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UPS Inc. (NYSE: UPS) reported a 14% increase in second-quarter revenue to $23.4 billion, with adjusted operating income up 40.8% and diluted earnings per share up 43.7% to $3.05, 34 cents higher than the median estimates of analysts polled on Barchart.

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Five or 10 years ago, a truckload carrier would have looked askance at acquiring an LTL carrier. Truckload carriers were comfortable shipping directly from the shipper to the consignee at a minimal fixed cost, a model that runs counter to the multistop terminal networks of LTL carriers.

More LTL Carriers May Follow AAA Cooper To The Altar, Consultant Says

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UPS Inc. (NYSE: UPS) on Tuesday reported solid fourth-quarter results as delivery demand roared during a holiday shipping season amplified by soaring e-commerce activity as the COVID-19 pandemic raged in the U.S. and most of Europe.

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UPS Inc. (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/ups#NYSE">UPS</a>) reported a 14% increase in second-quarter revenue to $23.4 billion, with adjusted operating income up 40.8% and diluted earnings per share up 43.7% to $3.05, 34 cents higher than the median estimates of analysts polled on Barchart.

The gains were led by the Atlanta-based company's international parcel segment, which benefited from easy comparable results over the second quarter of 2020 when much of regular global commerce was curtailed due to pandemic-fueled government shutdowns. International revenue rose 30% to $4.8 billion, led by gains in Europe. The adjusted operating margin rose 24.7%, with adjusted operating profits up to $1.19 billion from $842 million, UPS said.

The company's U.S. domestic parcel segment, its largest, posted revenue of $14.4 billion, up 10.2%. Revenue per piece increased 13.4% on strong across-the-board product gains, UPS said. Adjusted operating margin grew 11.6%, while adjusted operating profit rose to $1.675 billion from more than $1.2 billion, a more than 30% year-on-year increase.

UPS' Supply Chain Solutions segment, which comprises all of the company's non package businesses, posted a 14.3% increase in revenue to $4.2 billion on strong demand across its lines, UPS said. The adjusted operating margin rose 9.7%, while the adjusted operating profit rose to $408 million from $207 million.

The unit's name was changed to reflect the $800 million sales of UPS' former LTL unit to Canadian firm TFI International Inc. (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/tfi#NYSE">TFI</a>). The deal closed on April 30 during UPS' second quarter.

UPS forecast a 12.7% operating margin for 2021. Capital expenditures for the year are scheduled to be $4 billion.

Shares in pre-market trading were down 2.4% amid weakness in U.S. equity markets.

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Five or 10 years ago, a truckload carrier would have looked askance at acquiring an LTL carrier. Truckload carriers were comfortable shipping directly from the shipper to the consignee at a minimal fixed cost, a model that runs counter to the multistop terminal networks of LTL carriers. The truckload-LTL relationship was mostly confined to truckload carriers handling shipments of overflow LTL freight weighing more than 8,000 pounds if LTL capacity was too tight to meet the demand. 

However, e-commerce has profoundly transformed supply chains and, by extension, the trucking industry. Truckload networks designed to efficiently handle heavier volumes are not well suited to move the lighter-weighted shipments — 1,000 to 1,500 pounds in total — that are the bulwarks of e-commerce. That's especially true for the middle-mile portion of the delivery chain, where freight moves from a supplier's warehouse to a retail store or a distribution center before the final delivery to a residence or business. In a changing distribution landscape, truckload executives have come to value the LTL network design, and they are voting with their dollars.

In January, Canadian carrier TFI International Inc. (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/tfi#NYSE">TFI</a>), which generates nearly half of its revenue from truckload, acquired LTL carrier UPS Freight from parent UPS Inc. (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/ups#NYSE">UPS</a>) for $800 million. Then two weeks ago, Knight-Swift Transportation Holdings Inc. (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/knx#NYSE">KNX</a>), the nation's largest truckload carrier, acquired privately-held regional trucker AAA Cooper Transportation (ACT), the nation's 17th-largest LTL carrier, for $1.3 billion.

According to veteran consultant Satish Jindel (pictured), there will be increased interest in LTL carriers from truckload carriers and from carriers not now involved in either segment. Jindel, whose Pittsburgh-based firm, SJ Consulting, advised Knight-Swift on the transaction, spoke last week to Mark Solomon, senior writer at FreightWaves, about the sweet spot LTL carriers find themselves in, and why the good ones that may want to sell — there aren't that many of them — can essentially name their price.

Q: How do you size up the Knight-Swift-AAA Cooper deal?

A: "It's a milestone development. It's by far the biggest push by a major truckload carrier — and Knight-Swift is the largest — into the LTL industry. Almost as important will be the extent to which Knight-Swift broadens ACT's geographic reach, how it cross-sells and what additional steps Knight-Swift takes to expand its presence in LTL. It has a lot of truckload customers that would be interested in leveraging ACT's capabilities."

Q: Can you explain the LTL carriers' appeal to truckload carriers?

A: "The traditional middle mile is typically a truckload move from a warehouse to a distribution center. There's still a lot of that. But e-commerce and omnichannel fulfillment are changing the transport and distribution landscape. Increasingly, deliveries from the supplier's facility are nonlinear, they move shorter distances, and they consist of several boxes on a few pallets instead of a truckload full of pallets. These changing characteristics are turning what was a truckload carrier's game into an LTL carrier's game.

"Truckload operators grasp the importance of e-commerce and the updated definition of the middle mile. They know that without a strong upstream game, the "downstream," or the last mile, won't matter much. However, they lack the know-how to replicate complex LTL networks. In addition, the resources required to grow a viable in-house LTL infrastructure, such as high-quality real estate, are in short supply. Due to barriers to entry in the LTL industry, which is evidenced by the fact that there have been only two asset-based LTL startups since 1980, the only option for truckload carriers to get into LTL is to buy one."

Q: LTL carriers have also gotten their financial houses in order following disastrous rate wars after the Great Recession?

A: "LTL carriers have exercised stellar pricing discipline over the past decade. They have shifted from what I call an "honor system" shipment-profile model to one that captures a shipment's actual weight and density and properly bills a customer-based on those characteristics. LTL carriers also recognize the high barriers to entry due to the cost and complexity of their networks. It's a concentrated segment of trucking, and price increases tend to stick even through downturns in industrial production activity which has traditionally been LTL's core business. The huge role that LTL carriers are now playing in e-commerce only adds to their appeal."

Q: If you look at the top 20 LTL carriers, which are attractive candidates for acquisition?

A: "Most of them are not prospects."

Q: Why not?

A: "Some are parts of larger companies. Pure-play publicly-traded LTL carriers trade at high multiples. Many carriers are family-owned and -operated. They have been around for generations, and the current leaders have strong ties to their companies' legacies. They also know that the macro tailwinds are strong. Rob Estes [chairman and CEO of Estes Express Lines, which was founded by his grandfather in 1931] has many family members in the business and would have no interest in taking a call from a potential buyer. R&amp;L Carriers is a $2 billion company and very private in all respects. They won't sell. Other LTL carriers like Southeastern Freight Lines and Averitt Express have already rejected attractive offers.

