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Subject:  Re: Structured products? Date:  2/14/2013  1:16 PM
Author:  globalist2013 Number:  34788 of 36318

The following appeared in my email box just now.

For investors who place a priority on principal protection, but who wish to maintain some exposure to the markets, Market Linked Certificates of Deposit (MLCDs) may represent an innovative alternative in today's uncertain economy. MLCDs offer principal protection when held to maturity (up to $250,000 of which is insured by the FDIC), but also offer potential returns based on the performance of various market measures, such as gold, silver, equities, commodities, or a basket of foreign currencies. Euro Pacific Capital began offering these products to our clients in 2012.

Currently, we are offering four MLCDs for the month of February (each with a minimum investment of $25,000):
1. The first tracks a basket of 10 commodity indices
2. The second tracks a proprietary long/short commodity strategy
3. The third tracks a basket of four currencies (BRIC) Brazil, Russia, India, China vs. the US dollar
4. The fourth tracks the performance of gold spot price
These products will be open for investment through February 22, 2013. We will continue to offer new products on a monthly basis.

Frankly, I have mixed feelings about this. I’ve got a lot of respect for Peter Schiff (the owner of Euro Pacific Capital). He’s a thoughtful, careful analyst. But the funds his company offers are another matter. They don’t do badly compared to their peers. They just don’t do exceptionally well, which I suspect is how these market-linked CDs would turn out. But I also suspect they will sell well, because investors are getting panicky about what lies ahead for markets, and the drumbeats of 4% investment returns for the rest of the decade are becoming louder.

About these products I’d make the same comment that I did about the Morgan Stanley Euro 50 Stoxx structured product. Consider the underlying investment thesis, and try to see if you can do a knockoff whose risks and rewards you control, not your counter-party.

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