Picking up Nickels

Thursday, April 14, 2016

March CPI-U numbers released: Pass on I Bonds until November 2016

The U.S. Bureau of Labor Statistics released the March 2016 Consumer Price Index (CPI-U) inflation data this morning, which increased by 0.43% 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 2016 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 2015 (237.945) and March 2016 (238.132) (courtesy of inflationdata.com), we can calculate the variable rate for the second 6 month period for April 2016 issue I Bonds.

That means these bonds would earn a rate of 1.64% (using 0.10% fixed & 1.48 variable) for the first 6 months and 0.26% (using 0.10% fixed & 0.08% variable) for the second 6 months. Based on this, April 2016 issue I Bonds are obviously not a very competitive investment when compared to something like the 12 month CD @ 1.31% APY currently being offered by Air Force FCU. Similarly, May 2016 issue I Bonds are even less attractive since they will have a 0.26% composite rate for the first 6 months of ownership.

Basically, I think we're having a repeat of 2015 where it makes sense to hold off on any I Bond purchases until the next rate reset in November 2016 to avoid six months of 0.26% interest.

Tuesday, April 12, 2016

April 2016 Financial Asset Roundup

Here are my current financial assets as of the market close on April 11th, 2016:

Asset Mar
Checking 1,669 958 -711
Money Market 65,104 64,743 -361
Savings Bonds 105,825 105,857 32
Treasury Bills 0 0 0
CDs 48,904 49,024 120
Brokerage 121,099 126,655 5,556
401k 121,438 124,248 2,810
Roth IRA 102,918 105,503 2,585
SEP IRA 501,546 515,709 14,163
529 Savings 129,986 133,187 3,201

Total Assets $1,198,489 $1,225,884 $27,395

The S&P 500 has continued to trend upward since the last update, rising 2.29% over that period:

(chart courtesy of yahoo.com)

On the jobs front, the unemployment rate for March rose slightly to 5.0%, while the 215,000 jobs added exceeded expectations. Oil prices have edged up to the $41 level (up from $38), and I've been seeing local gasoline prices above the $2 threshold again.

On the financial front, all of my 2015 personal and business tax returns are finally complete. I did get a modest refund on my Federal return and will be getting a portion of it in paper Series I Savings Bonds. On a related note, the March CPI-U numbers are due out later this week so that a Series I Savings Bond purchase can be properly evaluated. I'm anticipating a situation like last year where we had a six month period of 0% interest, but we'll know for sure on Thursday. Finally, I have a Penfed 1.31% APY 1 year CD maturing early next month with the usual dilemma of no concrete landing spot for the proceeds.

On the non-financial front, I'm anxiously awaiting the arrival of some warm Spring weather and the flowers and green grass that should accompany it. :D