Totally off-topic, but do you have any idea what is going on with smallcaps? Is TF just going to go up 2%/day perpetually now? Index is up 50% since November, just breathtaking.
As I have just joined your newsletter, I am not sure if you already addressed this question. I thought someone like me as a retail investor can't play TIPS/breakevens except the etf, TIPS, which doesn't have leverage. But it seems you are doing it with IB. I would like to learn how you do that. Would you please share some details on IB products you are using or any links I can research?
I'm watching incomes. I have gone back to the 1960's through present comparing commodity prices, personal incomes, productivity and CPI/Inflation.
Broad commodity prices have not lead inflation, nor reduced it. Commodity prices it seems have oscillated around personal incomes and, ultimately, cpi.
Conclusion: If commodity prices continue to rise without incomes rising, the only result, it seems to me, will be that people will buy less. Classic price/quantity supply/demand dynamics.
I want to make sure I fully understand to place the right trade. There are 2 ways to trade this
1) just buy the TIPS, or
2) buy the TIPS and simultaneously sell an equivalent amount of the long bond. This reduces the trade cost? and more closely tracks the inflation? any increased risk with selling the bonds as well in the case of a correction?
Great piece, thanks for the insights. What are your thoughts on a short NDX/QQQ position (puts maybe?) as another liquid proxy to the inflation trade? If real rates head north, I could see these positions coming in as well?
Am sure most of y’all read Larry Summers comments. No sure if it is sour grapes for him not being appointed to Biden’s economic team or it’s his true call. Perhaps a little bit of both.
1) Why don't you use your pull and get the exchanges to list options on the RINF ETF so you can pull a "Kuppy" and sell weekly puts to subsidize your TIPS carry trade?
2)Please address my fear that the gov't can say what inflation is or adjust it for improvements in quality, etc. in how the mechanics of the TIP pricing works.
3)Isn't there some sort of tax consequences in the TIPs if you don't buy the new issue?
Reminds me of the zero coups in 1981...pretty great deal for 30 years... for a little retail piker like me...any etf pairings that could be matched similarly..? And while we're at it... u still luv regional banks as part of an inflation play..? BTW... loving the education...seems a bit more useful than Elon's & Cathy Wood tweets :-)
Great piece Kev
Totally off-topic, but do you have any idea what is going on with smallcaps? Is TF just going to go up 2%/day perpetually now? Index is up 50% since November, just breathtaking.
Hi Kevin,
Thanks for sharing your thoughts.
As I have just joined your newsletter, I am not sure if you already addressed this question. I thought someone like me as a retail investor can't play TIPS/breakevens except the etf, TIPS, which doesn't have leverage. But it seems you are doing it with IB. I would like to learn how you do that. Would you please share some details on IB products you are using or any links I can research?
I'm watching incomes. I have gone back to the 1960's through present comparing commodity prices, personal incomes, productivity and CPI/Inflation.
Broad commodity prices have not lead inflation, nor reduced it. Commodity prices it seems have oscillated around personal incomes and, ultimately, cpi.
Conclusion: If commodity prices continue to rise without incomes rising, the only result, it seems to me, will be that people will buy less. Classic price/quantity supply/demand dynamics.
Interested in your thoughts.
Hi Kevin
I want to make sure I fully understand to place the right trade. There are 2 ways to trade this
1) just buy the TIPS, or
2) buy the TIPS and simultaneously sell an equivalent amount of the long bond. This reduces the trade cost? and more closely tracks the inflation? any increased risk with selling the bonds as well in the case of a correction?
Thanks in advance
Paul
Hi Kevin, for the amateurs here (maybe just me!): is IVOL a good way to play your TIPS theme?
Hi Kevin,
Great piece, thanks for the insights. What are your thoughts on a short NDX/QQQ position (puts maybe?) as another liquid proxy to the inflation trade? If real rates head north, I could see these positions coming in as well?
thanks for the article Kevin. it does seem like the inflation trade will have a pretty large headwind within the next 6 months because of the china credit impulse rolling over. https://twitter.com/sdypbuktkallman/status/1356970097097793539?s=20
Kevin, I love the trade, esp the psychology as outlined in your last article on breakevens. I still have to ask you, why not also have a steepener on breakevens? https://zh-prod-1cc738ca-7d3b-4a72-b792-20bd8d8fa069.storage.googleapis.com/s3fs-public/styles/inline_image_mobile/public/inline-images/bfm6407.jpg?itok=GuAu38dS. After all, isnt fading more your style? ;)
How about gold vs tips? Which one is better for inflation trades in your opinion?
Novice to bonds here, do you have to constantly roll this to avoid the coupons and potential issues they might pose?
Am sure most of y’all read Larry Summers comments. No sure if it is sour grapes for him not being appointed to Biden’s economic team or it’s his true call. Perhaps a little bit of both.
1) Why don't you use your pull and get the exchanges to list options on the RINF ETF so you can pull a "Kuppy" and sell weekly puts to subsidize your TIPS carry trade?
2)Please address my fear that the gov't can say what inflation is or adjust it for improvements in quality, etc. in how the mechanics of the TIP pricing works.
3)Isn't there some sort of tax consequences in the TIPs if you don't buy the new issue?
Reminds me of the zero coups in 1981...pretty great deal for 30 years... for a little retail piker like me...any etf pairings that could be matched similarly..? And while we're at it... u still luv regional banks as part of an inflation play..? BTW... loving the education...seems a bit more useful than Elon's & Cathy Wood tweets :-)
Excellent piece - esp for a day when the long end bond yields finally are taking a breather