Subject: Re: TIPS?
I really appreciate the different perspectives and points you've each made - about outsmarting the market with regard to inflation, plain treasuries vs TIPS, about the risk of moving goalposts, about savings and how to weather an extended equities slump, and annuities. Lots to consider.

Sutton wrote:

"It's hard for me to imagine a scenario where -- after some lag measured in a few months -- plain Treasuries won't keep up with inflation. So a plain Treasuries ladder (12, 24, 36 month) seems to me the safest way to keep most capital preservation, mostly".

and

"With retirement 5-7 year out, I'd probably have maybe kind of 20% in a bond ladder. Or maybe 25%. Depends on how much cash/cash equivalents you have set aside for equity buying opportunities (which, in a post-paycheck market meltdown, becomes grocery-buying opportunities)"

In terms of what Ive actually been doing - over the past year Ive been purchasing and rolling inidividual 6 month treasuries. The last time I spread it out to 3,6,12 months. With yields on the 2 year above 5% I'll now consider extending duration the next time one of the short term notes come due.

That said, a 10 year bond feeels like a bigger committment and bet on rates and inflation than a 10 year 2% TIPS does. I realize you dont lose principal if you hold to maturity, and maybe 4.5% on a 10 year is good enough. But I guess I've been thinking that the appeal of a 10 year TIPS is that, if held to maturity you can consider it safe as cash, with a small yield regardless of inflation. And that brings me back to thinking about what the purpose of that bucket is anyway.

Sutton again
"But in retirement it's an asset pool to draw down while you're waiting for the equity market to recover from whatever swoon it's having at the moment"

In the face of an extended sell off in equities - and once you've exhausted your cash/MMF and tneed to tap your bond holdings, is there any obvious answer to which would hold up better or - a 10 year conventional bond or a 10 year TIPS. Just seeing what has happened to prices on 10 year bonds this past year makes me realize that they are far from a risk free asset / couunter cyclical equity hedge...