"AAA Cooper sold at a multiple of 9.64 times its 2021 EBITDA. That is very reasonable considering that Old Dominion Freight Line (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/odfl#NASDAQ">ODFL</a>) trades at a 2021 multiple of 20 times its 2021 EBITDA, and Saia (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/saia#NASDAQ">SAIA</a>) trades at a 15.6 multiple. Keep in mind, though, that Con-way Inc., which had one of the largest LTL operations for years, was bought at six times EBITDA by XPO Logistics (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/xpo#NYSE">XPO</a>) in 2015. But Con-way had a 95 operating ratio [the ratio of revenues to expenses] in 2015. ACT, by contrast, has a more favorable ratio of 90. In addition, today's e-commerce market is much more robust than in 2015."

Q: So who would be available at a reasonable price?

A: "There are companies out there, though I'm not at liberty to identify them. I will say that any truckload carrier looking at high-quality LTL companies needs to move fast or it will be left standing out there."

Q: Amazon.com (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/amzn#NASDAQ">AMZN</a>) has 161 million square feet of fulfillment center space. It is largely driving the shift we are seeing in middle-mile configurations. Would Amazon be an acquirer?

A: "According to my sources, Amazon has reached out to some of the premium LTL carriers with buyout offers but has been turned away. Amazon is currently one of the largest, if not the largest, customers of many LTL carriers. The Knight-Swift-ACT deal could reenergize Amazon to return to the acquisition game.

"There's a reason for Amazon's interest in LTL. The company could provide two-day deliveries with just eight fulfillment centers. Each facility would have 20 million square feet, and Amazon could receive and stock merchandise in full truckload quantities. However, such huge fulfillment centers would pose too many other problems. The feasible alternative is to have 160 centers of 1 million square feet, which in turn requires Amazon to receive products in smaller LTL quantities and more frequently."

Q: How about in the other direction? Would LTL carriers be interested in acquiring truckload carriers to expand their portfolio?

A: "No. LTL carriers are already in the best competitive position. They don't need to dilute their balance sheets by acquiring a truckload carrier. LTL carriers would also not be interested in acquiring regional truckload carriers, because they already handle short-haul truckload shipments within their LTL networks."

Q: How do truckload carriers avoid making strategic and tactical missteps once they acquire LTL carriers?

A: "Provide the LTL operations with adequate capital for investments in the network and technology. Then, let its management leverage the customer relationships and the driver resources of the TL operation. LTL is a network-based business with much higher fixed costs and pricing complexity. Most of the people running these companies have been at it for decades. Knight-Swift is smart enough to know what it does not know. That's why it retained ACT's management and employees and is allowing it to operate as a separate business."

Q: The word "convergence" has been used quite a bit recently to rationalize the cross-trucking consolidation concept. Do you buy into the idea that the two sectors are in fact converging?

A: "The synergies between truckload and LTL are very strong. They utilize similar equipment and drivers, and many shippers rely on both services. The synergies are amplified by the profound changes playing out in e-commerce. The focus will not be on whether freight moves truckload or LTL. It will instead be on what types of shipments are going to be carried and what the appropriate network should be designed and executed to carry them."

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UPS Inc. (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/ups#NYSE">UPS</a>) on Tuesday reported solid fourth-quarter results as delivery demand roared during a holiday shipping season amplified by soaring e-commerce activity as the COVID-19 pandemic raged in the U.S. and most of Europe.

The nation's largest transportation company also reported all-time annual records for revenue at $84.2 billion and adjusted diluted earnings per share of $8.23.

On an adjusted diluted basis, UPS posted a fourth-quarter gain of $2.66 a share, way above consensus estimates that ranged between $2.10 and $2.14 a share. The adjusted EPS figures were 55 cents per share higher than the adjusted 2019 results, equating to a 26.1% year-on-year gain, Atlanta-based UPS said.

After adjustments and dilution, UPS reported a fourth-quarter loss of $3.75 a share. The adjustments included a $4.9 billion noncash charge for pension-related changes; a $545 million after-tax impairment change for selling its UPS Freight less-than-truckload operation to Canadian company TFI International, Inc. (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/tfi#NYSE">TFI</a>)  for $800 million in cash; and a $114 million after-tax charge for UPS' ongoing multiyear project to reengineer its massive distribution network to handle more business-to-consumer (B2C) traffic resulting from online orders.

The fourth-quarter 2020 adjustments totaled $5.6 billion, equal to $6.38 per diluted share, according to UPS. Adjustments for the 2019 fourth quarter were about $1.9 billion, UPS said.

Fourth-quarter 2020 revenue rose 21% to $24.9 billion, with double-digit growth across all of its three main segments, UPS said. On an adjusted basis, operating income rose 26% to $2.2 billion, the highest quarterly operating profit in the company's 114-year history.

Adjusted operating margin at UPS' core domestic U.S. segment rose 8.8%. Revenue per piece rose 7.8%, driven by ground residential traffic. Revenue at the company's international segment rose 26.8%, led by gains in Asia and Europe. Adjusted operating margin jumped 24.3%, while average daily volumes increased 21.9% with export growth across all regions, UPS said.

Revenue at UPS' Supply Chain and Freight segment rose 29%. UPS singled out Asian export freight forwarding and its health care businesses as strong contributors. UPS Freight, which is expected to be out of the portfolio by midyear, falls within the Supply Chain and Freight segment.

For 2020 as a whole, revenue rose 14.2%, adjusted operating profit rose 7% to $8.7 billion, and free cash flow hit $5.1 billion, UPS said.

In a brief comment, UPS CEO Carol Tomé said the fourth-quarter results "exceeded our expectations" and that she was optimistic about the outlook for 2021. The company has set 2021 capital expenditures at $4 billion, well below the $5.6 billion spent, on an adjusted basis, in 2020. The lower 2021 projection is likely to reflect Tomé's goal of more efficient capital allocation and her oft-stated mantra of the company being "better, not bigger."

The company provided no full-year guidance beyond the capex forecasts. In premarket trading Tuesday, shares were up 3.7% at $162 a share.

The ETF of ETFs approach continues gaining popularity as another such exchange traded fund joined that mix Thursday with the debut of the SPDR Dorsey Wright Fixed Income Allocation ETF (NASDAQ: DWFI).

	The SPDR Dorsey Wright Fixed Income Allocation ETF is the first ETF from State Street Global Advisors (SSgA), the third-largest U.S. ETF issuer, to trade on the Nasdaq. DWFI follows the Dorsey Wright Fixed Income Allocation Index, which &ldquo;is designed to provide targeted exposure to the SPDR fixed income ETFs that offer the greatest potential to outperform the other SPDR fixed income ETFs included in the Index selection universe. Dorsey, Wright &amp; Associates&rsquo; proprietary Index methodology ranks each SPDR fixed income ETF by relative strength and selects the four top-ranked SPDR ETFs for an initial equal weighted inclusion,&rdquo; <a href="http:// http://www.businesswire.com/news/home/20160602006214/en/State-Street-Global-Advisors-Expands-ETF-Offering">according to a statement</a>.

	DWFI holds five other SSgA fixed income ETFs, including the SPDR Wells Fargo Preferred Stock ETF (NYSE: <a class="ticker" href="/stock/psk#NYSE">PSK</a>). PSK is DWFI&#39;s largest holding at a weight of 25.2 percent. DWFI&#39;s second-largest holding is an allocation of almost 25 percent to the SPDR Nuveen Barclays Municipal Bond ETF (NYSE: <a class="ticker" href="/stock/tfi#NYSE">TFI</a>).

