| View previous topic :: View next topic |
| Author |
Message |
tomser
Joined: 01 Mar 2007
Posts: 289
Location: morgan hill ,ca
|
 Posted: Wed Sep 24, 2008 10:11 pm Post subject: TIPs went down lots why?? |
 |
|
hello diehard
Vg Tip went down lots and wonder why???
I may have to switch
best regard
tomser |
|
| Back to top |
|
 |
Peppe
Joined: 16 Apr 2007
Posts: 114
|
| Posted: Wed Sep 24, 2008 10:19 pm Post subject: |
|
|
| dividend date? |
|
| Back to top |
|
|
dave.d
Joined: 19 Mar 2007
Posts: 806
Location: Richmond, VA
|
| Posted: Wed Sep 24, 2008 10:21 pm Post subject: |
|
|
Declining inflationary expectations are bad for TIPS. So the real yield has gone up a bit... so I'm just getting interested in them again.
Perhaps I can buy Tomser's when he sells low.  |
|
| Back to top |
|
|
fishnskiguy
Moderator
Joined: 27 Feb 2007
Posts: 1185
Location: Eagle, CO
|
| Posted: Wed Sep 24, 2008 10:23 pm Post subject: Re: TIPs went down lots why?? |
|
|
| tomser wrote: | hello diehard
Vg Tip went down lots and wonder why???
I may have to switch
best regard
tomser |
TIPS are still THE best performing fund year to date of the eleven Vanguard funds we own.
Tomser, your posts worry me. You are seriously into the buy high sell low mode. Some folks do not belong in any mutual funds and would be better served putting everything in a CD ladder. My father was in that group and he had no regrets, and never lost a dime.
Just my suggestion, and I'm only trying to help.
Chris
_________________
Trident D-5 SLBM- "When you care enough to send the very best." |
|
| Back to top |
|
|
mithrandir
Joined: 08 Nov 2007
Posts: 527
Location: Southeastern PA
|
| Posted: Wed Sep 24, 2008 10:37 pm Post subject: |
|
|
| Today? It returned -0.40%. That's probably within one standard deviation of the mean daily return. |
|
| Back to top |
|
|
livesoft
Joined: 01 Mar 2007
Posts: 12536
|
| Posted: Wed Sep 24, 2008 10:44 pm Post subject: |
|
|
Despite all the folks writing that TIPS are "safe", they ain't any more safe than some other bonds.
YTD returns of
VIPSX: 3.09% (inflation-protected securities)
VFIIX: 3.42% (GNMA) |
|
| Back to top |
|
|
larryswedroe
Joined: 22 Feb 2007
Posts: 5423
Location: St Louis MO
|
| Posted: Wed Sep 24, 2008 11:03 pm Post subject: |
|
|
Declining inflation expectations has NOTHING to do with rising real rates.
Here is how it works,
Nominal bonds have three components.
A) Real rate--same as TIPS
B) expected inflation rate
C) risk premium for unexpected inflation
TIPS have two components
a) the real rate
b) should be a very tiny premium for liquidity vs nominal Treasuries.
In theory now B should be close to zero as they are now very liquid with tiny bid/offer spreads. |
|
| Back to top |
|
|
Valuethinker
Joined: 11 May 2007
Posts: 13393
|
| Posted: Thu Sep 25, 2008 3:57 am Post subject: |
|
|
| livesoft wrote: | Despite all the folks writing that TIPS are "safe", they ain't any more safe than some other bonds.
YTD returns of
VIPSX: 3.09% (inflation-protected securities)
VFIIX: 3.42% (GNMA) |
That's like seeing one car crash on the highway, and concluding that cars are inherently no safer than motorcycles.
TIPS are designed by their nature to be proof against the biggest problem of fixed income investors-- inflation.
Volatility in TIPS valuation on the way to maturity is irrelevant, given your real return is locked in on purchase. |
|
| Back to top |
|
|
larryswedroe
Joined: 22 Feb 2007
Posts: 5423
Location: St Louis MO
|
| Posted: Thu Sep 25, 2008 7:19 am Post subject: |
|
|
valuethinker
Actually volatility of TIPS is not irrelevent, even if hold to maturity. It is a good thing. The reason is the negative correlation to equities. Negative correlation and volatility are a good mix when you have disciplined rebalancing. Lowers portfolio risk when add a relatively small amount of the negatively correlated asset.
