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I Bonds 0.2% Rate Increase November 2013

On Minimalist Wealth

To the dismay of Neo-Keynesians, the Treasury has increased the fixed rate of I-bonds from 0 to 0.2%. It is odd that the government would increase it when unemployment is still so high level, but it reflects their fear of future inflation. Nevertheless, this is good news if you are in the market for safe, tax-efficient, inflation protected bonds.

The I-bond rate is re-evaluated every six months, and is equal to (fixed rate + 2 x inflation rate). Thus, I-bonds serve the same purpose as Treasury Inflation Protected Securities (TIPS), except with far more tax-efficiency.

Every individual and corporation can buy up to $10,000 I bonds a year. They can not be redeemed in first year. You will lose the last 3 months of interest penalty if you redeem before 5 years. Federal income-tax on I-bonds are deferred until redemption or maturity (30 years), and there are no municipal taxes.

Downsides to I-bonds

Financial markets mid-week report

On Ideas in the Making

Markets took a tumble on emerging market risk. I don't know how long emerging market risk is going to last, and each market has its own individual problem, but I know one thing for sure, after this sell off, in emerging markets, I don't expect emerging markets to go much lower much longer.

The U.S. dollar is extremely strong at the moment inflation is very low ( even though a lot of people are debating whatever the FED is using to determine inflation is wrong, because, as I'm sure almost anyone will agree, the real prices of goods and services have increased quite notably the last couple of years). But emerging markets, which have economies much larger than ever before in history, are trading at lower prices than during the height of the global crisis. The risk/reward seems disproportionate to me and all these sell off in emerging market seems to be very short- term thinking, although some countries do have legitimate risks. Overall these concerns about China and Turkey seem to be extremely exaggerated, China has a much bigger economy now then it had when its ETFs were trading at their peaks (FXI, HAO) and the outlook still looks strong. China has high savings, and a ton of foreign currency reserves and a developing domestic economy. There is real production of real goods happening in China, and while the shadow banking system and other concerns around china seem legitimate, they are to some extent already priced in and with the government in China being able to take such strong top-down action, I doubt it will cause much more damage.

Even if china does explode and go lower, I would probably start doubling down every 5-10% it went lower, because fact is china is a production machine and after such an explosion, I guarantee you they will spring back.

other than that I have started reading some of Peter Schiff's books as well as looked into other books like Currency Wars and strongly believe that the current stregnth of the dollar under rampant federal Quantative easing is unsustainable.


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