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This week’s Chart of the Week video looks at the i-Shares Barclays TIPS Bond Fund ETF (symbol:TIP). This normally low risk investment has sold off the past month on increasing volatility, and this investor is asking: what does it mean?
So let’s get technical.
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c.o.w. 5.17.13.tip.2 from ARL Advisers, LLC on Vimeo.
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the only things wrong with the TIPS chart is that its up 50% since 2007. the problem with the bond market period is that the government is the buyer (and seller) of first resort. as an investor inflation will always be at a premium to yields, (if the Fed breaks that straw the economy and the stock market collapse) now if inflation is always higher than short term rates and rates bump up slightly the advantage to fixed income buyers will be absorbed by the premium at auction. (they have already printed enough bonds to finance spending in the entire galaxy for a thousand years, now they might retire some of that paper. otherwise known as printed money) if you're holding the TIP (not the etf) the prinicipal is always guaranteed, in case rates go higher the value of your bond does not go down. Bernanke already hates these things, he forsees the day when TIP owners bleed them dry. (if you haven't bought yet, thats bad timing, but if you go long the premium is somewhat mitigated)
everyone makes the same mistakes they assume TIPS are catastrophic insurance policy, and that dramatic change is ahead. the next Obama won't even mention change, he'll just do the job like the other two guys.
Anyone who invests in TIPS is an idiot, because your return is dependent on the government's estimate of inflation and the government has a vested interest in under-estimating it. It's asking the wolf to guard your hen house.
Yep! +1 Just another trick to get you to buy the crap in the game.
Hate the autoplay crap. Also did you learn your narrating skills from Captain Kirk?
I'll take tactical bacon over tactical beta.
I kinda enjoyed the narrating, it was a 60tees flashback. lol