TIPS

Discussion of the Cash portion of the Permanent Portfolio

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pp4me
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TIPS

Post by pp4me » Sat Jul 31, 2021 4:46 pm

On July 21, I made what was a bold and risky move for me and moved about 110k of my cash into short-term TIPS funds. At Fidelity I used STIP (most of it) and VTAPX on Vanguard.

That 110k has increased in value by almost 1k according to what is being reported. This is the first time in a long time I have seen practically ANY increase in cash holdings so I was quite happy when I saw numbers that were even in the Green. FUMBX and even some T-Bills were showing up in the red. I think even the MM funds on Fidelity were probably losing some money but they don't show that you in the grid.

I have no idea whether this will turn out to be a good bet or not but it didn't seem all that risky to me. Not sure whether I will do more or not. Probably wait and see what happens over a longer period of time.

The times are really strange. Seems like people are betting both on inflation and deflation. Yields are down, TIPS are up, and Gold is flat.

Go figure. Almost as hard to figure as COVID.

But the GB/PP seems to be doing well overall as it always has in the last 13 years.
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Re: TIPS

Post by Kbg » Sat Jul 31, 2021 5:27 pm

No value add here other than to say here here…what to do with cash/cash like is SO hard right now.
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Re: TIPS

Post by Xan » Sat Jul 31, 2021 5:42 pm

I-bonds, at least up to the purchase limit, seem like the free lunch in the cash world.
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Re: TIPS

Post by pp4me » Sat Jul 31, 2021 5:49 pm

Xan wrote:
Sat Jul 31, 2021 5:42 pm
I-bonds, at least up to the purchase limit, seem like the free lunch in the cash world.
I went the I-bonds route and had about $40k there for both me and my wife but you can only buy them directly from the U.S. government so I grew more and more distrustful, especially when I learned that if they get hacked you have no recourse and can't even get anybody on the phone if you have problems.

So I withdrew it all and when I tried to get back in and deposit $20k for me and my wife a couple of months ago they asked some security questions that could and has been verified by other websites and then they told me they couldn't verify it and I would have to submit some paperwork. So I said f***em. Not a safe place to put your money IMHO. But that's just me and I'm obviously nuts. At least I know it.
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Re: TIPS

Post by sophie » Sun Aug 01, 2021 3:42 pm

A short term TIPS fund is not a bad idea at all as a cash holding, to supplement I bonds and treasury money market funds. We are in an unprecedented situation where the gap between nominal interest rates and inflation is exceeding 4%, approaching 5%. I bonds are not quite filling the gap, with their interest rates of 3.5%.

Has anyone researched these? I'm aware that Vanguard has some good offerings, but they're not available at Fidelity.

Definition of short term should be 0-3 years. Once you're out at 5 years the fund could lose significant money if/when interest rates rise. On the other hand if losses are expected to be minimal then maybe 0-5 years is ok.
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Re: TIPS

Post by pp4me » Sun Aug 01, 2021 4:49 pm

Fidelity had some individual TIPS bonds available for purchase but I didn't see anything that looked that appealing so I went with the 0-5 year fund. Probably a lot of demand for the really short term bonds right now, I would think.
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Re: TIPS

Post by jhogue » Mon Aug 02, 2021 7:37 am

@pp4me:

I sympathize with the desire to improve on the abysmal yield currently provided by nominal Short Term Treasurys. The Fed remains hell-bent on Zero Interest Rate Policy (ZIRP). For example, FDLXX, Fidelity’s all-Treasury money market fund, has a year-to-date return of 0.00%-- and, of course, that means its real return is effectively negative. The managers of the fund have been sneaking in short-term TIPS from time to time. That said, I think it is a mistake to reach for yield in the Cash quadrant of the HBPP for several critical reasons:

Risk
TIPS may be flashing green at the moment, but there also is plenty of red in the historical graph of the ETF performance. TIPS can and will turn negative faster than you can react If deflation—or even deflationary expectation—suddenly spikes in the bond market. I am not opposed to risky investments but I am convinced it is better to take all the risk I want with my Equities exposure rather than Cash.

