Aug. 18–As I walk through my supermarket, I see big displays of Coke and other major brands at the front of each row.

I know these companies pay slotting fees to get the best placements, while minor brands are hidden on the bottom shelves in the back of the store.

I even own stock in a company, Source Interlink, that builds and manages the racks around the checkout counter.

If you think Madison Avenue real estate is expensive, you should see how much they charge for putting candies and batteries at your fingertips while you’re waiting to pay.

It never really bothers me that the big brands are bribing the stores to get in my face.

But it does bother me when stockbrokers and mutual funds play the same type of games.

When you ask your broker for the best growth or income fund, you’d like to believe your broker is pushing the one with the best prospects. But in many cases, your broker is pushing the one that pays him the highest slotting fees.

Stockbrokers, like supermarkets, control the customers.

With thousands of funds to choose from, they have to find some way of picking and choosing. Most give preference to their own house brands, which allow them to make money both selling and managing.

Firms encourage their brokers to push their funds first by paying extra bonuses. Supermarkets push house brands all the time.

But brokers should tell you whether they are getting paid extra to push their own brands.

Brokerage firms also charge funds fees to get on an approved list. While brokers can sell any fund, their firms make it easier to sell the funds that are paying them listing fees.

Some funds go further, and actually share the ongoing fees with the selling broker. Many call this good marketing. But you have a right to know your broker is getting paid extra to push a particular name.

Funds and brokers have come up with ingenious ways of disguising these fees.

Brokers don’t like to appear to be taking payoffs, and funds don’t like to look like they have high cost structures, so the extra fees are often hidden in the commissions a fund pays.

Instead of three cents a share, the fund pays the broker six cents. The extra fees get lost in the costs of trading stock, and no one ever has to know the money is changing hands.

Of course, some funds take this practice to foolish extremes, paying higher commissions, called “soft dollars,” for everything from cab service to vacations.

The SEC is starting to talk about reducing these abuses. In time, they will take action. But right now, the best thing for you to do is to ask hard questions and focus on performance.

Peter Siris (guerrillainvesting@hotmail.com) is a New York hedge fund manager.

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(c) 2003, Daily News, New York. Distributed by Knight Ridder/Tribune Business News.

KO, SORC,

Aug. 4–The war on deflation has started. The Fed and the President are committed to do what’s necessary to create jobs, stimulate demand, and get the economy moving.

Their success won’t be instantaneous, but they’re determined. This means interest rates will rise, and bonds sink. It also means people over 40 are probably receiving exactly the wrong advice from their financial advisers.

To learn from history, let’s return to 1979. After a decade when bonds sank, stocks were flat, and rising interest rates choked growth, the Fed declared war on inflation.

Over the next 23 years, it delivered on its promise. With tighter monetary policy and lower deficits, which even became surpluses, interest rates dropped from record highs to record lows. Inflation almost disappeared, bonds surged, and later, stocks followed suit.

But today things have changed. Unemployment is up. Tech has crashed, and the economy is stagnating.

To get the economy moving, the President and the Fed have declared war on deflation. The government is increasing spending, cutting taxes, and printing money.

Progress may be slow, but this government will keep at it until the economy comes roaring back.

There’ll be a cost to these expansive programs. It will come in the form of higher interest rates. Mortgage rates are already going back up. Expensive growth stocks could stagnate. That’s the price of getting the economy moving.

The problem is financial advisers are still telling most people over 40 to keep an increasing percentage of their wealth in bonds and other fixed income instruments.

But if we are in for a period of rising interest rates, this is exactly the place you don’t want to be.

If you are older, sinking bonds and flat real estate will not make you comfortable in your retirement. Instead, consider keeping a higher percentage of your net worth in stocks, especially those that pay good dividends.

They should provide both yield and growth. Companies selling commodities, such as oil and gas, should do well.

Look also at real estate investment trusts with underlying businesses that will strengthen with the economy — retail, apartments, and office buildings. If you want to own bonds, pick those with very short maturities.

You’ll get less income, but you won’t be trapped in them forever.

The new war on deflation will change many investment rules.

Don’t let your investment adviser leave you fighting the last war.

–Peter Siris is a New York hedge fund manager. Web address: guerrillainvesting@hotmail.com

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To see more of the Daily News, or to subscribe to the newspaper, go to http://www.NYDailyNews.com

(c) 2003, Daily News, New York. Distributed by Knight Ridder/Tribune Business News.