This Day On The Street
Continue to site
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

ETF Safety in the Eye of the Beholder

NEW YORK ( TheStreet) -- If you tune out the noise -- Spanish bond yields, Greek elections, U.S. job weakness, China "hard landing" -- simplicity can guide intelligent investment decisions. Here are three potential ideas for ETF enthusiasts:

1. Safety in emerging-market sovereign debt. For example, emerging-market sovereign bonds are clearly better than comparable U.S. Treasuries. We can debate European contagion risk until we are blue in the face. Yet the iShares Barclays 7-10 Year Treasury Bond Fund (IEF) is distributing 1.85% annually whereas Powershares Emerging Market Sovereign (PCY) is delivering 5.25%.

The reality that the Federal Reserve and the central banks of the world endeavor to create inflation (a.k.a "reflation") only makes things less attractive for the safe- haven darling of U.S. government debt. Traders may try to eke out a bit more capital appreciation from IEF. That said, PCY provides 3.4% more yield and the collective debt-to-GDP ratio for the emergers in PCY versus the same ratio for the U.S. or for Europe will soon redefine the concept of bond safety. (Note: PCY is also dollar-hedged, reducing the currency risk associated with today's "strong dollar.")

2. Below 10 P/Es in foreign markets. It's true that I have virtually no equity exposure to foreign stock ETFs. Without a "black swan" opportunity, I am not going to buy or hold onto assets that fall below and stay below 200-day moving averages. (Note: Review the commentary at this link to understand the way in which I protect ETF portfolios with stop-losses, hedges and non-correlated assets.)

That said, emerging markets (particularly China) represent the engine of global growth. Were it not for a dependency on exports to Europe, would emerging stocks via Vanguard Emerging Markets (VWO) really trade at a price-to-earnings discount of 26% when compared with Vanguard Total U.S. Stock Market (VWO)? How about VWO trading at a 24% price-to-book discount when compared with VTI?
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $117.81 0.00%
FB $105.45 0.00%
GOOG $750.26 0.00%
TSLA $231.61 0.00%
YHOO $32.94 0.00%


Chart of I:DJI
DOW 17,798.49 -14.90 -0.08%
S&P 500 2,090.11 +1.24 0.06%
NASDAQ 5,127.5250 +11.3820 0.22%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs