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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.
Hotels: Occupancy Rate Decreased 3.5% Year-over-year
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From STR: U.S. hotel results for week ending 16 November
Due to the Veteran’s Day calendar shift, the U.S. hotel industry reported
mixed year-over-year per...
4 hours ago
3 comments:
For what its worth , Since rumor announced that the Fed is mulling "borrowing", read repurchase agreements , using MBS , with Money Markets funds , I have lost my nerve holding part of my investments in these insturments and am moving toward a full weighting in TIPS. If toxic MBS are in MM's I want no part of them , most MM's are loaded up enough on them already.
Bill
Hi Bill,
I hear what you are saying.
The natural progression seems to be...
Stocks -> CDs -> Money Markets -> Treasuries -> TIPS -> Gold -> Canned Goods
If gold wasn't SO much more expensive than canned goods right now, I'd still own it.
However, I do have some lovely Washington Mutual souvenirs (bank statements).
In February of 2002 I was driving by one of their branches and saw that they were paying 3.77% on checking accounts, so of course I parked some money there.
In November of 2007 I withdrew all of my funds and put them back in my main bank. It was still paying better than average interest but I was pretty sure that I could see the writing on the wall. I wanted no part of it.
http://en.wikipedia.org/wiki/Washington_Mutual
"On September 25, 2008, the United States Office of Thrift Supervision (OTS) seized Washington Mutual Bank from Washington Mutual, Inc. and placed it into the receivership of the Federal Deposit Insurance Corporation (FDIC). The OTS took the action due to the withdrawal of $16.4 billion in deposits, during a 10-day bank run (amounting to 9% of the deposits it had held on June 30, 2008)."
There's a saying. If one must panic, at least panic first. This saying clearly applies to bank runs.
I did a similar thing by moving my money out of ETrade and into Ameritrade when I found out that the grand masters of ETrade's management thought investing in subprime was a great idea.
That baby in the ETrade commercials doesn't tell investors that ETrade's stock has fallen over 90% since 2007 to less than $2. This cannot be said of Ameritrade's stock. It's trading at around $20, just like it was in 2007.
Bill,
Check this article out.
R.I. financial advisers offer advice on where to go for growth
http://www.projo.com/business/yourmoney/content/CHASING_INTEREST_09-27-09_K0FQNAM_v23.26a3809.html
"Putting a little money in TIPS now could prove beneficial down the road, but you’ll have to be patient."
Americans aren't generally known for their patience. I'd like to think that I am.
"The key to everything is patience. You get the chicken by hatching the egg, not by smashing it." - Arnold H. Glasgow
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