Diamonds and Dogs
Beware of Strange Men Offering TipsBeware of Strange Men Offering Tips
Treasury Inflation-Protected Securities (TIPS) have become very popular of late as investors are all aboard the train that says the dollar will fall, inflation and interest rates will rise, and commodities will spike as the government floods the economy with money. Much of that assumption may very well be correct, but here is the catch with TIPS. TIPS move with the CPI (Consumer Price Index) which measures inflation. The biggest ingredient of the CPI is labor cost. Unemployment hit 9.4% today a 26 or 27 year high. If unemployment stays high, labor costs will stay low, and the opportunity with the TIPS will not be there. To play higher interest rates and commodity prices, you may want to look to things like oil prices, gold prices, and grain prices. The labor market may keep the CPI low, and with it the TIPS would under-perform. Have a great pre-summer weekend.
Boeing (BA) took off to $52.65 per share as the airline producer is ready to launch into a new round of plane building. Flying high and gaining over $2 today, BA is up 17% this week.
T-Bonds were spanked this week as yields are heading higher, no matter what Washington thinks. The yield on the ten-year treasury hit 3.861%, the highest level since the first week of November, 2008. That came with the dollar at three week highs. There has to be a trade here somewhere&