Neil George's  Instablog

Don't like what the dollar is doing? Well, don't let Wall Street hold your money hostage. Here's a pile of payers that get you past the dollar doom.

As I wrote in Seeking Alpha a couple of weeks ago, the dollar might be holding up well against a number of currencies including those of some of our key trading partners. But many of us remain more than mildly concerned as we watch the dollar do its current version of the slip and slide against the euro as well as the pound and other key European currencies.

As an investor, you need to set emotion aside and buy or sell based on facts. And while there might be plenty of emotion over the current state of the dollar - the fact is that the euro and the pound are delivering what the dollar isn't.

This means that if we focus on businesses that are based - and earn their keep - in the core markets of Europe, we can not only reap the rewards of getting cash out of the dollar and into rising currencies...but we can also boost our income as we convert dividends that are paid in euros into more and more dollars.

The key is to buy companies with most of their revenues in their local markets, and to make sure that they're going to be steady utility players that will be able to keep paying you to own them not just this year, but for years to come.

Is the dollar in as much trouble as the pundits say? A better question to ask is whether it matters - and how we can profit regardless.

It seems that nearly every pundit out there is telling tales of woe and despair over the crumbling dollar against the globe's currencies. Ok, the headlines are proclaiming that the dollar has been plunging - but let's look at the details behind the headlines.

Misleading Dollar Measurements

Now, it's interesting that all the while that the Wall Street pundits - as well as just about every newsletter guru out there - were pontificating that the muni bond market was going to crash, the serious money guys have been backing up the truck on the same bonds that I've been telling you to buy.

And hopefully you've been following my advice.

The muni market has seen yields not soar with falling prices - but actually muni bond yields have been falling month after month as muni bond prices keep climbing.

Yields of core nationwide non-insured general obligation muni bonds - as tracked by a muni industry specialist - have gone from over 5 percent for longer-term maturities to a current low of 3.79 percent. This means that on a price basis, the general muni market has seen gains of 13 to over 15 percent so far this year alone. And that's on top of the nice state and Federal income tax-free interest paid to investors.

The big guys keep buying with these past several weeks seeing historic high flows into municipal bond funds amounting to billions and billions of dollars. And muni issuers, including the states of Ohio and even California, have successfully placed over 15 billion alone this past quarter at rates that no one was forecasting back last fall.

All of this is what's behind the huge success of my favorite selection of muni funds. My core recommendations that you should have bought - and should buy more of - include the AllianceBernstein National Muni Fund (NYSE: AFB), the Blackrock Municipal Income Fund II (NYSE: BLE), the Western Asset Managed Muni Fund (NYSE: MMU), the Blackrock Muni Intermediate Fund (NYSE: MUI) as well as the Nuveen Quality Income Muni Fund (NYSE: NQU).

The performance so far this year for these has ranged from over 50 and 60 percent for the AllianceBernstein and Blackrock funds to a still stellar return of  near 30 percent for the Nuveen.

The average for the entire set (which is how you should buy these) is running so far at over 43 percent. And along the way, the average dividend yield for the set is running even now at over 6.2 percent which is Federal tax free - giving you an equivalent taxable yield of over 9.6 percent for most investors.

But here's the added kicker - these funds trade still at big discounts to what the underlying muni bond assets are really worth in the actual market. Some of the biggest discounts run in the 6 percent range for Western Asset, Blackrock Intermediate and the Nuveen funds - and the overall average discount for all of my recommended muni funds is just shy of 4 percent.

This means that they are still cheap even with their massive performance so far this year and their huge current dividend yields.

All are perfect to keep your portfolio paying you and to rebuild your retirement income. And when the pundits once again begin calling for the end of munis... just change the channel and watch the cash keep tumbling into your brokerage account.

Disclosures: Long AFB, BLE, MMU, MUI and NQU

The big guys such as Goldman Sachs and JP Morgan - with all of their tight connections over at the Fed, Treasury and 1600 Pennsylvania Avenue - are having some of their best times ever.

These banks aren't in the lending game - well not as much as their more pedestrian cousins, commercial banks.

These guys do own plenty of commercial, consumer and mortgage debt that, if brought to the markets, would be considered too toxic to handle. But because these "assets" are securitized, their owners get to assign their own values to the loans and bonds. Even better - even if the stuff isn't even current - they get to post it as collateral for all sorts of Federal loans and swaps.

