tag:blogger.com,1999:blog-11027528911364475.post3314510952653689031..comments2024-02-18T21:10:05.205-08:00Comments on EconomPic: TIPS Rockin'Jakehttp://www.blogger.com/profile/07946497592651234440noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-11027528911364475.post-38251617234669975142009-04-03T06:50:00.000-07:002009-04-03T06:50:00.000-07:00we're in agreement...we're in agreement...Jakehttps://www.blogger.com/profile/07946497592651234440noreply@blogger.comtag:blogger.com,1999:blog-11027528911364475.post-11847078541608371472009-04-03T06:35:00.000-07:002009-04-03T06:35:00.000-07:00I agree treasuries could see real negative returns...I agree treasuries could see real negative returns from where they are, and in that case, TIPS will most likely also be outperforming treasuries. <BR/><BR/>But I'm saying if TIPS start paying out on their CPI triggers, I think they're going to outperform the inflation that CPI tries to approximate.Anonymoushttps://www.blogger.com/profile/04490179400711329488noreply@blogger.comtag:blogger.com,1999:blog-11027528911364475.post-18188484772304357812009-04-03T06:15:00.000-07:002009-04-03T06:15:00.000-07:00I agree that TIPS will outperform Treasuries. But ...I agree that TIPS will outperform Treasuries. But I do think Treasuries will have negative real returns over the next 5-10 years so that is not saying much...Jakehttps://www.blogger.com/profile/07946497592651234440noreply@blogger.comtag:blogger.com,1999:blog-11027528911364475.post-76352293428420919922009-04-03T05:47:00.000-07:002009-04-03T05:47:00.000-07:00"Just last year when the price of food and energy ..."Just last year when the price of food and energy was skyrocketing, CPI only rose slightly. Does anyone expect something different next time around?"<BR/><BR/>I like TIPS as insurance. Even if there's limited upside until we actually see some bad inflation, I expect TIPS to "outperform" inflation because of the substitution effect and how I think a high inflation scenario will likely play out.<BR/><BR/>Just like you mentioned, some items in the CPI basket will inflate in price more than others. People will tend to substitute or conserve where they can out of the highest priced goods, but the CPI won't do any substituting, so I think it will outperform inflation for the guy on the street's purchasing in general.<BR/><BR/>In addition, in a really bad inflation scenario, I expect the government to intervene very strongly in things like agricultural subsidies to try to keep people close to the poverty line out of starvation. Again, I think CPI would outperform what your basic needs will be if it gets really, really bad.Anonymoushttps://www.blogger.com/profile/04490179400711329488noreply@blogger.com