	DWFI also holds the SPDR Barclays Emerging Markets Local Bond ETF (NYSE: <a class="ticker" href="/stock/ebnd#NYSE">EBND</a>), SPDR Barclays International Treasury Bond ETF (NYSE: <a class="ticker" href="/stock/bwx#NYSE">BWX</a>) and the SPDR Barclays Intermediate Term Corporate Bond ETF (NYSE: <a class="ticker" href="/stock/itr#NYSE">ITR</a>).

	DWFI&#39;s selection universe can include US and non-US developed and emerging market bonds, treasury bonds, corporate bonds, high yield bonds, inflation-protected bonds, floating rate notes, first lien senior secured floating rate bank loans, US nonconvertible preferred stock and other preferred securities, US municipal bonds and US convertible securities, according to SSgA.

	The new ETF charges 0.6 percent a year, or $60 per $10,000 invested.

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Prized for decent yields and tax advantages, municipal bonds and the ETFs that track them could become prime destinations for income investors if the fiscal cliff becomes a reality. Fears of the fiscal cliff, the GDP-draining scenario under which old tax reductions expire and become new tax increases, have already pounded an array of sectors and ETFs.

Dividend funds, <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/11/3095162/fiscal-cliff-fears-are-hammering-these-etfs">telecommunications and utilities names</a>, just to name a few, have suffered at the hands of the fiscal cliff. As one example, the Utilities Select SPDR (NYSE: <a class="ticker" href="/stock/xlu#NYSE">XLU</a>) has plunged almost 5.9 percent in the past month. Conversely, the $3.4 billion iShares S&amp;P National AMT-Free Municipal Bond Fund (NYSE: <a class="ticker" href="/stock/mub#NYSE">MUB</a>) has jumped 1.3 percent.

Even with the recent bullishness, municipal bonds and the corresponding ETFs are not richly valued. 

"Not only do munis offer a significant tax advantage, but municipal bonds look cheap relative to other alternatives, particularly US Treasuries," said iShares Global Chief Investment Strategist Russ Koesterich <a href="http://isharesblog.com/blog/2012/11/26/the-calm-before-the-storm/">in a note</a>. "Over the last 30 years, the 10-year Treasury note typically yielded about 60 basis points over an index of general obligation (GO) muni bonds of a similar maturity. Today, thanks to the Federal Reserve artificially suppressing yields, the Bond Buyer 11— an index of GO munis yields – is yielding 170 basis points over Treasuries. Given the potential for more volatility, higher tax rates, and favorable spreads, I would continue advocate investors remain overweight to municipal bonds."

ETFs such as MUB, which has a 30-day SEC yield of 1.56 percent, and the $1.2 billion SPDR Nuveen Barclays Municipal Bond ETF (NYSE: <a class="ticker" href="/stock/tfi#NYSE">TFI</a>) could see increased inflows if the fiscal cliff comes to pass. Should that happen, the dividend tax rate will rise, at the very least on those earning more than $250,000 per year. TFI's 30-day SEC yield is 1.55 percent.

That would likely increase the allure of the tax advantages offered by municipal bond funds. Municipal bonds are attractive because these bonds are usually exempt from federal taxes and many are not subject to state and local taxes, either. 

Investors have already been pouring a bit more cash into muni bond ETFs in the days since Election Day. The iShares S&amp;P California AMT-Free Municipal Bond Fund (NYSE: <a class="ticker" href="/stock/cmf#NYSE">CMF</a>) and MUB both saw inflows from November 7-13 while investors took almost $400 million out of the iShares iBoxx $ High Yield Corporate Bond Fund (NYSE: <a class="ticker" href="/stock/hyg#NYSE">HYG</a>), <a href="http://isharesblog.com/blog/2012/11/23/bond-etf-flows-favoring-safer-havens/">according to iShares</a>.

CMF, which has nearly $275 million in assets under management, also has a 30-day SEC yield of 1.56 percent. Although the ETF focuses on muni issues from financially challenged California, nearly all of the ETF's 377 holdings are rated investment-grade.

Despite concerns about municipal defaults, <a href="http://www.benzinga.com/markets/bonds/12/10/2991065/colby-bullish-on-municipal-bonds-for-rest-of-2012">a scant percentage of muni bond issues</a> actually default. That has assuaged investors and helped bolster inflows to these ETFs this year.

With that in mind, investors looking for more yield while gaining the fiscal cliff protection offered by municipal bond ETFs can consider higher-yielding fare such as the Market Vectors High-Yield Municipal Index ETF (NYSE: <a class="ticker" href="/stock/hyd#NYSE">HYD</a>). HYD, which has over $994 million in AUM, has a 30-day SEC yield of 4.3 percent and pays a monthly dividend. The fund allocates nearly 22 percent of its weight to California bonds.

Another alternative is the $182.4 million SPDR Nuveen S&amp;P High Yield Municipal Bond ETF (NYSE: <a class="ticker" href="/stock/hymb#NYSE">HYMB</a>). HYMB, which has a 30-day SEC yield of 4.18 percent, features an 18 allocation to California bonds.

For more on bond ETFs, click <a href="http://www.benzinga.com/markets/bonds/12/11/3111513/beyond-treasuries-bond-etfs-for-retirees#ixzz2DMYCX5ML">here</a>.

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Fiscal Cliff Could Chase Investors to Muni ETFs

As an asset class, municipal bonds have had plenty of negative headlines to deal with in the past several years. There was the credit crisis of 2008 and the ensuing recession of 2009-2010. Last year, noted analyst Meredith Whitney was featured on "60 Minutes," warning of impending doom in the muni bond market.

Also in 2011, Jefferson County, Alabama and Harrisburg, Pennsylvania, the Keystone State's capital, defaulted on muni bond obligations. Stockton, California followed suit earlier this year. Speaking of California, the largest U.S. state by GDP and population, is running deficits that have some pondering further municipal defaults. 

But just as they did in 2011 <a href="http://www.benzinga.com/markets/bonds/12/01/2263499/ripe-for-the-picking-time-to-short-muni-bonds">muni bond ETFs are defying logic in 2012, offering not only solid returns, but a valid avenue for investors looking to do some retirement planning</a>.

"Despite low interest rates, munis will continue to draw appeal among baby boomers because they prefer the low volatility compared to other asset classes," James Colby, portfolio manager and senior municipal strategist for Market Vectors municipal bond investments, said in an interview with Benzinga. "Munis continue to come through the crucible and they're no worse for the wear."

Part of the allure municipal bond ETFs hold for retirees is their steady, tax-free income stream. All six Market Vectors muni bond ETFs pay monthly dividends. The $3 billion iShares S&amp;P National AMT-Free Municipal Bond Fund (NYSE: <a class="ticker" href="/stock/mub#NYSE">MUB</a>) also features a monthly distribution. The monthly payout highlights one advantage of an ETF over owning an individual muni issue.

"If you buy an individual bond, you get a semi-annual coupon payment," Colby noted. "With muni bond ETFs, you get monthly dividends that are tax exempt and that's an appealing feature for retirees."

