1. TIP Auctions: I just checked the dates for the upcoming treasury auctions for the inflation protected bonds. The 10 year TIP is going to be auctioned on Monday July 6, 2009, and the 20 year is scheduled for July 27, 2009. http://www.treas.gov/offices/domestic-finance/debt-management/auctions/auctions.pdf My broker does not charge anything for its customers to submit a non-competitive bid. I am going to buy some of both maturities in my ROTH IRA, and just forget about them. The price and yield for the non-competitive bid will be set by the competitive bids, as explained at the treasury direct web page: How Treasury Auctions Work
While I have a Treasury Direct account and could buy them directly from the government via that account, I would not want to own this type of security in a taxable account. Individual - TIPS In Depth
The reason for buying this security in a retirement account has to do with the government taxing the yearly accretions to principal resulting from increases in CPI which are not received until the bond matures. So, to avoid pay tax on "income" that is not received, I would put the TIP in a retirement account. This is explained in more detail in this article: BNET
I would prefer to buy these securities at par value directly from the treasury and then hold them until maturity. This article explains one of the reasons: Forbes.com
If you buy at par value from the treasury, you are guaranteed to receive at maturity the greater of par value or the accreted value of the principal resulting from the increases in the CPI over the life of the bond. Advantages and Disadvantages of Treasury Inflation Protected Securities:
When you buy a mutual fund or an ETF containing these securities, there is no promise to pay you back your original investment. Your investment will fluctuate forever based on the pricing of the bonds contained in the fund. The bonds owned by the fund have maturities- the fund does not have a maturity. The investor owns shares in the fund and not the bonds owned by the fund. View the fund itself as having a perpetual maturity. Investors need this point drilled into their head. FINRA - Investor Information - Smart Bond Investing
Another issue might arise when an investor buys a seasoned TIP in the open market. If the principal value had been increased by several periods of CPI, then you are paying for that accretion when you buy the bond. Sort of like buying a regular bond at an amount in excess of its par value. This might work out okay for you unless there was a period like the last year or so where the CPI has fallen. Then, the principal is reduced by the amount of that deflation. If the deflation continued, and if the remaining duration was relatively short, it is possible that the investor would not receive his entire principal back upon maturity for such an open market purchase. Of course, the converse is also true, some of the newer TIP issues may be selling at below par value due to the recent fall in CPI, which might make them appealing to an investor now with a long term time horizon and at least ten years or so to maturity.
2. Philadelphia Fed Report On Manufacturing: This report did not receive much press yesterday. The Philadelphia Fed reported that its survey of manufacturing firms in its region had the most positive results since September 2008, improving from a negative 22.6 in May to a negative 2.2 in the June survey. The new orders and shipment index rose 21 points.
3. Conference Board Reports a Sharp Increase in Leading Indicators: Another green shoot yesterday was the Conference Board reporting an increase in May of 1.2% for the Leading Economic Index.The Conference Board Seven of the 10 indicators improved in May and the Board said the recession was "losing steam." www.conference-board.org/pdf The six month change in the LEI has become positive for the first time in 2 years. If the positive trends noted in the report continue, then the Board expects a "slow recovery" to start before the end of 2009.
4. S L Green Realty: I own both common and preferred shares. S L Green declared its regular cash dividend on the cumulative preferred stocks that I own, SLGPRC and SLGPRD: YahFin The common shareholders are moving closer to zero, with this REIT declaring a 10 cent cash dividend. The company announced back in May, after completing a stock offering, that it would reduce the common dividend from 37.5 cents to 10 cents, so this dividend reduction is old news. Yah Fin
5. Turner Investment Partners Report: This is a link to a report from Turner Investment Partners that documents how the worst, most undeserving stocks performed the best since the rally began in early March. www.turnerinvestments.com I do not need any convincing, since I owned some of them. It is probably time for the quality names to assert themselves more, if this rally is to gain a second wind.
6. Microsoft Raised to Conviction Buy: Goldman Sachs raised Microsoft to a conviction buy this morning and raised its price target by 4 dollars to $29. CNBC.com Maybe it would have been better for GS to place MSFT on its conviction buy list a few weeks ago when the price was hovering near $16 or $17. The reasons used by the analysts now to justify their upgrades were clear then. After all, I noted them when I made my last buy at $17.79, and I am just a lone wolf investor operating from my home, with no help, and in what the Wall Street wizards would call the back country.
7. Treasury Will Auction 104 billion in Debt Next Week: The U.S. just finished a debt auction of long dated paper and will start next week a 104 billion dollar auction of 2, 5, and 7 year securities. I do wonder when the world will get weary of financing our excesses. It is just fascinating to me that the U.S. will run a 1.8 trillion deficit this year, has failed miserably to plan for the 100 trillion or so funding gap for social security, medicare & other future promises, and yet plans to embark on yet another federal social program that will cost a "trillion or so", more like a "few trillion or so" when the bills start to arrive down the road. Their is a sense of entitlement among many in our society, which is coupled with an unshakeable belief in the right to receive benefits without paying their full cost.
8. Cash for Clunkers: This new incentive program will give consumers up to $4500 to buy a new fuel efficient vehicle this year.washingtonpost.com YahFin This legislation was attached to the funding bill for our troops in Iraq and Afghanistan. It should spur auto sales.
9. It is the Best of Times for Youngsters with Jobs: This would be just a great time to be young again, with a good job, and all of these programs. There is a program to give up to 8 thousand in tax credits to buy a new home for a first time buyer (10% of the home's value, up to $8,000(usnews.com)), interest rates for mortgages are at the lowest level in my adult life, home prices have fallen tremendously, stocks have tanked and present good long term values, and things just never looked so good for the youngsters.
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