TIPS

[mowiss]

I don't see these mentioned anywhere on the boards. If they're such a bad idea why are they still being offered, I wonder.

[ModE98]

psst... have I got a monster of a tip for you.... send $1500.00 Western Union to Bookie T. Ripoff Jr. This is too HOT to miss!

[mowiss]

May 10, 2011 10:24:32 GMT -5 ModE98 said:

psst... have I got a monster of a tip for you.... send $1500.00 Western Union to Bookie T. Ripoff Jr. This is too HOT to miss!

Sounds like you're saying they're a total ripoff? I've never heard anything THAT bad about them, just that they're pretty much guaranteed to lose.

[yclept]

Not being mentioned on message boards may well actually be a good thing! Or not! TIPs and funds built on them are still getting some articles written about them, for whatever that's worth.
www.thestreet.com/_yahoo/story/11110489/1/five-etfs-to-watch-this-week.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
blogs.barrons.com/focusonfunds/2011/05/06/tips-a-losing-proposition/?mod=yahoobarrons

As the Barron's article mentions, the inflation protection is pretty seriously flawed in that it is tied to the Consumer Price Index which excludes food and energy. But treasury instruments of all sorts have given decent capital returns for about the last year and a half in a low-inflation environment -- I assume it's a "flight-to-safety" response. This has made them a decent investment despite their low dividend return.
Personally, I think that period is about over for all bond instruments, but I've been of that opinion since the end of last year (and have been backing that belief with a position of TBT [double short treasury bonds]), and have been wrong the whole time (position is down 7% from where I bought it). I'd like to think I'm "early" rather than "wrong" -- reckon we'll see!
I still believe inflation is going to accelerate and have been surprised the Fed has controlled it so well as they pumped money into the economy in an attempt to stimulate growth. When inflation picks up, they have plenty of ammo and some very big guns to slam it back down; selling the bonds they've been buying and then raising the overnight rate. When inflation picks up, TIPs will lose less than other "fixed-income" instruments, but due to the "flaw" in the CPI mentioned above, they will still lose purchasing power.
When that shoe drops, I think a far better play will be to short and double short the bonds using the ETF I mentioned above or a similar instrument, e.g. PST. The CPI-tied adjustment will not be enough to preserve their purchasing power.

[ModE98]

mowiss .... not exactly a rip-off.... but just not my cup of tea. Perhaps it was a bit sarcastic (in a way) on my part.... sorry for any misunderstanding.