Arguably, the default risk in the muni bond market is overstated. Colby notes muni bonds are a $3.7 trillion marketplace, but only 2% of that number trades on any given day. 

"Less than half of 1% of all rated bond issue default," according to Colby. "We will continue to see entities run into great difficulties, but the muni bond market has a great ability to compartmentalize the problem children. One default doesn't provide for contagion across other issues."

Investors seem to be buying into that, having added $11.4 billion to U.S. municipal mutual funds this year, the best start since 1993, <a href="http://www.bloomberg.com/news/2012-05-14/most-buying-since-1993-refutes-default-wave-specter-muni-credit.html">Bloomberg reported citing Lipper data</a>. 

Along those lines, the Market Vectors Long Municipal Index ETF (NYSE: <a class="ticker" href="/stock/mln#NYSE">MLN</a>) has risen 6% this year despite <a href="http://www.benzinga.com/markets/bonds/12/05/2594825/5-etfs-for-retirement-planning-mub-pgf-vtv">a heavy allocation to issues from financially-downtrodden California</a>. Low fees of 0.24%, a trailing 12-month yield of almost 4.2% and a monthly dividend make this fund a compelling retirement planning option.

"There are a lot of headlines touting negativity in the muni bond marketplace, but this hasn't sent investors scurrying away from the asset class," said Colby. 

Colby also noted "a huge mismatch between supply and demand" in the high yield space, a catalyst that helps explain why the Market Vectors High-Yield Muni ETF (NYSE: <a class="ticker" href="/stock/hyd#NYSE">HYD</a>) is up almost 9% this year.

With $604.4 million in AUM, a 0.35% expense ratio and a trailing 12-month yield of almost 5.3%, HYD has outperformed more noteworthy bond ETFs by significant margins this year, including the Vanguard Total Bond Market ETF (NYSE: <a class="ticker" href="/stock/bnd#NYSE">BND</a>), the PIMCO Total Return ETF (NYSE: <a class="ticker" href="/stock/bond#NYSE">BOND</a>) and the iShares Barclays TIPS Bond (NYSE: <a class="ticker" href="/stock/tip#NYSE">TIP</a>).

Other muni bond ETFs suitable for retirement include the Market Vectors Intermediate Muni ETF (NYSE: <a class="ticker" href="/stock/itm#NYSE">ITM</a>), the Market Vectors Pre-Refunded Muni ETF (NYSE: <a class="ticker" href="/stock/prb#NYSE">PRB</a>) and the SPDR Nuveen Barclays Capital Municipal Bond ETF (NYSE: <a class="ticker" href="/stock/tfi#NYSE">TFI</a>).

For more on municipal bond ETFs, please click <a href="http://www.benzinga.com/markets/bonds/12/01/2263499/ripe-for-the-picking-time-to-short-muni-bonds">HERE</a>.

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Muni Bond ETFs And Retirees: A Match Made In Heaven?

In 2010 one brave analyst took to 60 minutes to give deliver a warning message: municipalities are broke. Meredith Whitney made a very controversial call, declaring state and local governments a poor place to invest. In particular, she noted her expectations for the future of the municipal bond market which included hundreds of billions of dollars in defaults within the next five years.
A full year later, Meredith might want to rethink her prediction.
<h3>How Munis Performed in 2011</h3>
See the chart below of three popular municipal bond ETFs (more on <a href="http://www.high-yield-passive-income.com/municipal-bonds.html" target="_blank">municipal bond investing </a>options and the benefits of triple tax free investing):
<img src="http://i.imgur.com/Gk8LI.png" alt="municipal bonds, muni bonds, municipal bonds 2011" width="544" height="240" />
This chart includes:
<ul>
<ul>
<li>iShares S&amp;P National Municipal Bond ETF (<a class="ticker" href="/stock/mub#">MUB</a>) – Invested primarily in intermediate term issues, MUB looks for general obligation and sales tax revenue bonds for investor protection. The fund is invested largely in bonds with an A-rating or better by credit ratings agencies. MUB yields 2.86% to investors</li>
<li>SDPR Nuveen Barclays Municipal Bond ETF (<a class="ticker" href="/stock/tfi#">TFI</a>) – Barclay's created this lesser diversified, rules based index for municipal bond investors. The ETF owns bonds with Aa3/A- ratings or better from at least two of the three major ratings agencies including Moody's, Standard &amp; Poors', and Fitch. TFI yields 3.19% to investors.</li>
<li>iShares S&amp;P Short-Term National AMT-Free ETF (<a class="ticker" href="/stock/sub#">SUB</a>) – This fund was included for the fact that it sticks to the short end of the yield curve. The SUB ETF holds 25% of assets in short-term securities with maturity dates less than 1 year in the future. The remaining holdings are kept in bonds with less than 5 years to maturity. SUB yields 1.28% per year at the current price.</li>
</ul>
</ul>
<h3>Where Meredith Missed the Muni Market</h3>
Meredith missed horribly in her prediction. A quick look from the chart shows us the outsized capital gains for muni investors in the year-ago period. Atop this gain, however, investors also have very reasonable tax-free distributions.
So where did Meredith go wrong?
Here's just a few of the things she missed:
<ol>
<ol>
<li>Europe – You cannot have a conversation about the debt markets without addressing the international markets. Given that the PIIGS nations (an acronym which includes Portugal, Ireland, Italy, Greece and Spain) all face budget and debt woes, Americans naturally find the town next door to be a better investment than European Sovereigns.</li>
<li>Bernanke – Any investor knows not to fight the Fed.  We're finally seeing the strategy of <a href="http://www.etfbase.com/how-to-short-treasuries/" target="_blank">shorting Treasuries </a>paying off, but it's been fighting an uphill battle. Meredith Whitney made her call for troubled municipalities to default in December, just one month after another $600 billion quantitative easing program (dubbed QE2) rolled out to drive down yields. Given the Fed's capacity to deliver on lower interest rates (and thus higher bond values) one must question Whitney's timing.</li>
<li>Bottoming Real Estate Markets – Municipal bonds are very much tied to the fate of the real estate market. General obligation bonds backed by the full faith and credit of a municipality are the most directly related to property taxes. Luckily for state governments, US housing prices moderated to <a href="http://www.calculatedriskblog.com/2011/12/case-shiller-house-prices-fall-to-new.html">drop only slightly for the full year</a>, helped in part by a low interest rate environment and improving spreads between real estate cash flows and carrying costs. Trends look better for 2012, as a number of <a href="http://online.wsj.com/article/SB10001424052970204058404577110891819911670.html">builders exit the commercial markets</a> to begin building new residential real estate to grab yield.</li>
</ol>
</ol>
<h3>Fed Backstops Municipal Default</h3>
Most municipalities finance their obligations with long-term, callable bonds. Callable bonds are obviously favorable to the municipality and detrimental to investors in periods of falling interest rates.
Meredith Whitney may be right to say that municipalities have long term financing problems. It is true that most every government does eventually spend beyond its ability to finance ever-growing obligations. Municipalities face rising obligations to baby boomer workers through pensions and other investments. Certainly, pensions aren't meeting their “hurdle rate” to make good on future promises.
However, the same environment that crushes pension performance is enabling municipalities to fund their most pressing needs in the here and now. Call provisions allow municipalities to call higher yielding bonds issued over the last several years with new issues at lower and lower rates.
Do municipalities have a funding problem? Yes, and it would be a lie to deny the concern. However, Whitney's 5-year call is far too pessimistic – every municipality enjoys much lower borrowing costs today than it previously paid even five years ago.
Dear Meredith, don't fight the FED.
Written by: JT, who blogs about anything finance at <a href="http://moneymamba.com">MoneyMamba</a>.
Disclosure: No position in any ETFs reviewed in this article
©2012 <a href="http://www.etfbase.com">ETF Base</a>. All Rights Reserved.
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iShares S&P Short Term National AMT-Free Municipal

Municipal Rally – Oh How Meredith Was Wrong

Municipal bonds and the ETFs have sure garnered their fair share of negative publicity in 2011. Whether it has been skewering by Meredith Whitney, plenty of notoriety for the pathetic fiscal situations in states like California and Illinois or potential bankruptcies in scores of cities and towns throughout the U.S., what was once a benign asset class has turned controversial.

