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ETF Safety in the Eye of the Beholder

Granted, true value seekers are not content with P/Es of 11 like VWO. That's why you may want to dig a little deeper in your quest. State Street S&P China (GXC) (GXC) recently reported a P/E of 9.3, WisdomTree India Earnings (EPI) last reported a P/E of 9.8 and Global X FTSE Argentina (ARGT) at 9.5. (Note: Again, I am not making "buy now" recommendations.)

3. High-yield corporates hedge against inflation. As much as the gloom-n-doomers (and the Fed) discuss the painful effects of deflation, there's no denying the fact that the U.S. Consumer Price Index has annualized at 2.25% over the last five years. The "Great Recession" may have destroyed net worth as well as wage growth, but "stuff" still costs more. Perhaps ironically, CPI does not really account for soaring health-care and college costs.

So what's needed? In my estimation, one needs a covert hedge against the erosion of purchasing power. With iShares Barclays 7-10 Year Treasury Bond Fund currently distributing 1.85%, iShares High Yield Corporate Bond (HYG) and its annual distribution of 7.35% is a spectacular hedge. Normally, the yield spread is around 4%, but the 5.5% spread over comparable Treasuries means that IEF could lose badly on rising interest rates or rising inflation while HYG would likely hold firm until the norm is restored.

You can listen to the ETF Expert Radio Show "LIVE" via podcast or on your iPod. You can follow me on Twitter @ETFexpert.

Disclosure Statement: ETF Expert is a website that makes the world of ETFs easier to understand. Gary Gordon, Pacific Park Financial and/or its clients may hold positions in ETFs, mutual funds and investment assets mentioned. The commentary does not constitute individualized investment advice. The opinions offered are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial or its subsidiaries for advertising at the ETF Expert website. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert at the site.

Gary Gordon reads:

Real Clear Markets
Jeff Miller
Charles Kirk
On Twitter, Gary Gordon follows:

Jonathan Hoenig
Doug Kass
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