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Selling Blue Chip and Microsoft

Berko bashes bonds and broker advice to sell blue chips
Published: December 9, 2012
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The current 92-cent dividend yields 3.40 percent and may continue to grow modestly. But all the hype about 8, Surface and a smartphone is much ado about nothing. Come back home Bill Gates!

There's a possibility the Dow will take a short-term dive of 10 to 25 percent. But that's not a reason to sell your swell utilities and the “blues.” Yes, they'll fall when the market falls, and in the 28 years you've owned those stocks the market had a dozen big corrections. Guess what? All those issues still pay good dividends, most increased them annually and their market values always came back higher.

There's virtually no risk to your portfolio's 3.4 percent income.

Your charming broker must be tarred, feathered, rendered unable to reproduce, X-branded on both cheeks, banished from the brokerage industry, then forced to enlist in the French Foreign Legion as a fluffer. His recommendations are felonious, reek of self-interest and couldn't pass a smell test in a slaughterhouse sewage system.

Investing $228,000 in government bond fund will be injurious to your health and wealth. Almost three years of record-low rates have increased the potential for an epochal decline in bond prices. Yields are so low today that even a slight increase would devastate your principal value. For example investing $228,000 today in 20-year treasuries would yield 2.4 percent. If yields rise to just 2.90 percent in two years, the market value of the 20-year bond would tumble 17 percent to $189,000. That's not protection, that's stupidity! Even legendary Bill Gross, who runs the Pimco Total Return Fund, believes that the soon-to-come inflation and higher rates will “burn bonds to a crisp.”

Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775, or email him at mjberko@yahoo.com.