TAKING STOCK: Texas tea-stained toes

Dear Mr. Berko:

I am a successful corporate lawyer, my husband is an engineer, and together we manage a modest $240,000 collectively in two IRAs, plus $520,000 in combined pension plans at our respective employers. My IRA and pension plan are larger than his. And both of our IRAs own Bed Bath and Beyond shares, which you advised us to buy in March of 2009 at $21.45.

My husband wants to sell the 150 shares of Bed Bath and Beyond in each of our IRAs and take a profit. He thinks "the ride is over" for this stock. I, on the other hand, know more about the market than my husband does and more about Bed Bath and Beyond because we do some legal work for a competitor and believe the stock has a lot higher to go. We have agreed to have you arbitrate this disagreement and will abide by your recommendation.

Also, do you think oil prices will continue to head higher? If so, then do you think I should purchase an oil ETF as a good hedge against the declining dollar? Your soonest response would be very much appreciated.

GS in Cincinnati, Ohio

Dear GS:

I don't remember recommending Bed Bath and Beyond (BBBY-$61) at $21.25, but I do recall meeting you and your husband in early 2009, when one of your firm's partners asked me to visit Cincinnati and consult with two clients. As I recall, your husband told me he has a Ph.D. in chemical engineering from Purdue. In my "book of things," that's mighty impressive. I also recall that you monopolized the conversation and appeared to enjoy walking on his words, and I watched him shrug when you openly criticized his fascinating comments about fuel-efficient cars.

However, it's more likely that you're right and that BBBY still has some smooth miles of road ahead. Revenues for 2012 are expected to grow by 6 percent from $9.4 billion to $10.1 billion, earnings are expected to increase 15 percent from $3.90 to $4.50, and net profit margins may reach a record high of 10.4 percent. The board continues to repurchase its common stock, there are only 233 million shares outstanding, shareholders equity has increased four-fold since 2001, and there's zero debt and nearly $2 billion in cool cash.

Meanwhile, expansion should continue at a brisk pace. BBBY's marketing and merchandising people work smoothly together, their competent financial people govern with helpful cost controls, and management has created a very agreeable corporate atmosphere. There are 16 brokerages with a "buy" rating on BBBY, and the average five-year share price projection is between a low of $110 and a high of $135. Keep the stock.

The price of oil will move higher, or the price will move lower, and for an indefinite period of time, it will also be flat. The price of oil today is determined not by supply and demand but rather by speculative traders at Merrill Lynch, Morgan Stanley, Goldman Sachs, Bank of America, J.P. Morgan, etc., who enjoy undocumented agreements amongst themselves to inflate the price of oil for corporate and personal gain. It's the same Wall Street Gordon Gekkos who suckered the economy into the subprime mortgage mess a few years back.

Americans are driving less than they did three years ago, and we're producing more oil than we did three years ago. Supply has increased, demand has declined, the costs are higher, but Americans are shelling out a buck more per gallon for gas than we did a year ago. Go figure! Once again, it's the legal rape of the middle class by the big Wall Street brokesters and bangsters.

If you wish to get your toes black, then purchase OIL ($27.02). This ETF is linked to the performance of the Goldman Sachs Crude Oil Return Index via the purchase of unleveraged future contracts derived from the West Texas Intermediate (WTI) trading on the New York Mercantile Exchange. Good luck here.

Meanwhile, your congressman may be able to give you some excellent tips on the optimal time to buy or sell this ETF. And a $10,000 contribution to his PAC may provide you with regular and timely trading information.


Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate website at www.creators.com.

© 2012 Creators Syndicate Inc.

Published: Wed, Apr 4, 2012