Dear Mr. Berko:

My broker has recommended that I buy the 7.2 percent Ford Motor Co. bonds that will come due in June 2007 as a short-term, high-yield investment for an extra $40,000 that I have. What is your opinion on this bond, which sells for a little bit over par? My broker, who says he knows you very well, says that you will agree with this investment. I’ve never bought a bond that wasn’t bank quality, but this yield looks real good.

He also told me to sell a condominium unit I bought in Scottsdale, Ariz., two years ago. It has never been occupied, but I think I may have a $240,000 profit. He thinks the real estate market has topped, prices will stop rising and some prices will begin to fall. His sister owns five condominium units in the same building and she just listed them for sale. Hers were never lived in either, and she bought her units at the same time I bought mine. Can you give me your advice on this, too?

B.R., Durham, N.C.

Dear B.R.:

Yes, I know your broker. I’ve known him for nearly 25 years. He’s a harmless sort of guy, dedicated, not very bright, buys his suits from a guy named Harry, ugly as a Salisbury steak and smokes cigars that smell like the New Jersey Turnpike. But I trust him. He knows he’s not bright, but he’s extremely careful; his clients won’t make big money, nor will his accounts have much risk. His goal is to do what’s right for the client. And because he inherited a bleeding, obscene fortune when he was 27, he doesn’t need to generate commission dollars to pay for his home in Vail, his Porsche, his 52-foot sailboat or his membership at his exclusive golf club. He was my client for 12 years until I persuaded him at age 39 to give up his day job and become a stockbroker.

Now, I’m not a Ford (F-$9.96) devotee, but I feel that the company’s 7.2 percent bonds maturing on June 15, 2007, might be a wise and careful choice. Forty of these bonds would cost you $40,250 plus accrued interest from June. These short-term bonds have a current yield of 7.1 percent and a yield to maturity of 6.71 percent. That’s not bad for an 18-month piece of paper. Yes, the bonds are rated BB-plus (that’s a notch below bank quality), but I feel they are on solid ground. Ford has more than $23 billion in hard, cool, green cash, and the Street believes the company will be profitable this year and in 2006. If cash becomes short, Ford also has the option of cutting its 40-cent dividend or selling its Volvo, Jaguar, Land Rover or Aston Martin divisions.

Yes, these bonds are in the junk category, but I believe, just as your broker believes, that there’s little risk to this issue, and that in 18 months Ford will redeem these bonds without a hiccup. So follow this fellow’s advice quick as a bunny.

I also believe that real estate prices have peaked or are peaking around the nation, and I discussed this in detail with a group of Colorado investors back in early July. I can feel the resistance to higher prices in Boca Raton, Palm Beach, Fort Lauderdale, Tampa, Naples and Miami. I feel the bubble is hissing (it won’t burst) in California cities that begin with “S” and “L” and other cities around the country. As your broker advises, I’d certainly dump that condo you bought in Scottsdale. You bought it as a speculation, and I hear the slowdown in the Arizona market, too.

There are more than 100 good reasons home and condo prices should come down, and you can easily note them on several sheets of paper. However, can you give me three real reasons home and condo prices should continue to rise this year or next year? I doubt it.

The biggest reason for the hissing is that the average American family earns about $40,000 a year after taxes and can’t afford to buy a $400,000 home or condo. The interest, taxes, insurance and maintenance will cost that family more than $2,500 a month or $30,000 a year, which leaves $10,000 a year for food, transportation, etc. This is real tight, and that family would have to sell its firstborn into slavery, rent the garage to a meth dealer and run numbers in the evening to make ends meet. So take your broker’s advice and sell that condo, because the Scottsdale market is beginning to hiss, too.

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

© Copley News Service