Wikinvest Wire

Inflation protection - government vs. nature

Friday, June 27, 2008

Many of the not-so-bright bulbs in the investment community seem to recommend securing "inflation protection" from the government rather than from Mother Nature (see Money Magazine recommends commodities (kind of)). Here's a comparison of the two since TIPS (Treasury Inflation Protected Securities) became available in 1997.
The chart above uses the Lipper TIPS fund average from the Allianz Global website as a proxy for a TIPS investment. You can also get information on the Pimco Real Return fund (PRTNX) at the same location.

If you begin the comparison back in 2002 when gold should have come onto the radar screens of any open-minded investor who was paying attention, the difference in returns is even more dramatic.
So much for gold not paying any dividends.

Full Disclosure: Long gold, no position in TIPS at time of writing.

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4 comments:

Nick said...

Buying gold is still speculation; there's no wealth creation or expected (or implied) rate of return for holding speculative assets. It's a distinction still worth emphasizing, no matter how well gold has performed as a speculative investment recently, since so many people forgot or ignored the distinction in the housing market.

Gold has done very well as an inflation hedge, although one could speculate that TIPS would be much closer if inflation reporting and methodologies were more accurate, and less intentionally and maliciously manipulated. I suspect it will continue to do well against anything implicitly indexed below real inflation, especially as real inflation ramps up significantly in the next few years with government bailouts and spending programs.

Anonymous said...

Tim,

How about a feature on top 10 WW tax havens and safe banking centers? How to get the money out, where to put it and keep it away from you know who.

Tim said...

Don't know much about tax havens and safe banking centers - I still trust the FDIC to give me more paper money if the paper money at the bank somehow disappears.

Anonymous said...

Convert your money to Casino Chips - you can cash casino chips at other casinos throughout the world - and they're easier to get out of the country than gold, silver or paper money. Progressively visit casinos and convert chunks of paper into casino chips... they won't even request a SSN.

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