Monthly Archives: August 2017

Hello Folks

Bottom Line Up Front:  My current TSP remains 50% C-Fund and 50% I-Fund.

This month of August has been a painful one, with three major distribution days on the SP 500, indicating that institutional investors were selling shares and exiting positions.   The entire summer has been rather painful, additional distribution days are apparent on the chart of the SPY Exchange Traded Fund (ETF) which is a useful proxy for the SP 500 Index:

You may recall prior postings discussing distribution days:   Numerous days over the span of weeks can serve to end any uptrend which exists.  In simple terms, multiple distribution days can send the market lower.   We indeed have increased risk ahead that the market can go lower.   With that said, here is my reasoning behind my own TSP Allocation, and my logic as to why I am not changing anything.  At least not yet.

1.  History tells us that summers suck.   “Summer Doldrums” is one term used.   The worst month, is ahead – historically it is September, once we clear September, we may resume an uptrend.  Or not.  With this data point, we should not panic yet:  summers are always difficult.  And summer is almost over.
2. The US economy is strong.   People are employed, housing/real estate (in most markets) is tight, airline flights are jam-packed, and consumer spending is up.  Note:  Decaying and vacant big box stores and shopping malls are not an indicator.  Consumers are spending like never before, however fighting for a parking space and walking a mile in the sun, risking skin cancer, to the entrance of the mall, only to discover your pant size is out of stock (but “our store across town at Valley Springs Mall has them in stock”) is a thing of the past.   Spending continues – It is called Amazon.
3. The world economy continues to improve.   At the recent World Central Bankers Meeting in Jackson Hole, Wyoming, which concluded on August 25, the lead economist for the International Monetary Fund (IMF) reports that the world is seeing a broad-based recovery.

With that said, could things go south ?  Sure, anything can happen.  Do I think things will go south ?   No, my opinion is that once we clear September, the markets will resume an upward trajectory.  One speed bump in the path however is the threatened government shutdown, threats which are tied to the Border Wall and the federal budget.  In sum, when the most senior management of world’s most powerful nation cannot agree on a path forward, this hurts our credibility and “brand”, it also costs money:  $24 Billion was the cost of the 2013 shutdown according to Standards and Poor’s, the same company which created the S&P 500 index.  Contrary to popular belief, shutdowns are never “good” and they are never healthy for an otherwise choppy stock market.

With that said, I am optimistic and remain in the aforementioned TSP funds.  While my personal returns have been less than desired in the I-Fund and C-Fund, I am electing to remain there, as my belief remains that if Congress and the Oval Office can get on the same page, those two funds will see the best returns.   Note that even with the poor summer performance, the markets remain at their 50-day Moving Average lines (a trend identification tool), and well above their 200-day Moving Average lines:

This behavior reflects that the trend of the market remains upward.

I get quite a few messages and questions regarding various magazine and newspaper (print or online versions…) articles that claim the market will crash any day, and that doom is around the corner.   There are even a few internet chat groups out there, dedicated to stock discussions, claiming the same.  The best defense to all the noise is studying the markets and learning how they work.

I invite you to read about the “Magazine Cover Theory” which claims that when a “hot topic” is appearing on magazine covers, then that fad or topic is about to be dead, or reverse course.   A link about this theory is here:  http://www.businessinsider.com/the-fascinating-theory-that-the-economist-magazine-covers-are-like-cabbies-offering-share-tips-2016-10

That is all for now….be safe out there and talk to you soon.

Thank you for reading

Bill Pritchard

Good Evening

In the news is yet another alleged (innocent until proven guilty disclaimer applies…) case of fraud involving federal retirees.   In this recent (alleged) scheme, four Atlanta, GA brokers allegedly convinced federal retirees to roll their TSP accounts into annuities, which reportedly had very high fees and were reportedly represented as being “approved” by the TSP program itself.

SEC Press Release:  https://www.sec.gov/news/press-release/2017-135

SEC Complaint:  https://www.sec.gov/litigation/complaints/2017/comp-pr2017-135.pdf

For general heads-up and situational awareness, please be suspicious of the following things when investing your money, especially the “nest egg” called the TSP.  Red bold represents major warning signs.

• High investment returns with little or no risk. Every investment carries some degree of risk, and investments yielding higher returns typically involve more risk. Be highly suspicious of any “guaranteed” investment opportunity.  “Too good to be true” rule applies.
• Overly consistent returns.  As we know, markets go up, markets go down.  You can’t control the waves in the ocean.  Investment values tend to go up and down over time, especially those offering potentially high returns. Be suspect of an investment that continues to generate regular, positive returns regardless of overall market conditions.
• Unregistered investments. Schemes typically involve investments that have not been registered with the SEC or with state regulators. Registration is important because it provides investors with access to key information about the company’s management, products, services, and finances.
• Unlicensed sellers. Federal and state securities laws require investment professionals and their firms to be licensed or registered. Most schemes involve unlicensed individuals or unregistered firms.
• Secretive and/or complex strategies.  Super complicated investment ?   Esoteric, complicated strategy ? Avoiding investments you do not understand, or for which you cannot get complete information, is a good rule of thumb.
• Issues with paperwork. Do not accept excuses regarding why you cannot review information about an investment in writing. Also, account statement errors and inconsistencies may be signs that funds are not being invested as promised.
• Difficulty receiving payments.   “Check is in the mail” rule.  “Your money is locked up right now and cannot be accessed” etc.  Be suspicious if you do not receive a payment or have difficulty cashing out your investment. Keep in mind that fraudulent investment promoters routinely encourage participants to “roll over” investments and sometimes promise returns offering even higher returns on the amount rolled over.

Additionally, be wary of investment advisors, financial planners, stock brokers, etc, who are overly eager to get their hands on your TSP balance.   Some valid reasons exist to roll a TSP over, but cheaper fees is not one of them, as the TSP is about the cheapest retirement “holding tank” that exists (TSP, 401k, IRA’s are basically containers for money, inside that container are your individual investments, be it Mutual Funds, Stocks, ETFs, etc.   Consider the TSP a holding tank, or container).    Check out your potential new advisor.  The following sites may be useful:

FINRA Broker Check:    https://brokercheck.finra.org/

SEC Advisor Check:  https://www.adviserinfo.sec.gov/

PACER US Court Records (need an account):  https://www.pacer.gov/

State Comptroller Database checks.   Is the financial advisor claiming to be a registered LLC ?   Database checks will reveal this.   If not located, I would be suspicious.    The State of Texas version is here:  https://mycpa.cpa.state.tx.us/coa/

Would I do all of the above if I was investing $500 in a new hot stock ?  Probably not.   Am I rolling over a $1M TSP balance, along with a $1M IRA balance, into something called the Unlimited Opportunities Fund ?    Operating out of a UPS Store mailbox ?    Managed by a guy who carries a prepaid Trac-Phone ?   Yes absolutely.     Be careful who you listen to, we have some great folks in the federal retirement “information space”, Tammy Flanagan, Dan Jamison are two of them, both vetted and trusted professionals.   If you can’t identify the person behind the investment, website, etc., I would proceed with caution.

Be safe out there folks.    Talk to you soon…

-Bill Pritchard