Manages Parisian Family Office. Began Wall Street, 82. Founded investment firm, Native American Advisors. Member, White Earth Chippewa Tribe. Was NYSE/FINRA arb. Conservative. Raised on Native reservations. Pureblood, clot-shot free. In a world elevated on a tech-driven dopamine binge, he trades from Ghost Ranch on the Yellowstone River in MT, his TN farm, Pamelot or CASA TULE', his winter camp in Los Cabos, Mexico. Always been, and will always be, an optimist.

Thursday, October 06, 2005

Perfect for Clients of Big Brokerage Firms.........

Oct. 3 (Bloomberg) -- Suppose you wanted to invest in hedge funds and your principal was guaranteed by the Federal Deposit Insurance Corp.? At first blush, this sounds like an easy way to anchor a risky investment within a safe vehicle. Two federally insured certificates of deposit (CDs) are being sold that are linked to the return of a hedge fund index maintained by Hedge Fund Research, Inc. of Chicago. One is offered by HSBC Securities USA, a unit of Europe's largest bank. The other is sold by Bear Stearns Cos., the New York-based securities firm. (..) There are a few catches with the principal guarantees on both CDs. Although Bear Stearns says it intends to maintain a secondary market for the CD, early redeemers would receive the lower amount in a bid-ask spread. The guarantee is only good up to $100,000 and only if you hold seven years to maturity. There's no minimum interest with either product. Both certificates only pay if the return of the underlying index --the HFR U.S. Global Hedge Fund Index (HFRXGL) -- is above an ``initial index level equal to the closing price of the index on the month the CD is issued,'' according to the Bear Stearns CD's terms. Then there are the expenses. Unlike a standard CD sold by a bank, Bear Stearns investors are charged a monthly fee called an ``adjustment factor'' that reduces the return of the index by 1.8 percent annually. (..) Mike Dubis, a certified financial planner with Touchstone Financial in Madison, Wisconsin, said he was troubled by the fact that neither certificate pays interest or dividends annually. ``I do not like what I'm seeing,'' he said. ``It's expensive, confusing, illiquid, no dividend inclusion, tied to a poorly managed index and psychologically confusing to investors. I would not allow any of my clients to buy this product.'' (.. )
Expensive, confusing, illiquid, no dividend inclusion, tied to a poorly managed index and psychologically confusing...Sounds like they've created the perfect product for clients of big Wall Street Brokerage firms! The sheep don't know what they buy, they just want to believe they have a shot at making half a buck. Layers of fees abound to the delight of the marketing guru's who put these products together. Wall Street once again going to the bank with slick advertising. The beat goes on.

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