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Hello Folks

This week has lots in store, many things are in the works which may impact your TSP balance.  Whether it will be positive or negative is to be determined.  Lets talk about a few of those things.   Before we get far down the road, allow me to state that my personal TSP Allocation is 100% G-Fund.  Have I missed some gains ?  As I discussed in a prior post, I sure have, however I refuse to “chase gains” and abandon my own system based methodologies, using technical analysis and volume action as my primary tools.  Some have said the “The Fed Trader just chases moves in the market” well I hope my length in the G-Fund helps dispel that belief.   Keep in mind that I am not providing recommendations, advice, or financial consulting on this free site.  Disclaimer is Here.

Indeed the market has gone up this year (so far), however I think if you re-wind the tape, the market gets a boost from something positive in the news, then it goes flat, then somebody juices things again with a news release, it goes up for awhile, then flat, then another news article comes out.  Like invisible summer thermals, there is no true substance behind these moves.  Volume is lackluster, and a closer look behind the scenes reflects some economic indicators displaying a cooling economy.   Let’s get started with a look at the S&P 500:

Visible above is the lack of volume (with the exception of strong buying action on June 28) over the last few months.  I have said on this site numerous times that volume is the foundation holding any price move up, without volume, prices can fall quickly.  Of course, they have not, and those in the G-Fund have missed some gains.  However my confidence would be boosted if volume came into the markets.

On July 26, 2019, the most recent GDP figures (2Q 2019) were released:

Consumer spending had its smallest gain in four months.  Some believe “consumer spending” makes up 60-70% of the GDP.  In this category are purchases of motor vehicles, clothing, food, housing, and recreational activity.   Government spending accounts for 18-20% of the GDP, as does business investment.   Some very stimulating GDP information can be found at this link:  https://www.bea.gov/system/files/2019-05/Chapters-1-4.pdf

Another indicator often used to gage things is the Yield Curve.  I have discussed it here numerous times, so I will not repeat myself, however note that it remains inverted:

This is evident in the above chart, with the spreads below zero.  This is a fairly reliable indicator of a slowing economy.

Yet another indicator of things cooling off, we have the Chicago Business Barometer, which depicts business and manufacturing activity across the United States.  If is often believed to be the best leading indicator of the economy.  Leading, not lagging (historical), because factories and production of widgets slow down long before a full blown recession develops.  See below graphic, courtesy of Trading Economics website.

The above indicator reflects a contracting manufacturing climate.

This week a few important events are underway:

July 31:  FOMC meeting concludes, likely with an announced 25 basic point interest rate cut.  Note to self:  You don’t cut rates in a booming economy.  Look past the public news statements and look at action, not words.  The FOMC is cutting rates.  Why ?   Volume action behind any up-moves in the markets will be important.  Does “big money'” jump in ?  Or does the market go up on lackluster volume yet again ?

August 2:  Jobs Report/Employment Situation is released.

All week:  Team from US is in China attempting to restart tariff and trade talks, with the hopes of reaching an agreement.  China, a communist country, with a long history of espionage, running intercepts on US military aircraft, and computer hacking, has been asked to agree to concessions on intellectual property theft and the increase of US goods purchased by China.  Opinion:  I don’t see any agreement ever happening.  We need to install a drop-dead date and hold them accountable, or not, and move forward from there.  Period, the end.  This wishy-washy, numerous visits with no deal, tariffs-are-postponed-yet-again, etc. stuff is becoming very frustrating.

Summary:  Based on volume action and market response to the rate cut, and Chinese tariff negotiations, I am open minded to returning to stock funds, but will wait until I see clear and convincing evidence to justify my return to the stock funds.  I remain 100% G-Fund until then.

Thank you for reading, talk to you soon…

-Bill Pritchard

Hello Everybody

Bottom Line Up Front:  I remain 100% G-Fund in my personal TSP.  To say I have not had any gains this year is indeed an accurate statement.   Arguably, more importantly, I have not had any losses, which if anything, makes me feel good, as I enter “the last quarter” of my 25-30 year federal career.  Some may state “you are actually losing money in the G-Fund, if you consider inflation.”   While technically correct, this is more of an impact if you are in the G-Fund for 20 years: a 1-year sabbatical in the G-Fund is easily recovered when conditions are favorable.

With that said, the risk-tolerant may research an allocation of 50% G-Fund and 50% C-Fund for their personal TSP accounts.   This is not advice or a recommendation. 