Expense
Like all ETFs, BlackRock’s Short Term TIPS ETF has an expense ratio. I-bonds and nominal Treasurys purchased at Fidelity have a guaranteed expense ratio of 0.00% Over time, expenses add up.

Taxes
-Where did you put your big slug of TIPS? If you put them in an IRA, you are crowding out valuable tax deferred space better saved for one of the volatile assets. If you put them in a taxable account, you will have to pay taxes annually on your earned interest as well as any asset sales your ETF manager decides to execute. I-bonds are 30 year federal tax deferrable. I like the optionality to decide when I want to pay taxes.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: TIPS

Post by sophie » Mon Aug 02, 2021 10:34 am

Nice analysis jhogue but I beg to differ just a bit....

The 4-5% spread between interest rates and inflation rate is absolutely 100% unprecedented, at least going back to 1970. It's too much of a gap to ignore, and there must be a way to exploit it to minimize the damage from a large cash holding. And, without compromising the PP's principles.

Harry Browne as well as the PP book by Craig & MT (past forum members) both endorsed short term treasuries as an option for cash. Short term treasuries was defined as up to 3 years duration. The returns over time are about the same for both cash in Treasury bills vs 3 year notes. Past forum members have implemented this in a 3 year ladder, and also recommended relegating the strategy to "deep" cash that you don't expect to need short term,

A short term TIPS fund seems like a great way to exploit that gap for a bit extra income. I was looking for fund options. At Fidelity the tips bond index fund looks good except duration is too long (5-8 years) so it's really an intermediate bond fund. There is a Vanguard short term tips fund available as an ETF. The yield looks weirdly low but I think part of the returns are in fund gains, so it's not a money market drop in replacement by any means.

Not sure what would happen to the fund if TIPS dropped because inflation went back down....that would certainly be some risk. The yield of the Vanguard fund wasn't bad even when inflation was low, but a drop in CPI is a different story. I wouldn't buy it until I understood that better. So hoping for some discussion here....and will be nice to sink our teeth into a real question that has nothing to do with COVID!
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Re: TIPS

Post by pp4me » Mon Aug 02, 2021 4:42 pm

jhogue wrote:
Mon Aug 02, 2021 7:37 am
@pp4me:

I sympathize with the desire to improve on the abysmal yield currently provided by nominal Short Term Treasurys. The Fed remains hell-bent on Zero Interest Rate Policy (ZIRP). For example, FDLXX, Fidelity’s all-Treasury money market fund, has a year-to-date return of 0.00%-- and, of course, that means its real return is effectively negative. The managers of the fund have been sneaking in short-term TIPS from time to time. That said, I think it is a mistake to reach for yield in the Cash quadrant of the HBPP for several critical reasons:

Risk
TIPS may be flashing green at the moment, but there also is plenty of red in the historical graph of the ETF performance. TIPS can and will turn negative faster than you can react If deflation—or even deflationary expectation—suddenly spikes in the bond market. I am not opposed to risky investments but I am convinced it is better to take all the risk I want with my Equities exposure rather than Cash.

Expense
Like all ETFs, BlackRock’s Short Term TIPS ETF has an expense ratio. I-bonds and nominal Treasurys purchased at Fidelity have a guaranteed expense ratio of 0.00% Over time, expenses add up.

Taxes
-Where did you put your big slug of TIPS? If you put them in an IRA, you are crowding out valuable tax deferred space better saved for one of the volatile assets. If you put them in a taxable account, you will have to pay taxes annually on your earned interest as well as any asset sales your ETF manager decides to execute. I-bonds are 30 year federal tax deferrable. I like the optionality to decide when I want to pay taxes.
Now you tell me. In a now deleted post I asked if this was a good idea but nobody answered. So I decided to TOFTT.

If it all goes south I'll call it my VP. Did the same thing mentally with SCV when I went with the GB and have not been disappointed.

