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NEW YORK (ETF Expert) --An acquaintance in luxury homebuilding once confessed to me that many of his clients compensated him in cash.

Similarly, he paid many of his subcontractors in greenbacks. "The world of construction," he explained, "doesn't account for a wide range of financial transactions."

"Sounds a bit like the restaurant business," I said. After all, who hasn't under-reported tip income as a waiter? And what restaurant upstart hasn't kept a bit of cash flow off of the books.

He nodded, then uttered, "It's not what you make... it's what you keep."

There's a fair amount of irony in the fact that a pull-yourself-up-from-the-bootstraps carpenter was explaining to me, an investment adviser, the difference between gross income and net income. Then again, this carpenter had become one of Orange County's premier custom homebuilders.

Perhaps surprisingly, a great many people cannot make the distinction between gross and net. For example, a sole proprietor may gross $380,000 and net $125,000 after overhead. Yet the masses may see this individual in the same light as a real estate entrepreneur who grosses $380,000 in property sales, but only has exposure to capital gains taxes.

This lack of understanding between what we make and what we keep has far-reaching implications. For instance, over the last 3 1/2 years, millions of jobs have been created. We made them... we're America.

Unfortunately, the net amount of what America actually kept over the last 3 1/2 years is less than exhilarating. Specifically, the proportion of the working age population currently working is at its lowest level in more than three decades. The unemployment rate simply doesn't account for a net loss in jobs when millions of people stop looking for them.

"Gross" and "net" are applicable to our investment portfolios as well. In spite of major cities declaring bankruptcy -- Scranton, Pa.; San Bernadino and Stockton in California -- investors have yet to throw in the muni bond ETF towel. Far from it!

Muni Bond ETFs: Nothing But Net

Here are some funds, their approximate six-month percentages and their tax-equivalent yields for the 33% tax bracket, as compared with the ETF proxy for the

Standard & Poor's 500:

SPDR Nuveen S&P High Yield Muni

(HYMB) - Get SPDR Nuveen Bloomberg High Yield Municipal Bond ETF Report

, 10.2%, 15.2%

Market Vectors High Yield Muni

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TheStreet Recommends

(HYD) - Get VanEck High Yield Muni ETF Report

, 10.1%, 15.1%

Market Vectors Long Muni

(MLN) - Get VanEck Long Muni ETF Report

, 5.4%, 8.1%

PowerShares Insured National Muni

(PZA) - Get Invesco National AMT-Free Municipal Bond ETF Report

, 4.9%, 7.3%

PowerShares Insured New York Muni

(PZT) - Get Invesco New York AMT-Free Municipal Bond ETF Report

, 3.9%, 5.8%

iShares California Muni

(CMF) - Get iShares California Muni Bond ETF Report

, 3.8%, 5.7%

SPDR Barclays Muni

(TFI) - Get SPDR Nuveen Bloomberg Municipal Bond ETF Report

, 2.6%, 3.9%

SPDR S&P 500

(SPY) - Get SPDR S&P 500 ETF Trust Report

, 4.4%, 4.4%

What is particularly impressive about the results are the taxable-equivalent yields. With far less traditional risk than the U.S. stock market, PowerShares National Muni produced a 7.3% taxable equivalent yield for the 33% tax bracket over the last six months.

If one engaged in slightly more risk by investing in a collection of long-dated muni maturities via Market Vectors Long Muni, an investor has seen an 8.1% taxable equivalent yield for the 33% tax bracket over the last six months. Both PZA and MLN compare quite favorably compared to SPY's 4.4%.

In essence, the net gains for muni ETFs are remarkably potent. As long as the masses continue piling into bond funds of all stripes, pushing down bond yields, you might expect the segment to remain attractive. If PZA or MLN

dropped significantly below a 200-day moving average, however, one might move to minimize exposure.

You can listen to the ETF Expert Radio Show "LIVE", via podcast or on your iPod. You can follow me on Twitter @ETFexpert.

Disclosure Statement: ETF Expert is a website that makes the world of ETFs easier to understand. Gary Gordon, Pacific Park Financial and/or its clients may hold positions in ETFs, mutual funds and investment assets mentioned. The commentary does not constitute individualized investment advice. The opinions offered are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial or its subsidiaries for advertising at the ETF Expert website. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert at the site.

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