Structured Products: Unsafe at Any Price

When will people ever learn? Take a look at the excellent piece this morning in the Journal's Money and Investing column about how the structured product market is coming back, after a hideous series of losses for customers.

I am sure structured products can be good for someone, but certainly no individual should ever own them, as they are impossible to price and can almost never be freely traded. These are "talked into" products, totally opaque securities that really can only be sold back to the issuer, and even then they don't want them. Bear Stearns and Lehman excelled in them, and they were a huge part of the problem of this market. They are unregulated and easily abused and they have cost people fortunes.

But it doesn't matter. The government, in its endless wisdom, doesn't even ask for any disclosure on this junk. So they are accidents waiting to happen.

For me the issue is simple: Who would still be dumb enough to think about buying these structured products? As a hedge fund manager I caught on to their lunacy almost immediately when I tried to sell one that should have been up big but was actually down. (It was on regional banks, and the banks were on fire, but the structured index got hammered.)

But they still continue to be sold.

I think this is a revolting development that will only hurt people down the road.

I guess it doesn't matter, though, because we can't defend suckers, and suckers are born every minute.

Random musings: The bank bears never owned up to all of the money that banks were able to raise. Shameless, even as one prominent one called me a buffoon for suggesting that the money could be raised. No accounting for being wrong if you are a professor. Bank of America (BAC - commentary - Trade Now) did raise the money. Wells Fargo (WFC - commentary - Trade Now) did raise the money. PNC did raise the money. It happened; get over it.

At the time of publication, Cramer was long WFC.

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Know What You Own: In Tuesday morning trading, the most active stocks included Bank of America, the Financial Bear 3X (FAZ - commentary - Trade Now), General Motors (GM - commentary - Trade Now)S&P Depositary Receipts (SPY - commentary - Trade Now), the Financial Bull 3X (FAS - commentary - Trade Now), Citigroup (C - commentary - Trade Now) and Regions Financial (RF - commentary - Trade Now).

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