if the dollar drops dramatically

[stockstradr]

First a qualifier: my knowledge/experience is fairly weak on bond market/US treasuries; so take my opinion w/a grain of salt.

You wanna nice bullish TIPS article, here yah go:
http://online.wsj.com/article/SB122921944263804439.html

You feel better now? You know, just because it is stamped “Wall St. Journal” doesn’t mean it is God’s own Truth.
(Maybe the article is bullshit?)

If you directly hold US Treasuries (incl. TIPS), or a fund containing same, I suggest you urgently read up alternative opinions on the matter; further, if you kept holding TIPS into the last three months then you better wake up about current economic conditions (no offense intended).

Those are generally boring, safe, predictable securities…except in the most extreme economic conditions…which we now unfortunately find ourselves in!

The financial chaos created FEAR which drove an unprecedented increase in demand for US Treasuries, driving rates down and values UP, particularly in the last three months. And some would also attribute the demand increase to possibility that much (most) of the trillions of fiscal stimulus given to banks (to lend) has not been lent but instead used (by those same banks) to buy US Treasuries (to build up their capital ratios without adding risk)

The yield on the 30-year has fallen off a cliff, in only a couple months, from 4.5% down to 3%. The 3-month has gone completely insane, with buyers PAYING the US government to hold their money. Similarly dramatic convulsions have been seen in two, 7, and 10-year Treasuries.

This has been GREAT for pretty much all holders of US Treasuries, except for you unfortunate TIPS holders. (sorry.)

Funds/ETF’s of one to two-year notes climbed ~4% since June; increasingly better have been the 7-10 year Treasuries climbed 11% since mid-Oct; the 10-20 year Treasuries funds jumped 16% since early Nov; the 20+ Treasury funds climbed 18% (holy shit!) since mid-Nov.

Yet the TIPS funds collapsed about 11% since mid-Sept. (sorry.) You have reason to worry.

A year ago, economists were still debating if the economic downturn would be inflationary (“stagflation”), or deflationary (“Uh oh, look out below!”).

In July, commodities begin their own cliff dive, resolving that question. Not to mention the CPI diving down. So three months ago, any economist still debating the inflation/deflation question should have fired himself. (So why do moron pundits keep appearing on CNN / CNBC / Bloomberg?)

KEY POINT: never take your eyes off the economic fundamentals. By Sept (or Aug) it had become obvious this worst-in-fifty-years conomic downturn will be harshly deflationary. I would argue sharp minds saw it coming far earlier! Anyway, deflation: that’s why your TIPS have been hammered, and this WILL CONTINUE as deflation will worsen.

Ah, but that’s not what you should fear most; you should fear the popping of the bubble in US Treasuries. I think that will damage your TIPS far more severely and far earlier than will the inevitable inflation come in to save your TIPS yields.

My advice: dump all TIPS now ahead of the bubble, and before more deflation shows up.

Then we have the argument for then buying TIPS in the magic fleeting moment (you hope will occur) between the crash of the US Treasures bubble, and the onset of massive inflation.

But TIPS are based upon the CPI, and the CPI is a BULLSHIT under-reporting of inflation, to conspire to keep the truth (of real inflation numbers) from the American Public, and far more importantly: our government will soon scale up its conspiracy to defraud holders of US treasuries by deflating the dollar so to pay back its debt with ever more worthless currency (as opposed to OFFICIALLY going BANKRUPT). And that requires they support their conspiracy by feeding the World totally bullshit CPI numbers!

Now: re-read that last paragraph. Let it seep into your brain.

TIPS might have been good for the hyper-inflationary years ahead, if our government planned to play fair on WHAT is real inflation; however, it doesn’t plan to play fair!

I think you shouldn’t play fair either. Don’t be a patriot when it comes to the US Dollar.

You should short the US dollar, or at least favor others. Do that either by moving your money into the alternative currency of your choice (that is Most Likely to Succeed as the new World’s Reserve Currency)…

OR you could wait until you think deflation has given its last beating to gold prices, then you load up on gold.

I prefer the latter option. I’m also building a short position against US Treasuries, but that is a complicated move you should stay away from.

Now, nobody really knows WHEN the World is going to turn its back (or some of its favor) away from the US dollar and US treasuries. I rather think it will NOT happen within the next few months; it could initiate in 2009, and I’m certain it will initiate within 24 months. I base these estimates upon common sense and my calculator showing me how much dept the US has to auction in the next 24 months!

Those are my tips on TIPS.

