cute fuzzy bunny
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
...for those still on the fence, looks like another nice buying opportunity...
brewer12345 said:Another 15 or 20 cents and i will be scooping some up...
FIRE'd@51 said:Also, real rates on TIPS have been drifting down - so everything else equal, ISM and OSM should be trading up, not down. Do you suppose there are credit issues at SLM?
FIRE'd@51 said:Do you suppose there are credit issues at SLM?
brewer12345 said:Not bloody likely.
FIRE'd@51 said:So, basically, it's stupid retail investors dumping the stock because the next 3-month's yield is under 5%.
brewer12345 said:We haaaave a winnah!
FIRE'd@51 said:All the better for us. Actually, it looks like OSM is slightly more attractive at these prices. To have the same YTM, I calculate that OSM should trade about a dime higher than ISM. Do you guys concur?
wab said:all of the trading is done among a few people on this forum.
rjpatt said:What exactly is ISM? I typed ISM into yahoo's ticker lookup but there wasn't a profile to see what it is.
youbet said:Based on the recently published Jan 07 CPI index of 202.4, the April 15 through May 14 payout for ISM will be 4.12% at par.
Texas Proud said:OK... looks like they are trading at a discount... but only 2.05% spread... from what I see on TIPS, they are 2.375... am I missing something
Cute Fuzzy Bunny said:You're buying dollars for 84c and at normal levels of inflation you're getting paid like a very decent 5 year CD while you hold it. At higher levels of inflation, even better.
My entire cash position right now is divided between penfed 5 and 7 year 6.25% cd's and ISM.
clifp said:Interesting little security. I am correct in assuming that this exactly the same as a TIPs bond trading at 14% discount to par.
RustyShackleford said:And ISM is kinda looking at the derivative of inflation, not
the integral. If inflation spikes one year and then becomes low, ISM pays great
dividends during that year, and then not so good; whereas TIPS pays based on
the inflated principal from then on.
Who said I'd never use calculus after you leave college LOL.RustyShackleford said:Not quite. For one thing, the returned principal is exactly $25, regardless
of inflation; so dependng on whether inflation over the next 11 years is
greater/less than 1.6% annually, the principal will under-/out-pace inflation
(since the 11th-root of 25/21 = 1.016). TIPS exactly matches inflation.
For another, the coupon is only 2.05%, not 2.375%. And it's added to inflation
over the last year. TIPS is added to the cumulative inflation since you bought the
thing. So ISM is probably doing better until the cumulative inflation hits 25/21,
and worse afterwards. And ISM is kinda looking at the derivative of inflation, not
the integral.
On the other hand, Brewer is a lot smarter than me, at least where bonds are
concerned, and I'd love to be told why I'm wrong !