Tips etf (tip)

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Jan 14, 2009 11:24 am

What are people's thoughts on TIPS right now?  A lot of my clients want ultra-safe investments, but can't accept 0.5% in MMKT or 2-3% in CD's.  Treasuries are a ticking time bomb, and if inflation out-duals deflation in the next 6 months, TIPS could reap a windfall.  Ultimately, TIPS should do well, it's just a matter of when that Washington Printing Press kicks into over-drive and puts a gallon of milk at $8.75.

I am partial to TIP (Barclays).
I welcome other perspectives.
Jan 14, 2009 11:26 am
B24:

What are people's thoughts on TIPS right now?  A lot of my clients want ultra-safe investments, but can't accept 0.5% in MMKT or 2-3% in CD's.  Treasuries are a ticking time bomb, and if inflation out-duals deflation in the next 6 months, TIPS could reap a windfall.  Ultimately, TIPS should do well, it's just a matter of when that Washington Printing Press kicks into over-drive and puts a gallon of milk at $8.75.

I am partial to TIP (Barclays).
I welcome other perspectives.



Fixed or indexed annuities.

Jan 14, 2009 11:32 am

Listen to Hank...

Jan 14, 2009 11:43 am
Hank Moody:


Fixed or indexed annuities.

 
It's amazing when someone on here speaks the truth.
Jan 14, 2009 11:53 am
Hank Moody:
B24:

What are people's thoughts on TIPS right now?  A lot of my clients want ultra-safe investments, but can't accept 0.5% in MMKT or 2-3% in CD's.  Treasuries are a ticking time bomb, and if inflation out-duals deflation in the next 6 months, TIPS could reap a windfall.  Ultimately, TIPS should do well, it's just a matter of when that Washington Printing Press kicks into over-drive and puts a gallon of milk at $8.75.

I am partial to TIP (Barclays).
I welcome other perspectives.



Fixed or indexed annuities.

 
Please explain why you answered the question this way. I'm not following the logic. I don't use Indexed annuities, so I'm wanting to know if I'm missing something here. I don't see why fixed annuities beat TIPS (based on the question asked).
 
Jan 14, 2009 11:59 am
LuvIndy:
I don't use Indexed annuities, so I'm wanting to know if I'm missing something here.  
 
Yes, I believe you are.
Jan 14, 2009 12:00 pm

Because we all think inflation will happen is a good reason to think it WON'T.  All my new money is looking for some type of guarantee...I can't guarantee inflation...thats what you're doing if you sell TIPS..

Jan 14, 2009 12:03 pm
bspears:

Because we all think inflation will happen is a good reason to think it WON'T.  All my new money is looking for some type of guarantee...I can't guarantee inflation...thats what you're doing if you sell TIPS..

 
Dude, this might be the coolest thing you've said on this forum, ever.  Especially the middle sentence.
Jan 14, 2009 12:18 pm

Thanks Snags

Jan 14, 2009 1:32 pm
LuvIndy:
Hank Moody:
B24:

What are people's thoughts on TIPS right now?  A lot of my clients want ultra-safe investments, but can't accept 0.5% in MMKT or 2-3% in CD's.  Treasuries are a ticking time bomb, and if inflation out-duals deflation in the next 6 months, TIPS could reap a windfall.  Ultimately, TIPS should do well, it's just a matter of when that Washington Printing Press kicks into over-drive and puts a gallon of milk at $8.75.

I am partial to TIP (Barclays).
I welcome other perspectives.



Fixed or indexed annuities.

 
Please explain why you answered the question this way. I'm not following the logic. I don't use Indexed annuities, so I'm wanting to know if I'm missing something here. I don't see why fixed annuities beat TIPS (based on the question asked).
 



Fixed and Indexed Annuities only go up in value, never down.

