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Buy This Guaranteed Loss! - From Rbs

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Buy This Guaranteed Loss!

This sort of thing is infuriating:

June 24 (Bloomberg) -- Royal Bank of Scotland Group Plc, JPMorgan Chase & Co. and Barclays Plc are charging fees on some structured notes that equal or exceed the securities’ highest possible yield, as sales of the opaque products draw scrutiny from regulators.

Got that?

The "in english" explanation of the above paragraph is that if you buy these products you are guaranteed a loss.

Now it's entirely plausible for someone to create a product that guarantees you a loss.

What's infuriating is that there are no people sitting in jail for marketing such products to you without a clear duty to disclose that it is impossible for you to make a profit if you buy them.

Of course if they clearly disclosed that fact they might not sell very many of them, would they?

Are our pension funds buying into these products?

“It seems inconceivable that the commission could be more than the potential return to clients,” said Tase, who is now a high-net-worth adviser with First Liberties Financial in New York. “If you are paying more fees than your potential return, as an adviser, I would not be able to suggest that note.”

This guys seems worth hiring, he's a proper expert.

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Guest sillybear2

Maybe they can just sell them to the BoE or Fed, they buy any old crap at over the top prices.

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[Are our pension funds buying into these products?

This guys seems worth hiring, he's a proper expert.

Our pension funds probably ARE these products. No wonder that some people decide, even after looking into all the tax relief possible, they would rather just save up the f...ing (flaming) money themselves. Pension funds often have very poor returns and annuities are pathetic just now.

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I saw this earlier to-day too.

There are very few payoffs from structured products that wealthy people cannot create for themselves at a massively lower cost by utilising simple options, bonds (incuding zeroes) and futures.

I remain astounded that people who have enough "money" to "invest" in these "products" are so silly that they do not understand the basic building blocks required to completely disintermediate the "creators".

The only conclusion that I can draw is that most people who become "rich" do so much more by accident than by design.

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I have always rigorously avoided considering an investment whose description contains any of the following words:

Structured

Securitised

Collaterised

It usually means higher fees, higher losses and smaller gains.

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I have always rigorously avoided considering an investment whose description contains any of the following words:

Structured

Securitised

Collaterised

It usually means higher fees, higher losses and smaller gains.

Yes.

I am not a scientist but I abhor any investment that goes beyond first principles.

I would add "product" to your list.

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Guest sillybear2

I can remember reading a prospectus for a structured FTSE bond a year or two back, you know the type, they shove your money into a 5 year government bond thus guaranteeing the capital then use the interest coupon to purchase an over priced index call option, but this one was different, they were offering 75% of any potential gains in the FTSE but full downside risk, i.e. limited upside but unlimited downside, the marketing speak was great, I had to read it a couple of times to really take in its "you're a complete f****g idiot to buy this" nature. I find it breathtaking that people would invest in such things.

Edited by sillybear2

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[Are our pension funds buying into these products?

This guys seems worth hiring, he's a proper expert.

Our pension funds probably ARE these products. No wonder that some people decide, even after looking into all the tax relief possible, they would rather just save up the f...ing (flaming) money themselves. Pension funds often have very poor returns and annuities are pathetic just now.

it looks to me that trustees of pension schemes (commonly unqualified except in brown-nosing) choose awful products and charges, a bit like amateur BTL investors getting their knickers in a twist over expensive bathroom fittings

one of my old company pension schemes is an exception and all it is is an index fund at v low corporate rate

Edited by Si1

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I saw this earlier to-day too.

There are very few payoffs from structured products that wealthy people cannot create for themselves at a massively lower cost by utilising simple options, bonds (incuding zeroes) and futures.

I remain astounded that people who have enough "money" to "invest" in these "products" are so silly that they do not understand the basic building blocks required to completely disintermediate the "creators".

The only conclusion that I can draw is that most people who become "rich" do so much more by accident than by design.

Pensioners buy them,

My next door neighbour about 5 yrs ago told me he had invested 20k pounds in a Halifax bond for 5 yrs and only got back 15-16k.

It happens all the time, legalised theft.

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Guest sillybear2

Pensioners buy them,

My next door neighbour about 5 yrs ago told me he had invested 20k pounds in a Halifax bond for 5 yrs and only got back 15-16k.

