.bodytext {float: left; } .floatimg-left-hort { float:left; margin-top:10px; margin-right: 10px; width:300px; clear:left;} .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 12px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 12px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 12px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} tr.d0 td { background-color: #ccccff; color: black; }
Dear Mr. Berko:

Dear B.R.:

When knights were bold in the days of old, and medieval kings passed through a village, their advisers would cast coins on the streets for the unwashed, the rabble, the ruck and peasantry. This largess purchased good will for the king and stilled the grumbling and disfavor among the common herd. It was good for the local economy; commerce prospered temporarily as the new coin was spent creating a short-term demand among the butcher, the baker and the candlestick maker, the tinker and the smithy. However, a year later the villagers began to grumble again as prosperity began to wane.

And so, too, the $1,200 bounty per family proposed by President George W. Bush and authorized by Congress in this election year will temporarily still the grumbling. This “splurge” will place billions into the pockets of consumers and certainly jump-start the economy. Still, that’s like giving Typhoid Mary an aspirin so she can return to the kitchen and cook a few more meals.

The real problem is that the consumer is broke, busted, tapped out, and his piggy bank is as empty as Mother Hubbard’s cupboard. His home is mortgaged to the hilt, and in many instances the money he owes on his house exceeds its value. His credit cards are maxed out, he has personal loans at Beneficial and Household Finance and debts at GMAC and Ford Motor Credit, plus his credit union has him nailed to the cross. He’s two months behind on his cell phone and power bills, and he’s delinquent at Sears and Macy’s.

And in the October, November, December quarter, consumer spending increased 1.4 percent, but consumer income grew by less than 0.5 percent. Making matters even worse, unemployment unofficially exceeds 5.5 percent and is headed higher.

I know it’s bad luck to be superstitious, but when our government starts to provide alms to the hoi polloi (that’s us), it’s an admission that the economy is in worse shape than Washington is willing to admit. Though the $1,200 douceur per family will certainly be spent faster than one can say “three sore small toes” thrice and quickly, it’s only a Band-Aid in place of a necessary surgical procedure.

This national bonus basically robs Peter to pay Paul, and the $120 billion infusion will have about as much long-term impact on our economy as the advent of another fly at a slaughterhouse. This short-term benefit puts the economy on steroids, the results of which should last till the November elections. But the larger question is: “What can be done to increase consumer demand, and what new arrows does Congress have in its quiver when the steroidal effect wears off?” Another splurge?

Though I’m not comfortable with a second splurge, I will tell you that I am comfortable with Bank of America Corp. (BAC-$42.58) for its masterstroke purchase of Countrywide Financial Corp. Still, like most Americans, I was gabberflastered and gagged that Countrywide’s derelict and departing chief executive officer, Angelo Mozilo, who earned a salary of $2 million a month, also got a $100 million, tax-favored severance package. I almost cried!

But the genius of this purchase is that many of those Countrywide mortgages will be refinanced, and BAC will earn a bleeding fortune in fees and ancillary charges. The $2.56 dividend, which has been raised every year for decades through good times and bad climes, yields an attractive 6 percent and may be raised again this year. The recent upheaval in the mortgage and credits markets has not hurt BAC’s earnings power, and this year’s earnings should exceed $4 a share.

Morningstar’s bank analyst, Ganesh Rathnam, reckons that BAC should reach the $70 level in the next 18 to 24 months. I agree. I would urge you to buy another 50 shares and reinvest your dividends. If you had started a dividend reinvestment program (DRIP) when you bought BAC in 2003, you’d probably have 10 more shares now.

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