Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20
China Under Reporting Coronavirus COVID-19 Infections, Africa and South America Hidden Outbreaks - 12th Feb 20
Will USD X Decline About to Trigger Precious Metals Rally - 12th Feb 20
Copper Market is a Coiled Spring - 12th Feb 20
Dow Theory Stock Market Warning from the Utilities Index - 12th Feb 20
How to Get Virgin Media Engineers to FIX Hub 3.0 Problems and NOT BS Customers - 12th Feb 20
China Under Reporting Coronavirus COVID-19 Infections by 66% Due to Capacity Constraints - 12th Feb 20
Is Coronavirus the Black Swan That Takes Gold To-Da-Moon? - 12th Feb 20
Stock Market 2020 – A Close Look At What To Expect - 12th Feb 20
IBM AI Mega-trend Tech Stocks Investing 2020 - 11th Feb 20
The US Dollar’s Subtle Message for Gold - 11th Feb 20
What All To Do Before Opening A Bank Account For Your Business - 11th Feb 20
How and When to Enter Day Trades & Swing Trade For Maximum Gains - 11th Feb 20
The Great Stock Market Dichotomy - 11th Feb 20
Stock Market Sector Rotation Should Peak Within 60+ Days – Part II - 11th Feb 20
CoronaVirus Pandemic Stocks Bear Market Risk 2020? - Video - 11th Feb 20
Facebook (FB) AI Mega-trend Tech Stocks Investing 2020 - 10th Feb 20
The US Constitution IS the Crisis - 10th Feb 20
Stock Market Correction Continues - 10th Feb 20
Useful Tips for Becoming a Better Man - 10th Feb 20
Will CoronaVirus Pandemic Trigger a Stocks Bear Market 2020? Part1 - 9th Feb 20
Could Silver Break-out like it did in 2011? - 9th Feb 20
The End of the Global Economy - 9th Feb 20
Fed to Stimulate in Any Crisis; Don’t Let Short-Term Events Bother You - 9th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Treasury Inflation Protected Securities (TIPS), Are They For You?

Economics / Inflation Nov 05, 2009 - 04:58 PM GMT

By: Michael_Pollaro

Economics Best Financial Markets Analysis ArticleOn November 4th, Bloomberg ran this piece: U.S. to Sell $81 Billion in Long-Term Debt Next Week

http://www.bloomberg.com/..

Same old same old, right?  Another big treasury auction.  Maybe it’s a bit more than that, this time.


Here’s what I found interesting.  In the opening paragraph of the article we learn this (bold italics mine):

The U.S. Treasury Department said it plans to sell a record $81 billion in its quarterly auctions of long-term debt next week and will replace the inflation- protected 20-year bond with a reintroduced 30-year security.

And later in the article this (again bold italics mine):

The Treasury said issuance of its Treasury Inflation- Protected Securities will rise “gradually” and that it is considering more frequent TIPS auctions to improve liquidity. The department announced it would sell the 30-year TIPS bond in February, with a reopening in August, in a change from its previous TIPS bond auction schedule.

The skeptic in me ponders, why would the Treasury want to expand its TIPs program?

Is it because the Treasury knows the market is getting a bit more worried about price inflation and TIPs may prove “helpful” in funding the government's trillion dollar deficits.  Well, if that’s true, that price inflation is returning, then that’s only going to exasperate the federal government’s future financing needs, isn’t it. 

Which leads me to my next question, which is, why then would the Treasury expand its TIP program?  One answer could be that the Treasury doesn’t believe price inflation is an imminent concern.  Plausible, given, in my opinion, the misplaced hope in the supposed Output Gap.  The other answer is that it doesn’t matter to the Treasury, at least to the extent one might think, because the Treasury knows that the BLS has their back.  TIPs, you see, are indexed to the CPI, which means that they can be "managed" to yield a negative rate of interest, for the benefit of the government and to the detriment of unsuspecting investors.

Managed, you say?

In my essay U.S. Third Quarter GDP Too Good to be True, I introduced to you economist John Williams, proprietor of Shadow Government Statistics, a guy who makes his living questioning government economic numbers.  The link to my essay is here:

http://www.marketoracle.co.uk/Article14726.html

Well, guess what?  Williams says the CPI is “managed” just like GDP, “massaged” over the years to show consumer price inflation in a better light.  Williams explains why here, under the section entitled Special Consumer Inflation Focus:

http://www.shadowstats.com/article/aa871

How “massaged” is the CPI?   According to Williams, by a lot:




So, is this new TIPs program good for you; or is it good Uncle Sam?  I guess I'm just too much of a skeptic, but it certainly has me wondering. 

Maybe you should be wondering too, at least the next time you want a buy a TIP.

By Michael Pollaro

Email: jmpollaro@optonline.net

I am a retired Investment Banking professional, most recently Chief Operating Officer for the bank's Cash Equity Trading Division. I am a passionate free market economist in the Austrian School tradition, a great admirer of the US founding fathers Thomas Jefferson and James Madison and a private investor.

    Copyright © 2009 Michael Pollaro - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Michael Pollaro Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules