Municipal bonds are issued by local city and county governments to raise money. They may fund libraries, schools, highway improvements, or sports stadiums.

Some municipal bonds are general obligation (GO) bonds. This means that the issuing government is free to use the money as it sees fit, whether to buy a new police cars or pay janitors at the county hospital.

Other municipal bonds can be used only for a specific purpose. For instance a county could use the funds to build a toll road. The tolls collected from motorists is used to repay bond owners.

Some consider GO bonds safer because the government can pay the required interest out of any money collected, whether taxes or speeding ticket fines. Some consider the other bonds safer. That’s because a municipality’s toll booth may continue to make money even as its property tax base goes downhill.

Historically, municipal bonds have low rates of default. The few cases of prominent muni bond defaults made big news. But the 1983 Washington Public Power Supply System default on bonds used to finance nuclear power plants and the 1994 Orange County California bankruptcy remain exceptions.

The big appeal of municipal bonds is that their interest is tax-free at the federal level. However, because of this feature municipal bonds pay interest rates that on average are lower than corporate bonds.

Therefore many wealthy investors with a high marginal tax rate put all their money into muni bonds to reduce their federal tax burden. Municipal bonds are not as advantageous for investors in lower tax brackets.

They also are not the best investment for tax-sheltered accounts such as conventional or Roth IRAs. That’s because accumulating tax-free income inside a retirement account is a waste of its tax-shelter status.

Interest income from municipal bonds is taxable by cities and states.

There are many thousands of muni bonds to choose from, and they are not easy or convenient to buy even for the wealthy. Bond brokers generally service institutions with millions of dollars to spend.

However, investors can buy shares of the iShares S&P National AMT-Free Municipal Bond Fund: MUB and SPDR Barclay’s Capital Municipal Bond ETF: TFI.

MUB tracks the S&P National AMT-Free Municipal Bond Index.

TFI tracks the Barclay’s Capital Municipal Managed Money Index (ticker: LMMITR).

(AMT stands for Alternative Minimum Tax. So the income from both these ETFs is not taxable by the IRS.)

MUB’s expense ratio is 0.25%. TFI’s is 0.30%.

MUB’s total holdings is 592. TFI’s is 282.

MUB’s average credit rating is AA-. TFI’s is AA2.

Both funds pay dividends monthly.

MUB’s average maturity is 7.93 years. TFI’s is 7.70.

TFI has a slightly higher expense ratio. It also has just half as many holdings, so it’s not as diversified as MUB. Otherwise they have similar characteristics, so it’s not necessary to buy both.

Investors in the highest tax brackets who want to diversify their municipal bond portfolios while receiving monthly checks should consider investing in either MUB or TFI.

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Colombia’s Peso Rises to a Two-Week High as U.S. Adds to Private Payrolls
Colombia’s peso rose to a two-week high as U.S. companies added more jobs than forecast in August, boosting prices for commodities the country exports.

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Will Barry Bonds reach the 756 home run mark and eclipse Hammerin’ Hank Aaron? The controversial Barry Bonds certainly is a baseball legend in his own mind, but does he have enough star quality and MLB cache to keep him in the baseball limelight? Is he a has been or someone who should be a has been? The question many people are asking is simply this one— is Barry Bonds washed up? Many people believe it is time for Bonds to hang up his cleats. He has been injury plagued the last couple of seasons and has also been involved in Major League Baseball’s steroid controversy. In the past the slugger has admitted that he’s used steroids and contends that the drugs were administered unwittingly. Despite his use of performance enhancing drugs, there is no question that he has been one of the game’s most productive players.

Barry Bonds is chasing perhaps the greatest mark of them all– the all-time Major League Baseball home run record. Currently Hank Aaron, who has 755, is the one that fans admire. Bonds also trails Babe Ruth, who accumulated 715 dingers.

He will start this season at 708 and will need either one outstanding year or two extremely productive ones to break the record. Many experts believe with the injuries he’s sustained over the past few seasons it will be hard for him to reach the plateau set by Aaron. Another problem with Bonds setting a new lifetime home run mark is that people believe it will not be a true record because the slugger used steroids.

If he does become the most prolific long ball hitter to ever stand at home plate, there will be some contending that he cheated in order to do so. Critics will claim that during some of his most productive seasons he was on steroids and could not have hit that many home runs without “the juice.” It’s not that Bonds didn’t have any ability; he was and still is a gifted athlete. The question is because he whacked at least some of his homers while on steroids will people respect the record the same way they have for Ruth and Aaron. That is the big question.

