Stock Market -- what a difference a couple of days makes

I read recently that the real rate of return for bond from 1926 to 1997 was close to 2.0%.

If I am a long term investor and think that rate will continue to be the real rate of return on average, TIPS make a lot more sense than traditional bonds if the fixed portion of the TIPS is 2.5%.

Not to mention how TIPS are negatively correlated to the stock market.

Hmm, think you stopped a few steps short on thinking TIPS through. Whatever, 2.5 it is then. Just remember that inflation forecasts are notoriously unreliable, TIPS are always real. Too bad about the liquidity though.

Why do you say TIPS are negatively correlated with stocks?

I don't know what the 10 years historic data we now have shows. but I would guess that on balance the beta is around zero, could even be slighty positive. I know there are periods when correlation is negative, but doubt that is consistent for any length of time.

Most of what I have been reading lately says that TIPS should dominate the fixed income portion of portfolios if one plans to use tax advantaged accounts.

There is only one risk for indexed bonds is market risk while there is more risks when buying conventional bonds.

Indexed bonds - market risk - Real interest rate risk

Indexed bonds - real yields risk(when held to maturity) - none

Conventional bonds - market risk - Real interest rate risk and Inflation expectation risk

Conventional bonds - Real yield risk (held to maturity) - Forecast error risk

The inflation protection built into TIPS can provide investors with predictable real returns and an explicit hedge against inflation. As the table below shows, monthly returns on TIPS, as defined by the Lehman Brothers U.S. TIPS Index, have had a positive correlation to monthly changes in inflation, while other major asset classes have had a negative correlation to inflation.

http://www.pimco.com/LeftNav/Bond+Basics/2006/TIPS+Basics.htm

I told you guys back in August that the only play during uncertainty is to make the flight to safety with Warren Buffett. Since then you'd have made a whopping 33%, and you would have been able to sleep at night.

"be fearful when others are greedy and be greedy only when others are fearful"

http://finance.google.com/finance?q=NYSE:BRK.B

I own some brk.b shares but it only is a small percentage of my overall portfolio.

The problem with Bershire Hathaway is that Warren Buffett isn't going to live forever. There is a unknown premium with Bueffett as the head. When he passes, who knows what will happen to the company and the stock price.

It always strikes me odd how some people look to someone Donald Trump as a model of sucesss when they should look to someone like Buffett. Buffett seems a heck of lot nicer and happier person and has had a lot more success than Trump. The personality of the two couldn't be any more different.

In the 1996 Annual Report of Berkshire Hathaway Corporation:

Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered by the great majority of investment professionals.

Stay long on AAPL, keep the faith in Jobs.

http://www.bloomberg.com/apps/news?pid=20601213&sid=aY4yp2MGvziY&refer=home