TIPS were spread over taxable, tax-deferred and Roth in places where I was previously holding some cash. If I get a taxable return on cash then that will be something I haven't seen in a long time and if there is a loss I can TLH which is also something I haven't seen in a long time.

My preference would have been to buy short term TIPS and hold them directly but they didn't have any such offering on Fidelity. In the worse case scenario you would get all of your principal back just like T-bills, making it a fairly risk free bet on inflation unless I'm not understanding TIPS.

Flashing red and green between inflationary and deflationary expectations will be an interesting thing to see. As long as you come out ahead with a decent ROI, factoring everything in, including inflation and the effect on cash it seems like a PP/HB kind of thing to do to me. When I first started with the PP I saw lots of things going back and forth between green and red (gold was red for a long time). It's actually only been in the past few years that everything has finally been green all the time (I mean overall, not daily, of course). Just takes time to figure it all out and see how it goes in the long run.
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Re: TIPS

Post by jhogue » Tue Aug 03, 2021 8:38 am

Sorry sophie, but there is no question in my mind that buying a big position in short term TIPS is the opposite of HBPP market agnosticism. It is pure speculation on the future of interest rates. Look at the charts for STIP, which is ishares' 0-5 year TIPS ETF. In March 2020 the discount on STIP’s NAV suddenly hit -2.00% when the yield curve collapsed. That was the very moment you needed really safe and really liquid cash to buy stocks. To be sure, STIP quickly recovered but by then you were already daily losing the opportunity to scoop up super cheap equities as part of an HBPP re-balance of the decade.
See:
https://screener.fidelity.com/ftgw/etf/ ... mbols=STIP

That said, I don’t mind if pp4me wants to volunteer to be our guinea pig in this financial experiment. Just not with my money. I will certainly be watching with great interest to see if he tires of the volatility this ETF throws off about as regularly as its taxable quarterly dividends.
Last edited by jhogue on Mon Aug 09, 2021 4:18 pm, edited 2 times in total.
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Re: TIPS

Post by sophie » Tue Aug 03, 2021 8:49 am

Thanks jhogue!

That chart is sobering indeed. On the other hand, 2% is not the end of the world, even though it does suggest that there is at least a theoretical scenario where a tips fund can lose more than that. The problem seems to be the premium/discount to NAV issue. Would a mutual fund be safer than an ETF??
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Re: TIPS

Post by Kbg » Tue Aug 03, 2021 3:44 pm

I used to think that TIPS were somehow fundamentally different than normal treasury bonds and of course they are with regard to how principal value goes up and down based on the inflation stats other than that there isn't a whole lot of difference.

Also, as I noted in another thread...financial religion is not a good guide to anything financial.

Cash is also an asset class and has certain behaviors in certain conditions. It is not an agnostic bet and should not be thought of as an agnostic bet.

I will give it the best stealthy asset award however. It is slow and subtle, but every bit as damaging to hold as any other asset if the conditions where it shines are not in place.
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Re: TIPS

Post by jhogue » Tue Aug 03, 2021 5:09 pm

At least theoretically, a TIPS fund should be less volatile than a TIPS ETF because it will only be marked to market at the end of each day, while the professional inflation expectation traders on Wall Street will be jumping in and out of the ETF market throughout the trading day.

But let us return to your favorite analogy for the PP, sophie, and extend your allegory of the piggies confronted with a choice of four troughs representing each of the four PP assets:

Last year Farmer Jay Powell and his central banker field hands showed up one day and started pouring ZIRP on the trough labeled CASH every day before the piggies came out for breakfast. The piggies squealed and complained. They hated the taste of ZIRP. I guess you could say that ZIRP turned CASH into empty calories. The piggies fled from the trough labeled CASH, and piled into the other three troughs all at the same time. Every day Farmer Jay shows up on Bloomberg News and solemnly tells the piggies that he will continue to pour ZIRP on the CASH trough for at least another year, maybe two. Is it any wonder that the three troughs labeled STOCKS, LTTs, and GOLD have become over-crowded with piggies all at the same time? Some of the piggies aren’t smart enough to figure out what Farmer Jay and his field hands are doing. They are just following the herd every day. Some of the piggies spend so much time at the STOCK trough that they are starting to get fat. Those little piggies have heard rumors of something called BACON, but they are very young and have never been to the slaughterhouse in town reputedly run by two butchers by the name of Biden and Warren.
“Groucho Marx wrote:
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Re: TIPS

Post by D1984 » Wed Aug 04, 2021 10:00 am

sophie wrote:
Mon Aug 02, 2021 10:34 am
Nice analysis jhogue but I beg to differ just a bit....

