| by Ron Rowland
Thursday, July 21, 2011 at 7:30am Your heroes in Washington D.C. are locking horns about the government debt. If they don't reach a deal very soon, the Treasury may have to stop borrowing money next month. Why Risk Huge Losses in U.S. Stocks? Settling for the world's worst performing stocks makes no sense! In this presentation, we'll show you why we believe U.S. stocks pose substantial risks to your capital while offering pathetically low profit potential and why many Asian and South American economies pose far less risk and yet are beating the Dow by up to 26 to one! | Internal Sponsorship | I don't know how it will all end. But here's what I do know: If you own Treasury ETFs, you're on the wrong end of a potentially bad loan. We can no longer assume that U.S. government debt carries no credit risk.  | | They get a C-minus. | On the other hand, what are the alternatives? Exactly what else are you supposed to do with your cash? We don't have many good choices. If you must loan your money to a shady character, then you at least want to get your cash back as soon as possible. You do this by keeping your maturity and duration short. I totally agree with Martin's latest assessment: Avoid medium- and long-term U.S. government securities. That includes Treasury ETFs with average duration of more than 1-3 years. And you probably ought to stay on the shorter end of that scale. Even short-term Treasury ETFs aren't free of credit risk or interest rate risk. And the yields aren't exactly impressive, either. But conservative investors should take a look, anyway. What Is "Short-Term?" This may seem like a simple question, but it's an important one. Treasury securities are issued with maturities as short as three months and as long as thirty years — plus various points in between. ETF sponsors know investors usually want to stick with one part of the yield curve. I like the way iShares breaks it down. They have six Treasury bond ETFs. The most conservative, SHV, keeps its portfolio maturity at one year or less. Their other five offerings cover ranges of 1-3 years, 3-7 years, 7-10 years, 10-20 years, and 20+ years. Get immediate yields of 7.6%, 8.5%, even 13.8% ... Plus, total AVERAGE annual returns as high as 44.2%! In this brand-new video presentation, income investment specialist Nilus Mattive introduces you to 16 conservative companies that are kicking off huge dividends ... gaining rapidly in price ... and can deliver greater income with every passing year. | Internal Sponsorship | Some people would disagree with me on this, but I think it's fair to describe bonds maturing in three years or less as "short-term." A stricter definition might include only maturities of one year or less. Whichever definition you chose, you can use ETFs to match your investments to your desired time frame. Six Short-Term
Treasury ETFs As we saw last week, short-term Treasury ETFs are yielding next to nothing. However, in the current environment, we're not buying them for income, we're buying them for relative safety. Here are six ETFs that you may want to consider: - SPDR 1-3 Month T-Bill Fund (BIL)
- Schwab Short-Term U.S. Treasury ETF (SCHO)
- iShares Short-Term Treasury Bond Fund (SHV)
- Vanguard Short-Term Government Bond Index Fund (VGSH)
- iShares 1-3 Year Treasury Bond Fund (SHY)
- PIMCO 1-3 Year Treasury ETF (TUZ)
A few of these ETFs are eligible for commission-free trading at various brokerages (SCHO at Schwab, SHY at Ameritrade, and VGSH at Vanguard). Contact your broker for details. Should You Hedge
Your Treasury ETFs? Treasury ETFs of any category are, of course, indirectly tied to the fate of the U.S. dollar. The negative impact of a falling greenback may not be readily apparent, but it's still there. Hence you may also want to consider hedging your currency exposure.  | | Gold is the ultimate currency hedge. | A good way to do this is with a gold bullion ETF — one based on the actual metal, not shares of mining companies. Gold is likely to move up quickly in any weak-dollar scenario, so having a small slice in a gold ETF is a good insurance policy. SPDR Gold (GLD) was the original gold ETF and is still the largest. iShares Gold (IAU) is also a good choice. One handy thing about IAU is that each share represents 1/100 ounce of gold. GLD shares are tied to 1/10 ounce. Therefore, investors may find it easier to get the precise allocation they want with IAU. I sincerely hope Washington gets its act together and the U.S. avoids default. Meanwhile, now is a good time to review your Treasury holdings and possibly shift your exposure to the short end. The ETFs I named above can help you do it. Best wishes, Ron P.S. The U.S. isn't hopeless. But the rest of the world is full of even better opportunities, which are what I seek out for my International ETF Trader members. To learn how you can join them, risk-free, click here. | 
