis to provide $5 million a year in advertising money for an “aggressive multilingual outreach” program to bring phone service to low-income, non-English speaking Californians. If this is not forthcoming, Public Advocates will delay the spinoff in the California courts until an agreement is reached.
Anyhow, you’ll find the business climate in New Mexico a lot more sensible and with a lot less hassle. The phone company there is U S West (USW-$47), and its recent alliance with Time Warner could make U S West an exciting stock. Just thought you’d like to know.
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Malcolm Berko welcomes questions and comments. Write to him at P.O. Box 1416, Boca Raton, Fla. 33429.
