This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Inflation Bonds Tip the Scale

Here's a tip: Don't expect TIPS funds to take flight just because inflation is finally showing up in the official data.

A pair of reports last week from the Institute for Supply Management may have shown contrasting results -- the services index plummeted in September, while manufacturing rose -- but they did share rapidly rising inflation gauges.

In the manufacturing survey, the prices paid index surged from 62.5 in August to 78 in September. In the service sector index, the prices paid index jumped from 67.1 to 81.4, which was the index's highest reading since it was created in 1997.

The idea that inflation is rearing its ugly head is hardly a shocker. Americans have spent the year steadily watching their purchasing power erode in every place except Wal-Mart (WMT - Get Report), where most of the goods arrive on fast boats from China.

What they have not seen, however, is a marked step-up of inflation in the official data -- a conundrum that may rank second only to Fed chief Alan Greenspan's mystery of the flattening yield curve.

That riddle could very well be solved as early as Friday, when the September consumer price index is released. Economists are expecting a dramatic increase to 0.9%, up from 0.5% growth in August. Some are predicting even bigger jumps down the road as higher energy prices are finally pushed onto the consumer.

"We have seen the CPI creep up lately, but over the next few months it is poised to really take off," says John Silvia, chief economist at Wachovia, who adds that that the big gains in the CPI will be presaged by spikes in the producer price index.

Under these circumstances, it would seem like Treasury Inflation Protected Securities, or TIPS, funds would emerge as the perfect investment. They are designed to protect investors from the erosion of purchasing power that rising inflation can cause.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
TIP $113.59 0.00%
WMT $82.25 0.00%
AAPL $124.43 0.00%
FB $82.22 0.00%
GOOG $548.00 0.00%


DOW 17,776.12 -200.19 -1.11%
S&P 500 2,067.89 -18.35 -0.88%
NASDAQ 4,900.8850 -46.5560 -0.94%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs