This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

ETFs That 'Lose Less' Can Earn You More

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (ETF Expert) -- Motivational speakers frequently explain that the Chinese word for "crisis" or "wei-ji," represents a combination of "danger" ("wei-xian") and "opportunity" ("ji-hui"). That said, how much opportunity can be found in crisis after catastrophe after calamity?

For instance, the PIGS (Portugal, Italy, Greece, Spain) have been responsible for staggering levels of market volatility for 24 months. Time and again, one or more of these debt-laden countries have caused conditions many market watchers would describe as chaotic.

Indeed, I have made sure to have negligible direct exposure to European equities for at least the last two years. Even when a number of credible experts began suggesting that enhanced Eurozone coordination in recent weeks has reduced risks, there has been scant evidence for the containment of rising debt yields.

Actually, it gets worse than that. It's one thing to watch the Italian yield curve invert and discuss the unsustainable path for Italy with a 7.4% 10-year note. It's another thing to recognize that the costs of intra-bank lending via increasing three-month LIBOR rates and the inability of banks to use government bonds as collateral are creating a liquidity crunch. (Review, "3 Reasons Why Stock ETF Investors Must Tread Lightly.")

In other words, just when we thought that U.S. recession risks were fading, investors have to consider the implications of a recession in Europe. Similarly, just when we thought that the recent earnings season had demonstrated the flexibility and sustainability of corporations in the world environment, investors may have to factor in which companies might be the most damaged by European unrest.

While skyrocketing Italian bond yields will send Eurozone policymakers back to the drawing board, the year-to-date results for the S&P 500 aren't all bad. The benchmark remains 12% above the closing lows of October; moreover, the SPDR S&P 500 Trust (SPY) is only down about 1% with dividends reinvested.

Perhaps the question isn't whether the next "euro-plan" will send the Dow up or down 350 points. Instead, investors may need to recognize that the ETFs which lose less during a two-year crisis (and counting) create more profitable opportunities than other asset choices.

Here, then, are the percentage returns for a variety of risk assets -- for Wednesday, 11/9 and for the prior two years:

Losing Less "Key" To Better 2-Year Returns
Italian Bond Crisis 2 Years
(11/9/11)
JP Morgan Emerging Market Debt (PCY) -0.50% 19.48%
PowerShares High Yield Corporate Bond (PHB) -0.77% 18.34%
JP Morgan Alerian MLP Note (AMJ) -2.06% 54.67%
Select Sector SPDRs Utilities (XLU) -2.18% 26.59%
First Trust Morningstar Dividend (FDL) -2.23% 32.99%
Vanguard Consumer Staples (VDC) -2.30% 24.41%
SPDR Pharmaceuticals (XPH) -2.68% 36.00%
S&P 500 SPDR Trust (SPY) -3.69% 16.58%
iShares MSCI All World (ACWI) -4.49% 2.79%
Vanguard Emerging Markets (VWO) -5.49% 2.74%

Stock quotes in this article: PCY, PHB, AMJ, XLU, VDC, FDL, XPH, VWO, ACWI 

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,501.65 -12.72 -0.08%
S&P 500 1,875.39 -4.16 -0.22%
NASDAQ 4,126.9670 -34.4910 -0.83%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs