Comments on: Thumbs down on Capital Series Australia

By: Skip

Skip — Mon, 23 Mar 2009 08:42:41 +0000

Simply pointing out some of you’re comments are not factual.

By: Dean Morel

Dean Morel — Mon, 23 Mar 2009 00:55:52 +0000

Skip, I have no motives except an honest review of this product. I have no relationship with CBA and no issue with them in general. Are you able to say the same?

If you are a financial advisor then why are you not willing to provide your name and company details?

IT DOES not state the disappearing yield clearly enough for most retail investors. I know this as many have contacted me to say thanks for pointing it out.

My point about total control is correct. In the CBA offer you are restricted to their dates. With an index fund you have control over entry and exit times, you can dollar cost average, sell part at any time etc etc.

No intelligent retail investor in the world could think this was a good deal. Only financial advisors and CBA could think this is a good deal as they make money at the expense of investors. Which are you Skip?

By: Skip

Skip — Mon, 23 Mar 2009 00:33:42 +0000

It’s a good thing that you’ve pointed out the opportunity cost in an explicit manner. This is definately worth taking into account (although given your obvious subjectivity I’ll check the math myself).

With regard to disclosing the yeild, you might want to re-read the offer documents. I know we all love a bit of bank bashing but it states pretty clearly on p.4 Part 1 that it may or may not pay coupons (with reference to section 1.7 for more explanation). In Pt.2 p.3, section 2.2 it states clearly with regard to this issue of the product “coupons are not payable for either strategy 1 or strategy 2″.

Any one reading this will no doubt start questioning your motives if you make incorrect statements.

Your final point about TOTAL control. We live in uncertain economic times. You invalidate you entire point suggesting “Total control” exist anywhere at any time. There is a cost involved: too high or too low is relative to the need of the investor. It seems this product is attempting to provide certainty in uncertain times (for some people / organisations & some of their portfolio).

By: Dean Morel

Dean Morel — Sat, 14 Mar 2009 04:19:12 +0000

The issue with this offer is that you’re paying an incredibly high fee for very limited protection. The current yield on the ASX 200 is around 7%, so that is your annual fee for the protection, which as I pointed out in the post is almost worthless. IIRC the yield/fee was around 5.5% when I originally posted the article.
The second major issue is the deceptive nature of the PDS and marketing material. CBA went to pains to hide the fact they were keeping the yield.

You don’t need outperformance. Go for the ASX200 index fund and get capital growth plus yield plus TOTAL control over the timing.

By: Skip

Skip — Thu, 12 Mar 2009 21:47:47 +0000

In regard to the comment on 1st Dec 2008, why is outp erformance the major issue. It appears the WFC is the result of an obsession with “out performance”. What if you don’t want to lose money but you need to invest & get a reasonable return i.e. the return required to meet your objectives. If you’re not chasing the Holy Grail of “Out Performance” then these type of offers fullfill a part (I stress “a part”) of any reasonable investment portfolio. No, not for everyone but suitable for part of some portfolios.

By: Dean Morel

Dean Morel — Wed, 03 Dec 2008 04:28:59 +0000

Frank I can only assume you are not being completely honest. If you have read my article I fail to see how you can not know what this has to do with the accumulation index.

Your question about where is the accumulation index alternative totally misses the point. Of course there is no directly comparative product available, that is the whole point of structured products. To make something of no value available and charge for it.

Think outside your box and ask whether there is any real value being offered. The answer is no. If you come to any other conclusion then I suggest you’re letting financial compensation or other biases interfere with your thinking.

Investment loans over charge. There is no need to be considering a capital guarantee over exactly a 5.5 year time frame at this point. If you advise clients then do the right thing and recommend they buy an index fund or similar product.

By: Dean Morel

Dean Morel — Mon, 01 Dec 2008 00:32:17 +0000

Hi Frank
Thanks a lot for your informed comment.
I not sure how you drew the conclusion that I misunderstood the product, when I did not comment on the detailed structuring of the product.
I’m also not sure where I gave the impression the ASX200 includes dividends. It absolutely doesn’t and my main point was that CBA is hoping investors think that it does and at no point do they point out that investors won’t be getting the dividends.

All of the above is mere detail. The bottom line is this product guarantees (except if someone can show me the upside) under performance to the accumulation index over the next 5.5 years in all circumstances, except the very unlikely situation of the index being around 30% lower in exactly 5.5 years!

It is irrelevant that other products are worse, except in that most structured products are terrible investments for retail investors.

How can your or anyone say this is a fairly decent offering? I see nothing decent in it, unless investors have the opportunity to participate in outperforming the ASX200 index by more than 30% (ie the amount of dividends they’ll loose). As volatility is currently high the IV on options will mean CBA is likely to pay a high price for those calls, reducing the chances of any outperformance.

Can anyone point me to a page in the PDS that shows how investors may outperform?

Cheers
Dean