ETFs

Peng: Fed Tapering to What?

twocents@thestreet.com (Bo Peng) — Thu, 23 May 2013 14:49:00 GMT

NEW YORK (TheStreet) -- Fed Chairman Ben Bernanke's Congressional testimony Wednesday left the market gyrating in schizophrenia and confusion. In his opening remarks, he seemed to emphasize that the recovery is still fragile and QE has been helpful, thus implying continued QE. Equities (SPDR S&P 500 Index ETF), bonds (iShares 20+ Year Treasury Bond ETF), and gold (SPDR Gold Trust ETF) all exploded.

Then, during Q&A he started talking about discussing scaling back asset purchases in the coming FOMC meetings. All markets promptly turned tail and closed in red. In order to parse Bernanke's seemingly self-contradictory remarks properly, it helps to take a step back first and set up the proper context.

Here's how QE is supposed to work: you inject liquidity, or, as in the case of Abenomics QQE (Quantitative-Qualitative Easing), liquidity and base money, into the economy, force up inflation expectation and intimidate people into spending. Never mind the poor folks without means of effective inflation protection, e.g., retirees relying on life savings and workers with little bargaining power. Also see: Stock Tip Truth-O-Meter >> ...

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4 ETFs to Watch When the Fed Speaks

twocents@thestreet.com (David Fabian ) — Thu, 23 May 2013 09:30:00 GMT

NEW YORK (TheStreet) -- It's no secret that the bull market over the last several years has been fueled by the loose monetary policies and aggressive quantitative easing of the Federal Reserve. Investors around the globe closely monitor every word of Fed Chairman Ben Bernanke's speeches in order to divine the next big opportunity in their investment portfolios. Often his remarks have an immediate and profound effect on major markets, which is why it is important to pay close attention to key segments of the economic landscape.

From my own experience watching the markets and trading for my clients' portfolios, I have often seen big moves made in a very short time, based on even the hint of a policy shift from the Fed. These swift swings can be either positive or negative for your portfolio, depending on your asset allocation and response to change. By monitoring these four ETFs you can get ahead of the curve and potentially avoid any long-term pitfalls on the road to prosperity.

Stocks ...

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The Hazards of Dividend-Stock ETFs

twocents@thestreet.com (Stan Luxenberg) — Wed, 22 May 2013 13:41:00 GMT

NEW YORK ( TheStreet ) -- Searching for reliable income, investors have been pouring into exchange-traded funds that hold large-cap dividend stocks.

Favorite choices include iShares Dow Jones Select Dividend , which yields 3.3%, and SPDR S&P Dividend , with a yield of 2.8%.

But the funds may not be as safe as many shareholders think. The problem is that dividend stocks have rallied sharply. Now many command premium prices. ...

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New Emerging Markets Bond Fund Targets Commodity Countries

twocents@thestreet.com (Roger Nusbaum) — Wed, 22 May 2013 11:26:00 GMT

NEW YORK (TheStreet) -- Seasoned ETF investors will be familiar Research Affiliates fundamentally weighted equity indexes as opposed to market cap weighted indexes. The PowerShares FTSE RAFI US 1000 Portfolio was the first fundamentally weighted equity ETF and has done very well since its inception compared to the SPDR S&P 500 .

Fundamental weighting has since been applied to many other equity funds and even a corporate bond fund and the latest fundamentally weight fund is the PowerShares Fundamental Emerging Markets Local Debt Portfolio . Instead of looking at things like cash flow and revenue in the equity funds, PFEM weights sovereign debt by country in the fund on the basis of population, GDP, energy consumption and land. Energy consumption is viewed as a proxy for economic activity and with land the methodology is concerned with a country's natural resources.

The word local in the name of the fund means that bonds owned will be denominated in the currencies of issuance as opposed to U.S. dollars. There are quite a few emerging market bonds funds that only hold U.S. dollar denominated debt including the PowerShares Emerging Markets Sovereign Debt . ...

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ETF Basics Part 3: The Benefits of the ETF Structure

twocents@thestreet.com (WisdomTree) — Mon, 20 May 2013 15:00:00 GMT

This is part 3 of 3. Please click here for part 1, and here for part 2.

