Comments on: Do Federal Reserve inflation targets eliminate the need for inflation protection? http://www.savings-bond-advisor.com/do-federal-reserve-inflation-targets-eliminate-the-need-for-inflation-protection/ Thu, 18 Mar 2010 07:09:13 +0000 http://wordpress.org/?v=2.0.4 by: Savings Bond Alert #021: US Savings Bonds http://www.savings-bond-advisor.com/do-federal-reserve-inflation-targets-eliminate-the-need-for-inflation-protection/#comment-420 Wed, 14 Jun 2006 18:28:40 +0000 http://www.savings-bond-advisor.com/do-federal-reserve-inflation-targets-eliminate-the-need-for-inflation-protection/#comment-420 [...] Do Federal Reserve inflation targets eliminate the need for inflation protection? [...] […] Do Federal Reserve inflation targets eliminate the need for inflation protection? […]

]]> by: Tom Adams http://www.savings-bond-advisor.com/do-federal-reserve-inflation-targets-eliminate-the-need-for-inflation-protection/#comment-402 Wed, 14 Jun 2006 00:35:12 +0000 http://www.savings-bond-advisor.com/do-federal-reserve-inflation-targets-eliminate-the-need-for-inflation-protection/#comment-402 Mario - thanks for the spelling help! I've fixed the errors. I don't think there's a one-size-fits-all answer to your portfolio question. The best way to diversify your portfolio depends on your age, the size of your portfolio, and other factors. In general, the older you are and the smaller your portfolio, the more conservative you should be. Risk is for the wealthy, who can absorb potential losses, and for the young, who have lots of time to recover from bad investments. Mario - thanks for the spelling help! I've fixed the errors.

I don't think there's a one-size-fits-all answer to your portfolio question. The best way to diversify your portfolio depends on your age, the size of your portfolio, and other factors. In general, the older you are and the smaller your portfolio, the more conservative you should be.

Risk is for the wealthy, who can absorb potential losses, and for the young, who have lots of time to recover from bad investments.

]]> by: Mario http://www.savings-bond-advisor.com/do-federal-reserve-inflation-targets-eliminate-the-need-for-inflation-protection/#comment-401 Tue, 13 Jun 2006 23:45:12 +0000 http://www.savings-bond-advisor.com/do-federal-reserve-inflation-targets-eliminate-the-need-for-inflation-protection/#comment-401 Tom, any advice on what a good portfolio percentage of inflation indexed bonds might be? I've read 10-15% in Money Magazine, but have >90% right now, and am wondering if I've got too much insurance. By the way, the Fed chairman's name is Bernanke, but I'm sure you all knew that. Tom, any advice on what a good portfolio percentage of inflation indexed bonds might be? I've read 10-15% in Money Magazine, but have >90% right now, and am wondering if I've got too much insurance.

By the way, the Fed chairman's name is Bernanke, but I'm sure you all knew that.

]]> by: Tom Adams http://www.savings-bond-advisor.com/do-federal-reserve-inflation-targets-eliminate-the-need-for-inflation-protection/#comment-398 Tue, 13 Jun 2006 05:07:11 +0000 http://www.savings-bond-advisor.com/do-federal-reserve-inflation-targets-eliminate-the-need-for-inflation-protection/#comment-398 Sam - With EE rates at 3.7% and the I bond fixed base-rate at 1.4%, inflation has to average just 2.3% for I bonds to be the better deal. Keep in mind that when the Bernanke and other Federal Reserve board members talk about holding inflation to 1% to 2%, they're talking about <b><i>core</i></b> inflation, which is the CPI minus changes in food and energy prices. The I bond rate, on the other hand, is based on the entire CPI, including the food and energy components. Even over the last 10 years, a period during which inflation has been at historic lows, the CPI component has added slightly over 2.5% to I bond yields. Extending the period back so that it includes periods with more typical inflation levels results in the CPI component adding a bit more than 4% to I bond yields. Sam - With EE rates at 3.7% and the I bond fixed base-rate at 1.4%, inflation has to average just 2.3% for I bonds to be the better deal.

Keep in mind that when the Bernanke and other Federal Reserve board members talk about holding inflation to 1% to 2%, they're talking about core inflation, which is the CPI minus changes in food and energy prices. The I bond rate, on the other hand, is based on the entire CPI, including the food and energy components.

Even over the last 10 years, a period during which inflation has been at historic lows, the CPI component has added slightly over 2.5% to I bond yields. Extending the period back so that it includes periods with more typical inflation levels results in the CPI component adding a bit more than 4% to I bond yields.

]]> by: Sam http://www.savings-bond-advisor.com/do-federal-reserve-inflation-targets-eliminate-the-need-for-inflation-protection/#comment-396 Tue, 13 Jun 2006 02:08:37 +0000 http://www.savings-bond-advisor.com/do-federal-reserve-inflation-targets-eliminate-the-need-for-inflation-protection/#comment-396 Only time will tell if Bernanke can contain inflation to 1% to 2%. But if he does, wouldn't the fixed rate on the I bond have to increase significantly for the EE to not be the better investment? Only time will tell if Bernanke can contain inflation to 1% to 2%. But if he does, wouldn't the fixed rate on the I bond have to increase significantly for the EE to not be the better investment?

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