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
TheStreet Open House

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

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.
Submit an article to us!
DOW 17,143.37 +11.40 0.07%
S&P 500 2,001.21 +2.23 0.11%
NASDAQ 4,559.1310 +6.3720 0.14%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

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