As if there already wasn't enough at stake during this year's election, what with the Democrats wholeheartedly pushing for full-on socialism, investment bank Julius Baer has decided to make it even more interesting.
The bank is pitching its rich clients on a way to bet on the U.S. election, selling as much as $40 million of structured notes tied to large American companies hinging on which party will hold the White House next year, according to Bloomberg. In theory, you pick the note that corresponds to the winning party and you should be able to profit.
The bank is selling "Democrat Victory" notes that include names like Ford and Walmart, while its "Republican Victory" notes include names like Google, Amazon and Citigroup. To us, there doesn't seem to be much of a difference between these portfolios, which seem to be more of a marketing gimmick.
The bank oversees 422 billion Swiss francs and intends on "wading into the debate" about the political drivers of our current market rally. And while structured products to play the election may seem like an odd idea in the U.S., they are big business in Switzerland, where they brought in 94 billion Swiss francs in the third quarter alone.
Martin Raab, a Zurich-based senior portfolio manager at Asset Security Trust said: “I am sure that other issuers will shortly come up with some similar thematic baskets for their retail clients.”
The notes have a term of one year and pay out the performance at maturity. They have entry costs between 1.28% and 1.4% and are more expensive than a typical ETF. "Structured products use derivatives to track the performance of an underlying asset," Bloomberg notes.
Strategists continue to keep President Trump's policies in focus as we move closer to the election. Jefferies Group strategists recently wrote that industries like healthcare and financials would see "quite significant changes" if a Democrat wound up winning the election.
Raab also took exception to some of the baskets, questioning why Amazon would be in the Republican-themed basket, especially since the company just lost a cloud computing contract with the U.S. government. He also points out that a Democratic administration likely wouldn't cause outperformance in names like Coca-Cola.
Vontobel Holding AG sold similar notes to predict the 2016 election. More than 80% of the firm's customers bet on Hillary Clinton.
And most importantly, we hope no one spoils this for Julius Baer and reminds them that no matter who wins, it's Fed policy that is truly catalyzing the insane mania behind today's market.