Dear Mr. Berko: I have an account at Dean Witter & Co. and felt lucky in May to buy 500 shares of the Merrill Lynch 8.625 Percent Series 8 Preferred Stock with a good 8.625 percent yield at the initial public offering price. And I didn't have to pay a commission. Well, several months later my 500 shares, which cost me $12,500, were trading at $18 and I had quickly lost $3,500. I was concerned but didn't think Merrill would go out of business so I called to buy another 500 shares because the yield of $18 was almost 12 percent. When I asked the broker what he thought, he said it was dangerous and didn't think I should buy more shares. He even suggested that I sell the 500 I had already purchased at $25 per share. When I asked him what the commission would be to sell that stock (I've never asked about commission before) he said the cost would be about $245.

Well, that sounded like a lot of money too me, almost 3 percent, so I figured I'd call Merrill Lynch & Co. because it was their stock. The Merrill broker was vague on whether or not I should sell and wanted me to visit with him to discuss it. But he said it would cost me $257 to sell the stock, so I called my Dean Witter broker and sold the stock through him. Now that it is selling for $20 and yields 11 percent, I wonder if I did the right thing. Do you think Merrill will stop paying the dividends on this preferred stock, or do you think I should buy it back? — R.T., Aurora, Ill.

Dear R.T.: The Good Lord must have a special place in his heart for fools, which is probably the reason he made so many of them. I'd rather feed my hand to a woodchopper than pay Dean Witter & Co. or Merrill Lynch & Co. a $250 commission for a 500-share transaction when Charles Schwab will sell the whole shebang for $12.50.

In this difficult market you need to be a smart investor, so move your account to Schwab or Ameritrade, Scott Trade or Muriel Siebert. If you make just one trade a month you will save thousands of dollars a year in commission costs. Only a real moke would pay Merrill a twentyfold increase in commissions, which the brokerage industry calls the "ultimate hustle."

Your Dean Witter broker gave you lousy advice and charged you $245 to hear it. Cheese and crackers got all muddy; those 500 Merrill shares now trade at $20 with a delicious 10.78 percent return. So I'd advise you, quick as a bunny, to repurchase them from Charles Schwab. It will cost $10,000 plus $12.50 commission plus a $5 to $9 in add-on costs for FCC, DSL, ICC, and DEA charges plus shipping, handling and insurance.

I'm going to give you an absolutely guaranteed maybe (there are few stronger guarantees) that Merrill will continue to pay all the interest due on its 8.625 percent preferred. When John Thain and his Goldman Sachs toadies began too infest Merrill Lynch & Co. they had an inkling of how troubled the waters were. They were wisely advised in September 2007 to immediately jettison some $29 billion in assets but scoffed and snickered at that advice.

Now Thain and his toadies wish they had listened because those assets are bringing about $8 billion less today than they would have had they been sold last September. Merrill is in big trouble because the "$80 billion in excess balance sheet liquidity" bragged by Thain in late 2007 was probably a number he pulled out of his nose. It "ain't" there. So Thain and his Goldman dilettantes are relegated to picking apples from the Merrill barrel and selling them on the cheap.

Working at Merrill today must be like biting into a urinal cake and the dissonant chorus of angry voices from its boardroom sounds like skirling bagpipes. But Merrill must prevail. The company's preferred dividend obligations total $270 million.

So Thain's next move should be to eliminate the $1.40 dividend on Merrill's common stock ($1.4 billion), which is equal to five years of all of its preferred dividend payouts combined. And Merrill will meet its preferred dividend obligations and Merrill will meet them on time. If Thain fails to pay its preferred dividend obligations, Merrill might as well close its doors because the company will be the laughingstock of the investment community.

So buy another 500 shares of the 8.625 percent preferred. Its 10.78 percent dividend yield is your silver lining in Merrill's dark cloud. But for the love of Mike, Mary, Mark and Martha, be a smart consumer and use a discount broker. It must be downright and outright humiliating to allow yourself to be suckered into a commission of 50 cents a share when Charles Schwab will do it just as well and just as fast for 2.5 cents a share.

But if you don't mind being half a sucker, then ask your broker for a 50 percent commission discount and insist that he put it in writing.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, FL 33429 or e-mail him at malber@comcast.net. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

COPYRIGHT 2008 CREATORS SYNDICATE, INC.

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