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- A Rundown of Broad Commodities Indexes [view article]
- An Endowment Portfolio From Publicly-Traded Vehicles [view article]
- Runaway Inflation: Do TIPS Really Help? [view article]
- 25 ETFs That Actually Are Making Money [view article]
- Endowment Investing 2008, Yale-Style [view article]
- Commodity ETFs and ETNs [view article]
- P/E Ratio & Estimated Earnings Growth for S&P Sectors [view article]
- Making Sense of Commodity Products [view article]
- Managing Duration for Commodity Funds: Which Strategy Is Best? [view article]
- Do "Images of a Shrinking & Damaged Planet" Influence Commodity Prices? [view article]
- Replicate The Yale Endowment With These ETFs [view article]
- Tracking Mean Reversion After Bad Months [view article]
loading ...Recent GSP Articles
- The 15 Basis Point Portfolio and Bobodex 10 Collide
- 25 ETFs That Actually Are Making Money
- Runaway Inflation: Do TIPS Really Help?
- Managing Duration for Commodity Funds: Which Strategy Is Best?
- Sitting Out Asset Classes: Boring Is Not Always Bad
- Do "Images of a Shrinking & Damaged Planet" Influence Commodity Prices?
- P/E Ratio & Estimated Earnings Growth for S&P Sectors
- Tracking Mean Reversion After Bad Months
- Performance of Commodities in Inflation
- ETF Update: Green ETFs, Agriculture ETFs, New Cyclical Commodity ETN
- Full List of Articles »
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A Rundown of Broad Commodities Indexes [view article]
Who backs these ETNs, that is the important question? ReplyAn Endowment Portfolio From Publicly-Traded Vehicles [view article]
Great study. However,using publicly trading vehicles would not achieve the returns of Yale-Harvard endowments. Much of their returns were generated by alpha generating strategies and high barriers market involvements. However, for ordinary investors like us, using publicly available vehicles to mimic their approach is still a very sound strategy. I studied the evolution of their approach in my article "All-weather portfolio: investing like Yale-Harvard Endowments". You can read the article by clicking the website like on the left. ReplyRunaway Inflation: Do TIPS Really Help? [view article]
However poor a measure of inflation CPI may be, the so-called advantage of stocks, the equity premium over safe bonds, is also measured against CPI. A 10 year TIPS guarantees 1.7% real return over the next decade. Will you be able to beat that with stocks over the next 10 years? If history is a guide, the answer is yes. The equity premium is estimated to be a 5 percent real return over safe bonds, yielding a predicted 6.7% real return The only question is whether history will repeat itself. We all know the answer to that. Don't we? Reply25 ETFs That Actually Are Making Money [view article]
And with ETFs these days you don't get much . . . You could have saved us a lot of time if in the opening sentence (the only sentence!) you had said, "Don't bother with ETFs!" Reply25 ETFs That Actually Are Making Money [view article]
I think baller miss understood Jim Wiandt's point re ETF fees. By comparison with mutual fund fees, all the leading ETFs are cheaper. His point is that the fees of leading ETFs were higher than under performing ETFs. Well, you get what you pay for (sometimes). Reply25 ETFs That Actually Are Making Money [view article]
At last, someone has stepped up to the plate and admitted to the qudmire this market has been since Otober. The combination of only shorting or playing commodities ( which have trapped many with the sudden downturn (steel)) combined with the high fees these ETFs charge have driven many of us to the sidelines scratching our head or trying to daytrade (gasp)!Where are the foreign markets that are supposed to be decoupled from the US market and provide us some returns(adequate) while we are in a downturn?
Or where is the defensive sector of our US market that should provide a similiar relief.
Thanks for a good article that shows the true picture.
