"Introducing 'Auto-Callable Notes': Wall Street's Latest Scheme To Rip Off Retail Investors"

I saw that ZeroHedge headline yesterday and skipped the story thinking "Why is this news? Someone told me about these wee beasties a while ago." And promptly moved on to wondering what the temperature was in Blagoveshchensk and if there was was time to make a dash before the weather turned.
Then this morning it hit me. No one told me about auto-callable notes.

I read about them. At FT Alphaville. In July.

Here are the first couple paragraphs of the ZH piece:

It's a classic Wall Street bait-and-switch.

Despite the obvious flaws inherent in certain structured products targeted at retail investors - flaws that would become readily apparent to unsuspecting mom-and-pops if they only bothered to scrutinize the fine print instead of blindly trusting their financial advisor - the big wirehouses rarely miss an opportunity to seduce customers with high advertised yields, masking the fact that buyers are virtually guaranteed to pay more in fees than they earn in returns.

The Wall Street Journal highlighted the latest display of this predatory behavior in a story published Tuesday about the latest popular investment trend: "auto-callable notes" tied to the FANG stocks. The notes promise investors a sizable yield, but they can also be "auto-called" - i.e. the note is cancelled and investors are handed back their principle (minus a generous slug of fees) - should the underlying stocks outperform or underperform (the details vary from offering to offering). These note were supposed to help retirees and other retail investors reap any rewards associated with the stocks continuing their record run, while shielding them from the inevitable denouement. Or at least that's what they were told by their financial advisors....

And then I remembered I not only read the Alphaville post but thought enough of it to link to it in July 23's "Structured Products Are Back Baby!":

Back in the day (2005 - 2008) structured products were all the rage in many areas of finance and one we posted on quite a few times was the structured carbon trading biz.
Mainly because the plain vanilla instruments just weren't opaque enough—read profitable for the marketeers—there were some really creative packages being put together.

Top-tick of those halcyon days can be pinpointed as December 3-15, 2007 when, of the 4483 Non-Governmental Organisation (NGO) delegates to the U.N. climate conference in Bali, the largest single contingent was from the International Emissions Trading Association (IETA), 336 strong and fully 7.5% of all the accredited delegates. (a total of 10,000 attendees flew in from around the world because Bali climate)
Good times.

Anyway, that stroll down Memory Lane was triggered by a piece Dan McCrum wrote last week.
From FT Alphaville:

RBC, through the FANG barrier 

One of the products Mr. McCrum highlighted are known as:

"Auto-Callable Contingent Coupon Barrier Notes Linked to the Lesser Performing of Four Equity Securities, 

Due July 1, 2021."

to which the only possible response was:

How can anyone look on this and not weep tears of joy?

That my friends is the highest expression of the marketeers art and makes our former favorite pale in comparison. ...

And, if you are wondering, the low temperatures in Blagoveshchensk next week are forecast to be 5°C (41°F) so I may have missed the season. Decision time.