Re: Shorting the US dollar
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I guess my question is kind of vague, since I don't have the exact numbers. But looking at these things day-to-day, I'm wondering why anybody would own TIPS. Worse case its a supply-and-demand thing, and TIPS just aren't worth what they cost.
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A TIPS principle follows the CPI. If the CPI goes up 3%, your principle goes up 3%, and the interest you are paid is off the new, higher principle. At maturity, you are paid either the inflation-adjusted principle or your original principle (whichever is greater). It's an investment backed by the US Government.
So my question to you is, how are TIPS "not worth what they cost?" They are perhaps the safest investment available anywhere. They are guaranteed to beat inflation by a solid margin.
I think you are getting way too caught up in the after-market value of your securities. When interest rates go up, long-term bonds go down. But at maturity, your bond is worth face value, whether interest rates went to the sky and back or not.
You buy a 30-year TIPS for your 401k. In 2035, you are guaranteed to be paid a principle with equivalent buying power to the one you put up today (and pay no tax on the appreciation), and in the meantime, you've gotten 60 interest payments. That's a great option for a retirement account.
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