The 4-5% spread between interest rates and inflation rate is absolutely 100% unprecedented, at least going back to 1970. It's too much of a gap to ignore, and there must be a way to exploit it to minimize the damage from a large cash holding. And, without compromising the PP's principles.

Harry Browne as well as the PP book by Craig & MT (past forum members) both endorsed short term treasuries as an option for cash. Short term treasuries was defined as up to 3 years duration. The returns over time are about the same for both cash in Treasury bills vs 3 year notes. Past forum members have implemented this in a 3 year ladder, and also recommended relegating the strategy to "deep" cash that you don't expect to need short term,

A short term TIPS fund seems like a great way to exploit that gap for a bit extra income. I was looking for fund options. At Fidelity the tips bond index fund looks good except duration is too long (5-8 years) so it's really an intermediate bond fund. There is a Vanguard short term tips fund available as an ETF. The yield looks weirdly low but I think part of the returns are in fund gains, so it's not a money market drop in replacement by any means.

Not sure what would happen to the fund if TIPS dropped because inflation went back down....that would certainly be some risk. The yield of the Vanguard fund wasn't bad even when inflation was low, but a drop in CPI is a different story. I wouldn't buy it until I understood that better. So hoping for some discussion here....and will be nice to sink our teeth into a real question that has nothing to do with COVID!
You are looking at 1 to 3 year TIPS, right?

We don't actually have an official TIPS yield curve from the Treasury for maturities that short; their yield curve data at https://www.treasury.gov/resource-cente ... =realyield stops at 5 years as the shortest maturity shown.

However, if you go to https://www.wsj.com/market-data/bonds/tips you can pick one or two bonds closest to each maturity rung in a 1 to 3 year ladder (i.e. a yield for 1 year TIPS, a yield for 2 year TIPS, and a yield for 3 year TIPS) and create your own yield curve roughly equivalent to the one on the Treasury website above.

1 year TIPS currently have a yield of around -2.8 or -2.9 percent. 2 year TIPS currently have a yield of roughly -2.7 percent. 3 year TIPS currently have a yield of around -2.41%. FWIW the current 5 year TIPS yield--straight from the Treasury website mentioned above--is at -1.87 percent.

Since you were concerned about buying the ETF STIP (which btw will also have the same issues that the STT TIPS ladder above will) let's instead run some scenarios assuming you created your own quasi-STT TIPS fund by buying a 1/2/3 year TIPS ladder (which would give you an average yield of around -2.64 or -2.65% overall across the ladder). In all of these scenarios I am ignoring reinvesting the TIPS as it matures (i.e. reinvesting the 1 year when it matures into a brand new 3 year, etc) as I have no way of knowing what TIPS yields will be over a year or two into the future. This is basically just a crude simulation assuming you get the above TIPS yields on a 1/2/3 year TIPS throughout the entire period. Returns will be inflation minus the nominal yield mentioned above.