The U.S. muni bond market is massive, $3 trillion by some estimates, so an implosion in this market could be catastrophic. On the other hand, the specter of such an event and several municipal bankruptcies from coast to coast over the past several years have served to boost yields on munis and in an environment where yield is prized, some muni bond ETFs may just be worth a look. 

Here are a few your broker probably forgot to tell you about.

iShares S&amp;P National AMT-Free Municipal Bond Fund (NYSE: <a class="ticker" href="/stock/mub#NYSE">MUB</a>):
OK, MUB probably isn't one of the muni bond ETFs your broker forgot to mention and if he did, that's just weird. The iShares S&amp;P National AMT-Free Municipal Bond Fund is home to almost $2.3 billion in assets under management and nearly 1,500 issues. The bulk of MUB's holdings are investment-grade and roughly two-thirds have maturities of 1-5 or 5-10 years. For the risk taker in you, California bonds account for almost 23% of MUB's weight. Current yield: 3.43%.

Market Vectors High-Yield Municipal Index ETF (NYSE: <a class="ticker" href="/stock/hyd#NYSE">HYD</a>):
The Market Vectors High-Yield Municipal Index ETF is totally different animal than MUB. Not only is HYD subject to the alternative minimum tax, the ETF allocates about 75% of its weight to non-investment grade fare. In other words, this is the junk bond ETF of the muni world. That's not a black mark by any means as HYD is up almost 9% year-to-date. Current yield: 6%.

Market Vectors Short Municipal Index ETF (NYSE: <a class="ticker" href="/stock/smb#NYSE">SMB</a>):
The Market Vectors Short Municipal Index ETF is definitely an under the radar option in the muni bond ETF universe, but this fund should not be overlooked. In this case short does not mean inverse. It means most of SMB's holdings have maturities of 1-6 years. A move above $18 would extend this ETF's bullish ways. Current yield: 1.98%.

SPDR Nuveen Barclays Municipal Bond ETF (NYSE: <a class="ticker" href="/stock/tfi#NYSE">TFI</a>):
TFI is one for the conservative muni investor as 99% of the ETF's weight is allocated to bonds rated Aaa or Aa. The bulk of TFI's holdings range in maturity from five to 30 years. Expense ratio: 0.23%. Current yield: 3.3%.

Market Vectors CEF Municipal Income ETF (NYSE: <a class="ticker" href="/stock/xmpt#NYSE">XMPT</a>):
No, we don't have a bias for Market Vectors, but hey, the firm knows what it's doing when it comes to muni bond funds. XMPT is the newest muni bond ETF in the Market Vectors stable, having made its debut in July. Home to 78 holdings, XMPT is sort of a fund of funds because it holds a basket of closed-end muni bond funds designed to track federally tax exempt bonds. An expense ratio of 1.43% is high, but a 30-day SEC yield of 6.22% is inviting.

Technicals

XMPT

Five Muni Bond ETFs Your Broker Forgot to Mention

When al-Qa'ida struck the United States on September 11, 2001, killing thousands, our nation was stunned. The American people demanded a swift and powerful response – to punish those behind the attacks, to leverage all elements of national power to protect the United States and its citizens, and to ensure that nothing like the attacks carried out that Tuesday morning ever happened again.
 

Our military, with the help of our intelligence community, quickly swung into action, driving al-Qa'ida from its safe haven in Afghanistan, destroying its training camps, and disrupting its ability to plan, coordinate and launch another attack.
 

But it was also understood that more could be done – and needed to be done – to fight al-Qa'ida. 
 

In the decade since 9/11, the United States government has undertaken an unprecedented effort to unmask and choke off al-Qa'ida's financial support networks. The strategies developed by Treasury's Office of Terrorism and Financial Intelligence (<a class="ticker" href="/stock/tfi#">TFI</a>) have placed the Department squarely within our country's national security community and at the forefront of the battle to deprive al-Qa'ida –and terrorists the world over – of the financial wherewithal to operate. 
 

Treasury is not alone in this fight, not by any stretch. This is truly a whole-of-government effort, involving our colleagues in the State, Justice and Defense departments, the Intelligence Community, and the law enforcement community. 
 

Nor is the United States alone in this fight. 
 

We work closely with the UN, which has established an extensive legal framework for combating terrorist financing on a global level.
 

We work closely with dozens of countries – many of whom are represented here this morning – to stem the flow of funds to terrorists. 
 

And we work closely with the international banking community and others in the private sector to prevent terrorists from using the formal financial sector to receive, store, move and use funds.
 

As we focus today on what the U.S. government has done and can do to combat terrorist financing, it is entirely fitting that we acknowledge the critical role played by each of these partners in the fight against al-Qa'ida and the financing of terrorism more broadly.
 

This morning, I'd like to briefly share the Treasury Department's assessment of al-Qa'ida's current financial situation and sketch out where we will take Treasury's counter-terrorist financing efforts in the months and years to come. 
 

In the last few years, it became clear that al-Qa'ida was encountering financial difficulties. By 2010, we believed the organization was in its worst financial position in years. We assessed that al Qa'ida's increasingly precarious financial situation would not only impair its ability to operate, but also would likely send al Qa'ida and its affiliates in search of new sources of funding. 
 

Recent intelligence confirms that al-Qa'ida devotes a great deal of attention and effort to raising money and managing its budget. For example, we have learned that al-Qa'ida kept meticulous accounting statements on operating costs – such as weapons, fuel, and salaries – tracking expenditures that amounted to little more than one dollar.
 

We have also learned that al-Qa'ida's shaky bottom line attracted the attention al-Qa'ida's senior leaders, who, in early 2010, lamented that al-Qa'ida was experiencing great financial hardship.
 

These difficulties were not simply a theoretical concern for al-Qa'ida's leaders. Indeed, the shortfall had begun to affect al-Qaida's operational capabilities. New information reveals that early last year, al-Qa'ida not only was stressed financially, it was struggling to allocate funds to plan and execute terrorist attacks against the U.S. homeland and Western interests.
 

This financial squeeze led al-Qa'ida to explore new avenues for funding. And by early last year, the terrorist group was seeking to fundraise through another method: kidnapping-for-ransom.
 