It happens all the time, legalised theft.

Indeed, if they're going to take market risk they'd be better off just buying an index tracker or ETF with low management fee's, at least they get the dividend yield and it's open ended, if the market tanks they can hold on for a while for a recovery instead of being cashed out at a fixed term at the worst time.

Edited by sillybear2

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Pensioners buy them,

My next door neighbour about 5 yrs ago told me he had invested 20k pounds in a Halifax bond for 5 yrs and only got back 15-16k.

It happens all the time, legalised theft.

It does happen way too often.

If governments and central bankers were intelligent, they could exert their massive market power to stop it.

Instead, they fiddle about with the rules and don't bring about change.

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Indeed, if they're going to take market risk they'd be better off just buying an index tracker or ETF with low management fee's, at least they get the dividend yield and it's open ended, if the market tanks they can hold on for a while for a recovery instead of being cashed out at a fixed term at the worst time.

Agree with you fully, however he picked up a leaflet in the Halifax one Saturday morning thats me point.

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It does happen way too often.

If governments and central bankers were intelligent, they could exert their massive market power to stop it.

Instead, they fiddle about with the rules and don't bring about change.

Agree with you also, the govt must get a grip on regulation again and soon...

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Guest sillybear2

Agree with you fully, however he picked up a leaflet in the Halifax one Saturday morning thats me point.

Yup, they just push stuff with fat upfront and trailing commissions, this thing has been going on for years, well before all that boohaha about mis-selling of payment protection. Remember the regulators regard banks f***g their customers sideways as 'financial innovation'.

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The banks and the financial sector have become, over a period of time, institutionally criminal, like the police become institutionally racist and the Catholic Church heirarchy institutionally paedophile.

The boards need to do serious prison time and have their licences revoked until they learn some basic morality.

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Not all products on offer at rbs are that bad they have just brought out a 5.5 year guaranteed bond that offers a return of 30% if the ftse does not decrease so in 5.5 years time if the ftse is the same as the day you buy it or anything above you will get a 30% return.

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Not all products on offer at rbs are that bad they have just brought out a 5.5 year guaranteed bond that offers a return of 30% if the ftse does not decrease so in 5.5 years time if the ftse is the same as the day you buy it or anything above you will get a 30% return.

So where does a 5.5 year put (assuming that I have got your double negative right) on the FTSE trade with premium due in 5.5 years?

I am prepared to bet a large amount of money that it is somewhere north of 30%.

I would not be surprised if it was between 35% and 37%.

My guess is that the firm is short atm (spot and not forward) puts and are hoping that their retail muppets will bail them out of a bad market position at below market prices.

Edited by LuckyOne

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Guest sillybear2

Not all products on offer at rbs are that bad they have just brought out a 5.5 year guaranteed bond that offers a return of 30% if the ftse does not decrease so in 5.5 years time if the ftse is the same as the day you buy it or anything above you will get a 30% return.

That's not an investment, that's something you'd find in William Hill. You'd be better off putting your money into a government bond (or a savings bank, haha, gambling) and buying a 5 year call option, the upside is unlimited should the FTSE return say 50% you get to keep it, the worst that could happen is losing your premium, but that would be less than your lost interest if your capital was tied up in that structured product.

You could even buy a FTSE tracker and along with a protective put option, that's cheaper, more open ended and a bit less binary than the above product and protects your capital, along with offering unlimited upside and dividend income.

As LuckyOne points out, the clever people have done just that and are looking for idiots to take the other side of the trade.

Edited by sillybear2

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That's not an investment, that's something you'd find in William Hill. You'd be better off putting your money into a government bond (or a savings bank, haha, gambling) and buying a 5 year call option, the upside is unlimited should the FTSE return say 50%, the worst that could happen is losing your premium, but that would be less than your lost interest.

You could even buy a FTSE tracker and along with a protective put option, that's cheaper, more open ended and a bit less binary than the above product and protects your capital, along with offering unlimited upside.

I agree completely (ignoring my possible confusion about puts and calls because of double / triple negatives).

In terms of the wholesale versus retail rip-off, exchange traded products are least bad followed by spread betting houses followed by banks.

