Gyroscopic Investing

Predictions?

I think we lucked out getting such a high rate for May right before the commodity crash.  Nice that any negative adjustment to CPI will simply result in no interest payment for that period.

Hopefully the fixed rate will be > 0%.  I'm holding off on this year's purchases for my wife and I until then, as from what I understand, the fixed rate stays the same for the life of the bond, although of course the variable rate fluctuates.

Storm, that is correct.

I view the I bond, as it currently sits, at worst, as a 1 year cd with 6 months guaranteed at 4.6%, but you can't redeem it early, and will be punished on day 1 of year 2 with 90 days of interest as penalty of selling, so you have to factor that in.

You can't beat that in the market today, even if the next inflation amount is zero, so unless you're scared of hitting your $10k per person limit, I wonder if holding out is the best decision.  As far as I can tell, if employment isn't improved by November, they probably won't see a need to offer higher than zero fixed interest on these.

I think it should be pretty easy to tell what the inflation portion will be in the final days of October, so I am thinking if the adjustment looks good compared to ST rates at the time that could be a great time to buy in, as you'll get 6 months at 4.6% and the rest you'll know pretty close to what it's going to be.  Then, if they DO raise the fixed rate, come the end of January 2012 you buy up to another $20,000 for you and your wife then.  They use a calendar year to set the purchase limits.

ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt