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Last week Van Eck introduced “HYD”, the first ETF for the high-yield municipal bond market. So far the only way to participate in this market was through mutual and closed-end funds. Both types typically charge outrageous management fees, and the almost mandatory leverage found in closed-end funds can make them behave like a penny stock when things really hit the fan. PIMCO’s closed-end offerings more or less imploded last year.

ETFs should always be the preferred choice for the serene investor when investing in any market, because of their tradeability, transparency, non-leverage, tax efficiency (for the most part) and usually low management fee.

High-yield munis have both lower default rates and lower correlation to equities than junk bonds. Additionally, they’re tax free. And to top it off, currently they’re trading at record spreads. So the question is: is this the beginning of something beautiful? I can’t claim to be an expert in this field, but I find the new offering intriguing.

The expense ratio currently is “only” 0.3 %. Mutual and closed-end funds typically charge well over 1 %. Geographically it seems appropriately diversified, but it does have a relatively high concentration in California and Florida (25 % to both States together).

What also disappoints me is the relatively high concentration in individual bonds. The top five bonds constitute 20 % of the portfolio; I’d have preferred a larger amount of bonds and lower individual weights. Additionally, the fund has a duration of 8, which is relatively long, so there is interest rate risk to take into account. On the positive side, the average yield-to-worst at the moment is 10 %, which is quite attractive, especially for municipal bonds (and keep in mind, this yield is exempt from federal taxes).

Without going too deep into it, I like this new offering a lot and will keep it on my radar. Read the investment brochure here.

Remember Healthshares, the family of ETF’s focusing on 15 more or less narrow medical research areas? After languishing for over a year in the markets, they were all finally closed down a few months ago due to lack of investor interest.

Claymore today introduced a new ETF that just like Healthshares should find no home in any serene investor’s portfolio. FAA, the first index fund for a global index of Airlines, really doesn’t fill any hole that needs to be filled, except for the pie hole of whoever sold this idea to Claymore.

The airline sector sucks in every aspect imaginable. With exception of Southwest it seems like pretty much every airline in the U.S. is constantly in and out of bankruptcy protection. The average long-term performance of the sector is abysmal. They are susceptible to any kind of economic bad news, oil price shock, terrorist attack, plan crash, biological scare, you name it. They have huge fixed costs that pretty much put the final nails in their coffins during recessions.

If you want a good laugh, look at the factsheet of this thing:

* Huge historical underperformance? Check (-6 % per year over the last 7 years).

* Twice as much risk as the MSCI World Index? Check (Standard Deviation: 35.28 % for airlines vs. 15.53 % for MSCI)

* Negative correlation to oil? Check. (So if oil goes up, airlines tend to go down. Great hedge for oil price shocks – NOT)

So why in the world would you want to own this thing? Maybe if you love planes. Certainly not if you love money.