ETF Expert

There are no words to describe it… only numbers will do. Dow 14000 is now Dow 12800. S&P 1565 is now S&P 1416. And the "can’t-touch-this" Nasdaq has slipped from 2800 to 2560.

All it took was 5 weeks for stocks to erase 11 months of gains. All it took was a Fed to say that it would stop cutting interest rates.

Of course, the Fed expressed a desire to raise interest rates on August 8, 2007. By August 16, they were already cutting rates dramatically in one of the worst egg-on-face moments of Fed Chairman Bernanke’s short tenure.

The Fed will be cutting rates again. (Watch what they do… not what they say.) And it will likely stoke the fires of the equity markets as the actions did in August and September.

For now, however, only the defensive actions are keeping diversified portfolios afloat. Here are 3 that I’ve been writing about at various points in the year.

1. SPDR Lehman Intl Treasury Bond ETF (BWX). This one has experienced nearly 10% appreciation since being introduced in October. You don’t buy it for long-term capital growth. You do buy it for lowering portfolio risk, some "cap app," and a steady stream of income. Read my post on "Foreign Fixed Income."

2. PowerShares Emerging Mkts Sovereign Debt (PCY). If you think domestic stock assets have struggled, get a gander at the emerging markets. Yikes! If you’re looking to cool off that volatility, you can see how this diversifier has served as an ideal hedge.

3. CurrencyShares Swiss Franc Trust (FXF). I am the first one to admit it… I’ve profited immensely from the dollar’s decline. Currency Shares Euro (FXE), the Currency Shares Australian Dollar (FXA) and the Currency Shares Canadian Dollar (FXC) each contributed handsomely. Check out my earlier posts on these investments.

That said, the U.S. dollar is likely to find its footing against some of these long-standing winners. If that happens and if the dollar does rally, the Eurodollar and Australian dollar may stumble. Yet, even as the U.S. dollar rises against those currencies, the U.S. dollar will likely fare poorly against the Japanese Yen and the Swiss Franc. I favor the CurrencyShares Swiss Franc Trust (FXF).

Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Advisor with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.