Q: Dear Mr. Berko: I have $30,000 to invest for 12 months in something that is absolutely safe and guaranteed. I can't afford to take any risks with this money. I'm considering a 12-month, 3.9 percent certificate of deposit offered by my broker. Do you have a better and higher yielding alternative that I can consider? He's not charging me any commission to buy the CD, which almost makes me beholden to him, so I'd like an alternative suggestion right away.

My next question is; What do you think of Ben Bernanke, who will be the next chairman of Federal Reserve? Do you think he will continue to raise rates like Alan Greenspan to keep inflation in check? He doesn't look very impressive and I hope he is able to do a good job of running the economy.-- T.G., Raleigh, N.C.

A: Dear T.G.: It just frosts me that many investors believe CDs peddled by a broker are commission-free and are equal in yield to those issued by a local bank. Be mindful when purchasing a CD from a stockbroker that he doesn't work for the Salvation Army. On that $30,000 CD your broker may earn as much as $100 to $150 and the brokerage firm that has positioned the CD in its inventory might scalp another $100 between the raw cost of the CD and the price you paid.

Most brokerages are real sneaky about commissions, which are included in the cost of the products they sell you. They don't want you know what those charges are. So unlike buying 500 shares of Oink Inc., where the commissions are clearly included in the purchase confirmation, you have no idea what the commission costs are when buying a CD. For all you know the broker may buy that $30,000 face value CD at $29,700 and the difference between his cost price and your purchase price represents the commission to the broker and the trading profit to the firm.

You can purchase a $30,000, 12-month CD from Corus Bank, Countrywide, Giant, Nexity and other banks at 4.8 percent and earn $1,440 or purchase a 3.9 percent CD from the broker and earn $1,170. The difference of $270 represents the broker's commissions and his firm's trading profits. Be mindful that banks don't pay their people a commission to sell CDs, so that $270 difference should be put in your pocket not the broker's, which is why the yield is higher at the bank and lower at the brokerage.

"Fed-heads" usually get off to a rocky start when they assume the helm. When William Miller became Federal Reserve chairman in 1978, the economy was rocked, socked and docked by high oil prices. Three months after Paul Volker became Fed-head in late 1979, the U.S. economy fell into a painful recession and 52-week Treasuries were yielding 12 percent a few years later. And shortly after Alan Greenspan became Fed-head in 1987, the Dow melted and crashed like a white-hot meteor, plummeting over 26 percent. But I think (and pray, too) that Ben Bernanke will have smooth sailing when he takes over the post from Alan Greenspan.

The Fed increased interest rates to 4.25 percent in mid-December (13 consecutive increases) raising investors' expectations that the cycle of increases may soon be over. The "Mumbler," as most observers know, always raised rates too soon, overreacted and raised rates too high then underreacted and kept them high for too long. Next he dropped rates but waited too long, overreacted and dropped them too low. I think history may rank Greenspan as one of the worst chairmen in the history of the Fed. I realize this represents a minority opinion, but all great thoughts and ideas begin as minority opinions.

I think Ben Bernanke may make a great Fed chairman. His ego is well-hidden, he speaks understandable English, he's articulate, candid and a warm people-person. While the Mumbler strongly believed inflation was snipping viciously at our economic heels, several key government reports recently concluded that inflation is still a threat but it's nowhere close what Greenspan believed it to be in November and December. Core wholesale prices (excluding energy and food costs) actually fell in October and November. The significance of this is that Ben (I like that name - kinda has a Ponderosa sound to it) won't be inclined to raise rates as Greenspan before him frequently wanted to do.

Bernanke won't get a free ride when the housing and condominium markets begin to freeze, hiss or collapse. Then Bernanke's skills at crisis management will be given the litmus test. He knows that the construction business (glass, bricks, plumbing, carpets, appliances, concrete, lumber, roofing, furniture, mortgage lending, tools, garden supplies, etc.) employs more Americans than any other segment of the economy. So Bernanke might even lower rates to make mortgages affordable and maintain the vibrancy plus the continuity of this market.

Bernanke, unlike his predecessor, is not an ivory tower elitist. He's a Princeton economist who unlike the Mumbler, has many publications to his credit and was once head of the President's Council of Economic Advisers. He's a personable guy whose smile matches his eyes and he won almost unanimous backing by the Senate Banking Committee in the late November. I like the guy and the few economists with whom I enjoy a working relationship think he's a natural.

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

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