Monthly Archives: December 2014

Hello Folks and Happy New Year

2014 trading is now over, with December 31 being the last day of trading for the year.   Unfortunately, the markets closed down today, with the Dow Jones Index down 160 points.   The SP 500’s December gains were erased as a result of today’s performance.   Volume was higher than prior day, but still below its average trading volume, obviously a result of many market participants being out of the game for the holidays.   However I would have preferred an “up day” on the last day of the year, versus a down day.  Investors Business Daily is reporting six (6) Distribution Days on the SP 500 within the last few weeks, which is a negative sign.    Some observations:

2014 Close-out observations

Here is a chart of the SP 500, without comments, my primary graphics program is Window’s based and I am on Annual Leave with my MacBook, and have yet to “master” the MacBook graphics editing software I have installed.

Some positive observations are the SP 500 closed out 2014 up 11% for the year, notwithstanding quite a bit of turbulence throughout the year.   Small Cap stocks (S-Fund) will likely come in as top performer for December, and out performed the last three months, according to my analysis.   I-Fund underperformed both the C-Fund and S-Fund for the year, not a huge surprise, due to various international flare ups and global economic issues.

Another positive observation is the “2080 level” on the SP 500 was broken on December 23, reflecting the market’s desire to seek higher altitudes, a positive sign.

Note that the first trading day of the year, Friday January 2, is sandwiched between Thursday (New Years) and Saturday, and it is unlikely we see any huge market volume that day.   With that said, an “up day” is preferred versus a down day, as the first day of the year “sets the tone” for the mood and sentiment of the market.   I remain 100% S-Fund.

2015 Observations and Challenges Ahead

As stated above, the first trading day(s) of the calendar year “sets the tone” for the rest of the year.   So we need to monitor that.    In addition, Crude Oil continues downward, it is currently trading at $53 a barrel level.   See chart:

While “cheap gas” is good for consumers, Mom and Dad who are deciding to top the minivan fuel tank and take that road trip or not, depending on what circle you ask, it may or may not be bad for big business.  I sat down and had lunch recently with a close friend who is employed in the Oil and Gas exploration industry in West Texas, he felt that $70 a barrel crude oil was the magic number so everyone makes money but fuel is not super expensive for the end consumer.   West Texas exploration, to include fracking, has slowed down significantly,  and as we enter 2015, Oil and Gas (aka “ONG”) companies will be re-assessing 2015 projects.    Lets take a look at the screen shot of my iPhone Rig Data app, which shows oil rig activity in proximity to your GPS location.   The red pins represent an oil rig.

Immediately apparent is the extensive drilling activity in Texas, especially near the Big Lake, TX and Carrizo Springs, TX areas.    While this does not directly impact your TSP balance, I feel this information sheds some light on the oil production going on in our country, as our domestic companies try to deliver product to the end-user while seeking to keep the Supply/Demand equation in balance so that prices are not too cheap nor too high.

Additional challenges we face are the interest rate hikes expected in summer/fall 2015,  which may reduce lending and business activity, which may then affect other things.   Note that historically, markets never have positively respond to interest rate hikes, so expect some turbulence in response to this, up to and including a new bear market as a worst case scenario.

One more challenge is the fact that the current bull market is very mature, being six (6) years old now.   So we are “due” a correction/bear market, it is just a question of when.

With that said, I remain 100% S-Fund.  We had tremendous subscriber growth in 2014, thanks for the interest and support.   I get a lot of cool emails and appreciate all of them.   Please continue to share this site with your friends and coworkers.  I wish everyone a Happy New Year and see you in a week or two with another update.   Thank you !

– Bill Pritchard

Hello Everybody

The markets had been in a nerve wracking decline since December 8, however found “a bottom” at the 1972 area on the SP-500 on December 16, then resumed upward rather strongly after that.  I did not get overly concerned (but yes, somewhat concerned) because my other indicators were not flashing red flags.    Various opinions exist on the cause of the decline, mostly this was attributed to Russian economic problems and President Putin.   Apparently cheap oil is not good for Russia’s primarily oil based economy (they don’t produce much of anything else) and fears of a Russian economic collapse sent global markets down.   We also had folks in financial press discussing why “cheap oil” is bad for the US economy.    Which of course I can’t agree with, as cheap oil means people will take road trips, airlines will report higher profits, FedEx pays less to fuel their trucks, and oil based products such as vehicle tires arguably will not be priced as high.  I wonder how the economy would do if gasoline was $8 a gallon instead of $3.   

