Market linked cd

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Aug 19, 2009 1:40 am

For those in age/wach/wells have any interest in these market linked CDs with the current market condition it may be a good way to gather assets? Any opinions?

Aug 19, 2009 10:33 am

Maybe you should get some sleep and try to redesign your thoughts into a logical question.

Aug 19, 2009 12:40 pm

They would have been a great idea 4 or 5 months ago.  Most of the ones we offer have dropped their max rate from 5% to 4%, and next month its being dropped to 3%.

Aug 19, 2009 6:12 pm

OK, take it a step further.
Problem: Fixed income buyers, can't find yield. Need to stay fairly short, dont really need the cash flow, most concerned about safety of principal. Solid corporates, 4-5 yr munis, dont offer worthwhile yields, or at least not enough yield for the client to bite.
Solution: Market Linked Structured Products
1. Wells Fargo note linked to a Global Equity Index - 5.5 year term, 100% upside participation to a maximum of 50%. FDIC Insured. Downside is opportunity cost, which right now, is the sh*tty yields being offered
2. HSBC note linked to a Commodity Index (forget which one) - 5.5 year term, 100% upside to a max of 65-70%. FDIC Insurance same as above.
Put 75% into the Global Equity and 25% into the Commodity.
What am I missing? Punch holes in it, come up with a better idea. (just dont suggest high yielding fixed income MF's, not appropriate for risk averse investor in my opinion.)

Aug 19, 2009 6:40 pm

Thats what i think. Like i said in my post, client doesnt need the cash flow.

Aug 19, 2009 7:13 pm

It looks like a decent product fit those who are still skittish about the market but still wants to particpate on the upside. Also wells will be making secondary market so the client isn't locked in 100 percent for the entire duration. The only concern that I have is if I decide to move my clients probably won't be able to transfer this product. Any feedback on that?

Aug 19, 2009 7:49 pm

Why only AGE/Wach/Wells folks...you realize these are available other places too right

Aug 19, 2009 8:05 pm
skbroker:

It looks like a decent product fit those who are still skittish about the market but still wants to particpate on the upside. Also wells will be making secondary market so the client isn't locked in 100 percent for the entire duration. The only concern that I have is if I decide to move my clients probably won't be able to transfer this product. Any feedback on that?



I just moved so for me its not an issue.
But i believe that pretty much wherever you go, particularly with the larger regionals and wires, you can move it. This stuff is pretty portable among firms.

Aug 21, 2009 8:42 am

Portability should not be a problem....my shop had 2 products available for August:


WF - DJ/UBS Commodity Linked FDIC Ins Note- 5.5y; subject to a return cap
HSBC- 50/50 S&P EAFA Linked FDIC Ins Note- 5.5y; subject to a return cap
 
Looks like the same as what you were seeing.
 
I have been showing the equity linked note and have done fairly well.  However there are more than a few people who while not needing current income, are unwilling to give up an income guarantee if they invest in a "CD". 
 
 
Aug 21, 2009 6:24 pm

EXUBS - same products that i had

Aug 21, 2009 10:02 pm

imo, these notes are good to take people's equity money and put it in them.  these are not fixed income replacements.  on 100K, a client could earn $17,300 over 5.5 years in a CD (3.15% yield).  that is real money to 'give up'.  but if you take equity money and buy one of these notes you are giving them a real protection of prinicpal with equity like returns.  say you earn 50% on one of these notes that is like getting 9% a year w/fdic protection. 

 
Don't get me wrong, i love thse notes, and have done a lot of them in the past, these helped me greatly in the last couple years because i protected clients 'equity money' their fixed income kept plugging along providing the interest its supposed to.
 
fixed income is tough now no doubt, but don't jam a client with somehtng because you can't find something now, you must have patience
 
i have also been looking at step up agencies