Picking up Nickels

Wednesday, October 18, 2023

September 2023 CPI-U numbers released: Hold off on I Bond purchase

The U.S. Bureau of Labor Statistics released the September 2023 Consumer Price Index (CPI-U) inflation data last week, which increased by 0.249% over the past month.

As always, 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 2023 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 2023 (301.836) and September 2023 (307.789) (courtesy of inflationdata.com), we can calculate the variable rate for the second 6 month period for October 2023 issue I Bonds.

That means these bonds would earn the current rate of 4.30% (using 0.9% fixed & 1.69% variable) for the first 6 months and 4.86% (combined 0.9% fixed & 1.97% variable) for the second 6 months. In the current interest rate environment, an October I Bond purchase isn't compelling when compared to something like the 52 Week T-Bills @ 5.488% APY issued on 10/5/2023.

In my opinion, I would pass on October 2023 I Bonds and reevaluate them after the rate reset in November. Based on the spread between I Bonds and TIPS, David Enna of tipswatch.com projects that the new fixed rate will fall in the range of 1.40% to 1.70%, a nice increase over the current 0.9% and the first time above 1% since 2007. If that's the case, I'll seriously consider purchasing before the end of 2023 followed up by another potential purchase in April 2024 once the March 2024 CPI-U numbers are released.

Wednesday, October 11, 2023

October 2023 Financial Asset Roundup

Here are my current financial assets as of the market close on October 10th, 2023:

Asset Sep 2023 Oct 2023 Change

Checking 4,335 4,028 -307
Money Market 62,668 70,168 7,500
Savings Bonds 232,596 233,573 977
Treasury Bills 62,000 62,000 0
CDs 54,644 54,825 181
Brokerage 397,636 359,882 -37,754
401k 294,230 289,677 -4,553
Roth IRA 253,718 247,088 -6,630
IRA 1,291,162 1,256,503 -34,659
529 Savings 167,031 164,868 -2,163
Total Assets $2,820,020 $2,742,612 -$77,408
      -2.74 %

The S&P 500 has pulled back, falling 2.88% (+13.51% YTD) since the last update:

(chart courtesy of nasdaq.com)

On the jobs front, the unemployment rate for September remained at 3.8%, with a scorching hot 336,000 new jobs added. Oil prices fell to the $85 level (from $88) with upward pressure from the Hamas attack on Israel dialing up tensions in the Middle East. The $85 price translates to a local regular unleaded gasoline price of $3.59 at my last fill-up.

On the financial front, I did the usual Fidelity 401k transaction (FSKAX) and Vanguard VTI purchase in my taxable brokerage account. I took a distribution from my S Corp and put that cash in my Fidelity Cash Management checking account to try to get a bit of yield on that cash. I'm also starting to wonder if we're going to see some short-term 6% CD deals at some point as the tax-equivalent yield of T-Bills are getting close to that level. Is it possible we could see an old-fashioned holiday CD deal from Penfed this year?

Finally, the September 2023 CPI-U numbers are scheduled to be released tomorrow, so a follow-up post about the impact on Series I savings bonds is in my queue.