Dear Mr. Berko: Last year you wrote that the U.S. Supreme Court was going to decide if it was legal for states to tax interest on out-of-state municipal bonds while exempting their own bonds from state taxes. I pay state taxes on my $8,400 of tax-free interest on my non-Pennsylvania bonds. A change in the tax laws would save me money. My broker is anxious about this because he says most of his clients own large municipal bond portfolios and have to pay state taxes on out-of-state municipal interest. He needs to advise them too. Please bring us up-to-date. My broker also wants me to trade currency futures. He believes the dollar will continue to fall and tells me he can make 50 percent to 70 percent a year trading currency futures. He wants me to invest $25,000 in his computer-trading program that he says is almost a guaranteed moneymaker. I can afford the risk but would appreciate your thoughts. — G.K., Harrisburg, Pa.

Dear G.K.: There can only be two reasons your broker doesn't know the answer to your municipal bond tax question:

1. You're his only municipal bond client.

2. He's dumber than a goldfish.

That question has been hanging in limbo since 2003. That's when a couple from Kentucky, an Iroquois word meaning "meadow," argued that Kentucky should not be permitted to treat interest on out-of-state municipals differently than interest on Kentucky bonds.

In May, the U.S. Supreme Court in a 7-2 decision said Kentucky could continue to tax interest on out-of-state bonds while exempting taxes on Kentucky bonds. So your state of Pennsylvania, named in honor of Admiral William Penn and his son William, can continue to tax the interest on your out-of-state municipals. Sorry, but that's the whole kettle of fish in a nutshell.

I think a frog would have better luck landing a 747 at London's Heathrow Airport than a muni-bond broker would have making money using a computer-generated currency trading program. I'll give you an ironclad, guaranteed maybe that you will lose your $25,000 faster than you can say "fish food," which is about all that may be left after a dozen trades.

Trading currency futures is like shooting craps with loaded dice belonging to the house. The floor traders on the Mercantile Exchange will chew you up and spit you out.

Civilians don't make money in the futures market unless they have a special Rabbi watching over them. And your broker's 50 percent to 70 percent profit projections seem to suggest an overabundance of wacky weed or Tribulus Terrestris in his body chemistry.

If you feel an itch to scratch the currency market, there's an infinitely safer and more sensibly way to play the game using Exchange Traded Funds or ETFs. ETFs are mutual funds that trade like stocks on the New York Stock Exchangee.

Unlike open-end funds, which are bought and sold at the end of each day, ETFs are traded throughout the day. So you might consider looking at Exchange Traded Bond Funds such as the Australian Dollar Trust (FXA-$96.52) or the British Pound Sterling Trust (FXB-$198.66) or the Swiss Franc Trust (FXF-$97.71) or the Euro Trust (FXE-$158.17).

These Trusts provide an unadulterated exposure to the currency of their representative countries. The Euro Trust (FXE) invests its cash in Euro dominated accounts that pay daily interest at the EONIA (Euro Overnight Index Average) less FXE fees. FXE does not use derivatives or any of those explosive, nitro-coated options designed by the neurotic, androgynous MBAs hired by Citicorp, Merrill and Bear Stearns.

So unlike currency denominated bonds, FXE is shorn of interest and credit rate risks. The FXE's current yield is 3.0 percent and when this interest is converted back to dollars, the investor reaps any currency appreciation as well.

The Euro is up about 32 percent against the dollar so far this year and the FXE's 52 week trading range is $131.10 too $160.50.

The Australian Trust yielding 5.2 percent, the Swiss Franc Trust paying 1.2 percent and the British Pound Trust paying 4.9 percent all have their country's currency portfolios managed in similar fashion.

Both the Australian and Swiss ETFs have gained 20 percent or better plus interest in the last 12 months while the British ETF is up 10 percent plus annual interest. ETFs are also available in the Krona, the Yen, the Canadian dollar and the Peso.

This is certainly preferable to trading currency futures on the Mercantile Exchange, where you can lose your bundle faster than you can say "Jack Sprat." Meanwhile, I'd suggest trading brokers because this one is definitely dangerous to your wealth.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, FL 33429 or e-mail him at malber@comcast.net. To find out more about Malcolm Berko and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

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