Monthly Archives: February 2017

I am sure the title of this post got your attention.  I rarely make proclamations, however I am going to take the position that the bull market is just getting started.  You will read why below.

Before I share my rationale, allow me to discuss a very famous “Trend Follower” trader.   The trend following school of thought, one that I subscribe to, states that maximum returns are obtained from large, long-term trends, and smaller sub-trends within the large trend.  It also states that trying to guess the future is a futile endeavor.   A gentleman by the name of Ed Seykota, a professional trend follower, having managed money for others, coined what is termed “The Magazine Cover theory”  This theory saw its birth in the 70’s, pre-internet, but the concept still applies, only now you should include any big-name news website in addition to print magazines.

In sum, whatever a magazine cover says about the market, just do the opposite.   And you typically will see gains in your portfolio.  Note that many in the press are promising a crash to the “Trump Rally” and in doing so, they are throwing everything at the wall just to see what sticks.   Remember, the Trump Stock Market is all about policy-driven events, not interest rates.  Also observe that Mr. Trump claimed we would learn more details regarding his tax reforms within the first 100 days of his administration.  With any luck, America’s parents will have some extra cheer in their step just in time for summer vacation, and some breathing room in the family budget to take junior to Wally World.

What has happened in the markets since my last post ?  On February 9, the SP 500 broke thru the 2300 level, and in doing so, in my opinion it added new energy to the current uptrend.   The first “kickoff” of the uptrend occurred after the elections, then a second “confirmation” occurred on December 7.  Another way to look at this action is an “uptrend within an uptrend”.  Lets take a look at some charts, the second version of the charts below have my comments on the charts:

As can be seen above, the markets are doing quite well, making new All Time Highs in recent days and displaying positive volume action.   On a 30-day look back, the S-Fund and C-Fund are running pretty closely neck-and-neck with each other.  Top sectors/industry groups are Financial Stocks, Mining, and metal producers.  These are all “old school” large-cap stocks, so some argument exists that a move to C-Fund is warranted.   C-Fund indeed may outperform S-Fund in the next 30-60 days.   However I remain 100% S-Fund, since small cap stocks in almost all cases outperform their larger cap brothers.  I-Fund had some bursts of energy in January but in my opinion, the world is about to jump in with both feet into US stocks.   If that occurs, the domestic stock funds (overly complicated term for C/S Funds, or the L-Funds with C/S exposure) will do very well.   I hesitate to guess which fund will do best, if you want that, numerous TSP advice sites Ad-nauseam exist, all trying to outguess and outpredict each other (and all with no identifiable real human owner behind their content…).  I offer no performance claims, but I will share this old screen shot from a 2014 Corporate Finance class I was taking as part of an MBA program.  The screen shot involved a “stock market trading simulation.”  Some in the audience will recognize my username.  I post this here for entertainment value only….

Instead of a crystal ball, I respond to what is happening, and right now, we have C-Fund and S-Fund both performing very well.

In summary, we have a potential argument in support of why I think the Bull Market just got started.   With a little luck, hopefully I am right.   Thank you for reading and please continue to share this site with your friends and colleagues.

-Bill Pritchard

Hello Everybody

January is now behind us-  a lot of exciting things have happened up to now.  First, let me state that my TSP remains 100% S-Fund, which I have held since late November, an apparently correct decision as the S-Fund has been the best performing domestic stock fund since the election.  The I-Fund, representing international stocks, has outperformed the S-Fund, however those investments carry additional risk.  I am inclined to monitor the I-Fund for another 30 days before considering investing in that category of stocks.   Observe that we are seeking to capture long-term trends, and not fretting over what the market does over a few days.  Market cycles, if structurally sound, remain intact for months to years at a time.  Don’t jump on the first train that leaves the station, stand on the sidelines and let a few trains leave….identify the ones that are indeed headed the direction you are going before committing.

As I discuss market hiccups over a span of a few days, this brings to mind the prior week.  Many folks reached out to me (rightfully so…) in panic attacks over the Dow Jones Index dropping 122 points on Jan-30, breaking below the oft-mentioned 20,0000 level.  Mere days after, on Feb-3, the Dow Jones closed up 186.55 points, back above the 20,000 level, its best one day performance of 2017.

The SP 500 Index, my go-to market health thermometer, is performing well and is above my previously mentioned 2280 overhead resistance level (now “expired” since the index has demonstrated its ability to remain above 2280).  Recent volume action reflects accumulation by institutional investors.  The good folks at Investors Business Daily are rating the recent volume Accumulation as “B” out of grades A to F.  Price alone does not tell us everything, volume is half of the picture.  I often get asked “what is the best index to monitor XYZ” and I always recommend one that provides volume information.  Lets take a look at the charts:

Which brings to the forefront my opinion that the markets are no longer interest-rate driven, they are now policy-driven, policies and positions being advocated by Mr. Trump and Congress.  My crystal-ball prediction for the market ahead are that any industry with heavy current regulation, to include financial stocks, healthcare, transportation, and smaller, non-Fortune 500 type businesses, will have their stock prices perform well going into the future, as the current administration seeks to reduce regulation and create a business friendly climate.

As many know, the current administration is also seeking to review how our business is conducted in the federal workplace:   “Federal Government Inc” goes under a review.  Without getting in to politics, my personal opinion is that the folks charged with protecting the citizens or defending the country, should not lose much sleep.  In my study and review of the various statements and positions communicated since the election, I have determined that the following are pending action:

1. A plan to terminate/fire Federal Employees quicker
2. Hiring freezes (already happening)
3. Federal Employee Retirement system under review.  Important Note:  To change anything in regards to current employees, will be a large hurdle, as much of the current retirement system has anchors in existing federal law and regulation.  Future employees, that is another story.   Under Ronald Reagan, FERS was born, FYI.
4.  Changes to agency future roles and missions

In light of recent scrutiny of the federal workforce, this is a reminder that becoming informed about your retirement and benefits is even more critical than ever.   While I encourage folks to utilize The Fed Trader as an information source in regards to the stock markets and TSP fund performance, my forte diminishes in other areas.   Actually I am suspicious of anyone who claims to know every segment of the investing and financial planning space.   I do however, recommend my retired FBI Special Agent colleague (at least once a month on average, we have comms over a reader question or to clarify a concern…) Dan Jamison, CPA of The FERS Guide

If you have a question in regards to your benefits, Social Security supplement, life insurance, or pension/divorce dynamics, he arguably THE expert in the nation on this.  As “one of us” he understands our unique situations and is trusted and vetted as an information provider in the benefits space.   Please take a look at his site as you may find it useful.

That is all I have for now.   Again, I remain 100% S-Fund and may entertain an adjustment to I-Fund in the future.   100% S-Fund for now.   Thank you for reading and please share this site with your coworkers and colleagues.

-Bill Pritchard