I am somehwat financially literate and it has taken me over a decade to illustrate the problem to my own family. I am outraged that the system allows people to be ripped off consistently to-day.

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Guest sillybear2

I agree completely (ignoring my possible confusion about puts and calls because of double / triple negatives).

In terms of the wholesale versus retail rip-off, exchange traded products are least bad followed by spread betting houses followed by banks.

I am somehwat financially literate and it has taken me over a decade to illustrate the problem to my own family. I am outraged that the system allows people to be ripped off consistently to-day.

The structured product also robs people of their dividend income, so that's ~3.5% P.A. compounded over 5 years.

So over 5.5 years that's a 20% return assuming nobody bothers to really increase their dividends, so basically they're offering to pay you back your own dividends if the FTSE meets some arbitrary binary level, they get to keep the interest on your capital invested and the option premiums regardless.

Edited by sillybear2

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That's not an investment, that's something you'd find in William Hill. You'd be better off putting your money into a government bond (or a savings bank, haha, gambling) and buying a 5 year call option, the upside is unlimited should the FTSE return say 50% you get to keep it, the worst that could happen is losing your premium, but that would be less than your lost interest if your capital was tied up in that structured product.

You could even buy a FTSE tracker and along with a protective put option, that's cheaper, more open ended and a bit less binary than the above product and protects your capital, along with offering unlimited upside.

As LuckyOne points out, the clever people have done just that and are looking for idiots to take the other side of the trade.

Over time, 80% of banking is about ripping people off and 20% of the time it is about taking large risks and hoping for a large payout.

The rip off part of banking succeeds 99% of the time. The risk taking part succeeds about 40% of the time.

Unfortunately, recent large losses on the small, risk taking part of the business which should be at the expense of shareholders and bondholders has been socialised with all the attendant acrimony which means that the more significant rip off of retail customers by a very large part of the business will not be considered to be material by policy makers for a long time.

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I agree completely (ignoring my possible confusion about puts and calls because of double / triple negatives).

In terms of the wholesale versus retail rip-off, exchange traded products are least bad followed by spread betting houses followed by banks.

I am somehwat financially literate and it has taken me over a decade to illustrate the problem to my own family. I am outraged that the system allows people to be ripped off consistently to-day.

Ok well i am new to HPC & dont have the best og knowledge about the financial markets etc & trying to find out as much info as poss, personaly i thought the 5.5 year bond from RBS was a good one obviously the more financialy astute dont seem to think so though, but yes you are correct rbs are trying to get as much money as possible into the bank.

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Ok well i am new to HPC & dont have the best og knowledge about the financial markets etc & trying to find out as much info as poss, personaly i thought the 5.5 year bond from RBS was a good one obviously the more financialy astute dont seem to think so though, but yes you are correct rbs are trying to get as much money as possible into the bank.

I am new too in calendar terms even though I have posted quite a lot (too much in some people's opinion).

I know quite a bit about a few things and not much about many things.

There is always going to be someone here who knows more about a particular topic than most (ranging from structured products to blue rinses and the impact of ageing on colour recognition).

I hope that you enjoy yourself here. It took me a while (and a few catastrophic mistakes along the way) but I now get more from this site than I give which is a state that most posters can achieve.

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The banks and the financial sector have become, over a period of time, institutionally criminal, like the police become institutionally racist and the Catholic Church heirarchy institutionally paedophile.

The boards need to do serious prison time and have their licences revoked until they learn some basic morality.

Nothing new about that I'm afraid.

When I popped into existence (early 70s) my grandparents prudently opened a savings account for me, and put in £5 or £10 for every birthday and Xmas. Aged 20, I went to withdraw all the savings, and got... £200.

What happened? When they opened the account, it had a good savings rate. Then it quickly dropped to around %1 - this was in the high-inflation 70s BTW. Oh, and there were account management fees as well. This scam has a name, but I can't remember the exact name.

My point being: banks scamming customers is nothing new.

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Not all products on offer at rbs are that bad they have just brought out a 5.5 year guaranteed bond that offers a return of 30% if the ftse does not decrease so in 5.5 years time if the ftse is the same as the day you buy it or anything above you will get a 30% return.

That sounds like a very good deal...

...for RBS

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  • 146 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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