March 17, 2017

Jimmy Cefalo

WIOD-AM

Miramar, FL 33023

RE: What’s Pat Boone doing these days? Your radio ads for “your guy’s annuities”.

Jimmy,

“And it’s guaranteed, just like a CD”. As a matter of fact, it isn’t. The only thing that is guaranteed, “just like a CD” – drum roll, please – is a CD.

The main reason, indeed the only reason, it is not guaranteed “just like a CD” is because CDs have something called the FDIC backstopping them. That means that the Federal Deposit Insurance Corporation has a checkbook issued to them by the United States Treasury to use if for any reason the CD issuer defaults on any of its guarantees. In other words, the full faith and credit of the United States guarantees that any check issued by it will be paid in full in a timely manner.

Yesterday afternoon I also heard you say that you would get “10% the first year and 6% every other year”. As of 3:00 PM Thursday the 30-year Treasury bond was yielding 3.13% while the 10-year Treasury note was yielding 2.52%. 10%? How?

I twice called the number of the issuer and got 2 different answers to the question “Who guarantees the guarantor”? It was a combination of heath agency bonds – I am not sure whether it was an individual state or a health care facility - that made up its guarantee base. One thing for certain. It was not the FDIC.

On a “guarantee” basis and on a “yield” basis it does not pass the bag test. If you have forgotten the bag test, I’ll refresh your memory. You put the deal in a bag. Close the bag tightly. Put the bag in a closet for 24 hours Take it out and open it quickly. Stick your nose in. If it reminds you of a locker room after 2-a-days have Haz-Mat take the bag out  to be cleaned and burned. In an environmentally sensitive manner, of course

If you think Ronnie Lott or Jack Tatum were tough wait ‘til you go one on one with a skinny, bespectacled lawyer from the SEC. Talk about wolverines!

Kevin Smith

PS- Pat Boone? He was a pitchman for an investment scheme. The only thing the Feds left him with was a begging bowl. Look it up.