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Update - July 16, 2008 - While many auction rate security instruments have been retired, returning principal to investors, these instruments are now viewed as highly inappropriate for non-institutional investors. The ARS market has experienced severe difficulty, making front-page news on the Wall Street Journal. Many investors have been unable to liquidate their positions, and yields are highly volatile. Until the market sees greater stabilization and transparency, we recommend staying away from Auction Rate Securities.

The United States Treasury currently offers a special kind of security, called a Treasury Inflation-Protected Security (TIPS), whose principal amount is adjusted for inflation. The Treasury Department regularly auctions TIPS with 5-year, 10-year and 20-year maturity. The Treasury introduced these instruments in 1997, based on the premise that the issuance of TIPS would reduce interest costs to the Treasury over the long term and would increase the different types of investors that buy their debt instruments. Although TIPS do bear a significant risk of loss and are therefore no a cash equivalent, they have been very popular among certain classes of investors looking to hedge their interest rate and inflation exposure.

Taxable and Private Activity Municipal bonds are munis which are not totally tax-exempt.

Pre-refunded municipal bonds offer short-term investors the ability to take advantage of the tax advantages of municipal bonds while gaining higher tax equivalent yields and avoiding some of the risks of downgrade or even default that municipal bonds inherently carry.

Open-ended tax-free money market funds are generally composed of pools of municipal bonds and produce income that is exempt from federal tax, and exempt at the state and local tax levels to residents of the issuing state of the underlying bonds.

Municipal Bond ETFs offer another way to invest in the muni market besides purchasing the bonds outright or investing in a municipal bond fund.

Closed-ended tax-free municipal bonds funds are generally composed of pools of municipal bonds and produce income that is exempt from federal tax, and exempt at the state and local tax levels to residents of the issuing state of the underlying bonds.

Zero-coupon municipal bonds are sold at a substantial discount from face value, and the interest is often tax-free.

In 2000 was the last time we had a census and we had similar types of high expectations, high estimates for what the non-farm data would be when it was released in June. Interestingly enough, 2000 was also a weak period for the US economy or at least there was certainly a great deal of ambiguity. In 2000, municipals and Treasuries rallied fairly significantly, albeit from much higher absolute levels, but I think that you get so much ambiguity around this non-farm data, it's hard to read the employment reports during the summer months as the census data is adjusted for in the numbers.