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My Structured Product Pick for June 2020

by , 19 June 2020
My Structured Product Pick for June 2020
It's very hard to make sense of markets right now.

On the one hand, it's crystal clear the economy is in a mess. Unemployment is even higher than the worst of the Global Financial Crisis of 2008. The damage done by lockdowns cannot be easily undone.

On the other hand, governments have pumped unprecedented amounts of money into the system and the market seems to be on an unstoppable rise. Just last week Fed Chairman, Jerome Powell, announced the US Federal Reserve isn't “even thinking, about thinking, about raising rates”. The so-called “Dot Plot” shows us rates will be close to zero in the US until at least 2022 at least!

Many believe that the market is due for another pull back, me included, however I ask you to remember 2010 when almost no one believed that the worst was over. If you wait too long to buy back in you may miss out entirely. We have already seen a massive recovery.

If only there was some way to participate in the upside, if the market runs higher, but still be protected if a fall occurs.

But wait, there is!

That's exactly what my pick for June does. It's called the Enhanced S&P500.

Today's structured product pick has the following features:

1. It's based on the pure S&P500
2. You will earn 105% of any upside and it's UNCAPPED
3. It has 30% soft capital protection
4. It is totally offshore and based in US dollars
5. All costs are included so the returns you see above are exactly what you'll get

This may be confusing to those new to structured products so let me go through some of these features in greater detail.

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It’s based on the pure S&P500
 
The S&P 500 is an index of the largest 500 listed companies in the US. We chose the US because it’s the best performing large developed economy in the world. American companies have dominated global markets for decades and I see no reason this will change.
 
In addition, the US implemented massive stimulus packages early in the crisis making it more likely that they can weather the downturn better. The Fed is absolutely set on achieving maximum employment and listening to Powell they are totally unconcerned about the monetary policy impact on stock markets.
 
They are happy to force stocks into a bubble so long as employment comes down in the short-term. 
 
You will earn 105% of any upside and it’s uncapped
 
After 5 years you will get 105% of the increase in the index. This is uncapped, meaning that there is no limit on your potential upside.
 
So, you won’t miss out no matter how high markets may rise. In fact, you are guaranteed to outperform even in the strongest bull market.
 
Let me give you an example:
 
Let’s assume you invest $100,000 in the product.
 
If the S&P500 index level rises 50% over the next 5 years you will receive $152,000 back in your hands when the product expires. You will get slightly more back than the index! 
 
30% soft capital protection
 
If the index is not down more than 30% after 5 years, then you will get all of your investment back in US dollars. If it is more than 30% down, you will get the same return as the index.
 
Let’s put that in context, if the S&P500 fell 30% from here, it would be lower than it was at the worst point of the recent crash. It would then have to remain there for 5 years for you to lose money!
 
This sort of index performance would be worse than anything we’ve seen since the great depression! And even then, given the way markets function these days the comparison is not valid! 
 
It is totally offshore and based in US dollars and the costs are included
 
This is simple enough to understand. All returns are in US dollars. This is a fully offshore product so South African’s would have to use their offshore allowances to invest. But given the recent appreciation of the currency this seems like an advantage.
 
At the time of writing we’re hovering around R17 to the dollar. Having strengthened from above R19.00 (and considering South Africa is still a junk status borrower) having a fully offshore, capital protected S&P500 investment seems like a winner to me.
 
The guys at Rand Swiss will happily organise your FX transfers at a deep discount to other providers. As a Money Morning subscriber, you can expect to get the best rates, just you tell them I sent you.
  
 
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Every time this event happened the price of Bitcoin soared more than 29 times!
 
It happened in 2012...It happened in 2016 ...
And it just happened again!
 
 
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All costs are included so the returns you see above are exactly what you’ll get
 
There is nothing for free in the world and if it sounds too good to be true it usually is. So, let’s have a look at how this product can guarantee outperformance of the S&P500 on the upside AND give 30% downside protection on the downside.
 
There are a few things you need to know about structured products.
 
Firstly, you will not be able to receive dividends in line with the S&P500.
  
You’re investing only in the price level. For me this is not an issue, because the additional 5% performance and capital protection will usually easily make up for this dividend difference. Also, remember if we go into really tough markets, there is a good chance many companies will cancel their dividends. Your product will be unaffected in this situation.
 
Secondly, this product is essentially a note created by an AA rated international bank. That means it holds a FAR BETTER CREDIT RATING than the South African government.
 
The difference is you do take on the banks credit risk instead of the risk of investing in the underlying companies. This means should the bank go belly up you potentially could see some haircut on your profit.
 
But also remember, the credit products are safer than equity products in terms of a liquidation event. So, while the banks shares could go to zero, your investment likely would not (even in the event of liquidation).
 
So, while you’re not getting diversification across companies, you are getting a MUCH safer asset class.
 
Finally, there are no additional costs like brokerage, management, fees, advice fees etc. these are all included for the broker as a distribution fee. What you see is what you get!
 
If you’d like to find out more about this specific product send an email to support@randswiss.com and I’ll get back to you.
 
Viv Govender,
Rand Swiss, Wealth Manager
 
P.S: This simple strategy beats ANY investment hands down - and to claim R5,190, R2,517 or even R1,141 instant payouts, simply add me to your contacts...


My Structured Product Pick for June 2020
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