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Below is a re-post of a post I did on the topic 08/20/10. Obviously, my opinions on 'structured products' are merely opinions, not exhaustive studies, and they needed to be vetted. But why not save yourself a bunch of highly probably grief and go gamble where the payoffs are much, much bigger and where the downsides are fewer and far more easily understood?

And if you want a clear, simple example of where you could have been looking --since this is a bond board-- why weren't you buying a chunk of Travelport's debt when it was trading low 30's as recently as less than a year ago? The bid is now high 60's, meaning, you could exit --right now-- with at least double on your money in less than 12 months time. No 'structured product' is going to offer you that kind of payoff. However, every one of them is at least as risky. What about adverse, asymmetrical bets (that favor the *seller*, not the buyer) do you not understand?

Stop screwing around looking for pennies on the dollar. Step back from markets and THINK. "Where's the big money trades? Where's the easy money trades?" They are out there by the thousands. All it takes to find a couple of them is a bit of thinking. I watched an interview this morning in which a very ordinary retail investor turned $100k into $41 million in less than ten years.

How? Courage. Persistence. *And* Imagination.


Does anyone on the board invest in structured notes, like reverse convertibles or accelerated return notes, etc?


I've bought some reverse-converts in the past. Rather, I should say I was sold some reverse-concerts in the past. But that was long ago when I was still using a "full-service" broker and letting him guide some of my buying decisions.

Joe would call me up to chat and mention that his company was bring to market a reverse-convert based on the price movement of Apple's stock, for instance, with such-and-such upside features and such-and-such downside protection. On that one, I did make good money, but not as much as if I would have bought the underlying directly, and therein lies the problem with all such structured products. The whiz kids who dream up these things are creating products whose average net-expectancy is negative. In other words, "heads we win, tails you lose". In the case of the Apple reverse convert, when the issuer saw that it was going to have to pay out money, it exercised its call option. Had Apple's stock tanked, I would have been the one taking the hit.

I won't say I wouldn't ever buy another structured product, but it is highly doubtful, because the effort to do proper due-diligence is better spent identifying less complex and less adverse opportunities.
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