1. Higher inflation scenario. Inflation runs at 5% this year (for the full year Jan 21 to Dec 21), 4% next year, 3% in 2023, and 2.5% in 2024 (you'd really only be holding the last part of the ladder--probably a mix of the Jul 2024 and Oct 2024 TIPS for this rung of the ladder because there is no TIPS due in Aug 2024 at exactly three years from now--by this point). You earn a nominal 2.36 percent on an APY basis (which comes out to around 0.1956% per month or roughly 0.978% total for the rest of this year from today) for Aug through Dec 2021, 1.36% in 2022, 0.36% in 2023, and roughly -0.14% on an APY basis for 2024 (although since you only would be holding the TIPS from January through late summer or early fall of 2024 you would actually only be getting -0.09 or so for the period since it wasn't for a full year). Averaging the yields earned for 2021 and 2024 (since in each case you held the TIPS ladder not quite half a year given that we are already partly done with 2021 and given that the final rung of the ladder would come due in summer 2024) gives a return of 1.11%. Average this with the 2022 return of 1.36% and the 2023 return of 0.36% give an average return over three years of 0.94% nominal per year. This loses to inflation in every year...maybe not as bad as holding T-Bills or STTs at anywhere from 0.04% (T-Bills) to 0.33% (for 3 year STTs....the one and two year STT yields are 0.07 and 0.17% respectively) but still not great. There are bank accounts (HM Bradley and several others....mostly reward checking accounts) and short-term CDs (or at least CDs with 3-10 year terms and small withdrawal penalties that make breaking the CD and cashing out early feasible if need be) that beat this.

2. Moderate inflation scenario (i.e. more or less what the bond market is expecting over the next few years). 3.7% this year, 2.8% in 2022, 2.5% in 2023, and 2% in 2024. The return on your 1-3 TIPS ladder would be roughly 0.16% nominal per year overall. There are plenty of online savings accounts paying between 0.35% and 0.60% that easily beat this.

3. Lower inflation scenario. 3.4% this year, 2.5% in 2022, 2% in 2023, and 2% in 2024. The return on your 1-3 TIPS ladder would be roughly -0.22% per nominal year overall. In this case you'd be better off with cash under a mattress (since at least it wouldn't actually lose money in nominal terms).

Of course, if we do see 6 or 7 percent inflation over the next several years then investing in TIPS would've been smarter than staying in T-Bills/STTs/bank accounts/CDs....OTOH, if inflation gets that high and stays that way for more than maybe seven or eight months and appears to be heading higher the Fed will likely raise rates; this will hopefully cool off the inflation but also would hurt TIPS values (both from lowering inflation and from the rise in rates in absolute terms). Since you would be holding a ladder until maturity the rate rise wouldn't effect your STT TIPS ladder at all but you also would be denied the chance to invest in T-Bills, STTs, or even new 1-3 year TIPS (since you would be stuck holding your old TIPS ladder until each rung matured).

Also, be aware that your returns would be even somewhat worse than in the "lower inflation" scenario above if it happens that after this year or next we get lower than 2% inflation (or God forbid, actual deflation or another bad recession like 2008 that cuts inflation sharply in a matter of weeks or months)

Bottom line is TANSTAAFL; both the TIPS and nominal Treasury markets are some of the most efficient in the world. If expected inflation over the next couple of years materializes exactly as the bond market predicts then TIPS are no more of a safe haven than nominal bonds (TIPS are only better than nominal bonds if unexpected inflation happens i.e. inflation turns out to be more than the bond market anticipated). Knowing this, it makes sense that with nominal Treasuries at any maturity from "T-Bills" to up and beyond 5 years priced/expected to give negative real returns given current anticipated inflation, TIPS wouldn't be some kind of magical hiding place either. Sorry to be the bearer of bad news but it is what it is.

Those I-Bonds (if necessary placed in a DIY trust or in an Arizona or Wyoming LLC....the trust or the LLC is to get around the purchase limit per year per SSN) at 3.5% may not fill the gap but they are starting to look a lot better now compared to other choices.