Investors should not make mistake so many make of thinking of asset in isolation. BTW-all else equal then longer TIPS better than shorter TIPS since you get more volatility than with shorter TIPS. And IMO at these levels going longer not a bad idea even in isolation |
|
| Back to top |
|
|
Tramper Al
Joined: 18 Oct 2007
Posts: 3236
|
| Posted: Thu Sep 25, 2008 9:47 am Post subject: Re: TIPs went down lots why?? |
|
|
| tomser wrote: | Vg Tip went down lots and wonder why???
I may have to switch |
Shoot, I've been doing the opposite. So hard to remember, is it buy low or buy high? |
|
| Back to top |
|
|
jhd
Joined: 18 Jan 2008
Posts: 66
Location: Minneapolis, MN, USA
|
| Posted: Thu Sep 25, 2008 11:15 am Post subject: Re: TIPs went down lots why?? |
|
|
| tomser wrote: | Vg Tip went down lots and wonder why???
I may have to switch |
Taleb talks about Bloomberg machines (pic) in "Fooled by Randomness". These things give real-time price changes on a variety of investments, but also explain the movements, saying things like "Dow up 0.1% on dividend news" or "Yield on 5-year notes down .08% on Asian stock prices". This is stupid, according to Taleb; short-term prices are complex enough to be basically random. This is a (rare?) point on which EMH random walkers like Bogleheads and skeptics like Taleb agree.
| Tramper Al wrote: | | Shoot, I've been doing the opposite. So hard to remember, is it buy low or buy high? |
_________________
No, I'm not panicking. |
|
| Back to top |
|
|
Paladin
Joined: 03 Mar 2007
Posts: 1259
Location: California
|
| Posted: Thu Sep 25, 2008 11:44 am Post subject: |
|
|
| larryswedroe wrote: | Declining inflation expectations has NOTHING to do with rising real rates.
Here is how it works,
Nominal bonds have three components.
A) Real rate--same as TIPS
B) expected inflation rate
C) risk premium for unexpected inflation
TIPS have two components
a) the real rate
b) should be a very tiny premium for liquidity vs nominal Treasuries.
In theory now B should be close to zero as they are now very liquid with tiny bid/offer spreads. |
If TIPS are now very liquid why are they behaving so differently to ST Treasury. I think this might have been the question that tomser was asking. The TIPS NAV has dropped about 3x that of ST Treasury in the past 10 days or so. |
|
| Back to top |
|
|
astroturf
Joined: 26 Aug 2007
Posts: 548
Location: Greater NYC Area
|
| Posted: Thu Sep 25, 2008 11:52 am Post subject: |
|
|
| I suspect there's cash hoarding or liquidations in the credit markets, a lot of it by hedge funds. Everything is on-sale unless it's treasury bonds where some of the cash is heading to, prices go down, real yields go up. |
|
| Back to top |
|
|
bookshot
Joined: 01 Sep 2008
Posts: 392
|
| Posted: Thu Sep 25, 2008 11:57 am Post subject: |
|
|
| paladin, good point. I think institutions, who seem to be responsible for much of the current market volatility, are not much interested in TIPS, hence reducing liquidity relative to nominal Treasuries. I also think that deflation is currently a big concern to many investors, making TIPS less attractive and driving up rates. For example, the Fed is considering lowering rates, a sign they are less concerned with inflation. |
|
| Back to top |
|
|
Tramper Al
Joined: 18 Oct 2007
Posts: 3236
|
| Posted: Thu Sep 25, 2008 12:04 pm Post subject: |
|
|
| Paladin wrote: | | If TIPS are now very liquid why are they behaving so differently to ST Treasury. I think this might have been the question that tomser was asking. The TIPS NAV has dropped about 3x that of ST Treasury in the past 10 days or so. |
Perhaps so, but wouldn't that make you MORE enthusiastic about owning TIPS than you were 10 days ago? |
|
| Back to top |
|
|
Paladin
Joined: 03 Mar 2007
Posts: 1259
Location: California
|
| Posted: Thu Sep 25, 2008 12:06 pm Post subject: |
|
|
| astroturf wrote: | | I suspect there's cash hoarding or liquidations in the credit markets, a lot of it by hedge funds. Everything is on-sale unless it's treasury bonds where some of the cash is heading to, prices go down, real yields go up. |
I think you are right. We've heard this from a number of sources. If this credit crunch continues for some time yet as many have suggested I question the wisdom of holding TIPS and munis. The offsetting increase in yield is not really going to help much if buyers don't come back into the market. |
|
| Back to top |
|
|
Paladin
Joined: 03 Mar 2007
Posts: 1259
Location: California
|
| Posted: Thu Sep 25, 2008 12:07 pm Post subject: |
|
|
| Tramper Al wrote: | | Paladin wrote: | | If TIPS are now very liquid why are they behaving so differently to ST Treasury. I think this might have been the question that tomser was asking. The TIPS NAV has dropped about 3x that of ST Treasury in the past 10 days or so. |
Perhaps so, but wouldn't that make you MORE enthusiastic about owning TIPS than you were 10 days ago? |
It WOULD make me more enthusiastic if I was buying TIPS not holding them. |
|
| Back to top |
|
|
Les
Joined: 10 Mar 2007
Posts: 1741
Location: Northern Calif.
