David Swensen, the top-ranked college endowment manager in the past decade, said individual investors should own inflation-protected Treasuries because U.S. economic recovery efforts may lead to an increase in consumer prices.
Mr. Swensen is an original thinker, which is rare among portfolio managers. His Yale portfolio has performed badly since 2008, so perhaps recognizing the inevitability of inflation will help restore his model's reputation. The only disadvantage of using TIPS instead of gold as an inflation hedge is that TIPS are subject to default risk. This is low now, but then again no one thought the U.K. would be in danger of losing its AAA rating for gilts.
I don't own TIPS. I do own IAU and GLD (with covered short puts).
