Observations by David Robertson, 9/30/22 - errata

Hi everyone,

I just noticed my wording in the “Inflation” section in regard to TIPS was not very clear.

What I wrote was, “The most common proxy for real rates is 10-year TIPS because the TIPS yield reflects a risk-free return and an expectation for longer-term inflation.”

What I should have written was, “The most common proxy for real rates is 10-year TIPS because the TIPS yield reflects a risk-free return net of an expectation for longer-term inflation.”

As a result, the TIPS yield is only as good an indicator of real returns as the inflation expectation that it nets out - and there is decent evidence that expectation is not very good.

Sorry for the confusion - and have a great weekend!

Dave

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