Hey, I Bonds might not be a total disaster after CPI-U today

Have a question about your personal investments? No matter how simple or complex, you can ask it here.

Hey, I Bonds might not be a total disaster after CPI-U today

Postby robjer » Fri Mar 15, 2013 9:00 am

Anybody think the fixed will climb off Zero for May I bonds? Maybe to .02?
robjer
 
Posts: 27
Joined: Sat Apr 14, 2012 7:28 pm

Re: Hey, I Bonds might not be a total disaster after CPI-U t

Postby BBL » Fri Mar 15, 2013 9:26 am

Keep hope alive - but I doubt it....
To win without risk is to triumph without glory. Pierre Corneille
User avatar
BBL
 
Posts: 716
Joined: Sat Aug 06, 2011 8:01 am
Location: Location: Location

Re: Hey, I Bonds might not be a total disaster after CPI-U t

Postby STC » Fri Mar 15, 2013 9:49 am

How are IBonds a disaster currently. Better yield then TIPS. No principle risk. Sounds like a darn bargain to me!
STC
 
Posts: 415
Joined: Wed Nov 14, 2012 10:22 am

Re: Hey, I Bonds might not be a total disaster after CPI-U t

Postby robjer » Fri Mar 15, 2013 10:18 am

Sorry, disaster was too strong.
Before today's CPI-U, it looked like May's bonds would have both a 0% inflation rate and a 0% fixed rate.
Maybe not a disaster, but no better than money in a mattress for 6 months for new bonds purchased in May.
robjer
 
Posts: 27
Joined: Sat Apr 14, 2012 7:28 pm

Re: Hey, I Bonds might not be a total disaster after CPI-U t

Postby STC » Fri Mar 15, 2013 10:21 am

robjer wrote:Sorry, disaster was too strong.
Before today's CPI-U, it looked like May's bonds would have both a 0% inflation rate and a 0% fixed rate.
Maybe not a disaster, but no better than money in a mattress for 6 months for new bonds purchased in May.


But a lot better then TIPS, and Nominal bonds at the moment. Sad state of fixed income...
STC
 
Posts: 415
Joined: Wed Nov 14, 2012 10:22 am

Re: Hey, I Bonds might not be a total disaster after CPI-U t

Postby nisiprius » Fri Mar 15, 2013 10:33 am

Why would changes in the CPI be expected to affect the fixed rate?

I don't expect to see increases in the fixed rate for a while.

Since I bonds can be redeemed in five years with no penalty and no interest rate sensitivity, they are directly comparable to a five-year TIPS held to maturity. They are currently paying more than a five-year TIPS; they are obviously a good deal, probably constrained by the Treasury being embarrassed or unable to offer a negative fixed rate or to eliminate the program entirely. Traditionally, they paid noticeably less than TIPS. This is clearly a case of "good time to buy." I don't think we will see a positive rate on I bonds until TIPS real rates rise a little bit into positive territory.

I bonds are no better when the CPI rises and no worse when it falls. If the CPI is zero, they are money in the mattress, but if the CPI is zero, there's nothing wrong with money in the mattress.
Last edited by nisiprius on Fri Mar 15, 2013 3:28 pm, edited 1 time in total.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
User avatar
nisiprius
Advisory Board
 
Posts: 25178
Joined: Thu Jul 26, 2007 10:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Hey, I Bonds might not be a total disaster after CPI-U t

Postby crowd79 » Fri Mar 15, 2013 11:07 am

What was the CPI-U number (2xx.xxx) released today? How does it compare to October of last year. Is it still lower? If yes, then we're still looking at a possible 0% for the next component...
crowd79
 
Posts: 622
Joined: Sun Nov 18, 2012 11:37 pm

Re: Hey, I Bonds might not be a total disaster after CPI-U t

Postby Dale_G » Fri Mar 15, 2013 11:15 am

Actually, taxpayers are better off if the inflation component is zero. There is never an advantage to pay taxes on inflationary gains. Now if the real rate was positive, I'd be happy to eventually pay taxes on that gain.

Dale
Volatility is my friend
User avatar
Dale_G
 
Posts: 2028
Joined: Tue Feb 20, 2007 6:43 pm
Location: central Florida - on the grown up side of 77

Re: Hey, I Bonds might not be a total disaster after CPI-U t

Postby dad2000 » Fri Mar 15, 2013 11:31 am

crowd79 wrote:What was the CPI-U number (2xx.xxx) released today? How does it compare to October of last year. Is it still lower? If yes, then we're still looking at a possible 0% for the next component...



I think I have this right:

Today (Feb 2013): 232.166
Sept 2012: 231.407

Sources:
ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
http://www.bls.gov/news.release/cpi.t01.htm
dad2000
 
Posts: 395
Joined: Fri Feb 03, 2012 8:04 pm

Re: Hey, I Bonds might not be a total disaster after CPI-U t

Postby robjer » Fri Mar 15, 2013 11:49 am

nisiprius, keep the personal attacks out of your response to me. No reason to tell me about myself.

