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A perfect inflation hedge should satisfy two distinct criteria, and no one yet has figured out how

 to construct an investment vehicle that does more than satisfy just one of these two goals. 

These two criteria consist of a short-term goal of being correlated with inflation, and a long-term goal of outperforming inflation.

TIPS — Treasury Inflation-Protected Securities? They are an extreme example, since they do an unparalleled job of satisfying the short-term goal while failing to satisfy the long-term goal. 

That’s because, by design, the TIPS yield is pegged to changes in the CPI.

Yet TIPS do a very poor job of fulfilling the long-term goal. In fact, their real yield currently is negative.

Mark Hulbert MarketWatch 16 November 2021


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