Gyroscopic Investing

Fixed Rate = 0.00%
Inflation Rate = -0.80%
Composite rate = 0.00%

OMG, I just bought a bunch of those I-Bonds! No better than my Credit Union, and less liquid!

Yikes.  Glad I skipped buying i bonds last year...

It's also strange to see outright deflation with negative interest rates on T-bills, while yields on long bonds are increasing.  It looks like the price deflation was almost entirely due to the drop in oil prices.  Kinda sucks for me because about the only consumer item that's actually dropped in price is gasoline, which is the one thing I have little use for.  The reduction in oil prices was not reflected anywhere else, it seems.  Someone is making out like a bandit.

I thought CPI excluded energy prices?

sophie wrote: Yikes.  Glad I skipped buying i bonds last year...

Me too. I remember some of our convo about that back then. I went with 3-YR treasury notes.

Remember all the hoopla about TIPS at bogleheads' forum?

Pointedstick wrote: I thought CPI excluded energy prices?

I think that's called "core CPI" (less food and energy).

Yes, TIPS owners must be crying their eyes out right now. 

Why the sad face?  .8% real is better than 0% real!  I thought people were glad Ibonds couldn't go negative for just this reason.

I want to give credit to Moda, btw. I got the idea to buy those notes from a post he wrote a long time ago.

dragoncar wrote: Why the sad face?  .8% real is better than 0% real!  I thought people were glad Ibonds couldn't go negative for just this reason.

The composite rate of return on new bonds is 0%, not .8%. Can someone explain to me why anyone would lend the government money for nothing in return? Safer than a bank? A mattress?

Corporations can't have huge piles of paper money lying around.

Corporations can't buy I-bonds, I don't believe, but the principle is the same for things they can buy, like T-bills.

Pointedstick wrote: Corporations can't buy I-bonds, I don't believe, but the principle is the same for things they can buy, like T-bills.

Right! What you said!

barrett wrote:

dragoncar wrote: Why the sad face?  .8% real is better than 0% real!  I thought people were glad Ibonds couldn't go negative for just this reason.

The composite rate of return on new bonds is 0%, not .8%. Can someone explain to me why anyone would lend the government money for nothing in return? Safer than a bank? A mattress?

Dude, you've been here long enough to understand real vs. nominal return.

dragoncar wrote:

barrett wrote:

dragoncar wrote: Why the sad face?  .8% real is better than 0% real!  I thought people were glad Ibonds couldn't go negative for just this reason.

The composite rate of return on new bonds is 0%, not .8%. Can someone explain to me why anyone would lend the government money for nothing in return? Safer than a bank? A mattress?

Dude, you've been here long enough to understand real vs. nominal return.

Right you are. I guess that mental leap to think of a 0% return actually being better than -.8% deflation was just a bit much for me. Forgive me. I have recovered. Have to learn to think like a Japanese or European investor.

Looking at http://www.bls.gov/cpi/cpid1503.pdf, it seems like Sophie's right. Excluding food and energy, 1-year CPI is actually +1.8%.

…Which is still really low, but it's not negative.

Bean wrote: Fixed Rate = 0.00%
Inflation Rate = -0.80%
Composite rate = 0.00%

In case anyone is unaware of how I-Bond rates are calculated, this inflation rate is for the six months from September to March.  Annualized, it's –1.60%.  Even better real return at 0% nominal!

I suppose better than a money market fund that breaks the buck.