Fast forward a few days after Dec-8 to the FOMC meeting and there is no indication that the expected Summer/Fall 2015 interest rate hikes will be accelerated, a worry in some circles.   This, combined with the abatement of Russian fears, sent markets soaring.    This is also why I analyze things based on numerous indicators and not just what happened on one day.

It is important to note that the S-Fund is the top performer so far this month, however C-Fund is very closely next in line.   My TSP allocation remains 100% S-Fund.

Some trivia regarding this past week’s events are that our two consecutive 200+ point gains in the Dow Jones Index, which occurred this past week, occurred previously the only other time was six years ago.   So the market is displaying “positive behavior” not typically seen.  The SP-500 had the best two day gain since 2011.   And on December 18, the Dow Jones Index had its biggest one day gain in three years.

The new “overhead resistance level” on the SP 500 is 2080.  Any penetration of this level is an All Time High and a good thing.   Crude Oil is at not-seen-since 2009 lows of $55.   I attribute this to our fracking oil exploration (I have friends in this sector) which is partially derivative of President Bush’s desire to not rely on OPEC.    Like all supply and demand equations, a Catch-22 exists, you can produce yourself (provide supply) out of business via cheaper and cheaper prices and soon it costs more money to drill the oil, and extract it, than it is worth.    That is beyond the scope of this site but you get the idea.

See some charts below regarding Crude Oil and SP 500 Index

In summary, it appears the recent speed bumps are behind us and the market has found a new uptrend.  I remain 100% S-Fund.     Note that Dec-22 week trading will be light, anything that happens that week can be basically discarded as unreliable action.   Ideally we do exit 2014 on an uptrend, as this “sets the tone” for the New Year.

I wish everyone a Merry Christmas and Happy New Year, as I will not likely be reporting much during the next two weeks.   I hope over this year, this site has generated thought, increased awareness of the markets, protected your balance from some damage, helped your balance realize gains, and provided some entertainment.   If the above have occurred, then 2014 was a good year for this site.  Please continue to share this site with your friends and colleagues and encourage them to sign up for free e-mail updates.

Thank You !

– Bill Pritchard

Putin is killing me.   I am not pleased with December market’s performance so far.  Those in international stocks, especially emerging markets, are seeing extensive pain.  Plan on a more extensive update and discussion this week.

– Bill Pritchard

Hello Everybody

Not saying that I predicted this or anything, but I am not completely shocked that after the AM sell off yesterday Dec 9, the markets spent the rest of the day basically regaining ground.   The NASDAQ (the location of almost all small caps and thus S-Fund holdings) actually closed 25 points to the positive, the SP 500 (large caps and thus C-Fund) closed almost positive, and the Dow Jones Index (large caps and thus C-Fund) didn’t quite do as well, it attempted to go positive but did not make it.   However, I am much more at ease now that the markets displayed a desire to regain lost ground.    Night-time SP 500 futures reflect a continued desire to seek higher territory.   I am TDY with my MacBook so my charts and graphics are a little different.  See chart:

The green circle shows night-time action, which is higher than the prior red bar, displaying daytime 12-09 action.

I remain 100% S-Fund.    This leads to a very common question I am getting from my great readers via email, which is “When you say you are 100% S-Fund, what does that mean.”    To that, I request folks please take a look at the FAQ, especially FAQ #10, at http://www.thefedtrader.com/qa/     That is my most common question via email.

Some other items, I am posting this “value added material” as it has some nexus to TSP and retirement.  I am cut and pasting a portion of the text as some subscriber’s work email do not allow for clicking on external links.

– Roth IRA’s require new election in 2015, per Military.Com website.    See link.  Cut and pasted from the site is:

In the past (and through 31 January 2014), contributions to Roth TSP accounts were made by designating a dollar amount that you wanted contributed.  Beginning 1 January 2015, those same Roth TSP contributions have to be made as a percentage of each of your pays, including basic pay, incentive pay, and special pay.  You can still make a dollar amount election for bonuses.