NEW YORK (WisdomTree) --There are many exchange-traded products on the market today. But would it surprise you to learn that the term "exchange-traded funds" is actually overused? The truth is that although the term "ETF" is now used as a sort of catchall, in reality, we believe only those exchange-traded investments registered under the Investment Company Act of 1940 ("registered") are truly exchange-traded funds.

Designed to ensure managers act in the investors' best interests, the Investment Company Act of 1940 ("'40 Act") is an important piece of legislation that defines how investments registered under the '40 Act are built and managed....

Should You Quit High-Flying ETFs?

twocents@thestreet.com (Gary Gordon) — Mon, 20 May 2013 10:00:00 GMT

NEW YORK (ETF Expert) -- In 1986, I visited the Philippine Stock Exchange. There were few, if any, computers on the floor. Black markers registered trading activity on a giant whiteboard. The feeling that I came away with was that I had caught a glimpse of an incomplete science experiment. Today, however, a number of frontier economies have upped their level of sophistication. The Philippines recently benefited from credit agency upgrades to its sovereign debt. Direct investment by foreigners has been bountiful. What's more, stock investors have pursued the up-n-comer for greater total return potential. Year-over-year, ETF enthusiasts have garnered roughly 53% from a dedication to iShares MSCI Philippines . That said, EPHE seems to be running on fumes. The Relative Strength Factor score for this exchange-traded vehicle has stayed in the top 5% of all exchange-traded funds for most of 2013, making it vulnerable to a volatile "risk-off" change of heart. Even in the local equities market where one might track the Philippine Stock Exchange Index, the relative strength data have flashed bright yellow warning lights.

Granted, the EPHE is hardly the only overbought ETF on a technical basis, nor is it alone in its questionable fundamentals. Yet, it is one of a select group of unleveraged ETFs that have risen more than 25% in the calendar year. That fact alone may make it ripe for profit takers and short sellers. In truth, downside risks have been largely absent in 2013. The fact that many view Thursday's stock asset stumble as an aberration is reason enough to take a harder look at the year's fastest price appreciators. How vulnerable are they? With the S&P 500 shedding 0.5% on the contemplation of the Federal Reserve slowing the pace of monetary stimulus, the biggest losers did tend to come from the year's highest fliers. The irrepressible WisdomTree Japan Hedged Equity had nearly 46% on the year prior to shedding 1.2% on Thursday. Homebuilders via iShares DJ Home Construction had been up roughly 23% year-to-date before suffering a 1.6% decline. The EPHE gave up 1.9% in the session. It's not uncommon for investors to take profits on ETFs that have far exceeded expectations. The bigger question is, how long should you hold onto the extreme winners that have treated you so well? Are you in danger of falling in love, the way some did with dot-com tech companies last decade? If you were one of the early adopters of a high-flying ETF, do you have an approach for making a graceful exit or will you cling to a misguided notion of hold-n-hope? Hopefully, you have an actual plan for managing downside risk. ...

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Unsupportable Fervor Requires an ETF Wish List

twocents@thestreet.com (Gary Gordon) — Sat, 18 May 2013 10:00:00 GMT

NEW YORK (ETF Expert) -- "I've never seen this in 34 years of investing," quippedTheStreet's Jim Cramer earlier this week. What was Cramer referring to? For the most part, he expressed excitement over the stock market's ability to reward stocks of companies that missed earnings expectations as well as to reward those that beat expectations by not taking profits.

In other words, regardless of what a corporation has already achieved or anticipates achieving going forward, investors are buying indiscriminately. Need proof that everything is a winner? Take a look at a three-year chart involving the S&P 100. In bullish rallies, one expects the majority of stocks in a major index like the S&P 100 to gain ground in an uptrend. The percentage of S&P 100 stocks that climb above and stay above a long-term 200-day trendline might be 70%, 80%, maybe even 90%.

