I-Bond Fiasco

I am happy with my Ibond investment and just bought my yearly limit of the new 0.9% fixed rate bonds to add to my mix. I might sell some of the 0% fixed rate bonds later this year or next if the interest rate keeps dropping.

Over the past decade we have elected the people who have allowed this inflation to plague us. often we re-elect them.
 
Just a reminder, despite flaws in the Treasury Department website, the new Ibonds now yield the inflation rate PLUS almost 1% more. 0.9% more to be precise. It’s an admittedly small opportunity to fight back in these inflationary times. But it’s better than a kick in the pants.
 

Sippican said:
Sounds like thats small returns.
I'm getting 5.50%, payable monthly for 5 years, plus CD's between 5.15% and 5.25% on a CD Ladder.
Why are folks saying 0.9% is good?
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I took that to mean .9% over the inflation rate.

I haven't actually seen a CD above 5% yet, but then I haven't been everywhere. IBonds were somewhere around 7% last I looked, and while the OP is gone now for some reason, I will say that the Government Bonds site is not the most intuitive program I've ever seen. It does work almost flawlessly, but as for being user friendly, I would call it "not good." When you finally figure it out, it does make sense, but I would have designed the site differently.
 
Sippican said:
Sounds like thats small returns.
I'm getting 5.50%, payable monthly for 5 years, plus CD's between 5.15% and 5.25% on a CD Ladder.
Why are folks saying 0.9% is good?
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Nobody says 0.9% is good. I am saying the inflation rate plus 0.9% guaranteed for 30 years is a good (not perfect) way for ordinary people to counter inflation. The fixed Ibond rate is added to the variable inflation rate for the past 6 months. The treasury will adjust the inflation rate every six months to keep it current. The fixed rate remains the same for the life of the Ibond.

Note: I bonds are not for money you will need soon. You can’t cash it in for the first year. And for the first five years you lose the last three months interest.

iBonds have a life of 30 years. IMO, they are one part of what should be a collection of bonds and CDs. If inflation rages, some protection like today Ibonds is nice to have. Naturally a person should also scoop up some of those 5+% CDs also. Make sure they aren’t callable. Many CDs over two years are callable, so the buyer can have the rug pulled put from under her if interest rates drop. Always do your due diligence and know what you are investing in and why. Don’t rush into things because some guy on the internet (like me) says it’s a good thing.
 
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Brookswood said:
Massive government deficit spending is inflationary. Too much money seeking too few goods. People bid up the price.
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"too few goods" - yup




"many European countries provided far less assistance to their economies when Covid-19 hit. However, these countries are also staring down the double-barrel of low supply and inflation ranging from 2.5% to nearly 80%. That suggests that supply chain issues and other outside factors, rather than government stimulus, may have boosted inflation."

Forbes article on gov spending and inflation
 
againstthegrain said:
"too few goods" - yup




"many European countries provided far less assistance to their economies when Covid-19 hit. However, these countries are also staring down the double-barrel of low supply and inflation ranging from 2.5% to nearly 80%. That suggests that supply chain issues and other outside factors, rather than government stimulus, may have boosted inflation."

Forbes article on gov spending and inflation
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Yes, economic issues are not as simple we would like them to be, and it's easy to point to a pet peeve and say, "There is the reason."

We've all been exposed to the supply chain issues that are part of the problem. But supply chain issues were real. Early on we had plenty of trucks, but no one to drive them. Trucking companies were hiring immigrants with little or no truck driving experience. You have to get products to outlets where they can be bought. If they are not there it's a shortage, hence inflation. Other issues came into play that disrupted supply also.

Nor have we mentioned low interest rates, which have been held low longer than I have ever seen for longer than I can remember. Low interest rates can spur the economy but cause inflation, which is OK in a recession, but when the economy is hot, low rates create bubbles, and OK, a lot of profit for Wall Street, but with all that easy money floating around it's inflationary.

Rampant government spending is also inflationary, and I'll bet someone can identify another cause.
 
Alligatorob said:
No, but but I believe he and the Ukraine war are just a drop in the bucket, when it comes the US inflation. I believe the heart of the problem is deficit spending, and we've been on that train most of my adult life. Few politicians from either party have made any real effort to stop it, not in 40 years anyway...
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Interesting thoughts on the topic here

As far as our politicians they are bought and paid for by special interest groups primarily funded by the super wealthy through business lobbying or directly into super pacs.
 
JustDave said:
I took that to mean .9% over the inflation rate.

