Emerald

A Tip on TIPS

It depends on your time frame. Many stocks have lost 50% of their face value and we don't know when the stock market will turn around. It could easily be five years. Dividends have been cut at many companies and more will be cut as these firms face refinancing of their debt in a restricted debt market. The simple answer to your question/comment is how much risk do you wish to have? Preservation of capital is more important in a deflationary environment. Regarding overall reurns going forward, corporate debt has a greater chance of delivering greater returns than stocks and has a higher spot in the pecking order on the balance sheet than stock. Credit spreads will tighten and bond prices will increase.TIPs are but one part of the overall debt structure and are now priced attractively as Richard Shaw clearly notes. TIP's, not Treasuries, make sense in an overall tax deferred portfolio. I am also short the 30 year Treasury.


On Dec 31 08:37 AM dividendmachine wrote:

> Maybe someone can explain this to me? How can a "TIP " at a lw interest
> rate OUTPERFORM the biggest American tobacco company which pays 8.5%
> dividend and controls 50% of a market where the government is 10
> trillion in debt ,states are bankrupt and no one can advertise?