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TheStreet Open House

Income-Oriented ETFs

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 (The Fred Report) -- Lately, we have been traveling and giving seminars and one consistent question has been what sort of investments look the best to provide income this year. In this article, we will look at some of the income-oriented ETFs. Our belief is that the markets are moving away from "safety and income" as propounded by the bears, to "income with possibilities for growth."


First, we look at a weekly chart of TLT (Barclays 20 Year Treasury Bond iShare) -- the biggest US Treasury ETF which tracks the price of the 20-year treasury. We can see the yield is around 2.70% and that there may be a topping pattern being formed to its price. The only real positive here is that the stochastic has become oversold, so we will watch for a rally - but is there anything that looks more appealing?

Next, we show a weekly chart of LQD (Investment Grade Corporate Bond iShare) -- this IS more appealing than TLT. This is a much stronger pattern that has hit recent new highs, and has a higher yield of around 4%. Here at the FRED Report, we have been advocating switching money from TLT to LQD for some time. LQD could continue to advance, and the yield fall, as fear continues to come out of the marketplace.

Last but not least, we look at Preferred Stock ETFs, represented here by PGX (Powershares® Preferred Portfolio ETF). The chart on PGX is attractive and the yield is over 6%. It looks as if fear is starting to come out of the marketplace, and if that is the case preferred stocks ought to do well. One of our concerns has been that rates could rise just a little - enough to hurt treasuries and utilities, but not other instruments. As fear comes out, some spreads will narrow. Should this occur, preferred stocks could do well.


Fred Meissner is founder and publisher of The Fred Report. Fred is a CMT and past President of the Market Technicians Association (MTA). He recently left Merrill Lynch's Market Analysis Department and Sector Strategy Department to form The Fred Report.�A detailed bio is here:Fred Meissner.

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