The picture we have been able to piece together from recent intelligence includes both good and bad news. While it was heartening to get confirmation that global efforts to disrupt al-Qa'ida's financing had begun to pay off, we are reminded that al-Qa'ida remains an innovative, resourceful and adaptive adversary. And we will need to continue to innovate and adapt, as well, to maintain the impact we began to see in recent years. 
 

With that in mind, let me turn now to the key areas where we will be focusing our energy and efforts. 
 

First and foremost, we will keep the pressure on. The recent deaths of Usama bin Laden, Ilyas Kashmiri and Atiyah abd al-Rahman, capping off a decade's worth of comprehensive efforts to attack al-Qa'ida, has left it weakened. 
 

But now is no time to let up. For us at Treasury, that means continuing to concentrate on disrupting al-Qa'ida's financial and material support networks.
 

Just yesterday, we designated three senior Pakistan-based al-Qa'ida leaders, including al-Qa'ida commander Abu Yahya al-Libi, Atiyah's deputy until Atiyah's death last month, and Younis al-Mauritani, a long-time al-Qa'ida fighter in charge of al-Qa'ida's external operations as recently as last year, who was arrested by Pakistani authorities just a few days ago.
 

These actions follow a set of designations we announced in July targeting a key financial pipeline for al-Qa'ida – which runs from Kuwait and Qatar, through Iran and into Pakistan – and which depends on an agreement between al-Qa'ida and the Iranian government to allow this network to operate within Iran's borders.
 

So job one is to continue our intensive focus on shutting down al-Qa'ida's pipelines of money, men and materiel.
 

Second, we will step up our efforts with our allies and partners around the world – particularly in the Gulf – to encourage more consistent and comprehensive counter-terrorist financing efforts. 
 

Although the power and reach of the United States Treasury is substantial, we need other countries to work with us to combat al-Qa'ida, its affiliates and other terrorist organizations. 
 

This is especially true for Kuwait and Qatar, which unfortunately have become permissive environments for extremist fundraising. There is no question that Kuwait and Qatar are strong allies of the United States, and that we share many important goals and work closely together on many important initiatives. 
 

But the fact remains that Kuwait is the only country in the Gulf that has not criminalized terrorist financing. In a recent mutual evaluation of Kuwait, the International Monetary Fund emphasized that this deficiency substantially hampers Kuwait's ability to combat terrorist financing. And although Qatar enacted a good terrorist financing law a year ago, implementation has lagged. 
 

The approach taken by Kuwait and Qatar poses a danger to them, and to all of us. So we will continue to work with Kuwait and Qatar, and urge them to take the necessary steps, as others in the region have done over the past decade. 
Third, as al-Qa'ida evolves, and the nature of the threat posed by al-Qa'ida and its affiliates changes, we will continually adapt and expand our counter-terrorist financing efforts to meet the shifting challenge. 
 

Most importantly, we are increasing efforts to combat the financial support networks for al-Qa'ida in the Arabian Peninsula (AQAP), al-Qa'ida in the Islamic Maghreb (AQIM), al Shabaab, and others inspired by, or possibly affiliated with, al-Qa'ida, such as Boko Haram. 
 

Attacking these groups' finances presents new and different challenges, because their means and methods of funding and facilitation differ from al-Qa'ida's traditional donor-based fundraising model. They also differ among one other. 
 

Working with our colleagues in the intelligence community and our partners around the world, we will devise disruption strategies tailored to the ways in which each group raises, stores, and moves money. 
 

Fourth, we are focusing on emerging trends in how terrorists raise money–most importantly, the increased use of kidnapping-for-ransom, which is quickly becoming a critical funding source for al-Qa'ida and its affiliates. 
 

For example, we have information that AQIM has raised tens of millions of dollars since 2008 through kidnapping-for-ransom operations in Africa.
 

Combating kidnapping-for-ransom is notoriously difficult. At the policy level, it is easy enough to say that no one should pay ransoms. But at the personal level –when one's citizen, colleague or child is being held hostage – it is awfully hard to adhere to the “no-ransoms” policy. Few do, which is one reason that al-Qa'ida and its affiliates are turning increasingly to kidnapping-for-ransom.
 

The U.S. Government has a policy against paying ransoms, and we believe this has dissuaded terrorists from targeting Americans. Our information reveals that earlier this year, AQIM was planning to target mainly Europeans, not Americans, for kidnapping-for-ransom operations because they believed European Governments would pay ransoms while the U.S. Government would not.
 

In addition to bolstering the “no-ransoms” approach, the international community must also make kidnapping harder in the first place through improved security measures. And if ransoms are paid, we must make it more difficult for terrorist groups to move, store and use that cash. 
 

As a community of nations and institutions dedicated to combating terrorist financing, we simply cannot allow kidnapping-for-ransom to become the primary way that terrorists sustain their financial health.
 

Finally, as we sharpen our efforts to combat new sources of terrorist funding, we will continue efforts to stay ahead of new ways terrorists store and move money. 
 

Our growing success in driving terrorists out of the formal financial sector has led terrorist facilitators to rely increasingly on informal methods of moving money – notably, hawalas and cash couriers. 
 

But it has also sparked an interest in exploiting new technologies and new payment methods, such as stored value cards to transactions by cell phones. 
 

These technologies hold great promise to bring people around the world into the formal financial sector, unquestionably a critically important policy goal. 
 

But these new methods of storing and moving value also create new vulnerabilities if not adequately covered by anti-money laundering and counter-terrorist financing regulations. So as we continue to disrupt specific actors and networks, we will also work to build a more transparent financial system with robust safeguards that is inhospitable to terrorist financing. 
 

In closing, as we remember the victims of the 9/11 attacks, this important milestone also provides us with an opportunity to reflect on the progress we have made in fighting al-Qa'ida and the broader threat of terrorism. 
 

Counter-terrorist financing has contributed importantly to that progress – more so than anyone would have predicted 10 years ago. And that is thanks to many of the people in this room, throughout Treasury, across the U.S. government, and around the world who have dedicated their careers to this cause. 
 

As we survey the challenges ahead – from terrorism to other threats to our national security – the effective deployment of financial measures will continue to be central to our strategy and our success. I know I speak for all of my colleagues in the Treasury Department when I say we relish the opportunity to use these tools to help make our country safer. ​

Politics

Remarks by Under Secretary for Terrorism and Financial Intelligence David S. Cohen at Treasury's Counter-Terrorist Financing Symposium

For most investors, the boring and uninspiring municipal bond sector is hardly given any thought. However, over the last year, the sector has been shaken by analyst predictions of wide-spread defaults. Perhaps the most famous, was credit analyst Meredith Whitney's 60 Minutes appearance, in which she predicted “hundreds of billions of dollars” of municipal defaults. Meredith's bold prediction fueled a wave of panic selling in the $2.9 trillion market. However, it seems that those predictions are coming up empty. The U.S. municipal bond market recently completed their best quarter since 1999.

The news continues to get better for muni investors. Default rates for the sector have plunged nearly 60% so far this year. Only 24 municipalities defaulted from January through June, totaling less than $750 million. This compares with the 144 defaults worth $4.89 billion in the first six months of 2009. These decreases in default rates have been caused by leaner state budgets. According to the National Association of State Budget Officers, states have cut their budgets by 14% since 2008 and headcounts for state employees are at their lowest levels since 1999. 

