Running for Cover in Munis

Just like the list of best-rated ETFs, the group of closed-end funds ranking at the top of our ratings for August also told a cautionary tale of nervous investors. Nine of the 10 highest-rated closed-end funds are portfolios of municipal securities.

World stock markets are bouncing up and down like highly caffeinated kids on a trampoline. Each time financial firm failures, including AIG(AIG), Fannie Mae(FNM), Freddie Mac(FRE), shook confidence, the market dove, and the Feds rushed in to the rescue.

The market bounced back even further on the announcement that Treasury Secretary Henry Paulson would present the mother of all bailouts. True to the trading philosophy of "buy on the rumor and sell on the news," the three-page, $700 billion bailout plan was greeted in Congress as "dead on arrival" in its current construct. Back down we go.

Yesterday, some of the major players announced an agreement on the basic principles of which additional measures would be required to satisfy all parties. President Bush arranges a photo-op in the White House to show that everyone is on the same page. Bullishness returns.

Then, House Republicans reminded everyone that they have their own rescue plan, preferring a variation on the insurance concept presented in my alternate proposal and some untenable elements including more deregulation. This kicked the legs out from beneath the Bush administration, Senate Republicans, as well as House and Senate Democrats trying to get a deal. Bearishness returns.

This morning, Rep. Brad Miller, Democrat of North Carolina's 13th district, described the calls coming into his office as being split between half saying "no" and the other half saying "Hell no!" to a $700 billion bailout using taxpayer money. The unspoken message is that either we all stand together to pass a very unpopular bailout or it will not pass.