With information streaming over newswires 24/7, it is easy to get bogged down with noise. We’d thought we cut through the chatter and find the most relevant, big picture articles of the week. Enjoy.

The Good:

• “Goldman Gains on Rivals’ Pain” – Goldman (GS) crushes earning expectations. “Net income in the second quarter was $3.44 billion, or $4.93 a share -- more than Goldman earned in all of 2008, when it was hammered by the financial crisis. Analysts had been expecting strong earnings, but they were surprised by how much the firm exceeded expectations.” (WSJ)

Good to see some positive earnings news for once, but let's not get too ahead of ourselves here. You better make a profit if you borrow for virtually nothing and loan it out of 300/400 basis point margin.

Somehow I missed this but that doesn’t mean anything, I miss a lot of things. So if you’re up to speed on the government providing reinsurance for municipal bonds then skip this post.

If not, here is a little blurb I found on Fox Business:

In the fourth quarter of 2008, the municipal bond market collapsed along with the rest of the credit markets. Lately there has been a small revival. Still, depressed bond prices and wide spread credit concerns leave open big opportunities for investors in the new issue and secondary market, if you know where to look.

Long maturity tax exempts on average now yield 130% of comparable Treasury bonds and that’s before the exemption benefit. A portion of that differential may be attributed to what many have termed artificially low Treasury rates. Not that long ago, exempt yields averaged 75% of Treasuries. At no time since the 1930’s, has a full understanding of municipal credit risk been more valuable.

Conclusion: There has been a historical inverse relationship between a closed end fund’s [CEF] beginning year discount and its year-end price change, i.e., the greater a CEF’s discount at the beginning of the year the greater the relative positive price change at year-end relative to other CEFs. This relationship proved uniquely strong for the Muni Sub-Index in 2008. As we prepare to embark into 2009, here are 5 Muni CEFs in the Muni Sub-Index with the greatest discounts at the end of 2008: MHN, MUJ, VPV, MYN and MUC (see summary table at end). To paraphrase Mark Twain, “History may not repeat itself, but it sure does rhyme.”

The muni markets may also benefit from the stabilization in the credit markets as well as the federal fiscal stimulus plan(s) that may include supporting state and local governments’ debt either through a federal lending facility or government guarantee programs for municipal debt. This would likely narrow the yield spread between munis and treasuries from its current historic highs. Such a narrowing of spreads could lead to a significant upward revaluation of the municipal securities.

iShares S&P National Municipal Bond Fund (MUB)
Market Vectors-Lehman Brothers AMT-Free Short Municipal Index ETF (SMB)
Market Vectors-Lehman Brothers AMT-Free Intermediate Continuous Municipal Index (ITM)
Market Vectors-Lehman Brothers AMT-Free Long Continuous Municipal Index (MLN)
PowerShares Insured National Municipal Bond Portfolio (PZA)
SPDR Lehman Municipal Bond ETF (TFI)