Despite the sectors rise over the last few months, municipal bonds still offer more value than treasuries. Term structures for most municipalities are actually better than that of the federal governments. With the potential for higher taxes down the road, the muni sector is offering incredible value to investors. 

Default risk, although decreasing, is still there. For investors, a wide approach is best. Both the iShares S&amp;P National AMT-Free Muni Bond (NYSE: <a class="ticker" href="/stock/mub#NYSE">MUB</a>) and SPDR Nuveen Barclays Capital Muni Bond (NYSE: <a class="ticker" href="/stock/tfi#NYSE">TFI</a>) are the two largest funds in the sector and can be used as broad plays. For those looking for more yield, the junk muni focused, Market Vectors High-Yield Muni ETF (NYSE: <a class="ticker" href="/stock/hyd#NYSE">HYD</a>) pays a 6.02% dividend.

Sector ETFs

Treasuries

Econ #s

Look Towards Munis For Value 

Find out what Don Dion was blogging about this past week on RealMoney.

PPLT

SGOL

SIVR

Dion's Weekly ETF Blog Wrap

U.S. Consensus published the population data that they rigorously constructed throughout the summer. Michigan was the only state out of the 50 that had a decrease in population (along with a congressional seat) at a modest .6%, since the last time data was collected. Texas on the other hand, gained the most congressional seats and population.
What does this all mean?
How to trade it: Bonds, Bonds, &amp; More Bonds…
One could anticipate further tax revenue growth collected by the IRS in regions that had population increases. This allows smaller municipalities to have more capital to pay of long-term debts. Thus, muni bond solvency increases and they will maintain or attain higher credit ratings. 
Meanwhile, smaller municipalities in regions where Michigan received large deviations to the downside in population; will have less tax revenue. With less tax revenue, increased pressure to pay long term muni bond debt will occur if fiscal cuts at local levels does not occur.
For example, Pontiac, MI, muni bonds are in the top ten for highest yields to maturity. Indicating that the population is exporting elsewhere to places in coastal regions and southwest states. Along with Pontiac's “rust belt” stigma of fading auto manufacturing aids to the associated risk.
Also consider that fact that Michigan has over a 12% unemployment rate, and people have to migrate to achieve work. States in middle America such as Oaklahoma, Nebraska, Kansas, and South Dakota local municipalities have a lower unemployment rate which adds to low bond yields.
Ways to trade bonds
Easiest way for a retail investor to have exposure to bonds is with the recent upheaval in bond ETF's.
SPDR Lehman California Municipal Bond ETF (NYSE: <a class="ticker" href="/stock/cxa#NYSE">CXA</a>)
S&amp;P Short-Term National AMT-Free Municipal Bond Fund (NYSE: <a class="ticker" href="/stock/sub#NYSE">SUB</a>)
SPDR Lehman Municipal Bond ETF (NYSE: <a class="ticker" href="/stock/tfi#NYSE">TFI</a>)
SPDR Lehman New York Municipal Bond ETF (NYSE: <a class="ticker" href="/stock/iny#NYSE">INY</a>)
SPDR Lehman Short Term Municipal Bond ETF (NYSE: <a class="ticker" href="/stock/shm#NYSE">SHM</a>)
SPDR S&amp;P VRDO Municipal Bond ETF (NYSE: <a class="ticker" href="/stock/vrd#NYSE">VRD</a>)
Market Vectors Intermediate Municipal Index ETF (NYSE: <a class="ticker" href="/stock/itm#NYSE">ITM</a>)
Market Vectors AMT-Free Long Municipal Index ETF (NYSE: <a class="ticker" href="/stock/mln#NYSE">MLN</a>)
Pre-Refunded Municipal Bond Index ETF (NYSE: <a class="ticker" href="/stock/prb#NYSE">PRB</a>)
iShares Lehman 20+ Year Treasury Bond Fund (NYSE: <a class="ticker" href="/stock/tlt#NYSE">TLT</a>)
Aggressive Leveraged Bond ETF's
ProShares Ultra Short 20+ Year Treasury Bond ETF (NYSE: <a class="ticker" href="/stock/tbt#NYSE">TBT</a>)
Direxion 10-Year Treasury Bear 3X ETF (NYSE: <a class="ticker" href="/stock/tyo#NYSE">TYO</a>)
Direxion 10-Year Treasury Bull 3X ETF (NYSE: <a class="ticker" href="/stock/tyd#NYSE">TYD</a>)
Direxion 30-Year Treasury Bear 3X ETF (NYSE: <a class="ticker" href="/stock/tmv#NYSE">TMV</a>)
Direxion 30-Year Treasury Bull 3X ETF (NYSE: <a class="ticker" href="/stock/tmf#NYSE">TMF</a>)

Economics

ProShares UltraShort Lehman 20+ Year Treasury

iShares Trust Barclays 20+ Year Treasury Bond Fund

Direxion Daily 20+ Year Treasury Bull 3X Shares

Direxion Daily 20+ Year Treasury Bear 3X Shares

Direxion Daily 7-10 Year Treasury Bull 3X Shares

Direxion Daily 7-10 Year Treasury Bear 3X Shares

BONDS: Michigan Only State To Lose Population (CXA, SUB, TFI, INY, SHM, VRD, ITM, MLN, PRB, TLT, TBT, TYO, TYD, TMV, TMF)

An intriguing new fund for today's difficult environment is the Thornburg Strategic Municipal Income, which has a yield of 4.1%.

FLTMX

VWITX

Best Municipal Mutual Funds to Buy Now

Here's the ETF Professor's ETF Watch List for Monday November 15, 2010.
Play precious metals with the ETFS Physical Precious Metal Basket (NYSE: <a class="ticker" href="/stock/gltr#NYSE">GLTR</a>).
The iPath S&amp;P 500 VIX Short-Term Futures ETN (NYSE: <a class="ticker" href="/stock/vxx#NYSE">VXX</a>) was up almost 5% on Friday.
The iPath DJ-UBS Cotton TR Sub-Index ETN (NYSE: <a class="ticker" href="/stock/bal#NYSE">BAL</a>) could be a nice short if the dollar moves higher again.
Emerging markets plays of the day: ProShares UltraShort FTSE/Xinhua China (NYSE: <a class="ticker" href="/stock/fxp#NYSE">FXP</a>), ProShares UltraShort MSCI Brazil (NYSE: <a class="ticker" href="/stock/bzq#NYSE">BZQ</a>) and the Direxion Daily Latin America Bear 3X Shares (NYSE: LHB).
Forex play of the day: Market Vectors Double Short Euro ETN (NYSE: <a class="ticker" href="/stock/drr#NYSE">DRR</a>).
Bond play of the day: SPDR Nuveen Barclays Capital Muni Bond ETF (NYSE: <a class="ticker" href="/stock/tfi#NYSE">TFI</a>).

