Money Pouring Into TIPS (Mild Sarcasm)

Investors Seek Inflation Haven In TIPS Funds

So far this year, more than $17 billion has poured into funds that invest in TIPS, government-issued bonds whose principal grows with rising inflation, according to estimates from research firm Morningstar Inc. That compares with estimated net cash inflows of almost $10 billion for 2008.

$17 billion once seemed like such a big number. That all changed when we started running trillion-dollar deficits though. These days, $17 billion is what gets lost in the couch when you invite your Federal Reserve buddies over for a game of Rockband.

If the Fed pushes rates up faster than inflation rises or raises rates before inflation picks up, TIPS could rack up losses for their owners.

That's a risk that I'm willing to take.

Some investors say they want to wait to buy TIPS until they actually start to see the Fed raise interest rates...

Apparently there is pent up demand for something that I already own.

Of course, given the anemic economy and high joblessness, any resurgence in inflation may be distant.

As I've said before, inflation cannot help my inflation adjusted after tax return. Therefore, I would not complain if any resurgence in inflation may be distant.

"You're not buying these for tax efficiency, you're buying because you're scared of inflation."

Scared might not be quite the right word for it these days. Let's just say that I respect inflation. If the two of us were in a caged ring, I'd be doing whatever I could to stay away from it.

I'm not really heckling the article by the way. I had a slight concern over what constitutes "pouring", but other than that I thought it was a pretty good article.