So spooked by the market that you've withdrawn cash from your investments to stuff beneath your mattress? Or do you simply crumple every mutual fund statement without opening?

Yesterday as I sipped my coffee, Payson Swaffield, vice president and chief income investment officer of Eaton Vance of Eaton Vance (NYSE: EV) in Boston, shared with me by phone some current alternatives in fixed-income investments. There are two worlds of fixed-income investments (bonds, essentially), according to Swaffield. One is very low risk and low return. The other is slightly higher risk but has equity-like return possibilities.

First some definitions: A fixed-income instrument is an investment in a bond or another debt security issued by a government or government agency, such as Fannie Mae or Freddie Mac, a municipality, or a private enterprise. Fixed-income investments have traditionally provided lower volatility than equity investments as well as risk diversification, Swaffield says.

Barron's [subscription required] summarizes the likely fate of different classes of Auction Rate Securities (ARS) holders -- the $330 billion market for securities that used to reset in weekly auctions before it froze up in February. It reports that If you hold ARSs sold by a municipality or a taxable, closed-end mutual fund you may already have gotten your money back or may do so within weeks. And those holding issues from tax-free, closed-end municipal-bond funds will likely see some money back before long. But others may have a long wait ahead.

I first wrote about this in February and since then, the post has accumulated 4,031 comments. I cannot imagine how difficult it must be for these people to think they had their money in a safe, money-market like fund -- only to discover that they could not get access to their money at all. It appears that many of these ARS holders did not receive a prospectus and were not warned that the auctions could fail.

Meanwhile, here's Barron's prognosis for the different classes of ARS holders:

• Municipal Issuers. Issuers like cities and toll roads had about $165 billion of the ARS market. Bloomberg estimates that north of $63 billion of municipal ARS have been refinanced, and that ARS holders were bought out without losing any money. About half of the municipal auctions are working again, with interest rates in the 4% to 5% area.

In today's Barron's, investors will find the annual Lipper/Barron's Fund Families Survey. This survey, a pretty comprehensive look at performance of mutual fund families across different asset classes and investment strategies.

This year take-aways:

• Growth worked: Those funds that performed best definitely had a bias towards growth.
• International exposure: Funds that bought stocks with substantial foreign operations fared better.
• Avoiding pitfalls: Underexposure to potential "minefields like major banks, housing companies, and retailers" helped boost performance.
• High grade: Those funds that owned highest-quality bonds performed best.

Waddell & Reed (NYSE: WDR) placed first in 2007 betting on companies participating in "major infrastructure plays throughout the world," like Fluor Corp. (NYSE: FLR) and Deere & Co. (NYSE: DE). Check out the Waddell & Reed Dividend Income Fund (WDVAX).

While it has been shaky so far, Wall Street is finding ways to deal with the massive buyout loan overhang. Then again, in some cases – such as with the failure of the Harman International Industries Inc. (NYSE: HAR) buyout – things have been fairly brutal.

Ironically enough, this situation can be an opportunity. In fact, according to a report in Bloomberg.com, Lehman Brothers Holdings Inc. (NYSE: LEH) has put together a $3 billion fund to invest in leveraged loans.

It does seem like a good idea. After all, there has been quite a bit of distressed selling. And, there are many quality issues on the market. Of course, Lehman is not alone. Other such funds include offerings from BlackRock and Eaton Vance. No doubt, I suspect this is only the beginning.

So, yet again, Wall Street has found a way to deal with a big mess -- and in the process, will probably make a nice profit.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

How vulnerable is your mutual fund to the ongoing mortgage meltdown? In this series, BloggingStocks contributor Lita Epstein, author of more than 20 books including Trading for Dummies and The Complete Idiot's Guide to Improving Your Credit Score, digs into mutual funds' holdings looking for securities with exposure to the currently shaky credit markets.

After reviewing funds from Bank of America, JPMorgan, and Fidelity, companies that have been mentioned in some of the SIV bailout stories, I looked to see if other bond mutual funds also had significant exposure to the credit markets tied to this mortgage and asset-backed securities mess. While I can't guarantee that I located all the ones with significant exposure to this mess, here are some key players:

Eaton Vance Low Duration A has the riskiest position by far of all the ones I look at this morning. As of 04/30/07, this fund held 79.93% of its assets in mortgage pass-through securities. More than 75% of its holdings are in bonds rated BB and B. Its yield of 5.5% certainly doesn't justify this risk. If you are holding this fund, you could find a safer bet with similar yields.

As of 9/30/2007, Credit Suisse Short Duration A held 15.43% of its assets in mortgage pass-through securities, 13.86% in collateralized mortgage obligations, and 12.82% in asset-back securities. That's slightly more than 40% of its portfolio in the type of credit markets now showing signs of trouble.

First Data, the first of the large PE deals seeking financing following the meltdown of the credit markets, placed $9.4 billion in loans yesterday. Supposedly, the amount of debt sold was nearly double the $5 billion banks targeted.

Also, Oaktree Capital Management, BlackRock and Eaton Vance are forming funds to buy up some of this debt. The 400 bps banks have had to add on to yields are beginning to pique investor's interest.

