Brett Arends looks for bargains:

Pah. This is like shooting fish in a barrel.

Look at inflation-protected government bonds. These are the safest investments in the marketplace, but they were dumped overboard last week in the wholesale panic. You want silly? Five-year TIPS, or Treasury Inflation-Protected Securities, offer an annual interest rate of 2.57% over and above inflation.

Meanwhile ordinary 5-Year Treasurys offered a straight yield, before inflation, of only 2.76%. So anyone buying the regular bonds, rather than the TIPS, is betting that annual inflation will come in below 0.19% a year between now and 2013.

I’ve been looking at TIPS too. You can buy them with an ETF from IShares (symbol TIP).

Arends also likes municipal bonds:

Municipal bonds? They now yield about 40% more than Treasurys, even though they come with that big, fat tax exemption. Interest payments from munis generally are exempt from federal taxes and, in some cases, state and local taxes as well.

Perhaps people making that trade think that exemption isn’t worth so much any more. Maybe they think taxes are going down in the next five years. Sure, why not? It’s not like there are any big deficits or bailouts to pay for.

Munis can also be bought via an Ishare (symbol MUB). You might be better off buying individual bonds of a shorter maturity though. If interest rates rise, long term munis could still get hurt. There’s also a short term muni ETF from SPDR (symbol SHM) with a duration of 2.6 years. The current yield is 4.36%.

Arends also recommends gold and JNJ. I am still trying to decide how inflationary all this will be and I’m a little skeptical of the gold trade. The Fed is fighting off deflation right now and whether they can inflate enough to offset the deflationary impact of falling asset prices is an open question.