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Junk the Miami bond idea and get Sirius about radio

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Dear Mr. Berko:

I’m a 68-year-old widow who recently sold a house. I have a few small investments worth about $91,000, savings of $12,000 and income from Social Security plus my husband’s pension.

My $91,000 only earns 5.2 percent in dividends. An insurance agent who does my life and health insurance wants me to sell all my stocks and put the money into a 16 percent bond guaranteed by a large real estate investment group in Miami.

My son will be 40 next month. I always give him $500 on his birthday, but if I buy this bond, I can afford to give him even more than cash this time. I was thinking of five inexpensive stocks, buying $200 of each issue from the enclosed list and having the stocks delivered to him. What do you think?

S.S., Boynton Beach, Fla.

Dear S.S.:

In the past few months, several folks have asked me about this 16 percent bond guaranteed by a Miami-based real estate company. With few exceptions, I would not conduct business of any kind with any Miami company. That 16 percent bond deal is a Ponzi scheme; the real estate investment group is a sham.

Your portfolio is in fine fettle, and I wouldn’t make a single change. In other words, forget that crooked bond because chances are you would lose your entire kit and caboodle.

Congratulations on your son’s 40th birthday, but I think you’ve got some priorities all wrong. That shouldn’t be a day for your son’s celebration; rather, it should be a day for your celebration because you’re the one who did all the work. Frankly, I wouldn’t give that 40-year-old lad a cough drop.

Your list is interesting.

Level 3 Communications Inc. (LVLT-$2.65) traded at $132 way back in 2000, when revenues were $1.1 billion and losses were $4 a share. Today revenues are $4 billion and getting better, and losses are just $1 a share. LVLT provides communications and information services with facilities in 27 major U.S. markets and nine European markets. This is a volatile speculation, but it could come out of hiding in a couple of years as impressive growth in new business continues to raise revenues. Good potential but rather high risks.

Vermont Pure Holdings Ltd. (VPS-$2.01) doesn’t float my boat. VPS is in the bottled-water business, and this year it may sell about $80 million of purified water, to which it adds certain minerals, plus natural spring water under the Vermont Pure name. Big deal. VPS hopes to earn a dime a share this year and may be a remote marriage partner for a larger bottler, but it doesn’t even wet my whistle.

Sirius Satellite Radio Inc. (SIRI-$2.38) might have enormous long-term appeal. Revenues are popping, losses are dropping and it has excellent show-stopping entertainment. SIRI has low debt and a huge cash stash, and is just one of two companies that own the entire satellite radio wave spectrum. The potential of SIRI today can be compared to the potential of cable TV 25 years ago. Many of my clients and I own SIRI as a long-term investment.

AXM Pharma Inc. (AXJ-$2.70) sells over-the-counter and prescription medicines in China, primarily for infectious respiratory diseases. AXJ owns 43 licenses to produce OTC and prescription products and has commercialized only six, from which it produces nine products. Revenues in 2003 were $10 million, and AXJ lost $4 million. This company is too inscrutable for my tastes.

Finally, Fiat (FIA-$7.28) is a $55 billion Italian auto and truck manufacturer. Whenever I hear the name Fiat, I have this picture in my mind’s eye of shirts being hand-stitched by little old Italian widows listening to Verdi. Meanwhile, FIA is also involved in publishing, mining, insurance, communications, metallurgy and aviation. Even with all this stuff, FIA can’t earn a profit. With few exceptions, it’s impossible not to love everything Italian. However, FIA has poor cost controls, low productivity and a bloated workforce, and its common stock is one of the few things Italian for which I do not care a whit.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.

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