Let me quickly  identify that the C-Fund has been, and likely will remain, the top performing TSP stock fund in the coming 30-90 days.  The I-Fund (shockingly), will likely be the next best performer for the same time period.   I am in neither fund, for a variety of reasons.  I maybe delusional, but I am going to claim that I am being disciplined in my approach, and refuse to succumb to emotion in my trading (watching the indexes climb higher indeed generates emotion).  However, the charts (volume primarily) and economic data, political climate, and other things, cause me to remain out of stocks.  Let’s talk a little bit about some things on my mind…

The Yield Curve, discussed in my July 15, 2018 post , is now “inverted” which historically has been a predictor of recessions.  The prediction is not overnight:  It is usually months away (rarely more than one year) before a recession is declared.  Consulting the website InvestoPedia tells us that an inverted yield curve is an interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the same credit quality. This type of yield curve is the rarest of the three main curve types and is considered to be a predictor of economic recession.

Fancy definitions aside, this is a rare event, but it is happening now, evident via the below chart.  A “spread” between he 10-Year Treasury Bond over 3-Month Treasury Bill of below zero gives us the graphical negative or inversional behavior on the chart:

In the second chart, I have included my comments.  The red boxes show prior inversions, student of market history will observe that the stock market, and economy, indeed performed poorly subsequent to the yield curve inversions.  Is it different this time ?   I don’t know.

Gold Prices, often mentioned on this site, is frequently used by me as an analysis tool.  It proved extremely useful when Argentina was having yet another financial crisis, discussed in my July 31, 2014 post.

In sum, the safe haven of Gold tends to rise in times of economic uncertainty, which exists now due to tariffs and trade tensions.  Lets take a look at the price of Gold, as it approaches a new high of $1,450 per ounce:

Good Evening everybody

A long-awaited update, overdue somewhat (my personal TSP allocation of 100% G-Fund has not changed…) but I wanted to let the trade agreement come and go, and let the market respond, prior to this post.  My lack of sleep from a new Beagle puppy in the household, who has decided that sleeping is for daytime and barking is for nighttime, has also impacted my evening writing time.

As most know, China is governed by the Communist party, has a long history of intellectual property theft (“IP Theft”), an even longer history of generally pirating and cloning everything from Back Street Boys CD’s to Tommy Hilfiger shirts, and routinely runs intercepts on our military assets operating in international waters and airspace, even causing the emergency landing of a US Navy EP-3 aircraft back in 2001.   When they are not doing those things, they occupy a leading role (besides Russia and North Korea) in the cyber-criminal/hacking space.  So the question of the day is, since when did anybody believe we could trust them ?   On the other hand, by sheer volume of people (very smart people, no question about that…), they consume a lot of food and products, many of which originate in USA.  Our major brands use Chinese labor to build IPhones and flat screen televisions.    Indeed, a huge trading partnership exists, and ideally we all play nice in the sandbox.

I beg the question, as I amusingly watch mainstream financial shows and listen to “China experts” on talk shows:  When did China become trustworthy ?  The stock market (arguably) forgot their negative history above and rallied since January.   Great if you were “on the train” but not so great when (and if) that train goes off the tracks.  Note that with the Dow Jones loss of 617 points on May 13, we know that the market clearly is sensitive to the trade talks.

In short:  the trade deal never got done.   On May 11, President Trump stated China now has “another month” to get their act together, which my math puts June 11, 2019 as the next “deadline” (of many moved deadlines…) for China to come to agreement.  China counter-strike retaliation on now-existing US tariffs is expected June 1.  China has other measures too, it can simply elect to not purchase from US producers.   This is potentially happening with US Soybeans, China’s largest agricultural import from USA:

China can (and probably will…) turn to Brazil, the worlds #2 producer of Soybeans, and tell them that “we are buying from you now” and tell US farmers to pound sand.   The trade disputes have not helped soybean prices, they are at near 10 year lows of $8 per bushel:

The Soybean farmer clearly has not seen his retirement account grow much.  No bull market for him, as supply begins to outnumber demand.

Our TSP does not trade soybeans, so lets move to stock market talk.  However the above discussion is important- it serves as a reminder that not everybody in America is high-fiving themselves over the stock market rally, we have farmers and their families who depend on the US/China trade.   Their situation could slowly expand into other parts of our economy if things are not resolved.