The important part is that you have to make the changes in January 2015, or Roth contributions will stop effective 1 February 2015.

– 2015 TSP Contribution limit is $18,000 and it is being advocated on other sites that TSP members go to Employee Express and elect $693 TSP contribution per pay period, by Dec-13.

See this USGS bulletin directed towards USGS employees (but useful to read for all federal employees) for further info.

– Don’t forget your FLEOA, PLI Insurance premiums for the new year ahead.

– As we approach the end of the year, it might be time to assess health/age related issues and look at Long Term Care Insurance.  Many government retirements occur at end of year, so this is a time to give this topic some thought. Suze Orman and Dave Ramsey tend to recommend LTC if age 55 or older.   BUT, each situation is different.   The federally endorsed program, is at https://www.ltcfeds.com/

** This site is dedicated to my personal opinion and observations regarding the TSP funds and the stock market.   The above information is “FYI” stuff.  I am not fluent (nor try to be, that is why a your heart doctor does not perform LASIK eye surgery on the side) in every topic, such as Roth IRA’s, tax planning, etc.   For specific questions on that, the best resource I recommend is Dan Jamison, CPA and retired Special Agent, whom I correspond with frequently regarding topics of common interest as they relate to retirement.   His email is dan@fersguide.com

“How do I log into Employee Express” or “Should I choose this option” type of questions are “not my lane” please contact your Help Desk, Payroll Office, HR, Benefits Specialist, etc.

Lets see how the week plays out….hopefully the markets will resume their uptrend as the week continues.  I remain 100% S-Fund.

Please continue to recommend this site to friends and coworkers.   For those who receive updates via email, please forward the update to those who may benefit from the information.

Thanks for reading

– Bill Pritchard

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Good Morning

I typically do not post morning updates, however somewhat unanticipated news out of China has caused global markets to “sell off” overnight, resulting in Dow Jones Futures (trade 24 hours) to be trading down 150+ points as of 7:45 AM Central Time on today.   The US stock markets will open in approx 30 minutes from this post, or 8:30 AM Central Time.   See chart below:

This chart is available at this link, which will of course change its content during the trading day:

http://www.cmegroup.com/trading/equity-index/us-index/e-mini-dow.html

While I try not to crystal-ball the “why” or the “what will it do tomorrow” questions, and instead prefer to react to the market itself, I will state that the financial news sites are all pointing the finger towards China for this sell-off.   Apparently China is tightening up their own lending and monetary policies at their banks, and as we know, when lending is reduced or restricted, this can affect growth and future business activity.   The Shanghai Index is reportedly suffering its greatest one-day sell off in five years as we speak.    Concerns over slowing Chinese GDP growth, along with some speculation that China’s recent prior growth is a carbon copy of the easy-mortgage/lending-fueled boom of USA, (which crashed hard in 2007 to 2009), resulting in Chinese lenders trying to avoid a similar USA situation.   Expect numerous opinions and speculation to explain China’s problems in today’s financial media.   Expect statements that the world is ending (and statements that the world is just beginning), another reason it is important to react to the market itself and not the confusing signals that exist in the media.  China being China, one can never be 100 percent certain that their data and reporting is fully accurate, FYI.

We also know that markets tend to over react to things, so a one day event of a down day is by itself, nothing to overly be concerned with, BUT we do need to monitor things over the next few days/weeks.   Note that December is typically a very good month, historically, for the US markets.

I would not be surprised to see International stocks / I-Fund get hit pretty hard today, I have expressed my opinion numerous times on this site as to why I am not in the I-Fund and its increased risk, in light of the “current climate” the world is in right now (war, global economic issues, etc).   Actually that was stated far too pleasantly.   I expect International stocks, especially those with Asia exposure, to be creamed today.  Again, those are my opinions.

I am happy that this is happening on a Tuesday morning, as this allows the markets to assess things and possibly bounce back at the end of the week.   Typically if this happened on a Thursday or Friday, the markets would sell off even harder as folks don’t want to be “holding anything” over the weekend, and a minor panic attack on a Thursday or Friday can result in a huge over reaction and sell off.   I am optimistic we don’t see that happen.

I am currently 100% S-Fund.

Thank You

– Bill Pritchard