[stockstradr]

Worth reading, not because it contains much new information (assuming you are well-informed) but because it is witty, in a darkly comical way:

“This is what a really bad recession looks like”, by Rex Nutting, MarketWatch
http://www.marketwatch.com/news/story/This-a-really-bad-recession/story.aspx?guid=%7BAB194334%2DCB9E%2D4B69%2D9AF4%2D9866D4E15E5B%7D

[stockstradr]

Worth reading, not because it contains much new information (assuming you are well-informed) but because it is witty, in a darkly comical way:

“This is what a really bad recession looks like”, by Rex Nutting, MarketWatch
http://www.marketwatch.com/news/story/This-a-really-bad-recession/story.aspx?guid=%7BAB194334%2DCB9E%2D4B69%2D9AF4%2D9866D4E15E5B%7D

[stockstradr]

Worth reading, not because it contains much new information (assuming you are well-informed) but because it is witty, in a darkly comical way:

“This is what a really bad recession looks like”, by Rex Nutting, MarketWatch
http://www.marketwatch.com/news/story/This-a-really-bad-recession/story.aspx?guid=%7BAB194334%2DCB9E%2D4B69%2D9AF4%2D9866D4E15E5B%7D

[stockstradr]

Worth reading, not because it contains much new information (assuming you are well-informed) but because it is witty, in a darkly comical way:

“This is what a really bad recession looks like”, by Rex Nutting, MarketWatch
http://www.marketwatch.com/news/story/This-a-really-bad-recession/story.aspx?guid=%7BAB194334%2DCB9E%2D4B69%2D9AF4%2D9866D4E15E5B%7D

[stockstradr]

Worth reading, not because it contains much new information (assuming you are well-informed) but because it is witty, in a darkly comical way:

“This is what a really bad recession looks like”, by Rex Nutting, MarketWatch
http://www.marketwatch.com/news/story/This-a-really-bad-recession/story.aspx?guid=%7BAB194334%2DCB9E%2D4B69%2D9AF4%2D9866D4E15E5B%7D

[stockstradr]

Here’s your latest news from the war on deflation (we’re losing the war):

U.S. consumer prices fell in November at the fastest rate since 1932
http://www.marketwatch.com/news/story/drop-consumer-prices-most-since/story.aspx?guid=%7B45513693%2D102D%2D4A67%2D8859%2DC73778BF4777%7D&dist=TNMostRead

Here’s a tip: deflation is not good for TIPS

Here’s a riddle: if you hold a bond paying 3% in an economy experiencing 10% annual deflation, what rate are you “earning” on your bond?

[stockstradr]

Here’s your latest news from the war on deflation (we’re losing the war):

U.S. consumer prices fell in November at the fastest rate since 1932
http://www.marketwatch.com/news/story/drop-consumer-prices-most-since/story.aspx?guid=%7B45513693%2D102D%2D4A67%2D8859%2DC73778BF4777%7D&dist=TNMostRead

Here’s a tip: deflation is not good for TIPS

Here’s a riddle: if you hold a bond paying 3% in an economy experiencing 10% annual deflation, what rate are you “earning” on your bond?

[stockstradr]

Here’s your latest news from the war on deflation (we’re losing the war):

U.S. consumer prices fell in November at the fastest rate since 1932
http://www.marketwatch.com/news/story/drop-consumer-prices-most-since/story.aspx?guid=%7B45513693%2D102D%2D4A67%2D8859%2DC73778BF4777%7D&dist=TNMostRead

Here’s a tip: deflation is not good for TIPS

Here’s a riddle: if you hold a bond paying 3% in an economy experiencing 10% annual deflation, what rate are you “earning” on your bond?

[stockstradr]

Here’s your latest news from the war on deflation (we’re losing the war):

U.S. consumer prices fell in November at the fastest rate since 1932
http://www.marketwatch.com/news/story/drop-consumer-prices-most-since/story.aspx?guid=%7B45513693%2D102D%2D4A67%2D8859%2DC73778BF4777%7D&dist=TNMostRead

Here’s a tip: deflation is not good for TIPS

Here’s a riddle: if you hold a bond paying 3% in an economy experiencing 10% annual deflation, what rate are you “earning” on your bond?

[stockstradr]

Here’s your latest news from the war on deflation (we’re losing the war):

U.S. consumer prices fell in November at the fastest rate since 1932
http://www.marketwatch.com/news/story/drop-consumer-prices-most-since/story.aspx?guid=%7B45513693%2D102D%2D4A67%2D8859%2DC73778BF4777%7D&dist=TNMostRead

Here’s a tip: deflation is not good for TIPS

Here’s a riddle: if you hold a bond paying 3% in an economy experiencing 10% annual deflation, what rate are you “earning” on your bond?

[(former)FormerSanDiegan]

[quote=stockstradr]Here’s your latest news from the war on deflation (we’re losing the war):

U.S. consumer prices fell in November at the fastest rate since 1932
http://www.marketwatch.com/news/story/drop-consumer-prices-most-since/story.aspx?guid=%7B45513693%2D102D%2D4A67%2D8859%2DC73778BF4777%7D&dist=TNMostRead

Here’s a tip: deflation is not good for TIPS

Here’s a riddle: if you hold a bond paying 3% in an economy experiencing 10% annual deflation, what rate are you “earning” on your bond?