Bonds will definitely be in the spotlight regardless of what he does this season. As long as he continues to play, the story of him chasing Ruth and then Aaron’s record will be a hot baseball topic this season and possibly next.

The fact that he plays half of his games in San Francisco’s hitter friendly AT&T Park certainly favors Bonds accomplishing this goal. But he also has things working against him. Most pitchers will try to throw around him, not giving Bonds very much at which to swing. As the season wears on, this will affect him both physically and mentally.

Bonds has complained in the past about how many walks he receives and how they take a toll on his legs. Another problem that may prevent Bonds from breaking the home run record is that he’s in the National League and is required to play the field. He has indicated he would like to stay with the San Francisco Giants and will refuse a trade to an American League (AL) team. If he were to go to an AL team, it could prolong his career because he would be able to be a designated hitter and would not be required to play the field.

He has said that San Francisco is his home and he will retire before he’s traded to another team. There is no question that this season he’ll be under scrutiny, and if he doesn’t produce the media will be all over him. Reporters may ask if he is over the hill, unable to go long without steroids, or if he can possibly stay healthy enough to finish his quest for the record.

The fact remains that Barry Bonds is going for the record and baseball fans will certainly be watching to see if he can do it. If he closes in on the mark, there will probably be sellout crowds in stadiums across the United States hoping to catch a home run ball from the remarkable Bonds. He will have many obstacles to overcome if he is going to accomplish this great feat.

One thing is certain it will be interesting to see if he has the stamina to hold on long enough to break the record. If he fails there will be people saying he should have retired at the top of his game and not have come back to try to break the record. Fans of home run fever will be tuning in the watch the saga of Barry Bonds.

Investing in the stock market is a lot of fun but takes a lot of work. We’re always looking for new and better ways to make money on the stock market and one way that many investors have found to get a quick bump in their portfolios is to invest in convertible bonds.

Whenever I talk to groups of investors I often discover that your average investor doesn’t know a whole lot about convertible bonds, and that’s ok. They know all about stocks, and they know all about bonds, but convertible bonds are a whole different beast.

So what are convertible bonds? Well basically they are what we like to refer to as hybrid securities. They usually carry a fixed interest rate just like a bond but in the future you may be able to exchange them for a specific amount of common stock in the underlying company that has issued the bond. So you get the best of both worlds, the steady and reliable income that a bond produces, and the upside potential for growth that a stock allows for.

Because that’s the problem with bonds, there is no upside growth potential. A bond is a contract. You agree to lend the company a certain amount of money and in exchange they agree to pay it back with a certain amount of interest over a certain fixed period. If next year the company comes out with a brand-new earth shattering product and their stock shoots through the roof, you don’t get any of that upside as a bond investor.

Convertible bonds fix that problem allowing you to take advantage of the fixed income opportunities that bonds give you and at the same time giving you the opportunity to take advantage of increases in stock price should something exciting happen to the company down the line.

One disadvantage that they do offer is that often times the interest that they pay will be slightly less than you would get if you owned a straight bond; but that’s merely the price you pay for the potentially unlimited upside that the convertibility offers.

Convertible bonds can often be a little difficult to understand because they use fairly complex pricing and many individual investors sometimes end up paying more than they should because they don’t understand the math involved. But then again, you are trying to get the best of both worlds so maybe that’s just the price you have to pay.

Also realize that a convertible bond is tied both to the bond market and the stock market. What that means is if the bond market drops and the stock market drops, your convertible bond may drop even more because it’s tied into both of those dropping markets. This can offer significant risk if you’re not careful.

Finally if you want to convert your bond in the stock, wait until after the next interest payment because interest payments are usually paid semiannually and do not accrue so you want to be sure to collect that interest before you convert the bond into a stock.

Hopefully now you know what you need to know in order to make a good decision about whether or not to purchase convertible bonds for your investment portfolio.

Sovereign wealth funds on the hunt
After months of relative silence, sovereign wealth funds, the huge, state-owned vehicles that export-rich countries use to invest their reserves, are on the prowl again.

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Monorail seeks to erase $640 million in debt
The first edition of the Las Vegas Monorail’s bankruptcy reorganization plan would wipe out 97 percent of the $659.7 million owed on bonds that financed the transit line’s construction.

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www.evndirect.com Modern economics is a subject that today’s students must understand in order to protect their tomorrows. Inflation, the creation of money, and the regulation of the economy are explained.

TREASURIES-US bonds steepen losses after ISM manufacturing
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