|
| Posted: Thu Sep 25, 2008 12:08 pm Post subject: |
|
|
| Paladin wrote: | | If TIPS are now very liquid why are they behaving so differently to ST Treasury. I think this might have been the question that tomser was asking. The TIPS NAV has dropped about 3x that of ST Treasury in the past 10 days or so. |
How can you compare ST Treasury to VIPSX NAV? VIPSX has an average duration (maybe 8yrs) much different the ST Treasury (2 yrs). And one is a nominal instrument while the other depends on real rate fluctuations. Sort of apples and oranges. |
|
| Back to top |
|
|
Tramper Al
Joined: 18 Oct 2007
Posts: 3236
|
| Posted: Thu Sep 25, 2008 12:14 pm Post subject: |
|
|
| Paladin wrote: | | It WOULD make me more enthusiastic if I was buying TIPS not holding them. |
I don't know, in a situation like this, I do often find myself wishing I had done something different in the past (owned less TIPS for the last 10 days), but that doesn't really get me anywhere. As far as the future goes, I see owning and not selling as being rather much the same as buying, |
|
| Back to top |
|
|
Paladin
Joined: 03 Mar 2007
Posts: 1259
Location: California
|
| Posted: Thu Sep 25, 2008 12:14 pm Post subject: |
|
|
| Les wrote: | | Paladin wrote: | | If TIPS are now very liquid why are they behaving so differently to ST Treasury. I think this might have been the question that tomser was asking. The TIPS NAV has dropped about 3x that of ST Treasury in the past 10 days or so. |
How can you compare ST Treasury to VIPSX NAV? VIPSX has an average duration (maybe 8yrs) much different the ST Treasury (2 yrs). And one is a nominal instrument while the other depends on real rate fluctuations. Sort of apples and oranges. |
Agreed but I am interested in the different behavior of real and nominal. |
|
| Back to top |
|
|
Tramper Al
Joined: 18 Oct 2007
Posts: 3236
|
| Posted: Thu Sep 25, 2008 12:20 pm Post subject: |
|
|
| Paladin wrote: | | Agreed but I am interested in the different behavior of real and nominal. |
In that case, then, your comparison (to TIPS) should likely be nominal Treasurys. With the same maturity and credit risk, I would then ascribe recent differences in returns to things like inflation expectation, insurance premium, and any liquidity premium. Fortunately for me, the inflation expectation + insurance premium sum seems ridiculously low, TIPS are plenty liquid for my purposes, and I like the way they behave in an otherwise equities-dominated portfolio. |
|
| Back to top |
|
|
Nitsuj
Joined: 20 Feb 2007
Posts: 1344
Location: Indiana
|
| Posted: Thu Sep 25, 2008 1:21 pm Post subject: Re: TIPs went down lots why?? |
|
|
| fishnskiguy wrote: |
Tomser, your posts worry me. You are seriously into the buy high sell low mode. Some folks do not belong in any mutual funds and would be better served putting everything in a CD ladder. My father was in that group and he had no regrets, and never lost a dime.
hris |
tomser has been in the hot hands/buy low sell high mode as long as I have seen his posts, predating this forum back to the old morningstar one. |
|
| Back to top |
|
|
|
Wiki
FAQ
Search
Memberlist
Usergroups
Register
Profile
Log in to check your private messages
Log in
