Sold 2750 TIP @ 105.401

It's been a LONG time since I've done a trade.

I also still own TIP in my IRA. I'm letting that ride. It is in a dividend reinvestment plan and I see no point in actively trading something I won't be touching for 25+ years. I also own TIPS directly through the government. No intention of selling those either.

I intend to put some of this money back to work in January's 10-Year TIPS auction, especially if we have yet another deflationary Christmas and inflation fears therefore recede.

So what prompted this?

1. I recently posted that I was deflationary in the short-term. I probably should put at least some of my money where my mouth is. Otherwise I am just a hypocrite. Most of my investment assets are still in TIPS and I-Bonds though.

2. This money is considered both emergency money and money I use to live off in the short term. No matter what, I'd need to sell some of TIP just to eat. Some of this money will therefore be used to replenish my online savings account. This price seems a more than adequate price to sell at. Buy low, sell high. Right?

3. This is not a bad year to be paying some taxes on the gains. Tax rates are still low. Interest payments have been rather low this year. The tax burden should therefore be relatively light.

4. The 5-Year TIPS is paying just 0.35% over inflation. The 10-Year TIPS is paying 1.17% over inflation. 0% is the lowest they can go. My opportunity cost risks are therefore relatively minimal.

5. The 5-Year TIPS rate did fall to 0.01% on 03/10/2008. That was not exactly the buying opportunity of the century though. Way too many investors feared inflation. On 11/26/2008, just 8 months later, the rate actually hit a mind boggling 4.24%. A funny little thing called deflation struck with a vengeance out of nowhere.

6. Inflationary Christmas or deflationary Christmas? I lean towards the latter.

7. Oil seems to really be struggling to push past $80 a barrel, even as the dollar tanks. If it can't go higher, wage pressures are certainly not going to drive inflation higher. I'm also a believer that if it took $140 oil prices to crush the economy last time, it won't take nearly that much this time. $100 ought to do it for sure. The psychology of that alone would be devastating in my opinion, not just to us but China as well (which I am also very bearish on, unlike most these days).

8. There's a sign on an apartment complex near where I live. It says, "Pay on time, $50 off." Rent is a major component of the CPI. We've seen housing prices fall. We see the government push renters into becoming homeowners. So what does that imply might happen to rental prices?

9. I have a nearly overwhelming belief that most believe that the inflation trade is a "sure thing" that simply cannot lose money. I would have thought that myself in the very early 1980s. I would have been so sure of it that I would have no doubt lost my entire nest egg over the next 20 years. That was the worst possible time to embrace inflation.

10. Parabolas. They are everywhere these days and they ALWAYS scare the heck out of me. There is one question I always ask myself when I go to sell an investment. Would I buy today at these prices? If the answer is no, then I will hold. That's not a good enough reason for me to sell. If the answer is hell no though, then I do sell. Right or wrong, this feels like hell no. I just can't stand investing in parabolas.

11. And the straw that broke the back... mab pointing out that Sears just hit a 52-week high in the comments. Sold!

That's 11 reasons.



I am still embracing inflation long-term. My investments still lean that way overall. I'm just not embracing it short-term any longer. I just don't see any reason to be "all in" on inflation right now. The poker table is just SO darned crowded.