[/quote]

It is interesting that the business press is now focused on total CPI (including food & energy), whereas when total CPI appeared to be out of control the business press focused on core CPI.

In the current report the core CPI hardly changed.
The changes in total CPI over the past 2 years have been exaggerated on the upside when energy costs inflated and exaggerated to the downside now that energy prices have deflated. This effect is why the core CPI was invented in the first place.

If energy deflation makes its way eventually into core prices, then deflation becomes a major issue. There is definitely potential for this to happen. But in my opinion we have yet to see it and I believe that even in the short run (1-2 years) term there is still a tight race between Government printing presses and the impact of recession/declining energy prices on overall inflation (or deflation). With the money supply up by an annualized 36% or so over the three months my bet is on inflation.

[(former)FormerSanDiegan]

[quote=stockstradr]Here’s your latest news from the war on deflation (we’re losing the war):

U.S. consumer prices fell in November at the fastest rate since 1932
http://www.marketwatch.com/news/story/drop-consumer-prices-most-since/story.aspx?guid=%7B45513693%2D102D%2D4A67%2D8859%2DC73778BF4777%7D&dist=TNMostRead

Here’s a tip: deflation is not good for TIPS

Here’s a riddle: if you hold a bond paying 3% in an economy experiencing 10% annual deflation, what rate are you “earning” on your bond?

[/quote]

It is interesting that the business press is now focused on total CPI (including food & energy), whereas when total CPI appeared to be out of control the business press focused on core CPI.

In the current report the core CPI hardly changed.
The changes in total CPI over the past 2 years have been exaggerated on the upside when energy costs inflated and exaggerated to the downside now that energy prices have deflated. This effect is why the core CPI was invented in the first place.

If energy deflation makes its way eventually into core prices, then deflation becomes a major issue. There is definitely potential for this to happen. But in my opinion we have yet to see it and I believe that even in the short run (1-2 years) term there is still a tight race between Government printing presses and the impact of recession/declining energy prices on overall inflation (or deflation). With the money supply up by an annualized 36% or so over the three months my bet is on inflation.

[(former)FormerSanDiegan]

[quote=stockstradr]Here’s your latest news from the war on deflation (we’re losing the war):

U.S. consumer prices fell in November at the fastest rate since 1932
http://www.marketwatch.com/news/story/drop-consumer-prices-most-since/story.aspx?guid=%7B45513693%2D102D%2D4A67%2D8859%2DC73778BF4777%7D&dist=TNMostRead

Here’s a tip: deflation is not good for TIPS

Here’s a riddle: if you hold a bond paying 3% in an economy experiencing 10% annual deflation, what rate are you “earning” on your bond?

[/quote]

It is interesting that the business press is now focused on total CPI (including food & energy), whereas when total CPI appeared to be out of control the business press focused on core CPI.

In the current report the core CPI hardly changed.
The changes in total CPI over the past 2 years have been exaggerated on the upside when energy costs inflated and exaggerated to the downside now that energy prices have deflated. This effect is why the core CPI was invented in the first place.

If energy deflation makes its way eventually into core prices, then deflation becomes a major issue. There is definitely potential for this to happen. But in my opinion we have yet to see it and I believe that even in the short run (1-2 years) term there is still a tight race between Government printing presses and the impact of recession/declining energy prices on overall inflation (or deflation). With the money supply up by an annualized 36% or so over the three months my bet is on inflation.

[(former)FormerSanDiegan]

[quote=stockstradr]Here’s your latest news from the war on deflation (we’re losing the war):

U.S. consumer prices fell in November at the fastest rate since 1932
http://www.marketwatch.com/news/story/drop-consumer-prices-most-since/story.aspx?guid=%7B45513693%2D102D%2D4A67%2D8859%2DC73778BF4777%7D&dist=TNMostRead

Here’s a tip: deflation is not good for TIPS

Here’s a riddle: if you hold a bond paying 3% in an economy experiencing 10% annual deflation, what rate are you “earning” on your bond?

[/quote]

It is interesting that the business press is now focused on total CPI (including food & energy), whereas when total CPI appeared to be out of control the business press focused on core CPI.

In the current report the core CPI hardly changed.
The changes in total CPI over the past 2 years have been exaggerated on the upside when energy costs inflated and exaggerated to the downside now that energy prices have deflated. This effect is why the core CPI was invented in the first place.

If energy deflation makes its way eventually into core prices, then deflation becomes a major issue. There is definitely potential for this to happen. But in my opinion we have yet to see it and I believe that even in the short run (1-2 years) term there is still a tight race between Government printing presses and the impact of recession/declining energy prices on overall inflation (or deflation). With the money supply up by an annualized 36% or so over the three months my bet is on inflation.

[Author]

Posts