I haven't actually seen a CD above 5% yet, but then I haven't been everywhere. IBonds were somewhere around 7% last I looked, and while the OP is gone now for some reason, I will say that the Government Bonds site is not the most intuitive program I've ever seen. It does work almost flawlessly, but as for being user friendly, I would call it "not good." When you finally figure it out, it does make sense, but I would have designed the site differently.
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I use Schwab for CD's. I build a 12 month ladder. 3,6,9,12 month payable monthly or when matured.
Don't want to lock in too much because rates may go higher.
 
againstthegrain said:
Interesting thoughts on the topic here
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Thanks, but I think that explanation of borrowing to support deficit spending is incomplete. Government borrowing competes with private borrowing driving the interest rates, and inflation.
againstthegrain said:
As far as our politicians they are bought and paid for by special interest groups primarily funded by the super wealthy through business lobbying or directly into super pacs.
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Yep, and we keep electing them...
 
Sippican said:
I use Schwab for CD's. I build a 12 month ladder. 3,6,9,12 month payable monthly or when matured.
Don't want to lock in too much because rates may go higher.
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I can't make these predictions, but I've picked up the idea that the Fed is nearing the top of it's planned rate increases. It seems to me that the current rate is more of where it was in most of my borrowing days. It's higher than the last 10 years, but that last10 years seems like the anomaly. I wonder if others see it that way. I can't remember a time when the average savings account paid 12 cents a year on a thousand dollars.
 
Alligatorob said:
Thanks, but I think that explanation of borrowing to support deficit spending is incomplete. Government borrowing competes with private borrowing driving the interest rates, and inflation.

Yep, and we keep electing them...
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Well the distinction I found most relevant was the difference btwn borrowing real money from the sale of bonds vs printing money resulting in an increase in the overall supply of $. Borrowing took as much, if not a little more w interest $ out of the money supply it was just it different hands. IMHO, that would not be inflationary even though it contributes to the deficit.

There are a number of opinions to be found at that link so there are many ways to look at it.
 
Sippican said:
I use Schwab for CD's. I build a 12 month ladder. 3,6,9,12 month payable monthly or when matured.
Don't want to lock in too much because rates may go higher.
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I just checked my bank today CD rates are now up to 5%. Earlier in the week, they were at 4.25%. And my bank doesn't have the highest rates out there, but I'll probably get them there, anyway, just for convenience. I'm only going tie part of them up until December when I can buy another iBond.

Can you explain what you mean by buying them in a 3 6 9 12 ladder? I don't know what that means or what the reason for it is.
 
againstthegrain said:
There are a number of opinions to be found at that link so there are many ways to look at it.
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In college I took an economics class from a professor of some note. He had been invited to address Congress on issues like this. He had lost an arm in an accident. When asked why him, he said Hubert Humphrey invited him because too many economists answered questions with "one one hand ... and on the other ...". Humphry told him they looked long and hard for a one handed economist.

About sums up what I think of most economist's opinions, always interesting to listen to, but there are more opinions than economists.
 
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Alligatorob said:
About sums up what I think of most economist's opinions, always interesting to listen to, but there are more opinions than economists.
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Ain't that the truth. It seems like economics would normally lend itself to numbers and equations, and it probably could in many ways. But load it with politics, and it's about as useful as propaganda.
 
JustDave said:
I just checked my bank today CD rates are now up to 5%. Earlier in the week, they were at 4.25%. And my bank doesn't have the highest rates out there, but I'll probably get them there, anyway, just for convenience. I'm only going tie part of them up until December when I can buy another iBond.

Can you explain what you mean by buying them in a 3 6 9 12 ladder? I don't know what that means or what the reason for it is.
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A CD Ladder is when you invest in CD's over a period of time where each CD in the Ladder matures at different timeframes. 3 months, 6 months, 9 months, 12 months, for a 1 year ladder. Each has different %'s of return. Right now I have 1 year ladder that ranges from 5.15% to 5.25%. You can also build CD ladders for as many years you want.
Schwab walks you through building CD ladders. You pick the number of years, which account the funds are coming from, and how much you want the ladder to invest. It them presents you with a number of banks offering CD's based on highest rates first.
Schwab takes the full allocation and divides it up into equal segments, so to spread them out over however many years you chose for the overall ladder.
I chose 1 year because I think there will still be some volatility in interest rates going up, so after 12 months I can see if CD's are the way to go.
The ladder can continue to build. Once my 3 month CD matures, I can look for another one after the 12 month CD is scheduled to end, and investing in another CD 1 year and 3 months out.
Schwab looks at banks across the US and can find the highest rates. Plus, they are FDIC insured and spread across different banks, so you won't take risks with going over the 250K threshold for FDIC insurance.
 


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