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3 'Tweaks' to Fortify Your ETF Portfolio

twocents@thestreet.com (Gary Gordon) — Fri, 17 May 2013 20:16:00 GMT

NEW YORK (ETF Expert) -- Extraordinary rallies off bear market bottoms are typical. Bullish run-ups in March 2003 and March 2009 registered enviable unrealized gains of 35% and 65% respectively; each advance experienced little resistance for roughly nine to 10 months.

Powerful moves off minor corrections are less typical, if not downright suspicious. Since mid-November, investors in the S&P 500 SPDR Trust have witnessed a soothing 22% ride to all-time highs.

In the last quarter century, you could probably count the number of times on your hand when U.S. stocks traveled a similar vertical trajectory for more than a half year without a significant hitch or pullback. ...

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What's Wrong With the Biggest Emerging Markets?

twocents@thestreet.com (Stan Luxenberg) — Thu, 16 May 2013 15:17:00 GMT

NEW YORK (TheStreet) -- In the years preceding the financial crisis, investors swarmed to the BRICs -- Brazil, Russia, India, and China. But those markets have slipped to the sidelines lately.

This year iShares MSCI Russia ETF declined 8.1%, while iShares FTSE China 25 dropped 6.7%. ETFs from India and Brazil have also dipped into the red. The poor performance of the BRICs is particularly notable because other emerging markets have been thriving. This year iShares MSCI Philippines gained 23.8%, while iShares MSCI Indonesia climbed 16.0%, and iShares MSCI Turkey returned 12.9%.

Can the BRICs regain the lead? Not yet, says James Upton, a portfolio manager for Morgan Stanley. "The BRICs are essentially broken," he said in a talk at a recent investment conference. "They all hit peak growth rates, and they are slowing down." ...

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3 Emerging Market Countries That Are Breaking Out

twocents@thestreet.com (David Fabian ) — Thu, 16 May 2013 10:30:00 GMT

NEW YORK (TheStreet) -- Emerging market countries have been a hot commodity for years, as investors have poured billions of dollars into these economies as a way of diversifying their portfolio. These up-and-coming economies offer many attractive qualities over developed markets, which can include: Lower debt burdens, solid economic prospects, high levels of natural resources and a burgeoning workforce.

Two of the largest exchange-traded funds in this space are the iShares MSCI Emerging Markets ETF and the Vanguard FTSE Emerging Market ETF . Both of these funds invest in a diversified basket of large- and mid-cap companies in several emerging-market countries.

Below are the weightings for each of the top 10 countries in their respective ETF. Also see: When It Pays to Hire a Financial Planner >> Emerging markets peaked at the end of 2012 and have been on a slow descent ever since. Despite the double-digit returns of the SPDR S&P 500 this year, emerging markets have not risen at the same pace as the U.S. I believe that this is largely due to the trend of investors shunning risk assets in favor of more stalwart, defensive and dividend-oriented stocks....

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Global Macro: Economic Contraction Keeps the ECB on Its Toes

twocents@thestreet.com (Andrew Sachais) — Thu, 16 May 2013 10:00:00 GMT

NEW YORK (TheStreet) -- The eurozone proved unable to escape the weak global growth trend, as the region contracted for its sixth straight quarter Wednesday.

Germany was the lone bright spot, but even that country failed to provide positive momentum to the region. The pair below is of CurrencyShares Euro Currency Trust over DB USD Index Bullish. This is, in essence, a tale of diverging central banks.

The Federal Reserve has been a major proponent of quantitative easing and loose policy for the past few years, providing liquidity and boosting investor sentiment. As sentiment has risen, the economy has gradually turned up. Now the talk is how the Federal Reserve is going to exit their continuing rounds of liquidity injections. >>Also see: Youku Swings Violently After Earnings Miss >> ...

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Oil Services Stocks: 12 Holds, 1 Sell

twocents@thestreet.com (Richard Suttmeier) — Wed, 15 May 2013 15:58:00 GMT

NEW YORK (TheStreet) -- So far in 2013, crude oil has formed a trading range between its Jan. 31 high at $98.24 and its April 18 low at $85.61. As a result of this range-bound trading the oils-energy sector became the cheapest of the 15 overvalued sectors, being overvalued by 6.2%.

