I still love my TIPS! They and my commodities are the only investments in my inheritance account that are up since they were purchased. My 10-year TIPS are up 17%.

Sy did not include the post where one person said TIPS overstate inflation and others have said this also. So take your pick!

Ray

Ray,

True, but could it be successful timing on your part? You happen to be a knowledgeable and dedicated investor. You bought individual TIPs at the right time and didn't bother too much with the TIPs fund. We all wonder how well a person would do if she bought the TIPs fund or individual TIPs now, regardless of what that person said about TIPs overstating inflation. There was no proof or argument submitted for that view.

Sy

Inadvertently is was part good timing but it was also based on Larry Swedroe's review of recent literature on TIPS in retirement accounts and I thought, and still think, this is the basis that should be used to evaluate TIPS; not the comparison in the Bloomberg article. My point is mine did provide (and are providing) the diversification benefit I desired and I do believe they are a good way to offset future inflation. The CPI-U is not a hedge against a commodity bubble and it could not expected to be so (this is why I am incrasing my allocation to an oil weighted ETF). It is meant to be an index of a general price rise and I believe it does that reasonably well. But since there is no alternative, all the gripping is misleading. End of homily. I do no want to continue this aspect of the debate.

Ray

Look: it's a point/counterpoint article that basically says nothing that hasn't been said before umpteen times.

Fleckenstein hates TIPS  because he has made a career out of being short seller.  If TIPS are such a "cheat" (assuming he knows the real rate of inflation) how come, like Ray, I have made decent money on them since I got in in 2000 when I retired?

Do a little exercise (if you're willing to look to past history) and use the custom graphing feature at TIAA, plug in $10K for 10 years (the longest period available at the site), and compare TIAA REA, CREF ILB, and CREF Equity Index.

Not only has CREF ILB been a respectable diversifier (like TREA), but it's beaten the pants off CREF Equity Index. Will this continue into the future?  Heck, I don't know.  But I sure am glad a nice chunk of fixed income is in the Vanguard TIPS fund.  Bob U.

 Beige is the ILB VA. REA is the top (best) one.

Bottom two are Equity Index and Stock Account

Ray

cgaros--

Sorry to hear you've got stocks in Zimbabwe.

Unlike Mr. Mugabe, I do appreciate the difference between nominal and real.

Over 10 years I've made real money.  Cheers.  Bob U.

P.S. TREA is another inflation hedge that has produced real returns over the same period.

Edit: Here's a link to the CPI numbers at Treasury Direct if one wants to track one's real return over the 10-year period previously referenced.  http://www.treasurydirect.gov/instit/annceresult/tipscpi/tipscpi_hiscpi.htm

Well I see that the graph has been deleted! At least it did show for a few hours.

Ray

Bob,

I use Firefox 3.0 but I have added a number of "add-ons" and I think one of them allowed me to copy the graph from T-C's site and paste it here. Look for "image zoom" "image toolbar". I suspect it is one of those that allows me to copy some images.

I suspect it is one of these two (use to be called "extensions" ) that enables me to do the copy of graphics.

Ray

Here is the URL: http://www.cusser.net/extensions/imagetoolbar/

Ray

Yes, there are lots of studies claiming that the Index overstates inflation, and while such may undermine public confidence in government reporting,  understating need not necessarily be sinister.

When the Congress commissiond private and government CPI studies back in the late 90s and claimed (as Moynihan did) that "reducing cost-of-living increases by eight-tenths of a percentage point would eliminate more than half of Social Security's projected shortfall over the next 75 years," then 'twas a dull researcher indeed who couldn't pick that ball up and run with it.