Jan 14, 2009 1:45 pm

I hear what you guys are saying.  I do use fixed annuities with many of my portfolios.  However, there is also a contingent of clients that either (a) won't buy annuities, or (b) I am just looking for a place to park safe(r) money for a year or two.  I don't disagree with the annuity argument, but am specifically asking about TIPS in general, since I already use FA's.  The other problem is that FA's are paying crap right now on short money.  So it appears that TIPS are a better alternative for short dollars that don't need to be spent.  For my clients that are in the withdrawal phase, I use fixed immediate's for their 3-7 year withdrawals.


Spears, what you are saying is one of my fears - that inflation won't happen as we think it will.  If this was a "typical" market, and Treasuries were at 2.5%, and cash was coming out of Washington like confetti, then this would be a no-brainer.  But we are in a weird economic environment, hence my pause with TIPS.
 
Thanks.
Jan 14, 2009 1:48 pm

Oh, and as you probably know, I can't sell indexed annuities.  However, a lot of the current VA income riders out there are really indexed annuities in disguise.

Jan 14, 2009 2:16 pm
B24:

Oh, and as you probably know, I can't sell indexed annuities. 



That sucks.  Another negative for Bob Jones' clients.
Jan 14, 2009 3:19 pm

Bob Jones?

 
I guess it sucks, but I was never a big proponant of EIA's.  Sicne I don't know ebough about them, how similar are they to some of the newer VA's with Income riders? 
Jan 14, 2009 3:24 pm
B24:

Bob Jones?

 
Inside joke.
 
I guess it sucks, but I was never a big proponant of EIA's.  Sicne I don't know ebough about them, how similar are they to some of the newer VA's with Income riders? 
 
Neither was I.  But it's amazing what you learn when you do your own research instead of believing the company mantra.  Talking about myself of course.
 
The main difference between FIA and VA's is that one has market risk, the other does not.  One has fees, the other does not.  One has a maximum potential gain, the other does not.  One can go down in value, the other can not. 
Jan 14, 2009 4:09 pm

Don't forget that with a VA, every one one of the companies in the subaccounts would have to go belly up to lose 100% of your client's cash. In the EIA, only one company (the issuing company) has to go belly up to lose 100% of your client's money.

Jan 14, 2009 5:47 pm

OR just lose 30-50% of your clients value in the last 18 months and still be in business...

Jan 14, 2009 5:49 pm
bspears:

OR just lose 30-50% of your clients value in the last 18 months and still be in business...

 
Man, Spears, you are on fire today.  What the hell happened to you?
Jan 14, 2009 7:33 pm
now_indy:

Don't forget that with a VA, every one one of the companies in the subaccounts would have to go belly up to lose 100% of your client's cash. In the EIA, only one company (the issuing company) has to go belly up to lose 100% of your client's money.




Stupid.

Jan 15, 2009 8:27 am
snaggletooth:
B24:

Bob Jones?

 
Inside joke.
 
I guess it sucks, but I was never a big proponant of EIA's.  Sicne I don't know ebough about them, how similar are they to some of the newer VA's with Income riders? 
 
Neither was I.  But it's amazing what you learn when you do your own research instead of believing the company mantra.  Talking about myself of course.
 
The main difference between FIA and VA's is that one has market risk, the other does not.  One has fees, the other does not.  One has a maximum potential gain, the other does not.  One can go down in value, the other can not. 
 
No, I know EIA's have some value, but since I can't sell them, I have not taken the time to research them.  I don't think they are bad products, I think they get a bad rap because of the number of reps that mis-represent them when they are sold.  I have had several clients that own them, and had no idea how the surrender charges worked, many thought their returns equaled the market returns with a floor, etc.  I am NOT saying all EIA sellers mis-represent them.  I am just saying that the products could stand on their own, even when fully explained.  There's just some slimy salesmen out there, and with all the nuances within ALL annuities, it just gives the "bad apples" more opportunity to "forget" some details.
I personally think they are a good alternative for fixed income/conservative investors that want some market participation without the risk of the market.