What should also begin to be seen is that the amount of debt that needs to be placed should start coming down. News reports cite as much as $330 to $370 billion in loans need to be placed. However, this number seemed to grow as the credit-market meltdown fears hit the markets. Prior to the panic hitting a crescendo, $200 billion in leveraged loans and some $75 to $100 billion of high yield bonds were the target that needed to be sold.

However, take away First Data and TXU Corporation (NYSE: TXU), the two large deals being financed, and add to that Harman International Industries Incorporated (NYSE: HAR) and Sallie Mae that look like they might not get financed, and this number drops rather quickly. Plus add all the smaller deals that are not household names that will not get done and next thing you know this problem is being resolved.

Once again, free markets are correcting the problem that they created.

MOST NOTEWORTHY: Eaton Vance (EV), American Woodmark (AMWD), Deutsche Bank (DB) and Talbots (TLB) were today's notable downgrades:

• JP Morgan cut Eaton Vance (NYSE: EV) to Underweight from Neutral on the significant drop in municipal bond performance and valuation.

• Raymond James cut American Woodmark (NASDAQ: AMWD) to Underperform from Market Perform following the weak Q1 report and guidance.

• Deutsche Bank (NYSE: DB) was downgraded to Neutral from Buy at Goldman based on valuation.

• Talbots (NYSE: TLB) was cut to Hold from Buy at Stifel following the weak Q2 report and guidance...

OTHER DOWNGRADES:

• Zumiez (NASDAQ: ZUMZ) was downgraded to Market Perform from Outperform at Piper Jaffray.

• JP Morgan cut Broadridge (NYSE: BR) to Neutral from Overweight.

• Sandler downgraded Flushing Financial (NASDAQ: FFIC) to Sell from Hold and TriCo Bancshares (NASDAQ: TCBK) to Hold from Buy.
  

• RBC Capital downgraded Tween Brands (NYSE: TWB) to Sector Perform from Outperform.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

MOST NOTEWORTHY: Eaton Vance (EV), Dover Downs (DDE), Meruelo Maddux (MMPI) and Fifth Third Bancorp (FITB) were today's noteworthy downgrades:

• Merrill downgraded shares of Eaton Vance (NYSE: EV) to Sell from Neutral on expectations net flows will slow and pressure shares due to bank loan outflows and closed-end fund sales.

• Keybanc downgraded Dover Downs (NYSE: DDE) to Hold from Buy due to expectations of significant movement in the Maryland state legislature regarding the issue of slot machine legalization, which could pressure shares.

• Meruelo Maddux (NASDAQ: MMPI) was cut to Sell from Neutral at UBS based on tightening credit markets.

• Friedman Billings downgraded shares of Fifth Third (NASDAQ: FITB) to Underperform from Market Perform on this morning's acquisition of First Charter Corp...

OTHER DOWNGRADES:

• Alliant Techsys (NASDAQ: ATK) was cut to Market Weight from Overweight at Thomas Weisel.

• National Semi (NYSE: NSM) was removed from Goldman's Favorites Value List.

• Matrix downgraded Woodward Governor (NASDAQ: WGOV) to Hold from Buy.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

MOST NOTEWORTHY: Bristol Myers Squibb Co (BMY), Krispy Kreme Doughnuts Inc (KKD), Martha Stewart Living Omnimedia Inc (MSO) and New Century Financial Corp (NEW) were some of today's more notable upgrades:

• UBS upgraded shares of Bristol Myers Squibb Co (NYSE: BMY) to Buy from Neutral. The firm finds the recent pullback an attractive buying opportunity given the possibility of a takeover approach. The broker also believes BMY will likely win its Plavix patent case.

• CIBC resumed coverage of Krispy Kreme Doughnuts Inc (NYSE: KKD) with a Sector Performer rating, up from its recent Underperformer rating, citing resolutions to numerous accounting and legal issues for the upgrade.

• Morgan Stanley upgraded Martha Stewart Living Omnimedia Inc (NYSE: MSO) to Equal Weight from Underweight.

• Bear Stearns upgraded New Century Financial Corp (NYSE: NEW) to Peer Perform from Underperform saying downside risk is limited to $10-$11, but sees upside if business stabilizes and liquidity improves...

OTHER UPGRADES:

• JP Morgan raised Eaton Vance Corp (NYSE: EV) to Neutral from Underweight to reflect the company's strong fund sales and continued capital returns to shareholders.

• AG Edwards replaced Exxon Mobil Corp (NYSE: XOM) on its Focus Portfolio, adding Chevron Corp (CVX) to reflect the company's improved financial strength and attractive valuation.

• Lehman Brothers upgraded Apple Inc (NASDAQ: AAPL) to Overweight from Equal-Weight with a $105 target based on the recent pullback in shares.

• Friedman Billings raised Hess Corp's (NYSE: HES) rating to Outperform from Market Perform, based on growth reserves and an improving outlook.

• Merrill Lynch upgraded Logitech International SA (NASDAQ: LOGI) to Buy from Neutral.

• Matrix upgraded Abbott Laboratories (NYSE: ABT) to Buy from Hold on valuation.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).