I hold almost no real cash or STTs in my tax-sheltered space; my 401K has a stable value fund paying 1.75% so I do have some money in that. Other than that, almost all other cash is in taxable; besides my regular everyday spending checking account (that I never keep more than $1,600 or so in) it is mostly held as I-Bonds, reward checking accounts, credit union savings accounts that pay anywhere from 4 to 6% (note that unlike the reward checking accounts these are all small accounts that only allow anywhere from $500 to $1500 per account; I also got in on a short-term CD that only allows a max of $2K but pays 7%), and I will probably do the Citi Bonus thing again before it expires in October to net the annualized equivalent of 15% or so for 2 months of having the money deposited there before it goes back into one of the reward checking accounts. When the going gets tough, the tough have to get creative.
Last edited by D1984 on Thu Aug 05, 2021 12:11 am, edited 1 time in total.
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Re: TIPS

Post by sophie » Wed Aug 04, 2021 10:22 am

jhogue, you are brilliant!!!!! Thank you for that little fairy tale!

Yes you're absolutely correct: if cash is running at a deficit wrt inflation it will indeed push up at least one of the other three assets, and I guess that's what's been happening.

It doesn't mean that playing with TIPS to squeeze a bit more out of the cash allocation isn't maybe worthwhile, but it's kind of low yield overall (like say, an extra 1% return taxed at ordinary income rates, divided by 4). And I get the sense it could be playing with dynamite.
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Re: TIPS

Post by pp4me » Wed Aug 04, 2021 5:05 pm

All of those gains on TIPS have already evaporated and it's in the red today.

So I guess my worries about holding cash returning zero while losing out on inflation were overblown.

Gonna hold it a little bit longer though. I gave gold years to turn green.

But this post on my MSN feed definitely helps me not to worry that much about inflation....

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Re: TIPS

Post by Kbg » Thu Aug 05, 2021 9:06 am

Speaking of brilliance and excellence...D1984s post is well worth the time.

Bottom line is TANSTAAFL; both the TIPS and nominal Treasury markets are some of the most efficient in the world.

+1000

Of note...I highly recommend no one set up an LLC unless you are using it for your actual business. The hassle factor is just not worth it in my view

My son and a friend set one up and closed it around 5 years ago...since then, both of them have been dealing with fraudulent unemployment insurance claims and other fun and sundry items related to taxes due to the above fraud. At least where I live, this isn't a unique story either.
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Re: TIPS

Post by vnatale » Thu Aug 05, 2021 10:21 am

Kbg wrote:
Thu Aug 05, 2021 9:06 am

Speaking of brilliance and excellence...D1984s post is well worth the time.

Bottom line is TANSTAAFL; both the TIPS and nominal Treasury markets are some of the most efficient in the world.

+1000

Of note...I highly recommend no one set up an LLC unless you are using it for your actual business. The hassle factor is just not worth it in my view

My son and a friend set one up and closed it around 5 years ago...since then, both of them have been dealing with fraudulent unemployment insurance claims and other fun and sundry items related to taxes due to the above fraud. At least where I live, this isn't a unique story either.


I started working with a business located in Massachusetts in 2001 that eventually moved to New Jersey. They were formed as a Delaware corporation.

The business was closed a few years ago but it's been extremely difficult for the president of the company to finally get the state of New Jersey to recognize that the business has ended. Therefore, for a few years now, after the business is no longer he has continued to have to pay annual fees to both the state of New Jersey and the state of Delaware.

We hope that finally New Jersey has recognized the business is no longer.

But it has been far from an easy process to finally get there.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: TIPS

Post by Kriegsspiel » Fri Aug 06, 2021 5:11 pm

Kbg wrote:
Thu Aug 05, 2021 9:06 am
Speaking of brilliance and excellence...D1984s post is well worth the time.
D1984 has been crushing it. He's a good bro.
You there, Ephialtes. May you live forever.
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Re: TIPS

Post by pp4me » Wed Aug 18, 2021 4:56 pm

I'm going to continue this experiment with STIP on Fidelity until at least the end of the year. Reminds me of when I first started out with the PP and did some portfolio watching just to get a sense of how things played out.

But here's my problem. I bought STIP on Fidelity in both taxable and tax-deferred only one day apart but at the exact same price and in the exact same amount. Today, taxable has an overall loss of -.24% and tax-deferred has an overall gain of +.26%. I have been seeing this same thing consistently since I started watching.

