Gyroscopic Investing

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.