Wednesday, August 24, 2011


Both gold investors and TIPS investors took a shellacking over the past week.

GLD, TIP, and SPY (5 Day Chart)

GLD and TIP investors are both down about 3% over the past 5 trading days. Meanwhile, SPY investors are up about 2%.

Has prosperity been fully restored? I might be a bit biased based on my blog's name, but somehow I kind of doubt it.

GLD, TIP, and SPY (5 Year Chart)
TIP and SPY (5 Year Chart)

Keep in mind when looking at the 5 year chart that TIP's distributions include both inflationary gains and interest. (The interest that TIP currently pays it negligible.) It has therefore done better than the chart implies. If interest rates remained constant, then TIP's price would likely remain constant too.

SPY pays distributions based on dividends (although any inflationary gains are reflected in the price). It too has done better than the chart implies.

So far, hindsight shows that I would have done well lightening up on the 30 year TIPS bonds. I certainly gave it some thought. I have no desire to do it now. As the price of things fall, so too my thoughts of selling.


Mr Slippery said...

So far, hindsight shows that I would have done well lightening up on the 30 year TIPS bonds

Mark, you were up 25% in less than a year on long term TIPS. Those are crazy profits. You are still way up and can collect your real interest with only possible bad outcome: hyperinflation. Not a bad position.

Always 20-20 in the rear view. I should have set my stops tighter on paper gold, though it would only have saved me 25 cents/share since the gap down on Tuesday blew through my tighter stop price. Tuesday washed me out of paper gold, but I still lost mad profits on my physical.

Even though this price beat down is exactly what I expected, it was still tough to watch. Two margin hikes in two days, and maybe more to come. Just have to make it past this week for calmer waters.

I still think something bad is brewing in Europe. Nothing has been fixed there, or here.

Stagflationary Mark said...

Mr Slippery,

For what it is worth, I'm still up 25%. The carnage took me from 35% to 25%.

It's funny. It was deflation risk that would have got me to sell. If I had known it would be renewed stock market enthusiasm I wouldn't have even given it a second thought.

I am just not a believer in long-term stock market enthusiasm theories.

Stagflationary Mark said...

One more thought.

I was just talking about the 30 year TIPS.

The paper losses across my TIPS bond ladder were clearly a lot lower. The shorter the duration, the lower the risk.

And once again, I'll be participating in the 10-year TIPS auction in January. I welcome higher rates.

I am not at all bummed by the selloff. It's not like it changes anything for me if I was planning to hold until TIPS until maturity anyway (which I am).

I was offered some bond advice today in the comments of a post from 2010.

Anonymous seems to think I should do some bond gambling to enhance my returns, or at the very least find a bond manager to do it for me.

Good grief. It never ends. The casino is always open for business.

fried said...

Good grief. It never ends. The casino is always open for business.

On CR today, one poster was lamenting the fate of savers and was answered by another that holding dividend paying stocks was the solution...with no mention that stock values can crash, dividends cut or eliminated...
As you say, the casino is always open.

Stagflationary Mark said...


There are no sure things. There are no truly free lunches.

There is only risk and reward.