Back on April 4, I wrote, Oil Services Stocks: Hold 'Em or Fold 'Em? In this post, I profile the 25 stocks in the Market Vectors Oil Services ETF. OIH has also set a trading range down from $45.12 on Feb. 14 to $39.42 on April 17. Today I profile updates for 13 of the oils services stocks. Each of these stocks still have the same ratings as on April 4 -- 12 rated hold and one rated sell.

The daily chart for Nymex Crude Oil ($93.11) shows declining momentum with the 21-day, 50-day and 200-day simple moving averages (SMA) at $92.89, $93.16 and $92.14. My monthly and quarterly value levels lag at $88.34 and $79.66, with a weekly pivot at $93.82 and annual risky level at $115.23....

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G7 Gives Bank of Japan Stimulus the Green Light

twocents@thestreet.com (Richard Cox) — Wed, 15 May 2013 13:43:00 GMT

NEW YORK (TheStreet) -- The G7 meeting on May 11 produced some favorable results for the Bank of Japan, with the final statements essentially suggesting that the group's finance ministers will not openly criticize recent policy moves to weaken the yen.

As part of the Bank of Japan's historic stimulus program, currency devaluation is viewed as an important precursor to building a sustainable recovery in Japan's export-driven economy. At this month's meeting, the G7 reiterated its comments from February, which showed no intention to "target exchange rates."

This opens the door for the Bank of Japan to continue adding to its easing program if current measures fail to generate inflationary pressures and promote visible growth in Japan. Moves in the currency markets are starting to gain wider attention, however, as the USD/JPY has seen forceful moves through the central psychological level at 100. This is the first time the USD/JPY has traded at these levels since 2009, with the yen dropping more than 15% against the dollar (and 13% against the euro) year-to-date. Focusing on Banking Rules ...

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Global Macro: The 'New Normal' in Markets

twocents@thestreet.com (Andrew Sachais) — Wed, 15 May 2013 13:04:00 GMT

NEW YORK (TheStreet) -- Developing economies have been on the offensive, enacting wide-scale easing of monetary policy, which has pushed money into American markets.

While many have cited the lack of economic support as a reason for risk assets to pull back, markets are getting comfortable with the "new normal." The new normal brings with it lower growth measures, around 2% growth in gross domestic product, and overall acceptable, yet not remarkable, economic readings.

For investors, the real importance lies in beating or missing expectations. Markets price in expectations, and whether a company or an economy over-performs or underperforms that measure indicates future price movement. ...

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Global Macro: China's Ripple Effects

twocents@thestreet.com (Andrew Sachais) — Tue, 14 May 2013 12:56:00 GMT

NEW YORK (TheStreet) -- The Chinese economy continues to turn out underwhelming data and show signs of a weak recovery.

Urban fixed investment, a main economic driver, came in weaker than expected Monday, followed by a miss on the Chinese industrial production measure. It doesn't look as if China is in free-fall mode, but recent data haven't been promising.

Also, cash flowing into China on speculation that the yuan has further room to climb could be damaging. The yuan has risen lately, and the Chinese central bank has its hands tied somewhat. If it cuts rates and depreciates the value of its currency, it invites more speculative flows into Chinese property markets, already at record highs. A property bubble could be disastrous for China, but the country needs more growth. Also see: Can U.S. Oil Independence Become Bullish for Shippers? >> ...

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ETF Basics Part 2: Understanding the Differences Between ETFs and Mutual Funds

twocents@thestreet.com (WisdomTree) — Mon, 13 May 2013 18:46:00 GMT

This is part 2 of 3. Please click here for part 1 of 3.

NEW YORK (WisdomTree) -- Even though exchange-traded funds (ETFs) have become fairly popular, we're still somewhat surprised by how often people misunderstand the differences between them and mutual funds. It's natural to compare the two, as they are both pooled investments, but we think that understanding the difference in the way the two are structured and traded may help investors choose the investment type best suited to their investment goals.