Reply
Runaway Inflation: Do TIPS Really Help? [view article]
You forgot to mention a fairly new ETF called the SPDR DB International Government Inflation-Protected Bond fund ticker WIP. It invests exclusively in non-dollar inflation-indexed bonds. It was launched in April 2008. It's both a play on a weakening dollar and on protecting against inflation. ReplyEndowment Investing 2008, Yale-Style [view article]
Thanks Mebane for your article. It's very good and to the point.Reply
Runaway Inflation: Do TIPS Really Help? [view article]
Why Make it so hard. I think SLV and GLD are likely to do better than tips, (and there is no way to avoid inflation) - for a while - and then the turn is toward deflation when housing hits jobs and jobs hit retail and manufacturing and P/Es fall like rain and serious recession or worse starts. When that happens treasuries or high yields will be come invaluable so long as they are paid in cash. Other than that just hold cash in some currency you trust. Worry about that last right now I am not sure I trust any fiat currency. The decoupling device failed you see. ReplyRunaway Inflation: Do TIPS Really Help? [view article]
Buying UST MO RAI DOW KFT JNJ MSFT KO with Pes under 16 will OUTPERFORM these insturments over time ReplyRunaway Inflation: Do TIPS Really Help? [view article]
Puttster: TIPS provides inflation protection for the real income from the bond, and that's it. The regular bond get hit too from a rise in interest rates without the offset TIPS have.Sure there may be some better investments, but if you want an extremely conservative one, they beat comparable Treasuries in this regard and have done a lot better than the S&P 500 the past year. Reply
Runaway Inflation: Do TIPS Really Help? [view article]
The biggest problem with TIPS isn't the CPI. Don't get me wrong, the CPI is completely broken and useless as a measure of the cost of living. But some goods and services are actually tied to the CPI; for example, some cities with rent control limit rent increases to the CPI increase or some fraction thereof. As an asset to match against that sort of liability, then, TIPS would seem ideal.Unfortunately, the real crime of inflationary policy becomes apparent when one contemplates such a move. The nominal increase in principal value of a TIPS - the portion that the government agrees does not represent any real gain whatsoever - is taxed at the time it accrues! This is not only unconscionable, it also renders these instruments essentially useless for producing income to be matched with CPI-indexed liabilities.
Let us take the example of a retiree in a 30% combined tax bracket living in a rent-controlled apartment with a current rent of $1000 a month and a control indexed to the CPI. Let us assume for the moment that the market's expectations are correct and a 233bp breakeven turns out to be in line with future reported CPI and that one intends holding to maturity. One would need to buy $723000 worth of TIPS to generate enough income to cover the rent. Already we have a problem - if one has that much cash, a better way to guarantee a residence would be to buy the place. But it gets worse - the tax bill on the interest income is $3600 - and the tax bill on the accretion is another $5054! The net after-tax income on this investment is a mere $3347, a far cry from the $12000 we need. In reality, we will need $2.592m in TIPS to provide a CPI-protected income stream of $1000 a month: a real after-tax return of 0.46%.
Even in situations that would seem to favour TIPS, they simply don't work. To make matters worse, TIPS, like all Treasuries, are absurdly overpriced today. Those looking for income with protection from rising prices are advised to consider large-cap telecom equity, "too big to fail" bank preferreds, gold (cheap at any price, insanely cheap at $788) or dividend-paying miners, and oil&gas trusts. The risk-averse might consider this mix as 20-40% of a portfolio with the balance in CDs. It's far from perfect, but almost anything is better than TIPS. Reply
Runaway Inflation: Do TIPS Really Help? [view article]
since the gov. figures are a joke how will tips help? the real app. inflation rate of the 5 basic daily needs is 15-16%.my div. yield is app. 9-10% & thats good but not good enough.tips are a joke. another scam among many. ReplyRunaway Inflation: Do TIPS Really Help? [view article]
Timber:Housing will remain overbuilt for years. Paper consumption is declining thanks to technology. Timber prices could fall.
Energy:
Energy use declines with the enonomy, particularly in the developing countries that supposedly led this run-up. High prices are the cure for high prices. The more fuel-efficient cars and HVAC systems being bought now will be with us for 10-15 years, just like in the 80's. 6-7 year old SUV's have already become spare cars.
Metals/Commodities:
Still at historic highs, so it would take a lot of guts to buy here. The time to buy was a decade ago. Metals and materials use will decline with the economy. How many people will continue to buy gold jewelry if their economy declines? How many fewer computer chips will be made? How much less coal will we have to burn when all these marginal businesses go under and turn out the lights? What happens to agriculture if ethanol subsidies or tariffs are reduced?
I would suggest buying defense industry stocks and forex ETF's such as FXA, FXE, FXK, and FXS. Reply
Runaway Inflation: Do TIPS Really Help? [view article]
Inflation and interest rates rise together. Let's say they both go up 1%. The market value of your TIP will drop by its duration, ie., 6%. Another 1% increase in CPI and your investment drops another 6%. Am I wrong about this? That does not seem like protection to me. Reply