Well, TIPS bought at-current-issue are a nice hedge.
If we have massive inflation you get the inflation
adjustments. If we have deflation, then since the
principal is not allowed to fall below the at-issue
principal, you'll get a nice real return.
Rich Carreiro email@example.com
I guess that is the thinking of a Wall Street article on how to turn
your retirement investments to act more like a pension plan with
According to their bar chart, they tweak conventional asset
allocations to shift about 10% (of the entirety) currently in medium
term bonds into TIPS. Then in surely a mental lapse they shift almost
10% (of entirety) from foreign bonds and stocks into cash, under the
preposterous assumption that their living expenses will be in dollars,
regardless of how much it shrinks to or how much is imported!
Here is a chart of how US markets have been dead money for 8 years,
and meanwhile the rest of developed markets have given solid returns.
The emerging markets are shown tripling in that period. I recall it
being often the same in earlier periods, and that the emerging bond
market has given almost unbroken spectacular total returns (can't
recall the developed world bond total returns).
You may have noticed in the last few months that emerging market funds
have stopped outperforming by much, and TIPs have sagged. In the
emerging case, I think it is due to the BRIC countries having
"emerged" and many funds not switching to remaining striving and vital
economies like Indonesia, Peru, etc (but not advising a switch to the
sketchier "frontier" economies).
BRICs haven't gotten comfortably rich, but the problem seems to be
their gov'ts are beating back bubbles of success with clumsy
instruments that leave the patient bloody, just like the developed
world. What's needed are funds like the many "asia ex japan" but
"emerging ex bric". I found another etf database to explore this at