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TIPS ETFs May Not Protect You From Rising Rates

twocents@thestreet.com (Roger Nusbaum) — Mon, 13 May 2013 14:20:00 GMT

NEW YORK TheStreet -- Last week we looked at ways to reduce fixed-income portfolio risks for when interest rates eventually start to move higher.

One segment of the bond market not discussed was Treasury Inflation-Protected Securities, which are more commonly referred to as TIPS.

Simply speaking, the par value of TIPS is increased consistent with the reported rate of inflation. TIPS also pay a lower rate interest at initial auction than comparable Treasuries. By holding TIPS, long-term investors benefit from the inflation adjustments and receive regular interest payments. ...

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Institutional Investors Consider the Convertible Bond ETF

twocents@thestreet.com (Gary Gordon) — Mon, 13 May 2013 10:00:00 GMT

NEW YORK (ETF Expert) -- There have been precious few opportunities to purchase U.S. stock weakness over the last seven months. Specifically, the smallest dips have reversed course quickly, always finding a way to grind higher. On the other hand, some exchange-traded vehicles along the more modest rung of the risk ladder have caught the attention of institutional buyers. Consider SPDR Barclays Convertible Securities . This ETF seeks the price and yield performance of the Barclays U.S. Convertible Bond Index > $500M -- an index that tracks U.S. convertibles with issue sizes greater than $500 million. With a slight increase in Treasury bond yields pressuring income assets over the past few days, sellers have pushed the price of CWB lower. However, during last week, CWB witnessed $45 million flow into the fund for a 4% increase in assets under management. The trading occurred on nearly five times the average trading volume. At present, CWB delivers an approximate annual yield of 3.75%. It has also been adept at capital appreciation in 2013. Year-to-date, CWB's total return is roughly 8.25%. Since the November elections, CWB has rocketed higher alongside gains in broader U.S. equities. Technical analysts might be more impressed with the exchange-traded fund's ability to bounce higher on every minor pullback to a 50-day moving average.

Why would an institution that purchases in large blocks pursue convertible bonds in the first place? After all, the annual yield is not necessarily a steal at 200 basis points above comparable Treasurys, at least not with the potential for convertibles to sell off sharply alongside a stock scare. The most likely reason is the pressure that institutional investors face with respect to putting cash to work. Consider the money manager who has waited patiently all year for stocks to correct a modest 5% -- an event that has happened each year in the first five calendar months since 1996. Alas, the market has kept on climbing like the Energizer Bunny on his way to the peak of Mount Everest. The institutional money manager may continue to wait with a higher-than-desired cash allocation, or he/she can look for a middle-of-the-road compromise. I believe that a cautious institution determined that if the market keeps rising, CWB will garner some of that upside; if markets sell off, CWB should not experience as much of the downside. Moreover, the monthly payouts of a decent annual yield could work well if the summertime moves sideways. In other words, someone may have made the decision to participate without chasing. The question that an individual investor may need to ask himself/herself is whether CWB is a reasonable compromise for excess money market dollars. Personally, I would be more inclined to wait for a modest pullback to a price point of $42.1 at the 50-day. What's more, I would be equally cognizant of an exit approach, utilizing a stop-limit loss order near $39.1. When the S&P 500 fell 19.8% from top to bottom in the summer of 2011, CWB dropped roughly 17.8%. That may be more downside risk than a number of income enthusiasts have in mind.

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Protecting ETF Portfolios From the Currency Wars

