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Dear Mr. Berko:

Dear P.W.:

I think the Dow Jones industrial average might be one big bump away before leveling off, and that bump could bring the averages down to a level between 7,000 and 7,500. There are still tens of thousands of investors whose trillions of dollars are locked up in the portfolios of thousands of evil hedge funds. These evil hedge funds are holding huge positions in collateralized mortgage obligations, credit default swaps, lettered stock, interest rate swaps and other specious equities that they, like kids with baseball cards, trade among themselves at predetermined higher prices. Hedge funds sold these packages at a profit to other hedge funds, which sold them at a higher price to other hedge funds, which sold them at a profit to other hedge funds … and on and on until there were no hedge funds left standing.

Now thousands of hedge funds are bloated with common stock, mortgages, restricted stock, auction-rate securities and private debt/equity securities clinging to their portfolios like angry, festering boils. They can’t be sold, because they’re illiquid, because their hedge funds can’t borrow more money and because the realistic values are deep underwater.

These hedge funds can’t sell those trillions of dollars of assets among themselves, because every one of their portfolios is stuffed with similar abscessing assets. But when this overripe boil pops, it’s going to spew putrid, yellow pus that will create a temporary financial tsunami. The blowout could last a day or two or three, claiming 1,000 or 2,000 points. But when it settles, the Dow will begin to repair itself in a steady and orderly fashion. It will happen. But it will happen when you least expect it!

Very high-yield closed-end funds could have some very speculative appeal. I will list five of them. But I have zero to little faith in their survivability. These issues should only be bought by politicians, serial rapists, lawyers, pedophiles, lobbyists, satellite radio advertisers and vampires. So if you are on that list, take a look at the following:

First Trust Strategic High Income (FHI-$4.43) has a 49 percent distribution rate and no leverage.

First Trust Strategic High Income II (FHY-$5.45) has a 46 percent distribution rate and no leverage.

Highland Credit Strategies Fund (HCF-$5.74) has a 40 percent distribution rate and no leverage.

RMK Multi-Sector High Income Fund Inc. (RHY-53 cents) has a 40 percent distribution rate and no leverage.

RMK Advantage Income Fund (RMA-78 cents) has a 37 percent distribution rate and no leverage.

But if you’d consider investing in a classy high-yield fund, I could comfortably recommend Franklin Templeton Limited Duration Income Trust (FTF-$7.88), which has an 11.2 percent distribution rate and is managed by Christopher “Topher” Mulumphy.

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