Index CD may boost returns but add risk

Low CD rates arepushing consumers to think outside the traditional CD box. The result is that a CD that is linked to currencies, stock indexes or commodities is increasingly gaining traction.

Called an index CD, its main appeal is that it’s linked to an index that can potentially boost returns by participating in market rises. So, say you have a five-year CD that’s linked to the S&P 500. If it goes up 30 percent during that time, investors can cash in on that growth when they redeem their CD.

“People do have to grow their money,” says John Rhett, chairman of SunTrust Investment Services in Atlanta, who has seen surging interest in his company’s index CDs. “They’re sitting on nearly zero percent interest rates. So they’re willing to take more risks.”

Firms like Wells Fargo and JPMorgan Chase offer CDs linked to baskets of stocks and commodities. [Read the full article]

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Although stock markets have rebounded sharply since last March, it is unlikely many investors are feeling complacent–not with unemployment rates still steep and nearly every state government facing severe budget cutbacks. Late last week, attention-getting policy decisions by political leaders in the United States and China added further uncertainty to the mix.

At least the most critical risks to the global financial structure have been addressed, you say? Not so, according to two international-fund managers who pay more attention than most to the world’s financial, political, and socioeconomic issues. In the minds of Rudolph-Riad Younes of Artio International Equity (NASDAQ:BJBIX – News) and Artio International Equity II (NASDAQ:JETAX – News) and Oliver Kratz of DWS Global Thematic (NASDAQ:SCOBX – News), there’s trouble brewing.

Warning Signs AboundYounes is dismayed by the response to the global financial crisis that began in 2007. [Read the full article]

Euro:The four-hour trend is short as it is tests the 1.4000 level. Recent attempts to break that level have failed, and have actually instigated relatively strong long bounces. The German IFO business survey numbers showed an increase in overall confidence levels, and that may aid the technical bounce off support. Favor a straddle.

Momentum: The euro trend went short Dec. 3 and has really struggled to show a real desire to break long and hold.

Elliott Wave: Eur/Usd traded lower overnight, starting the final leg of Eur/Usd weakness in a black wave V), that should reach new lows in the near term, now that wave IV) looks to be finished at the 1.4190 resistance zone. The pair could fall down to the 1.3900 zone once the low of a wave III) at 1.4028 is taken out.

Once a black wave V) is finished, somewhere below wave III), we will look for a turning point, as a red wave V will also accomplish a huge impulse wave 1/A at the same time. [Read the full article]

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