TAKING STOCK: The Volker Rule and Direct TV

Dear Mr. Berko:

I have followed your column for over 30 years and don't know of any columnist, financial or otherwise, who has lasted so long. My father-in-law, who now lives with us, remembers your column in the Clearwater, Fla. newspaper in 1978. I have two questions. I'm 58 and have contributed the maximum amount to my IRA every year, and today it's worth $222,000. I think I've done well (statement enclosed) managing this myself. I would like your opinion on buying 200 shares of Direct TV. I have looked closely at it and think it's undervalued and might be a good long-term investment. Next, a good friend who is an executive at one of the large banks here is very upset about the Volker Rule and has asked me as well as several of our friends to write our Congressman and object to it. What is your opinion? Thank you in advance.

HT: Durham, N.C.

Dear HT:

I remember your father-in-law who retired from the Clearwater Police Department. He was a classy gentleman and eschewed the "bully tactics" enjoyed by too many of his corpulent colleagues. He was also a superb marksman who taught me how to shoot a pistol.

You have done well and avoided the menagerie of high cost, low performance mutual funds, annuities and proprietary products that are the bread and butter of today's brokesters. And I like Direct TV (DTV-$49), which provides digital quality video and CD quality audio to homes and businesses under the Direct TV and SKY brands.

DTV's satellite dishes serve 20 million subscribers in the U.S., plus 8 million subscribers in South America, and those numbers should continue growing. Since 2002, revenues have grown from $9 billion to $30 billion this year. Earnings have been consistently strong, and the share price has tripled in that time frame.

Reuters, Ned Davis Research and Market Edge have "buy" recommendations on DTV, as do analysts at Big Box Brokerages, suggesting a medium term target price of $68 predicated on earnings of 5.31 in 2013. And as we continue to dumb down, TV viewership will continue to rise, and DTV's earnings will continue to ratchet higher.

This looks like a no-brainer, so hop on the bandwagon with Warren Buffett, Vanguard, Invesco, Growth Fund of America and other big names who agree with you.

Paul Volker preceded Alan "The Mumbler" Greenspan, who preceded Ben Bernanke as Chairman of the FED. Greenspan was a "camera- loving buffoon," who was often wrong but never in doubt. Bernanke is a sweet guy but over-sensitive to politics of power. And Vokler, all 6'8" inches of him, is a straight-shooting son-of-a-biscuit, who knew when he was right and would stick to his guns.

The Vokler Rule, a righteous rule, is a section of the ill-conceived Dodd-Frank Wall Street Reform and Consumer Protection Act, which was passed by the House in July of 2010 and is to be in force this July. The Rule prohibits banks and their affiliates from using depositor's money to trade and profit for their own accounts and restricts a bank's ownership of hedge and private equity funds. The reasoning behind the Rule is that banksters must not use federally insured public funds to engage in their for profit transactions. Vokler recognizes the fact that the disingenuous, venal, pinched-face, pinstripe suit ubermen, who run the nation's banks cannot be trusted to act in the interest of the depositors.

The loudest objectors to the Vokler Rule are the banks that lost hundreds of billions of our money and would have gone belly up if not for TARP (our money too) funds. The political heat to overturn this Rule is scorching the halls of Congress, and the line is 70/30 that it will be rescinded.

I wouldn't write that letter, and I think your father-in-law would give you the same advice. Today's banks have lost their "raison d' etre:" to help families buy a car, add a room to their home, open a checking account or finance a small business. Our banks have become monstrous, hungry crocodiles, patiently basking in the sun, waiting for a depositor's missed payment to snap its jaws.

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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: Fri, Jun 1, 2012

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