twocents@thestreet.com (Gary Gordon) — Sat, 11 May 2013 10:30:00 GMT

NEW YORK (ETF Expert) -- The last week has witnessed a renewed interest in foreign equities. In spite of a deepening recession in Europe, questions about China's growth, declining worldwide demand for commodities and little evidence of a self-sustaining global economy, some investors are filling their suitcases with overseas shares. Valuation "wonks" might describe the phenomenon in simplistic terms; that is, investors obviously recognize the earnings yields are compelling. The problem with this assertion is the fact that price-to-earnings bargains relative to U.S. stocks have existed for at least two years. More likely, investors love activist central banks and they expect foreign central banks to lower rates and/or devalue currencies. Back in December, before many folks caught up with the trend, I discussed why a hedged investment in Japanese stocks had enormous potential. (See "A Foreign Stock ETF for a Rapidly Declining Currency." Since that time, WisdomTree Japan Hedged Equity has packed on an astronomical 41.5%. Similarly, one should not be surprised when declining foreign currencies help pique desire for foreign equities. Recently, the European Central Bank cut its target rate from 0.5% to 0.25%. The Bank of Australia also lowered its benchmark to 2.75%. New Zealand's central bank explained that it is actively intervening in its currency markets to reduce the value of the New Zealand dollar. While Thailand has yet to act to depreciate the "baht," its central bank is widely expected to cut rates or implement other measures to devalue its currency. Rate cutting, quantitative easing and obvious efforts to devalue currencies are the primary reason for stock price appreciation in the United States and Japan since the bull's March 2009 inception. In contrast, less-aggressive central bank activity in some countries and regions have hindered interest in the market-based securities of those areas. WisdomTree India Earnings has been one of the biggest year-to-date losers due to the country's trade deficits, inflationary woes and currency appreciation. There is a reason that many are suddenly smitten with funds like iShares MSCI Pacific and iShares MSCI All-Country Asia excl Japan. In essence, it is the signals being sent out of by the central banks and governments of Asia-Pacific sovereign nations. They plan on fighting back.

Countries like South Korea, the Philippines and Thailand rely on exports to fuel their growth. While more mature countries such as Australia and New Zealand may be less-dependent on exports than emerging market counterparts, Australia and New Zealand depend a great deal on exporting natural resources/materials. It follows that alongside the massive decline in the Japanese yen, investors should expect a substantial increase in Asia-Pacific central bank intervention to depreciate respective currencies. Although stock investors may be looking out at the currency landscape and placing trades accordingly, currency ETFs representing countries in the Asia-Pacific region have yet to make dramatic moves. But they will. In fact, some analysts believe that a fallout from these currency wars may be less than 18 months away. Nevertheless, you might want to steer clear of excessive exposure to Asia-Pacific currencies where central bankers are determined to knock them down several pegs.

The problem for investors is determining how long to continue investing in the stock ETFs of depreciating currencies. One can go with WisdomTree Europe Hedged Equity to protect against the possibility of a rapidly declining euro; one can go with DXJ to protect against a rapidly declining yen. Perhaps one can short CurrencyShares Australia Dollar while simultaneously owning iShares MSCI Australia. In the end, however, a race to the bottom in the currency wars could wreak havoc on the global financial system. An astute investor better know how and when to exit riskier assets if he/she expects to be successful over the longer term. ...

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Can Bernanke Talk Investors Out of Higher-Yielding ETFs?

twocents@thestreet.com (Gary Gordon) — Sat, 11 May 2013 10:00:00 GMT

NEW YORK (ETF Expert) --Sometimes, when the chairman of the U.S. Federal Reserve speaks, as he did Friday, my diaphragm pushes on my lungs hard enough to inhibit breathing.

It's not that I don't admire Ben Bernanke on a variety of levels. It's just hard to believe that a man of remarkable intelligence is serious when he says, "In light of the current low interest-rate environment, we are watching particularly closely for instances of reaching for yield."

So members of the Fed are monitoring excessive risk-taking, are they? How can anyone refrain from riotous laughter? ...

Small Dividend Stocks Deliver Hefty Returns

twocents@thestreet.com (Stan Luxenberg) — Fri, 10 May 2013 14:32:00 GMT

NEW YORK (TheStreet) -- Searching for income, investors have been pouring into exchange-traded funds that hold big dividend-paying stocks. A favorite choice is Vanguard High Dividend Yield ETF , which yields 2.9%. But you can get more income with two ETFs that invest in smaller stocks: WisdomTree SmallCap Dividend , which yields 3.7%, and WisdomTree MidCap Dividend , with a yield of 3.2%.

Besides solid dividends, the WisdomTree funds have also delivered strong total returns. During the past five years, the small-cap fund returned 8.9% annually, compared to 5.5% for the S&P 500 and 7.7% for iShares Russell 2000 ETF. WisdomTree Midcap returned 9.4% annually, compared to 7.3% for iShares Russell Midcap .

