Picking up Nickels

Wednesday, April 16, 2008

March CPI-U numbers released: Grab some April 2008 issue I Bonds!

The U.S. Bureau of Labor Statistics released the March 2008 Consumer Price Index (CPI-U) inflation data this morning, which increased by 0.87% since last month.

As I have mentioned before, now (along with the release of the September CPI-U) is one of the best times to consider purchasing I Bonds. The reason for this is that we now know what the rate of return for April 2008 I Bonds will be for both the first and second six month periods, which is important since I Bonds must be held for 12 months before they can be redeemed.

Using the CPI-U data from September 2007 (208.49) and March 2008 (213.528) (courtesy of inflationdata.com), we can calculate the variable rate for the second 6 month period for April 2008 issue I Bonds:

That would mean these bonds would earn a rate of 4.28% (using 1.20% fixed & 3.06 variable) for the first 6 months and 6.06% (using 1.20% fixed & 4.83% variable) for the second 6 months. As anticipated, I Bonds are once again an attractive investment for the first time since October 2005, since the yield for 1 year CDs is currently hovering around 4% and could continue to fall in anticipation of an additional FOMC cuts rate on April 30th.

Please note that effective January 1st, 2008, the Treasury cut the I Bond annual purchase limit to $5000 per social security number. Under the new rules, you can purchase up to $10,000 worth of I Bonds by purchasing $5000 in paper bonds at your local bank in addition to the $5000 in electronic bonds that can be purchased online at treasurydirect.gov.

Tuesday, April 15, 2008

April 2008 Financial Asset Roundup

Here are my current financial assets as of the market close on April 14th, 2008:

Asset March 2008 April 2008 Change
Checking 854 631 -223
Money Market 22,710 35,447 12,737
Savings Bonds 4,685 4,701 16
Treasury Bills 0 0 0
CDs 98,785 89,125 -9,660
Brokerage 96,963 98,465 1,502
401k 95,537 96,658 1,121
Roth IRA 31,193 31,635 442
SEP IRA 179,433 181,450 2,017
529 Savings 36,181 36,964 783
Credit Card 0% Balance Transfers 0 0 0
Total Assets $566,341 $575,076 $8,735 (1.54%)

Market volatility is alive and well, with the S&P 500 index up by 0.58% since my last update:

(chart courtesy of msn.com)

We had some positive movement over the past month, mostly buoyed by Washington Mutual's $7 billion investment. In a "shocking" twist, inflation is starting to surface and oil has hit $113 per barrel. As far as personal money moves go, my Bank of America 5.15% APY 4-month CD has matured since my last update, and I will be moving that money to I Bonds by the end of the month. On a related note, the March 2008 CPI-U numbers will be released tomorrow, which will allow us to calculate the variable portion of the I Bond rate over the next year.

As an update to my personal recession watch, my relationship with the largest client of my IT services S Corporation has unfortunately ended. I am currently in negotiations with another client to increase my role there, so hopefully that is a sign that the IT business will not be hit as hard as it was in the aftermath of the bursting of the tech bubble earlier this decade.