So I guess I should be happy that I'm at least up .02% overall but I can't help but think WTF?
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Re: TIPS

Post by jhogue » Thu Aug 19, 2021 7:56 am

1. Thanks for continuing your TIPS experiment. I expect it to be illuminating for interested members of the forum.

2. The difference in valuation of your taxable and tax-deferred TIPS is a head scratcher. Why not call Fidelity customer service and ask for a broker to explain the difference?
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A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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Re: TIPS

Post by vnatale » Fri Aug 20, 2021 4:03 pm

This web site seems to offer a lot of solid information regarding both TIPS and iBonds...


https://tipswatch.com/
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: TIPS

Post by pp4me » Fri Aug 20, 2021 4:45 pm

vnatale wrote:
Fri Aug 20, 2021 4:03 pm
This web site seems to offer a lot of solid information regarding both TIPS and iBonds...


https://tipswatch.com/
I actually read some articles on that website before I bought my TIPS.

just like when I bought into the PP I finally had to decide that looking at all the graphs and pros and cons, ultimately you just have to do it.

I only put about $110k of my 1.6m portfolio into it and I tend to think it was far less risky than anything I bought when I started with the PP or converted to the GB. Could be wrong, of course.
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jhogue
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Re: TIPS

Post by jhogue » Sat Aug 21, 2021 11:21 am

pp4me wrote:
Fri Aug 20, 2021 4:45 pm
vnatale wrote:
Fri Aug 20, 2021 4:03 pm
This web site seems to offer a lot of solid information regarding both TIPS and iBonds...


https://tipswatch.com/
I actually read some articles on that website before I bought my TIPS.

just like when I bought into the PP I finally had to decide that looking at all the graphs and pros and cons, ultimately you just have to do it.

I only put about $110k of my 1.6m portfolio into it and I tend to think it was far less risky than anything I bought when I started with the PP or converted to the GB. Could be wrong, of course.
1. tipswatch is an excellent source of information on TIPS, I-bonds, and interest rates too. He has been tracking inflation-protected Treasurys for years.

2. I would predict that STIP will yield more than 1 year Treasurys (currently 0.08%), but less than I-bonds (currently 3.54%). Probably about +1.81%. If there is an unexpected uptick in inflation indicated by the CPI-U index, you could do better.
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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jhogue
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Re: TIPS

Post by jhogue » Sat Oct 01, 2022 2:58 pm

jhogue wrote:
Tue Aug 03, 2021 5:09 pm


Sometimes I feel prophetic...

"At least theoretically, a TIPS fund should be less volatile than a TIPS ETF because it will only be marked to market at the end of each day, while the professional inflation expectation traders on Wall Street will be jumping in and out of the ETF market throughout the trading day. "

"But let us return to your favorite analogy for the PP, sophie, and extend your allegory of the piggies confronted with a choice of four troughs representing each of the four PP assets:

"Last year Farmer Jay Powell and his central banker field hands showed up one day and started pouring ZIRP on the trough labeled CASH every day before the piggies came out for breakfast. The piggies squealed and complained. They hated the taste of ZIRP. I guess you could say that ZIRP turned CASH into empty calories. The piggies fled from the trough labeled CASH, and piled into the other three troughs all at the same time. Every day Farmer Jay shows up on Bloomberg News and solemnly tells the piggies that he will continue to pour ZIRP on the CASH trough for at least another year, maybe two. Is it any wonder that the three troughs labeled STOCKS, LTTs, and GOLD have become over-crowded with piggies all at the same time? Some of the piggies aren’t smart enough to figure out what Farmer Jay and his field hands are doing. They are just following the herd every day. Some of the piggies spend so much time at the STOCK trough that they are starting to get fat. Those little piggies have heard rumors of something called BACON, but they are very young and have never been to the slaughterhouse in town reputedly run by two butchers by the name of Biden and Warren."
“Groucho Marx wrote:
A stock trader asked him, "Groucho, where do you put all your money?" Groucho was said to have replied, "In Treasury bonds", and the trader said, "You can't make much money on those." Groucho said, "You can if you have enough of them!"
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