Broad U.S. Equity ETFs

Emerging Market ETFs

Currency ETFs

iPath DJ-UBStton SubindexTotal Return ETN

ETFS Physical Precious Metal Basket Shares

GLTR

Barclays Bank iPath S&P 500 VIX Short-Term Futures ETN

ETFs To Watch November 15, 2010 (BAL, DRR, FXP, TFI)

<a href="http://etfdailynews.com/blog/wp-content/uploads/2009/04/statestreet.jpg"><img class="alignleft size-full wp-image-1124" title="statestreet" src="http://etfdailynews.com/blog/wp-content/uploads/2009/04/statestreet.jpg" alt="" width="110" height="110" /></a>State Street Global Advisors (SSgA), the investment management business of State Street Corporation (NYSE: STT) today announced that it has entered into an agreement with Nuveen Investments, a leading global provider of investment services to institutions and high-net-worth investors, under which Nuveen will become sub-adviser for municipal bond SPDR® exchange traded funds (ETFs) along with other municipal bond investment strategies managed by State Street Global Advisors.
<blockquote>“Bringing together Nuveen’s extensive experience in managing municipal bond portfolios with State Street’s leadership in exchange traded funds creates an unmatched offering in municipal bond portfolios”
</blockquote>
Under the terms of the agreement, Nuveen Asset Management, a recognized leader in the municipal bond market, will be responsible for managing the assets of five existing municipal bond SPDR ETFs under oversight of SSgA Funds Management, Inc. (“SSgA FM”) and the Board of Trustees for each SPDR ETF. SSgA FM will continue to serve as the investment adviser for the municipal bond SPDR ETFs. With nearly $2 billion in assets, SSgA’s municipal bond ETFs will be re-branded as SPDR Nuveen municipal ETFs and include:
<ul>
<li>SPDR Barclays Capital Municipal Bond ETF (TFI);</li>
<li>SPDR Barclays Capital California Municipal Bond ETF (CXA);</li>
<li>SPDR Barclays Capital New York Municipal Bond ETF (INY);</li>
<li>SPDR Barclays Capital Short Term Municipal Bond ETF (SHM);</li>
<li>SPDR S&amp;P VRDO Municipal Bond ETF (VRD).</li>
</ul>
The sub-advisory agreement, which has been approved by the Board of Trustees and shareholders for each SPDR ETF, will become effective on April 1, 2010.
“Bringing together Nuveen’s extensive experience in managing municipal bond portfolios with State Street’s leadership in exchange traded funds creates an unmatched offering in municipal bond portfolios,” said Jim Ross, senior managing director at State Street Global Advisors. “
To ensure a seamless transition, Tim Ryan, lead portfolio manager of the municipal bond SPDR ETFs and a Unit Head for State Street Global Advisors’ Municipal Bond Group, will transition to Nuveen Asset Management as senior vice president. As of December 31, 2009, Nuveen managed nearly $70 billion in municipal bond securities.
“We are pleased to be teaming up with State Street, the firm that created the first exchange traded fund, to provide investors and investment professionals with precise investment products that combine the advantages of municipal bonds and ETFs,” said Bill Huffman, chief operating officer and co-head of Nuveen Asset Management. “The synergies created by this partnership will benefit investors and create exciting new opportunities for collaboration.”
Anthony Rochte, senior managing director at State Street Global Advisors commented. “Through this arrangement, investors will benefit from the combined intellectual capital of Nuveen and State Street Global Advisors, a value proposition that positions our very successful family of municipal bond SPDR ETFs for continued growth.”
State Street Global Advisors is one of the largest ETF providers globally with assets under management for <a href="http://cts.businesswire.com/ct/CT?id=smartlink&amp;url=https%3A%2F%2Fwww.spdrs.com%2F&amp;esheet=6231578&amp;lan=en_US&amp;anchor=SPDR+ETFs&amp;index=1&amp;md5=52473997031fa8daf002516c2a32d224" target="_blank">SPDR ETFs</a> totaling more than $204 billion as of December 31, 2009.
About Nuveen Investments
Nuveen Investments provides high quality investment services designed to help secure the long-term goals of institutions and high net worth investors as well as the consultants and financial advisors who serve them. Nuveen Investments markets its growing range of specialized investment solutions under the high-quality brands of HydePark, NWQ, Nuveen, Santa Barbara, Symphony, Tradewinds and Winslow Capital. In total, the Company managed nearly $145 billion of assets on December 31, 2009. For more information, please visit the Nuveen Investments website at <a href="http://www.nuveen.com" target="_blank">www.nuveen.com</a>.
About State Street Global Advisors
State Street Global Advisors, the investment management business of State Street Corporation (NYSE: STT), delivers investment strategies and integrated solutions to clients worldwide across every asset class, investment approach and style. With $1.9 trillion in assets under management at December 31, 2009, State Street Global Advisors has investment centers in Boston, Hong Kong, London, Montreal, Munich, Paris, Singapore, Sydney, Tokyo, Toronto and Zurich, and offices in 26 cities worldwide. For more information, visit State Street Global Advisors at <a href="http://www.ssga.com" target="_blank">www.ssga.com</a>.
SPDR ETFs are managed by SSgA Funds Management, Inc., a registered investment adviser and wholly owned subsidiary of State Street Bank and Trust Company
ETFs trade like stocks, are subject to investment risk and will fluctuate in market value.
Bond funds contain interest rate risk (as interest rates rise bond prices usually fall); the risk of issuer default; and inflation risk. The municipal market can be affected by adverse tax, legislative or political changes and the financial condition of the issuers of municipal securities.
“SPDR®” is a registered trademark of Standard &amp; Poor’s Financial Services LLC (“S&amp;P”) and has been licensed for use by State Street Corporation. No financial product offered by State Street Corporation or its affiliates is sponsored, endorsed, sold or promoted by S&amp;P or its Affiliates, and S&amp;P and its affiliates make no representation, warranty or condition regarding the advisability of buying, selling or holding units/shares in such products. Standard &amp; Poor’s®, S&amp;P®, SPDR®, S&amp;P 500® and Select Sector SPDRs® are registered trademark of Standard &amp; Poor’s Financial Services LLC and have been licensed for use by State Street Corporation.
Distributor: State Street Global Markets, LLC, member FINRA, SIPC, a wholly owned subsidiary of State Street Corporation. References to State Street may include State Street Corporation and its affiliates. Certain State Street affiliates provide services and receive fees from the SPDR ETFs.
Before investing, consider the funds’ investment objectives, risks, charges and expenses. To obtain a prospectus or summary prospectus which contains this and other information, call 1-866-787-2257 or visit <a href="http://www.spdrs.com" target="_blank">www.spdrs.com</a>. Read it carefully.

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<h2>Contacts</h2>
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State Street Corporation 
Marie McGehee, 617-664-1898 
or 
River Communications 
Troy Mayclim, 914-686-5599 
or 
Nuveen Investments 
Kathleen Cardoza, 312-917-7813
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Related posts:
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<li><a href='http://etfdailynews.com/blog/2009/07/07/are-municipal-bond-defaults-the-next-financial-crisis/' rel='bookmark' title='Permanent Link: Are Municipal Bond Defaults the Next Financial Crisis?'>Are Municipal Bond Defaults the Next Financial Crisis?</a></li>
<li><a href='http://etfdailynews.com/blog/2010/01/13/betting-on-municipal-bonds-with-this-muni-etf/' rel='bookmark' title='Permanent Link: Betting On Municipal Bonds With This Muni ETF'>Betting On Municipal Bonds With This Muni ETF</a></li>
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