Picking up Nickels

Tuesday, April 16, 2013

March CPI-U numbers released: April 2013 issue I Bonds are worth considering

First and foremost, a thought from a Massachusetts resident about the terrorist attack at the Boston Marathon yesterday.  As a past attendee of the annual Patriot's Day Red Sox game as well as someone who used to watch the Boston Marathon finish line from his office window, my heart goes out to the victims of the horrific attack yesterday. While I'm filled with anger at the perpetrators of such a heinous act, I'm also touched and amazed at the bravery and humanity displayed by the first responders as well as the average person on the street.

Now, on to less pressing matters. The U.S. Bureau of Labor Statistics released the April 2013 Consumer Price Index (CPI-U) inflation data this morning, which increased by 0.26% last month.

As always, 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 2013 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 2012 (231.407) and March 2013 (232.773) (courtesy of inflationdata.com), we can calculate the variable rate for the second 6 month period for April 2013 issue I Bonds:

That means these bonds would earn a rate of 1.76% (using 0% fixed & 1.76 variable) for the first 6 months and 1.18% (using 0% fixed & 1.18% variable) for the second 6 months. Based on this, April 2013 issue I Bonds are a competitive investment when compared to something like the 12 month CD @ 1.15% APY currently being offered by Bank of Internet USA.

The above average rates offered by April 2013 I Bonds over the next 12 months make them a compelling buy in my opinion, and I plan to max out my 2013 $10,000 annual limit at treasurydirect.gov by the end of April.  I also received the bulk of my 2012 Federal tax refund in the form of paper savings bonds using IRS form 8888, which unfortunately is currently the only way to purchase paper savings bonds.  If you have some cash that you're looking to put in a safe place where it can earn a competitive yield over the next year, then April 2013 issue I Bonds are worth considering.  However, I would do so before the end of the month to lock in that 1.76% rate over the first six month period.

Thursday, April 11, 2013

April 2013 Financial Asset Roundup

Here are my current financial assets as of the market close on April 10th, 2013:

Asset Mar
Checking 884 3,185 2,301
Money Market 40,710 39,675 -1,035
Savings Bonds 67,839 70,628 2,789
Treasury Bills 0 0 0
CDs 81,154 81,250 96
Brokerage 109,736 106,254 -3,482
401k 117,480 116,586 -894
Roth IRA 70,673 71,394 721
SEP IRA 363,420 368,532 5,112
529 Savings 81,030 82,512 1,482

Total Assets $932,926 $940,016 $7,090

The S&P 500 has once again hit all time highs over the past month, up 2.02% since the last update:

(chart courtesy of msn.com)

Once again, I'm amazed as the S&P 500 has climbed to yet another all time high, up 11% for the year. On the jobs front, the unemployment rate for March fell to 7.6% (once again the lowest since December 2008) although that was considered a disappointing number because it reflected people who had basically given up on finding a job. Oil prices continue to stay around $93
per barrel, although I've noticed local gasoline prices have fallen about 14ยข per gallon.

On the financial front, my assets have once again surpassed their previous all time high from March, leaving me only a 6.4% gain away from breaking
the $1m asset level threshold. I also finalized my 2012 personal tax returns and received a portion of my Federal tax refund as paper Series I savings bonds (currently the only way to purchase paper savings bonds). On a related note, I'm looking forward to the March 2013 CPI-U inflation data release on Tuesday next week to clarify the rate picture on April/May 2013 issue Series I savings bonds as an attractive investment. Unless something unexpected occurs, I will probably take an equity distribution from my S Corp's 2012 profit and use the proceeds to make an electronic savings bond purchase at treasurydirect.gov by the end of the month.

As for the non-financial, I'm excited to have re-upped with my largest client for another year. Having Mrs. Frugalson back in the workforce and knowing that I'll have another year of steady revenue does wonders for one's peace of mind. With the first quarter of the year behind me, I'm looking forward to a happy and productive 2013 and beyond for all.