My only point was that today's CPI-U might make the I Bonds for May better.
I didn't compare I Bonds to Tips or talk about any tax implications.
robjer
 
Posts: 27
Joined: Sat Apr 14, 2012 7:28 pm

Re: Hey, I Bonds might not be a total disaster after CPI-U t

Postby crowd79 » Fri Mar 15, 2013 12:05 pm

dad2000 wrote:
crowd79 wrote:What was the CPI-U number (2xx.xxx) released today? How does it compare to October of last year. Is it still lower? If yes, then we're still looking at a possible 0% for the next component...



I think I have this right:

Today (Feb 2013): 232.166
Sept 2012: 231.407

Sources:
ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
http://www.bls.gov/news.release/cpi.t01.htm


So, as it stands right now, the next component will be at least 0.65%, which will be higher (or lower) based on next month's CPI-U data.
crowd79
 
Posts: 622
Joined: Sun Nov 18, 2012 11:37 pm

Re: Hey, I Bonds might not be a total disaster after CPI-U t

Postby camaro327 » Fri Mar 15, 2013 12:08 pm

robjer wrote:Anybody think the fixed will climb off Zero for May I bonds? Maybe to .02?


No, even if they only offer 0.66% that beats the heck out of the vast majority of savings account rates. Plus the index to inflation guarantee is better than what a typical savings account can offer.
camaro327
 
Posts: 181
Joined: Fri Dec 21, 2012 12:04 pm

Re: Hey, I Bonds might not be a total disaster after CPI-U t

Postby gkaplan » Fri Mar 15, 2013 2:01 pm

robjer wrote:nisiprius, keep the personal attacks out of your response to me. No reason to tell me about myself.

My only point was that today's CPI-U might make the I Bonds for May better.
I didn't compare I Bonds to Tips or talk about any tax implications.


You're a relatively new poster, but you should know that nisiprius is one of the most respected members in these forums. You should at least consider his advice before you dismiss it out of hand.
Gordon
gkaplan
 
Posts: 5259
Joined: Sat Mar 03, 2007 9:34 pm
Location: Portland, Oregon

Re: Hey, I Bonds might not be a total disaster after CPI-U t

Postby DualIncomeNoDebt » Fri Mar 15, 2013 2:28 pm

robjer wrote:personal attacks


Didn't see his response as personal attack. Just a direct, informed response. A helpful one too.
DualIncomeNoDebt
 
Posts: 327
Joined: Wed Jul 18, 2012 4:38 am

Re: Hey, I Bonds might not be a total disaster after CPI-U t

Postby STC » Fri Mar 15, 2013 2:28 pm

gkaplan wrote:
robjer wrote:nisiprius, keep the personal attacks out of your response to me. No reason to tell me about myself....


You're a relatively new poster, but you should know that nisiprius is one of the most respected members in these forums. You should at least consider his advice before you dismiss it out of hand.


Nis is also notoriously curt with people, but gets a free pass by the admins due to his advisor status. A courtesy that is not extended to others who have "different" communication styles.

[If anyone feels that forum policy has been violated, please report the post ("!" in the top right corner). Members can always PM a moderator (or site admin) for an explanation if they disagree with a moderator action. --admin LadyGeek]
STC
 
Posts: 415
Joined: Wed Nov 14, 2012 10:22 am

Re: Hey, I Bonds might not be a total disaster after CPI-U t

Postby nisiprius » Fri Mar 15, 2013 3:30 pm

robjer, you are correct, and your retort was appropriate. I ought not to have made that remark and I apologize. I've removed it from my posting.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
User avatar
nisiprius
Advisory Board
 
Posts: 25178
Joined: Thu Jul 26, 2007 10:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Hey, I Bonds might not be a total disaster after CPI-U t

Postby gkaplan » Fri Mar 15, 2013 3:37 pm

STC wrote:
gkaplan wrote:
robjer wrote:nisiprius, keep the personal attacks out of your response to me. No reason to tell me about myself....


You're a relatively new poster, but you should know that nisiprius is one of the most respected members in these forums. You should at least consider his advice before you dismiss it out of hand.


Nis is also notoriously curt with people, but gets a free pass by the admins due to his advisor status. A courtesy that is not extended to others who have "different" communication styles.


I think you have the wrong person.
Gordon
gkaplan
 
Posts: 5259
Joined: Sat Mar 03, 2007 9:34 pm
Location: Portland, Oregon

Re: Hey, I Bonds might not be a total disaster after CPI-U t

Postby sscritic » Fri Mar 15, 2013 5:01 pm

232.166 - 230.280 = 1.886
1.886 / 230.280 = .0082
.0082 x 12 = 0.983 or 9.83%

Alternative:
232.166 / 230.280 = 1.0082
1.0082 - 1 = .0082
.0082 x 12 = 0.983 or 9.83%

Do you love extrapolation as much as I do?
sscritic
 
Posts: 21863
Joined: Thu Sep 06, 2007 9:36 am

Re: Hey, I Bonds might not be a total disaster after CPI-U t

Postby BBL » Fri Mar 15, 2013 5:19 pm

sscritic wrote:Do you love extrapolation as much as I do?


Ehhh extrapolation? I could take it or leave it.... But don't get me started on interpolation, now that's the ticket :!:
To win without risk is to triumph without glory. Pierre Corneille
User avatar
BBL
 
Posts: 716
Joined: Sat Aug 06, 2011 8:01 am
Location: Location: Location


Return to Investing - Help with Personal Investments

Who is online

Users browsing this forum: No registered users and 41 guests