Picking up Nickels

Thursday, April 15, 2021

March CPI-U numbers released: April 2021 issue I Bonds OK, but wait till May

The U.S. Bureau of Labor Statistics released the March 2021 Consumer Price Index (CPI-U) inflation data on Tuesday, which rose by 0.71% last month, the largest increase we've seen since in quite some time.

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 2021 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 2020 (260.280) and March 2021 (264.877) (courtesy of inflationdata.com), we can calculate the variable rate for the second 6 month period for April 2021 issue I Bonds.

That means these bonds would earn a composite rate of 1.68% (using 0% fixed & 0.84 variable) for the first 6 months and 3.54% (using 0% fixed & 0.1.77% variable) for the second 6 months. Based on this inflation spike, April 2021 issue I Bonds are very compelling when compared to something like the 12 month CD @ 0.80% APY currently being offered by Lafayette Federal Credit Union.

Basically, the May rate reset is the best composite rate we've seen in ten years and the elevated inflation trend may continue as COVID-19 stimulus continues to work through the US economy. I also anticipate the current 0% fixed portion continuing through May, but it is possible that it could increase slightly with the next rate reset. While the 1.68% composite rate for April 2021 bonds is very competitive, I'd suggest waiting until May before buying to get that higher 3.54% rate. I certainly intend to max out my annual purchase in May myself.

Tuesday, April 13, 2021

April 2021 Financial Asset Roundup

Here are my current financial assets as of the market close on April 12th, 2021:

Asset Mar 2021 Apr 2021 Change

Checking 4,441 2,908 -1,533
Money Market 107,402 115,494 8,092
Savings Bonds 174,967 175,188 221
Treasury Bills 0 0 0
CDs 46,615 31,430 -15,185
Brokerage 232,143 245,828 13,685
401k 353,282 368,669 15,387
Roth IRA 224,174 238,934 14,760
SEP IRA 1,071,233 1,100,369 29,136
529 Savings 180,847 181,902 1,055
Total Assets $2,395,104 $2,460,722 $65,618

The S&P 500 has been on a nice run, rising 5.88% since the last update:

(chart courtesy of nasdaq.com)

On the jobs front, the unemployment rate for March dropped to 6.0%, with a better-than-expected 916,000 jobs added. Oil prices pulled back to the $60 level, which translates to a local regular unleaded gasoline price of $2.48 at my last fill-up.

On the financial front, my assets have once again hit an all-time high, surpassing the previous high from February 2021. I also had some money moving around with my Alliant 1.85% APY 12 month CD maturing plus the addition of a distribution from my S Corp. We finalized our 2020 personal tax returns, made corresponding Roth IRA contributions, and opted to take a portion of our federal tax refund in the form of paper Series I savings bonds. One new addition will be adding to our non-retirement account investments with a monthly Vanguard Total Stock Market ETF purchase in our brokerage account to help diversify our tax deferred/Roth/taxable investment mix.

As for the non-financial, seeing my expanding circle of friends and family getting their COVID-19 vaccines has been great to see. We're finally far enough along where everyone in the Frugalson household has received at least one dose, although the reported blood clot issues from the Johnson & Johnson vaccine aren't great news.