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Author: WendyBG Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 471451  
Subject: Re: Feds Weapons at Zero Interest Rates Date: 2/12/2006 12:30 AM
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<will have to decide what allocations to commit to deflation hedge (e.g. 30 year bond) and inflation hedge (e.g. gold coins). Probably some of each!>

Instead of a 30 year bond, as a deflation hedge, may I suggest Treasury Inflation Protected Securities.

1. They will protect against inflation, which is a more probable destroyer of savers than deflation.

2. In the event of inflation (and consequently, rising interest rates), the value of 30 year bonds will drop, precipitously. Please study this, before buying. However, the principal of TIPS is adjusted upwards, at the rate of inflation, so the bond will not lose value (unless the real interest rate -- that is, the nominal rate minus the rate of inflation -- rises).

3. In the event of deflation, the principal of TIPS will not be adjusted downward.

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