Tuesday, January 30, 2007

TIPS redux...

I wrote about how much I hate TIPS recently. My opinion on them is less about trading and more about fundamentals. Capital Spectator has a post today on the subject, which is a pretty good one. Unlike my commentary, they have some trading ideas. I think if you read my piece and their piece together, you can see where I'm coming from, but you can also see that even if the long-term fundamental value is poor, trading opportunities can always arise.

2 comments:

dimitri said...

Tom, not so much a question on TIPS - just a random question. Given the recent spate of data (including GDP today), wouldn't the argument for an inverted yield curve (driven by housing concerns) begin to discipate? And assuming Fed keeps short rates where they are (assuming inflation continues to remain subdued) - isn't the play then on the long end moving to 5.25% - 5.50%? And if inflation does begin to percolate, the high end should move even higher, no?

I'm sure I'm missing something basic. What do you think it is?

Tom G. said...

I say if the Fed isn't cutting, the curve should be severely steeper. Take a look at my post from last Wednesday.