Picking up Nickels

Wednesday, October 19, 2011

September CPI-U numbers released: October 2011 I Bonds are a strong buy

The U.S. Bureau of Labor Statistics released the September 2011 Consumer Price Index (CPI-U) inflation data this morning, which increased by 0.15% last month.

As I have mentioned many times before, now 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 October 2011 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 March 2011 (223.467) and September 2011 (226.889) (courtesy of inflationdata.com), we can calculate the variable rate for the second 6 month period for October 2011 issue I Bonds:

That would mean these bonds would earn a rate of 4.60% (using 0% fixed & 4.60% variable) for the first 6 months and 3.06% (combined 0% fixed & 3.06% variable) for the second 6 months. Even with a useless 0% fixed portion, this is a very strong investment when compared to the 1 year CD @ 1.36% APY currently being offered by DCU.

With the continuing uptick in inflation we're currently experiencing (including the first cost-of-living increase for Social Security recipients since 2009), buying October 2011 I Bonds ASAP is a no-brainer. With no large increase in the fixed portion expected in November and the discontinuation of the savings bond sales at financial institutions on 12/31/2011, now is the time to max out your paper and electronic I Bond purchases.

I'd also like to add one final piece of advice with regard to those planning on buying paper I Bonds at your local financial institution. I recently went to buy an I Bond for my niece at my local Bank of America branch and was surprised to learn that they have discontinued savings bond sales as of 10/1/11. If you are having a similar difficultly buying paper I Bonds locally, you have the option to purchase paper I Bonds by filling out the form at savingsbondsdirect.gov found here and mailing a copy of this form along with a check made out to the specified Federal Reserve bank.

Monday, October 17, 2011

My modest (yes, really!) health insurance premium increase

Documenting large annual health insurance premium increases has been a rite of passage for me since I've started this blog. But lo and behold, I actually had a modest 2.1% price increase to maintain the current HMO coverage that I currently have with no plan downgrades or reduced benefits. In fact, this was the smallest price increase that I've endured without downgrading my healthcare plan (four times) since I started tracking this data in 2001.

Since 2001, my health insurance premiums have increased by 148% while the rate of inflation during that time is a much lower 28% (so says usinflationcalculator.com):

While I'm very pleased to have kept this profit eating monster at bay for a year, one thing I'm confused about is the reason behind this uncharacteristically low price increase. While I mentioned last year that I don't believe that President Obama's healthcare reform was the cause of large premium increases since costs started getting out of control long before he took office, I also don't believe that it caused this dramatic change in the typical price increases I've become accustomed to. And while this trend would greatly help our businesses and local/state/federal governments if it continues, I think the inevitable return to greater-than-inflation healthcare price increases will only hinder job growth, increase budget deficits, and add to the growing ranks of people without health insurance. Bah, humbug!

Tuesday, October 11, 2011

October 2011 Financial Asset Roundup

Here are my current financial assets as of the market close on October 10th, 2011:

Asset Sep 2011 Oct 2011 Change
Checking 2,405 456 -1,949
Money Market 33,124 40,088 6,964
Savings Bonds 47,154 52,224 5,070
Treasury Bills 0 0 0
CDs 99,784 87,554 -12,230
Brokerage 88,019 99,478 11,459
401k 89,544 91,473 1,929
Roth IRA 46,131 46,600 469
SEP IRA 253,194 256,881 3,687
529 Savings 52,904 54,039 1,135
Total Assets $712,259 $728,793 $16,534

The S&P 500 volatility has continued since the last update, rising 3.52% during that time:

(chart courtesy of msn.com)

On the jobs front, the unemployment rate for September remained at 9.1% although hiring was stronger than expected. Oil prices have once again remained somewhat flat, falling slightly from about $86 per barrel to around $85 per barrel. And of course, financial uncertainty continues around the world with the European debt crisis and the "Occupy"protests across the country.

On the financial front, I had a 4 year Penfed CD @6.00% APY mature at the end of September and put $5k of that idle cash toward some Series I savings bonds at treasurydirect.gov. On a related note, we're also due to get the September 2011 Consumer Price Index (CPI-U) inflation data next week which should shed some light on Series I savings bond purchases starting in November. I've also been keeping an eye on the Procter & Gamble (PG) stock price, since I'll be looking to sell my position before the end of the year to take advantage of the 0% tax on dividends and capital gains.

On the borrowing front, I bit the bullet and am attempting to refinance my existing 30 year home mortgage to a 15 year @ 3.125% at a small regional credit union. The process has actually progressed pretty quickly, although I've come to find out that applying for the loan on the credit union web site has actually been less efficient and more convoluted than contacting their mortgage originator directly. Oh well, being self employed I was fully expecting a process akin to a full body cavity search anyway. :) Oh, and one more thing... I have taken the plunge and pre-ordered an iPhone 4s from Verizon to replace my ancient 4+ year old LG phone. It's probably a bit weird for someone with a technical background like mine to just be getting a smartphone now, but my dread of a higher phone bill has been offset by the increase in functionality and productivity that I'm hoping to gain.