As discussed earlier (most of you know this, as reflected by the numerous emails, phone calls, cyber-stalking, and messages I get….when you have multi-thousand subscribers, you tend to get some “feedback”…), the market has rallied since January 2009.   If you absolutely cannot stand the boredom of the G-Fund any longer, you might consider 50% G-Fund and 50% C-Fund.  The C-Fund is the top performer since January, running closely with the I-Fund.  I am not “advising this” or “endorsing this” etc etc:   If you are dying from safety and boredom and you need a taste of the stock market, then you might review that allocation and decide for yourself.    I remain 100% G-Fund.  

Lets take a look at some current charts of the SP 500 and the SPY Exchange Traded Fund (ETF) tracking stock, which is useful for volume analysis.  My immediate observation is that the rally since January has been on lackluster volume, resulting in the theory that the stack of cards is easily toppled with the slightest wind:

If you read the comments on the above chart, you will understand the volume situation better.  In light of the volume action and recent selling, the folks at Investors Business Daily newspaper (probably the only credible financial newspaper) have given the stock indexes a “D” rating, reflecting their belief that major funds are selling and exiting stocks.   In additional news, the “Yield Curve” is now inverted.   I have discussed this before, back in July 2018 , in summary a Yield Curve inversion occurred prior to all market crashes since 2000 (almost 20 years).  Will it happen again ?  Well, I don’t know.   See below (Zero Line is “inverted” status on the chart):

One piece of economic news the market celebrated this week was the purported “Great Housing Starts” news.   By definition, “Housing Starts” is data collected when start occurs when excavation begins for the footings or foundation of a building. All housing units in a multifamily building are defined as being started when this excavation begins.  With that said, the “positive news” was the fact that April starts were higher than expected.

This is fine but if you compare 2019 starts to 2018 data, 2019 is lagging, a possible sign that the economy is cooler this year than last year.

Keep your calendars ready for June, it will be full of events, all potentially market moving:

June 1:  China activates retaliatory tariffs against USA.

June 11:  “Revised trade deal deadline” US/China

June 18-19:  Federal Open Market Committee (FOMC) / Federal Reserve meeting

June 28-29:  G-20 Summit held in Japan.  US/Chinese leaders reportedly may talk.

In conclusion, I remain 100% G-Fund.   For those who need more excitement in their life, take a look at my opinions above regarding the C-Fund.

Thanks for reading and being a subscriber.   If this site has enhanced your awareness of the markets, and you have a friend, coworker, or colleague who may find it informative, please share it with them.

Thank you and talk to you soon…

-Bill Pritchard

Good Evening Folks

I am getting beat up a little bit over my recent market pessimism…if anyone wants a rally and loves to grab gains, it is me.  However I do not advocate day trading your TSP, nor trying to chase gains, my mantra has always been to look at big trends and attempt to ride those trends for long-term gains.  As said numerous times, I use multiple data sources, and tend to ignore “experts” on financial news shows.   However, it is hard to ignore the fact that the market has returned strong gains during the 1st Quarter of 2019.  A humorous observation is the group who claims “it is just a paper loss” when they lose money riding a loss deeper and deeper, is the same group that squawks the loudest when they miss gains.  “It is just a paper gain” is never heard.  Just a data point for today’s post.  Before I proceed with my opinion-based analysis (did I say it was my opinion?), lets consider that my opinion is loss protection/risk management is more important than “seeking gains.”   A professional coach once said something to the effect of “play your hardest, the scoreboard will take care of itself” (or similar statement).   I have a similar approach, protect your losses, however when everything points to gains, indeed lets grab those gains.   Lets talk about why I am not presently trying to grab gains…

I have mentioned the “Yield Curve” numerous times here…I discussed it back in summer 2018, long before the mainstream press was talking about it.  Lets display a graphic image, basically a reading below zero (“0”) is an inversion of the yield curve (based on 10 Year Treasury Yield and 3-month Treasury Yield).   When this occurs, it is believed to be an early warning signal for a recession ahead, with a “lead time” (signal time to actual event) of 6-18 months.   I have blue-boxed the “stock market crashes”, and red-circled the yield curve inversion.   This is weekly data on the chart, to allow a good snapshot back 20 years.   As you can see, we back close to the inverted level (we had a day or two of inversion last week but it soon recovered).

