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Brian Kelly’s Trade TIPs for Market Skeptics

Wednesday, 11 Jul 2012 | 6:33 PM ET

If you think the economy is about to tank and you’re looking for a safe haven trade, market pro Brian Kelly, founder of Shelter Harbor Capital, suggests TIPs for you.

Ok, we'll stop with the puns.

We’re talking about TIPs or Treasury Inflation Protected Securities .

TIPs are indexed to inflation in order to protect investors from its negative effects.

Trade of the Day: iShares Barclays TIPS
The FMHR traders check up on how shares of JC Penney are trading since Guy Adami's trade this past May; and discuss why bond fund iShares Barclays TIPS makes today's "trade of the day."

According to Investopdia, TIPS are considered an extremely low-risk investment since they are backed by the U.S. government and since their par value rises with inflation, as measured by the Consumer Price Index, while their interest rate remains fixed.

Interest on TIPS is paid semiannually. TIPS can be purchased directly from the government through the TreasuryDirect system in $100 increments with a minimum investment of $100 and are available with 5-, 10-, and 20-year maturities.

Sound good? Wait there's more.

Kelly likes this trade for another reason. He believes that rather than inflation – investors are looking at an environment of deflation.

“And in a deflationary environment TIP bonds can’t go below par,” he says.

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Posted by CNBC's Lee Brodie





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Trader disclosure: On July 11, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Tim Seymour is long BAC; Tim Seymour is long INTC; Tim Seymour is long SBUX; Josh Brown is long AAPL; Josh Brown is long JPM; Josh Brown is long GDX; Josh Brown is long GLD; Josh Brown is long XLU; Josh Brown is long TLT; Josh Brown is long XLF; Josh Brown is long WMT; Josh Brown is long TGT; Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long AGU; Guy Adami is long NUE; Guy Adami is long MSFT; Guy Adami is long BTU; Brian Kelly is long EURO; Brian Kelly is long TIP; Karen Finerman is long AAPL; Karen Finerman is long BAC; Karen Finerman is long JPM; Karen Finerman is long WMT; Karen Finerman is long TGT; Karen Finerman is short SPY; Karen Finerman is short IWM; Karen Finerman is short MDY

For John Ehrhardt
Nothing to disclose

For Jeff Kilburg
Jeff Kilburg is long SPXU
Jeff Kilburg is long TBT

For Mike Greene
In the past 12 months, Benchmark or its affiliates have receive compensation for investment banking services from the subject Company: SWHC
In the past 12 months, Benchmark or its affiliates have managed orco-managed a public offering of securities for the subject company: SWHC
The research analyst, a member of the research analyst’s household, any associate of the research analyst, or any individual directly involved in the preparation of this report has a long position in the shares or derivatives of the subject company: SWHC
A member of the research analyst’s household serves as an officer, director or advisory board member of the subject company: SWHC
Benchmark makes a market in the securities of the subject company: SWHC

CNBC.com with wires.

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