Ibonds

Anyone moving out of the Ibond after a year or so of being in?

The thought has crossed my mind. If inflation is falling it could be possible to buy some longer dated fixed income that will yield more than the inflation rate over the next few years. Tough to time it though.

Nope.

The debt ceiling stuff is going to be a shit storm, and I’m trying to keep things shielded from it as well as possible. Plenty of time to move out before returns get low after things are resolved.

I was thinking let it ride myself.

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Originally Posted by CatFan

Nope.

The debt ceiling stuff is going to be a shit storm, and I’m trying to keep things shielded from it as well as possible. Plenty of time to move out before returns get low after things are resolved.

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But why wouldn't you consider buying a 5 year CD at 4.5% or more if you think inflation may come down and Ibonds may be paying 3% or less in the next year or so?

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Originally Posted by NitroZ7

But why wouldn't you consider buying a 5 year CD at 4.5% or more if you think inflation may come down and Ibonds may be paying 3% or less in the next year or so?

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First, they aren't a huge portion of my investments, and they are paying well right now, so bird in the hand. 4.5% is losing money right now, especially when its all taxable both federal and state. I've got enough tied up in CDs already after banking some profits from recession vulnerable stocks. Plus some WMT, DG and CVS

Chevron is keeping me up at night. I have big (to me) paper gains, and they just increased the dividend and announced a new round of stock buy backs. Staring into a recession is worrisome with oil stocks though.

I'm trying to stay out of investments that are likely to retreat but want to stay flexible. If the situation begins to look like we will default, the economy is going to go to hell anyway. Interest rates may rise in spite of spiraling into recession, accelerating the mess. If that happens, housing will crash hard. Most people needing mortgages have never seen rates higher than they are right now, and they will run away from double digit rates. Maybe time for a house someplace warm.

It seems plausible to me that the White House may ignore the debt ceiling on certain payments, but the turmoil created will still cause an economic mess. The 14th Amendment says: "The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned." which has been broadly interpreted in court (Perry v. US as specifically meaning a government debt, approved by Congress is a pledge of payment and that Congress does not have authority to retract or modify that pledge. Clearly a judicial and political nightmare, but it would seem that there is at least a logical argument that SS, bonds and payments on existing debt cannot be limited by Congress.

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Originally Posted by CatFan

First, they aren't a huge portion of my investments, and they are paying well right now, so bird in the hand. 4.5% is losing money right now, especially when its all taxable both federal and state. I've got enough tied up in CDs already after banking some profits from recession vulnerable stocks. Plus some WMT, DG and CVS

Chevron is keeping me up at night. I have big (to me) paper gains, and they just increased the dividend and announced a new round of stock buy backs. Staring into a recession is worrisome with oil stocks though.

I'm trying to stay out of investments that are likely to retreat but want to stay flexible. If the situation begins to look like we will default, the economy is going to go to hell anyway. Interest rates may rise in spite of spiraling into recession, accelerating the mess. If that happens, housing will crash hard. Most people needing mortgages have never seen rates higher than they are right now, and they will run away from double digit rates. Maybe time for a house someplace warm.

It seems plausible to me that the White House may ignore the debt ceiling on certain payments, but the turmoil created will still cause an economic mess. The 14th Amendment says: "The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned." which has been broadly interpreted in court (Perry v. US as specifically meaning a government debt, approved by Congress is a pledge of payment and that Congress does not have authority to retract or modify that pledge. Clearly a judicial and political nightmare, but it would seem that there is at least a logical argument that SS, bonds and payments on existing debt cannot be limited by Congress.

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The concern I have is these bonds may be paying 3% or lower within the next 2 years. And then if you redeem them then you may be buying bonds at much lower rates if you redeem them at that time. I just bought 20 year bonds close to 4% because I think you are correct that we get a big disruption in the market and the economy and wanted to lock in higher yields if I retire soon. I will probably hold mine until the summer and redeem and roll them into longer term fixed income if yields are still good.

I bought my I bond in May 2022 and will hold for the 15 months, then reassess...