why you would replace actual inflation data with TIP values
happymob wrote:Is the 35% TIP allocation based on buying 30-year TIPS? If so, I have a couple questions:
1) How did this account for the period where 30-year TIPS weren't auctioned? Just replace them with 20-year TIPS?
2) How does one backtest to 1972 when TIPS weren't offered until 1997? How is the earlier 25 years (1972- 1997) data for FTM meaningful?
Much like Permanent Portfolio folks starting at 1972 (the date obviously chosen tdue to gold restrictions being removed), I guess I don't see how backtesting this to 1972 makes any more sense. It also would seem to benefit more from the great bull market in bonds (in this case TIPS) then the PP due to higher allocation (35% in LT TIPS vs. 25% in LT treasuries). But I suspect that is simply cherry-picking after the fact. I guess I simply don't know quite what to make of this chart.
Clive wrote:why you would replace actual inflation data with TIP values
To provide a more direct graphical comparison
Similar real gain progressions can equally be seen when substituting inflation with T-Bill or Short Term Treasury or 5 year Treasury or 5 year treasury ladder or STT/LTT barbell ...etc. i.e. actuals (non-synthetic).
Using yearly TIPS gains (simulated or not) as a baseline seems rather arbitrary
Clive wrote:Using yearly TIPS gains (simulated or not) as a baseline seems rather arbitrary
Using etfreplay.com backtest/ETF Portfolio option to plot individual years for 50-50 SSO/TIP, benchmarked to SPY, indicates that for all years 2007 onwards the 50-50 relatively outperformed SPY. Conceptually if an asset allocation consistently relatively outperforms TIP then the potential is even greater. Generally the PP failed that criteria whilst FTM was much more viable. Replacing TIP with FTM provided a 1% annualised higher reward for 50-50 SSO/FTM compared to SPY across 2007 to YTD 2012 when yearly rebalanced.
steve r wrote:actually I am showing the SSO/TIP underperformed in 09, 10, and YTD
... like I said, playing around here I cannot imagine ever being 35% gold
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