Markets: So What SHOULD Investors Buy In A World Fraught With Risk? (TLT, TLH, SHV, CLY, GVI, CSJ, CIU)

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February 10, 2012 2:41pm NYSE:CIU NYSE:CLY

Mike Larson:  In Europe, despite news of what seems like the hundredth Greek deal, default is all but inevitable down the road. In the Middle East, tensions are  ratcheting up in Syria and Iran, with the odds of an Israeli military strike steadily climbing. And here in the United States, many economic


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,

Written By Mike Larson From Money And Markets

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.

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss  Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of  investing, interest rates, financial safety and economic forecasting.  To view archives or subscribe, visit http://www.moneyandmarkets.com/.


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