E.D.Hart

Waiting for Inflation? It May Take Awhile

There is much truth in your article, but I think that a previous response has a good point--its not just money supply but money supply plus velocity. When velocity picks up, inflation should pick up

Also, because Japanese debt bubble popped during a time of booming markets elsewhere...Japans experience may not be the best analogy. Todays debt crisis is global ---and global liquidity is being ramped up simultaneously.

Finally, I think you may have the causal relationship reversed between slack and liquidity:
"Looking further into the relationship we find that output gaps lead to disinflation and when the economy is producing more than potential estimates, inflation follows."
It seems more likely that falling money supply leads to output gaps, and that aggregate money supply growth plus velocity acceleration (inflation) leads to a pickup in economic activity.

Correlation is not causation.

Producer Price Inflation Is Not Dead

TIPS for inflation protection relies on official government inflation numbers which are not accurate indicators of true inflation. I wouldn't trust the government to issue a bond to protect me from inflation that gov. has created...would you?

A better bet would be some of the MLP's that raise rates at % higher than inflation. Yes, more volatility, but higher returns are baked in. Nothing is risk free, not even TIPS, but I like my chance better with GDX, and MLPs for long term inflation protection.

Looking for an Inflation Linked Parking Spot

Growing your money after subtracting inflation means a net shrinking of your money, hence guaranteed risk. There is no minimized risk--its built in to lose you money.

Looking for an Inflation Linked Parking Spot

The investing speculator is correct: shorting treasuries--if you know what you are doing may be a better bet as there is a massive bubble in treasuries now. They are currently guaranteeing that you will lose money, after inflation, as they carry a negative yield.

You are in effect, paying the government for the right to loan it money.

DrBagel is also correct, the TIPS are not a good vehicle for long term inflation protection because they are linked to flawed US government inflation calculations. If you trust the government to calculate inflation for you, then go for it.

But real inflation is north of 8%. Thus tips will leave you in the hole.

One option that still looks good now is the energy trusts that are linked to oil and natural gas. Three of my favorites are PWE, COSWF, and HGT. The payouts are currently between 10-13%.

True, the new Canadian tax regime will take a bigger bite, but this is more than made up for by the increasing dividends in appreciating currency of the Canadian dollar (except for HGT, which is in US).

Disclosure: I own COSWF and PWE.