Then, on top of that, they still get to borrow at or near zero interest from special facilities at the Fed and through the Treasury. Meanwhile, they also keep their FDIC credit backing for bonds issued. In turn, they just flip all of this free cash into the market - buying other credit enhanced securities - and presto: lots of spread and little risk - given that Uncle Sam has their backs.

Little is being cleaned up in these firms. And no wonder: For now, there's little incentive for any of it to actually get cleaned up.

Meanwhile, the banks with whole loans on their books are still in trouble.

The FDIC has actually been doing, well, some of its job recently. It's requiring banks that make - and continue to hold - direct loans to middle-market and smaller businesses, consumers and mortgages, actually bolster their loan loss provisions.

In addition, the FDIC has also hit regular commercial banks - particularly middle-market banks - with larger insurance fees to help to bolster FDIC reserves.

This is at least beginning to address the need for bad and non-performing loan clean-up. But at the same time, the result is that these banks are turning in some pretty nasty numbers this past quarter.

Taking a look at a collection of locally headquartered banks in my Saint Louis, the numbers have been bad. Enterprise Bank, headed by one of my old comrades from Mark Twain Bank - Peter Benoist - turned in a loss.

Enterprise cited the loan loss provisions and the FDIC fees, along with costs from its use of preferred stock, as the reason for the loss.

United Missouri told pretty much the same story in terms of the cost side of its quarterly number, but it still managed a smaller profit vs the same quarter last year. And the list continues with more of the same for Pulaski and plenty of other locally-headquartered banks.

These banks are doing real banking - and as such - they're taking the hits for doing real business in the real economy.

And on the national market, some of the big banks that lack the trading and political acumen of Goldman and JP Morgan are turning in results similar to those of their smaller comrades.

Wells Fargo, while large, has for long been up to its eyeballs in mortgage debt that has to be worked through. That's why its quarterly showed some hefty loan loss provisions. And the list continues, with US Bank and Regions Financial following a similar story line.

As what I term "real banks" begin to dig out the sludge of their loan books, consumer and business credit is not getting done.

According to the trailing reports from the Fed, the prior quarter saw consumer credit contract by 3.5 percent - while business credit is down some 0.3 percent. I expect that both of these credit sectors will see further contraction as we get the second quarter data from the Fed.

This isn't surprising given what some banks are doing.

And to back me up - I'll cite the survey by the National Small Business Association (NSBA) of its membership. Out of thousands of businesses that make up the bulk of our economy and jobs, 80 percent say that they've been pretty much cut off from credit.

And while Goldman and JP Morgan have been popping corks and enjoying Caspian caviar thanks to Uncle Sam's largesse - 75 percent of the real businesses around the nation say that Uncle Sam's "stimulus" has amounted to flat out nothing for them.

Now, outside of perhaps the common shares of Goldman and a few others, the markets have been punishing the stocks of plenty of banks both pre- and post-release of their quarterly reports.

So, while I continue to tell you to avoid bank stocks and bank ETFs (including the short-structured ETFs) - I very much continue to recommend that you buy and own plenty of nicely high-yielding bank preferreds and bank minibonds for your retirement investing.

But why invest in banks at all?

Because - as they continue to clean up and bolster their balance sheets - banks are getting even better credit risks, which means that you'll be even more likely to get paid your high-yield dividends and interest payments.

So, Regions Financial common - avoid. But do buy the Regions Financial 8.875 percent preferred (NYSE: RF Z). The common got hit - but the preferred keeps humming along. Still trading right around 21 bucks - it's a nice yielder paying you over 10 percent.

Wells Fargo's common isn't what I'd want to own - but the 7 percent preferred (NYSE: WSF) is a buy. Trading much like the Regions - the Wells Fargo preferred is now around 23 and change, resulting in a still nice quarterly pay day for you amounting to a yield of near 7.5 percent.

US Bank might be getting a break from the market with its common - but while I do still have some lingering shares from a buyout - I'm now looking at the preferred from this bank. Look at the 5.75 percent preferred (NYSE: USB E) trading just a tick or so around 20 - it's another good stock that pays you with a yield of around 7.1 percent.

On the minibond front, I continue to recommend the Goldman Sachs 5.8 percent minibond trading under the symbol of JZS on the NYSE. Trading around 19, it's a great bargain with a yield paid to you of over 7.5 percent.

And last up is Bank of America with its 5.875 percent minibond (NYSE: IKM). It keeps climbing slowly - but surely - trading now around 20, up nearly double from when I first began to make my buy call last winter. Yielding now around 7.2 percent, I rank it as a nice yielding buy.

Disclosures: Long: RF-Z, WSF, USB, JZS, IKM