MarketSafe Gold Bullion CD from EverBank … some thoughts?

http://www.everbank.com/main.asp?idpage=pro_mscd&affid=eb&referID=11808

Ahhh, ain't gold wonderful. Bit not all that glitters is gold.

Take for example, the Everbank MarketSafeSM Gold Bullion CD

***Begin Quote***

A CD made of Gold. Invest by June 20, 2006.
Diversify, seek higher yields, and safely invest in Gold Bullion market returns. You can do it all with the new MarketSafeSM Gold Bullion CD from EverBank®.

This is the latest addition to EverBank's popular line of MarketSafe CDs. You'll enjoy many of the same great features and protections as the rest of the line, including 100% principal protection, market-driven upside potential, no account fees, and FDIC insurance.

A conservative investment with great reward potential, the MarketSafe Gold Bullion CD is a smart new way to invest in the Gold market. 
***End Quote***

It's really has no relation to a CD in the traditional banking sense.

Stodgy old traditional bank CDs pay a paltry amount of interest for locking up your money for some term. This, on the other hand, appears to be a straight gold play combined with a put at the current price at no cost with FDIC insurance?

So they get the use of your money for the price of a put and a call at the current price. Hmmm?

Thus, to the extent that whatever they earn with your money exceeds the cost of the put and call, they are a "winner".
Why wouldn't I just buy the put and the underlying coins myself?

Plus does the FDIC know they are insuring commodity trades?

AND, having worked on the Street, what about trading partner breaks, market discontinuities, and bankruptcies?

In short, all that glitters isn't, imho. 

2 Responses to MarketSafe Gold Bullion CD from EverBank … some thoughts?

  1. Hakim says:

    If one lokks at their:
    MarketSafe CDs Product Term Sheets by Issue Date
    one realizes that in historical terms thier Averages take away 50% 0f the Returns if the market is on the Upside…However, if the market is down one gets the Principle amount back…that is the heavy ‘price’ one has to pay for security…I will collect coins instead

  2. FOT says:

    Greetings –

    On the MarketSafe(r) Gold Bullion CD it may be possible to construct calls to cover the five year term from a retail sense but probably more difficult than it appears. In answer to your regulator question yes they do – and there are a variety of insitutions who have been creating various index-based CD’s for over 20 years. Thanks for commenting though.

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