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Dear Mr. Berko:

Dear T.S.:

Here are some critically dangerous, implosion-prone, high-yielding issues, the dividends of which exceed 13 percent. I and two others wiser than I believe that the recent selling in these issues has been in excess of what is reasonable and in sympathy to related issues the prices of which deserved to be much lower.

On a risk scale of 1 to 10, with the smallest number measuring the lowest degree of risk, I would ascribe a “13” to each of these issues. However, there’s a caveat – two analysts whom I’ve known for years, one from Merrill Lynch and the other from Goldman Sachs, believe these issues may have lasting life and lasting dividends, and would recommend them in small doses.

RAIT Financial Trust 7.75 percent Series A Preferred (RAS-A-$10.70) matures at $25 a share on March 19, 2009, pays $1.94 and yields 18 percent. The company offers debt financing options to the real estate industry as well as originating and investing in mortgages.

NorthStar Realty Finance Corp. 8.25 percent Series B Preferred (NRF-B-$13.25) matures at $25 on Feb. 2, 2012, and pays a dividend of $2.06 with current yield of 15.5 percent. NRF originates, acquires and structures real estate loans secured by income-producing real estate.

Anthracite Capital Corp. 8.25 percent Series D (AHR-D-$13.25) matures on Feb. 12, 2012, at $25, and the $2.06 dividend yields a healthy 15.5 percent. AHR is managed by BlackRock Advisors and purchases portfolios of commercial-backed mortgage securities and issues bonded debt backed by these assets providing new capital for the real estate industry.

iStar Financial Series G (SFI-G-$13.75) matures on Dec. 19, 2008, at $25, and the $1.91 dividend yields 13.9 percent. SFI provides custom financing to high-end private and corporate real estate ventures.

Note that each of the above preferred issues has a short maturity, and that the difference between the current market price and the maturity value creates a “yield to maturity” which is significantly higher than their current yields.

The common stock of CapitalSource Inc. (CSE-$9.67) provides investors with a 24.8 percent yield, a portion of which is nontaxable because it is considered a return on principal. CSE provides capital to small and medium-sized businesses.

Penn West Energy Trust (PWE-$27.98) acquires, develops and owns oil and gas properties in Canada. PWE’s dividend of $4.01 equals a 14.3 percent current return.

Harvest Energy Trust (HTE-$22.37) engages in the exploration, production and sale of natural gas and oil properties in Canada. HTE’s dividend of $3.52 yields 15.7 percent.

Allied Capital Corp. (ALD-$18.43) is an investment firm specializing in buyouts, acquisitions and recapitalizations for small to medium-sized businesses. The $2.60 dividend yields 14.1 percent.

Ares Capital Corp. (ARCC-$12.57) is a business development company that specializes in acquisitions, recapitalizations and leveraged buyouts. The $1.68 dividend yields 13.4 percent.

If you purchase 100 shares of each of these issues, they will cost you just about $14,000 with commissions, and they should pay $2,200 in dividends over the next dozen months. That’s a current yield of 16.1 percent. Don’t cherry-pick.