Re: If you like bonds, you'll love this ---
- From: Rumpelstiltskin <PleaseDoNotReplyByEmail@xxxxxxxxxxx>
- Date: Sat, 12 Nov 2005 21:51:22 GMT
On Sat, 12 Nov 2005 07:19:51 -1000, Alvin Toda <aet@> wrote:
>On 11 Nov 2005 15:14:05 GMT, "ray$$$$" <ray$$$$@hotmail.com> wrote:
>
>>So, at latest by the middle of next year, I would expect the Bernanke money
>>printing press to shift into high gear. This should lead to more consumer
>>price inflation, a weakening US dollar and tumbling bond prices. From a
>>longer term perspective, I expect Mr. Bernanke will be the greatest
>>disaster that has ever hit the US bond market in the 200 years of
>>capitalistic history.
>>
>>
>>http://www.gloomboomdoom.com/marketcoms/mcdownloads/051108.pdf
>
>IIRC, there is something posted in this ng about I-bonds going up. But
>that's expected from the inflation point of view. However, I think
>that bonds are level or going down-- well long term bonds anyway, last
>I checked a while ago. Wouldn't want inflation to get out of control.
>Bernanke has made statements to the effect that's going to try to
>follow Greenspan's efforts. But then again he may be just another
>suck-up to Bush. Terrible way to run the nation's monetary policies.
I-bonds are based mostly on inflation. Of course, that is
"official" inflation, not real inflation. You can sell them after one
year with a 3-month interest hit. Even with the hit, they're better
than what you can get from a bank. After 5 years, there's no hit.
Here's a chart of the historical I-bond rates:
http://www.publicdebt.treas.gov/sav/sbirate2.htm
The composite rate given in the third table will only be
true for the whole year if inflation stays exactly the same at
the next six-month recalculation. Otherwise you'll get it
for the until the next recalculation, then it will be less or
more thenceforward depending on whether the official
inflation rate goes up or down.
For example, I bought some I bonds last May. My rate
was 4.8%, which was a composite of
1.2% fixed portion
3.6% inflation portion.
As of November 1, they'll be making
1.2% fixed (never changes after I buy the bonds)
5.73% inflation portion
whch gives a net of 6.93% for the next six months
I calculate the 5.73% by subtracting the current fixed
rate of 1% from the current total rate that's listed as
6.73% in the composite table. I could also get it by
looking at the "semiannual rate" in table 2, doubling
it and adding a bit because of compounding, but that's
more trouble.
I bought my bonds in May of 2005, so the
fixed rate, which stays with me as long as I hold
the bonds, is 1.2% rather than the 1.0% I'd get if
I bought them now. Therefore my composite rate
is 0.2% higher than it would be for the people
who buy I-bonds now, and will be as long as
I and those who buy now hold the bonds.
At least I think that's what's happening. I
haven't checked because it's a bit of a
nuisance to log into treasury direct. I have
to cut-and-paste my account number, then
answer a password. Not that I'm objecting
at all to the hassle, since it is my money after
all so I don't want it to be easy for anybody
to get at. I keep the records on my computer
encrypted, of course, decrypt them when I
need them, and overwrite, not just erase, the
decrypted versions as soon as I've finished
looking at them.
.
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