Hello everybody
Well, to say that I had an “uptick” in email activity from my now extensive (and very loyal) subscriber base would be an understatement. I have been cranking out email replies since my Oct 8 post regarding my move to G-Fund. The underlying theme of most of these emails is “I wonder if we should go back to the S-Fund, we missed some gains”. Which is a valid question. Allow me to discuss this and some other topics further. Also, let me state that I enjoy these emails and they indicate that my postings are being closely followed, which is the best affirmation this site and I could ever get.
As I have stated in prior posts, G-Fund is not for gains, but for safety and protection. In times of “storm clouds”, G-Fund is the storm shelter. And right now, in my opinion, we have storm clouds, with both the government being shut down, and the looming Oct-17 debt ceiling deadline. Trying to grab the last rays of sunshine while storms approach is a dangerous strategy and something I do not support. Observe that it is 11:30 PM in Washington DC, and nothing has been agreed on yet.
On October 8, I discussed my TSP Allocation which would be 100% G-Fund. My TSP request did not take affect until October 10. This means that my account likely obtained some gains on October 9, and possibly some on October 10, which were “up days” in the markets. Others who elected to move to G-Fund, assuming the allocation change was initiated on October 9, likely obtained some gains while awaiting the change, as every day since October 8 were positive days. Now, Oct 14, many are likely G-Fund. My point is this, as we headed for the exits, we likely obtained some gains on the way out.
Lets take a look at the SP 500 Index over the last few days. See chart below, with comments.
As can be seen, the pre-weekend trading days were mostly average to slightly above average volume, indicating optimism that a deal would be reached. Post-weekend, volume was lighter. Yes the indexes physically went up, but the volume is the story behind the move. Like most of my subscribers, I have hoped for a deal (yes, my paycheck is affected also…), and over the entire weekend, have seen the following terms used:
“We are having a discussion”
“Progress is being made”
“We are at the table”
“We are close”
One thing I have yet to see is
“We have a deal/agreement”
Based on public news media reporting, any Senate agreement must clear the House also. Some media outlets have expressed concern that Senator Ted Cruz and the Tea Party may try to derail any Senate agreements. Some news organizations, Bloomberg News in particular, have now come out and said that we are at the point that even if agreement occurs now, it may not be possible to have everything rubber stamped and signed off by Oct 17. Mind you, tomorrow is Oct 15. Some say midnight on Oct 17, some say not, some say Oct 17 is merely symbolic and even others say the debt ceiling is a concept invented by Obama’s team and is all make-believe, like Santa’s helpers and the Easter Bunny. Even others say the US “can’t” default. “Can’t ?” Be careful. Anything can happen. Long story short, my ability to sleep soundly has improved greatly since moving to G-Fund. Did I miss some gains ? Probably yes. Did I miss the chance for the markets to dangerously crash and hurt my TSP balance while this process is worked out ? Yes, absolutely.
Guys, my balance is 100% G-Fund for the reasons outlined above. I think trying to “grab some gains” is playing with fire. Now, if the market triples this week while yours truly sits in G-Fund, well I owe you an adult beverage.
However, until the budget/debt ceiling deal is signed, sealed, and delivered, and double-confirmed, I am 100% G-Fund.
Remember, in investing (and life), the greater the risk, the greater the reward. Less risk, less reward. Money stashed under your mattress ? Zero risk, zero reward. Trying to “play” the debt ceiling ? Potential huge reward, also huge risk. The question to ask yourself: Is your TSP balance worth it ? I know some fresh air would be nice, but do we really want to roll the windows down on our armored car right now ?
Hope everyone is doing well and lets keep our fingers crossed that this is resolved soon.
– Bill Pritchard
