SPEAKS: Mohamed El-Erian

Posted on October 10, 2022 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Mohamed El-Erian, Allianz’s chief economic advisor just opined that the U.S. is heading toward a recession that was “totally avoidable” amid ongoing concerns about inflation and economic stability. 

“I fear that we risk a very high probability of a damaging recession that was totally avoidable,” El-Erian told CBS’ “Face the Nation,” arguing that the Federal Reserve has made mistakes that will “go down in the history books.” 

“One is mis-characterizing inflation as transitory. By that, they meant it is temporary, it’s reversible, don’t worry about it. That was mistake number one. And then mistake number two, when they finally recognized that inflation was persistent and high. They didn’t act. They didn’t act in a meaningful way,” El-Erian said.  

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Do You Have These Horrible Investments in Your Portfolio?

Posted on April 14, 2015 by Dr. David Edward Marcinko MBA MEd CMP™

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Beware Structured Products and Annuities

By Michael Zhuang

Principal of MZ Capital Management

[Contributor to Morningstar and Physicians Practice]

Recently, I had a new client. As part of the on-boarding process, I examined her old portfolio and found some things I didn’t recognize.

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Cusip Symbol Description Return
25190A104 N/A Deutsche Bk AG London BRH Ret Opt Secs Lkd Ishare MSCI Mexico Capped -21.15%
25190A203 N/A Deutsche Bk AG London BRH Ret Opt Secs Lkd Ishare Euro STOXX 50 Idx -26.60%
90273L815 N/A USB AG London BRH Notes Five 15 -22.30%

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Structured Products

What these products have in common is they don’t have a ticker symbol, meaning they are not publicly traded securities. They also have weird descriptions and they all lost a lot of money.

I called Fidelity (my custodian firm) to find out what they were and how I could get rid of them. I was told that they are structured products created by the bank(s) to shove into their clients’ accounts (The managing “advisor” works for UBS).

That rang a bell! My very first job was a financial engineer for a French bank – Societe Generale. My job was to create structured products that had appealing features and made the bank a lot of profits. Now, that I finally see them in action from, the client side of the equation; I am not proud.

Annuities

But, these structured products are not nearly as bad as an Allianz annuity that a client bought from an insurance agent “friend” a while back. He bought the annuity eleven years ago for $150-k, and over the years, saw it steadily increases in value to $189-k.

Then, there came a time when he needed the money. So, he called to cash out and was shocked to discover there was a $62-k surrender charge. In other words, he was able to get $127-k back. I subsequently called Allianz on his behalf to find out when the surrender charge would end and was told there was no end! In other words, there would always be a huge surrender charge.

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insurance

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What the Heck!

So, what in the heck does that value of $189-k really mean, when every time you want to take out the “value”, you have to pay a hefty ⅓ surrender charge?

Alas, Allianz explained the client can annuitize and take the amount out over ten years (or twenty years,) during which no interest will be accrued.  So, they will take your principal -or- they will take your interest, either way they screw you.

More:

Assessment 

Do you have structured products or annuities in your portfolio? Don’t know – Find out, now!

Conclusion

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