My cost basis in TIP dates back to buying it on 4/3/09 at $100.27. Since this summer I have been carrying a double digit percentage exposure to TIP (Treasury Inflation Protected bond ETF) in the Asset Allocation Model.
Today, with inflation expectations coming my way (see chart), I am selling that exposure to TIPs down to 3%.
Obviously the narrative fallacy shopped by the Depressionistas has been decimated, and so have perpetual expectations of deflation alongside that.
Expectations dominate these returns, not lagging CPI or PPI data. The two positions that I have taken to protect against inflation expectations are long Gold (GLD) and long TIP. I remain long of both… just less of both, as prices melt higher.
I’ll buy TIP back on pullbacks to the following TRADE and TREND lines in the chart below. TRADE line support = $102.89 and TREND line support (intermediate term) = $101.43.
Keith R. McCullough
Chief Executive Officer