Pimco is ready to launch the first short-term TIPS ETF in the U.S.

Pimco is set to launch its second exchange-traded fund on Monday, again sticking with short-term Treasuries.

This time, however, the world’s biggest bond fund manager is moving into Treasury Inflation-Protected Securities. It’s a market with two entrenched competitors already vying for investment dollars. But TIPS have been hot attractions so far this year, and if inflation hawks are correct, could heat up even more in coming years.

New Competition

The Pimco 1-5 Year U.S. TIPS Index Fund (NYSE Arca: STPZ) will be the first to focus on the short-end of the yield curve. The two others already on the market take an intermediate tilt: the iShares Barclays TIPS Bond Fund (NYSEArca: TIP) and the SPDR Barclays Capital TIPS ETF (NYSEArca: IPE).

State Street Global Advisors also sponsors a global TIPS ETF, the SPDR DB International Government Inflation-Protected Bond ETF (NYSEArca: WIP). It

With inflation worries starting to surface and the US Dollar resuming its fall, many investment advisors have advocated the iShares Barclays TIPS Bond Fund (TIP). This ETF invests in Treasury Inflation Protected Securities, treasury bonds which promise to completely protect against inflation by calculating the coupon payment on inflation-adjusted principal.

The TIP is a smartly designed fund with an attractive expense ratio and plenty of liquidity. But it has one fatal flaw: TIPs haven’t been tested in truly inflationary times, and are thus a much riskier investment than most people think.

The protective value of TIPs rests on an accurate calculation of inflation. Critics have long accused the CPI of underestimating the true value of inflation. Much like the unemployment figures, the CPI numbers have been openly massaged over time to look more benign. They aren’t falsified per se, the index’s parameters

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I attended a Richard Russell tribute dinner in San Diego on Saturday. This function, in honor of the 84-year old Russell’s 50 years as a newsletter writer, was attended by almost 500 people, including the likes of John Mauldin, Robert Precter, Ian McAvity, the Aden Sisters, Ivan Boesky, Bill Bonner, Bert Dohmen and a host of others.

There was a brief question and answer period. One visitor asked him what he would do if he was running the country. In classic Russell fashion, the venerable analyst answered, “I’d do nothing. I’d let it happen. I’d let the bear market do its work.”

For the rest, Aaron Task of Yahoo Finance, Tech Ticker pulled me aside for a short video interview and the paragraphs below are from his