Not many funds focus on small-cap dividend stocks. When they seek income, investors prefer funds that hold familiar mega-cap dividend payers, such as Exxon Mobil and Johnson & Johnson . Small-cap companies are often seen as more volatile and less likely to deliver stable income. But even though small stocks can be volatile, they have a long track record for generating compelling results. ...

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The Threatening Yen

twocents@thestreet.com (Andrew Sachais) — Fri, 10 May 2013 13:12:00 GMT

NEW YORK (TheStreet) -- The yen fell below the 100 level on Thursday relative to the U.S., dollar. That has been the plan of Abenomics all along, and traders are finally favoring the dollar.

The chart below compares CurrencyShares Japanese Yen Trust over DB USD Index Bullish. That simply puts the movements of the U.S. dollar over those of the yen.

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A Bear Market in Bonds Will Come, Eventually

twocents@thestreet.com (Roger Nusbaum) — Fri, 10 May 2013 10:00:00 GMT

NEW YORK (TheStreet) -- The U.S. stock market has obviously been making new highs as bond yields have been making new lows. The big catalyst behind these good times, it could be argued, has been the nonstop purchase of assets by the U.S. Federal Reserve and its zero-percent interest rate policy. All of this is having the effect of pushing investors into riskier assets to get a "normal" yield/total return.

This action by the Fed is unprecedented and is distorting market prices and fixed income yields. Barron's pointed out that for the first time ever, junk bond yields as measured by the iShares iBoxx High Yield Corporate Bond ETF went below 5%. This past January was the first time junk bond yields went below 6%. For a little perspective, in the summer of 2006 two-year U.S. Treasurys could be bought with a 5% yield. That was certainly a different time but it speaks to the idea that investors are being squeezed to find yield.

Junk bond yields below 5% is an indication the bonds are expensive and the market is not properly pricing the risk taken by investing in this part of the market. The PowerShares Fundamental High Yield Bond Portfolio might be even more expensive than HYG, the information page at the PowerShares Web site for this fund shows the trailing 12-month yield at just 4.77%. >>Also see: Production Hurts Exxon Mobil, but Shares Remain Solid >> ...

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Keep Your Options Close, Your Hedge Closer

twocents@thestreet.com (Bret Kenwell) — Thu, 09 May 2013 19:26:00 GMT

NEW YORK (TheStreet) -- When the market was drifting higher, finally punching through all-time highs, it seemed like everyone and their brother was calling for the almighty crash.

The "triple top" was in play for a while. But what investors didn't seem to understand was that the previous two tops where from epic market collapses in 2002 and 2008. Granted, there are certainly many macro concerns to worry about now, but nothing like what we went through a few years ago.

With the S&P 500 up 15% so far this year and the inevitable pullback coming, where do you stash your cash? Contrary to belief, cash is not king. Not in this environment anyway. If you haven't been in stocks, you haven't been making money. >>Also see: Microsoft's Turnaround Recipe: Copy Google and Salesforce >> But where do you go from here? If not cash, then where? Obviously U.S. equities have become the best alternative for many investors, hence the large increase in liquidity and huge yearly gains. When you look at bonds, I believe that's not the place to be. Treasuries can't even keep pace with inflation....

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Fertile Investments in Health Care

twocents@thestreet.com (Steve Cordasco) — Thu, 09 May 2013 16:58:00 GMT

NEW YORK (TheStreet)--A few weeks ago, I had journalist Jonathan Last on my radio show. Last's most recent book, "What to Expect When No One is Expecting," details what we might expect from America's population implosion.

That's right, implosion.

The alarmist 1968 Book, "The Population Bomb," written by Stanford University Professor Paul Erlich, which predicted mass starvation and other privations, has largely been refuted as fertility rates over the last 40 years have fallen below the so-called replacement rate. The U.S. replacement rate is 2.1, meaning that if the average woman in the population has 2.1 children, the population will remain constant. Last wrote, "We have touched the replacement rate once or twice in the last 40 years." >>Also see: Biotech Is Where the Bucks Are >> ...

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