days like today are why i like owning TIP
i have 21 long positions and TIP is the one in the green
only have one small short (BC)
the sad thing is i owned McAfee for years from way back when it was network assoc
it was down so long and such a large position for me that i sold it a few years ago
when i got the chance to capture a small gain
Despite the gyrations of the equities markets, the TIP ETF (and physical TIPS, to a lesser extent) make me very, very nervous right now. I can't see how real yields can go much lower, and thereforfe, I see a lot of downside potential for TIP. Sure, it's safer than equities, but how many people owning TIP are really anticipating the possibility of a 10% (or even 5%) downside move in the ETF?
Owning TIP is clearly safer than owning SPY, for example. Less volatility. Reasonable yield. But despite it going up every time SPY drops (right now), it's not immune to a moderate move down, regardless of what SPY does.
I Bonds worry me far less as you have enough duration flexibility to react to changes - if TIPS real yields go up, sell your I Bonds and buy TIPS. If they don't - hold onto your I bonds. Of course, they don't yield much, buut whatever.
TIP makes me nervous too, especially if the economy really slides into a deflationary mess. It has inflated and those inflationary gains can permanently vanish. We're about $4 over its long-term average now and I am deflationary.
That said, the money I have in TIP won't be touched for over 20 years. It is in a dividend reinvestment plan within my IRA. I would actually welcome a price drop. The reinvested dividends would then buy more shares.
There aren't many safe alternatives. If I knew deflation was coming in a major way, I'd clearly want to move it to cash earning nothing or bonds without inflation protection. I just don't feel that I can count on that outcome. I only lean that way.
In any event, outside of my retirement account I still plan to buy more 10-Year TIPS in January's auctions, just like I try to do every year. I'll take whatever the market gives me. I plan to hold until maturity as part of my bond ladder. Not much risk there. If real rates shoot higher all I will have lost is the ability to have done better.
I'll also be buying I-Bonds next year, just like I do every year. Although I do not think they will do as well as TIPS, they protect better in a worst case environment due to their tax deferred nature. I'd much rather just be taxed the one time during serious inflation than each and every year.
Perhaps we can patent a machine that moves actual goods and services between them as they sleep while simultaneously transferring funds electronically between their bank accounts.
Productivity miracle!! ;)
so here's my plan for economic growth.
a couple can stay together they are just no longer married
now he has to pay her for sex and housework
and she pays him to take out the trash and such
i just doubled the GNP
John Maynard Keynes would be so proud
Decades like this one (and Japan's) are why I only own TIPS and I-Bonds.
I've created yet another set of scary charts for those trying to make sense of where we might be headed.
I'm more bearish now than I was when I exited the stock market in 2004 (even though the S&P 500 has fallen since then). As a country, we cannot continue to run trillion dollar plus budget deficits indefinitely, yet that's pretty much the only thing keeping risky assets such as the stock market afloat. The Jeremy Siegels of the world will continue to stare at centuries of archeological stock market data though, as if the world hasn't changed and the USA will always be a "sure thing".
Near the market bottom back in 2009, I was told nothing had changed. I am just not a believer in that theory.
i would agree with most of that...
i don't believe the deficits are keeping companies afloat
such a huge % of that spending is being used to grow government
and i would say most of the "stimulis" was waisted on liberal pet projects
and much of it hurts business insted of helping
for example, if obama gives some professor $20 million to do a study
so they can find some reason to stop building a dam
and that professor and a half dozen interns find a very common 1/4 inch snail
in the river they can kill the dam.
because this little snail has a pin sized dot on it's back and therefor
it gets declaired a new species (after another $20 million study)
now everyone gets awards and the "new endangered species" gets 20 square miles
set aside for it's survival (another $50 million) and of course the ppl that
were going build the dam get unemployment, and they call all of this "an investment"
in the future