indicators suggest the recovery is far from robust.
For all of those reasons and more, I’ve counseled caution and patience when it comes to investing. But it doesn’t mean I’m recommending you sit in all cash. There are select asset classes, sectors, Exchange-Traded Funds (ETFs) and stocks that I feel you can buy with confidence. So this week, I’d like to profile a few.
Here Are Some Safer Fixed-Income Alternatives for Today’s Market
It’s no secret that investors are starved for income in today’s market. You can blame the Federal Reserve, which has declared financial war on savers by pledging to peg interest rates to the floor until kingdom come!
You could chase junk bonds because they offer higher yields. But that means you’re taking on significant credit risk. You could buy emerging-market bonds, also because of their higher interest rates. But then you’re taking on the risk that those countries’ stocks, bonds and currencies will suffer from slowing global economic growth.
Now, what I like to stick with are shorter-term, high-grade corporate bonds, bond funds or ETFs. I believe that some corporations are in better balance-sheet shape than many sovereign countries! To get started, you can check out some of the offerings that iShares has at this Web site: http://us.ishares.com/home.htm. (Search for “Fixed Income” ETFs.) [Related: Barclays 20+ Year Treasury Bond Fund (NYSEArca:TLT), Barclays 10-20 Year Treasury Bond Fund (NYSEArca:TLH), Barclays Short Treasury Bond Fund (NYSEArca:SHV), iShares 10+ Year Credit Bond Fund (NYSEArca:CLY), Barclays Intermediate Government/Credit Bond Fund (NYSEArca:GVI), Barclays 1-3 Year Credit Bond Fund (NYSEArca:CSJ), Barclays Intermediate Credit Bond Fund (NYSEArca:CIU)]
I also like the fact that strategies you couldn’t take advantage of in the past — such as plays on the shape of the yield curve — are now open to individual investors. You can thank the proliferation of fixed-income ETFs, which are opening up a world of new opportunities.
Meanwhile, we’ve seen a nice run in other higher-yielding plays such as Master Limited Partnerships. These energy-focused “MLPs” transport and store natural gas and petroleum products, and pay out handsome dividends with the cash those activities generate.
The good thing is, they make money no matter what is happening with the underlying commodities. After all, it doesn’t matter if gasoline costs $2 a gallon or $5 — companies still need to get crude oil from oil fields to refiners who can turn it into gas!
Are There Any Stock Alternatives To the Usual Stuff Wall Street Peddles?
The answer is yes … you just need to know where to look! This isn’t the kind of market in which you want to just buy the S&P willy-nilly. That’s because it’s being artificially inflated with cheap, printed money in Europe, the U.K. and the U.S.
The problem with markets driven by quantitative easing (QE) — that is, money-printing — is that they don’t just stall out when central banks turn off the taps. They collapse utterly.
We saw that at the end of QE1 (March 31, 2010) and then again at the end of QE2 (June 30, 2011). The QE2 gains, which took eight months to rack up, went up in smoke in just two weeks last summer!
Plus, as I mentioned earlier, this is a market that’s still fraught with big macro risks. The debt crisis in Europe isn’t going away. The United States’ own balance sheet is getting worse, not better. And it’s unclear how much longer bond investors are going to put up with Washington giving them the shaft!
If you’re stuck holding lousy stocks that were rising on nothing other than cheap money, and one of these crises erupts, you’re going to get crushed! So your first step is to use an impartial ratings tool like the Weiss Watchdog service, to get ratings and ratings changes on key stocks you’re interested in. You can go here to sign up and get 10 free ratings: http://www.weisswatchdog.com/.
Then, I’d consider investing in the select, targeted opportunities — in sectors like restaurants, health care, and so on — that I’ve identified. Naturally I can’t share specific names or ticker symbols here. That wouldn’t be fair to my paying subscribers.
But if you’d like to join them, and learn much more about my big-picture worldview and how we’re making money from it, check out Safe Money Report by clicking here. I trust you’ll be glad you did!
Until next time,
Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Nilus Mattive, Claus Vogt, Ron Rowland, Michael Larson and Bryan Rich. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaMare based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Andrea Baumwald, John Burke, Marci Campbell, Selene Ceballo, Amber Dakar, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.
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