Some say “things are different now” (we hear teenage children say this too…) but I am not so sure.  Studies have shown that the Inverted Yield Curve has a reliability of 85% in predicting recessions.   This is just one tool in the tool box, so lets take a look at the SPY Exchange Traded Fund, a proxy to the S&P 500 Index:

As is clearly evident, we have had a strong rally since January 2019.   Should I say that again ?   We have had a strong rally since January 2019.   However if we look closer at the volume action, we can see above average volume only when the rally kicked off, then volume subsided after that.  Without volume, any hiccup or small problem can derail a rally into a damaging (to accounts) new downtrend.   If I had seen some solid, credible, volume since January, I would probably be back in stock funds now.   Yes, the SP 500 is above my previously mentioned 2825 level, but without volume to act as a safety harness, I sure hesitate to start walking across the canyon on that tightrope, even if I will get rich doing it.  Yes, markets have rallied strong (did I say that already?).

Moving forward, some big issues are still pending.  The biggest topic is the US/China Trade Agreement.  Today, April 4 2019, Mr. Trump met with Chinese officials at the White House.  This meeting was subsequent to a trip to China by Mr. Trump a few months ago, and after last week’s visit to China by chief trade negotiator Robert Lighthizer.   Note that the March-1 “agreement-done hard deadline” was deleted, in a good faith effort to stimulate discussions.   Today, it was announced (basically) that no progress has been made and that numerous issues remain.  It is my opinion that the markets will respond negatively if this deal does not come to fruition.

Tomorrow, Friday April 5 2019, the “jobs report” will be released.  It is believed that 170,000 to 190,000 non-farm jobs will have been added in March, and that the unemployment rate will be 3.8%.   Any major deviation away from those numbers will impact the markets.

In summary, my confidence has not rallied in sync with the market rally.  What the market giveth, the market can taketh away, so chasing gains is not something I am doing right now.  You, the reader, may have a different perspective (or risk tolerance), and you clearly should invest your TSP as you feel appropriate.   Possibly this site has provided a different point of view or perspective on your investment roadmap,  I hope it has- raising awareness and increasing knowledge about what impacts the markets is the whole idea behind this site.

With that said, my personal TSP remains 100% G-Fund.

Thank you for reading….

-Bill Pritchard

Good Evening

A shorter update tonight but FYI the Dow Jones Industrials index fell over 400 points mid-day, closing 200 points to the negative.   This will be the fourth, out of the prior five sessions, that it has closed down.

Believed to be behind the market angst are concerns over the reported upcoming US/China summit in Washington DC.   We have heard numerous versions of “good news coming” and “talks are going great” but now it is time to put powder on the table- the previously “set in stone” March 1 deadline is now past…the next benchmark is March 27, 2019.

A look at the SPY Exchange Traded Fund shows some insight into the volume, it indeed traded above average today, interestingly this is the first time since Jan 3, 2019 that a sell-off occurred with volume above average:

That is all for now….I remain “risk averse” and conservative while we navigate the turbulent waters.   My personal TSP Allocation is 100% G-Fund.

-Bill Pritchard

Hello Everybody

My last update was January 22, 2019, which means that we are more than one month (my average update time) between updates…my sincere apologies.

I am inclined to provide the “Sir Sandwich” answer (with “No Excuse” in the middle) which I learned as a young cadet at Texas A&M, 30 years ago (ouch), however I will add that my “off duty life” at this stage is pretty darn busy-  I might as well put an Uber driver sticker on the family SUV.  As such, some time has elapsed between updates.

Moving forward, my personal TSP Allocation is shockingly not any different from the last update.  I remain 100% G-Fund.   Before I share my opinion on what is driving the markets, let me say that my entry and exit criteria for the markets is largely summed up into a few simple concepts, one of which is “Has the condition/situation that prompted you to move [Into/Out of] stocks reversed?”  Being able to clearly answer that question is important.  This situation is assessed using both technical (chart) data and economic (fundamental) data, with the weighting towards the charts.   Recall the market sell-off in February 2018, discussed in a prior post.

Back in February 2018, some asked me “why don’t you get out” or “isn’t it time for the G Fund.”  As you may recall, I remained in stock funds due to my assessment of the backdrop, the bigger picture.   The momentary crash in Feb 2018 subsequently reversed itself.  The inverse question, and situation happening now (in my opinion) is (interestingly enough, one year later) that the markets are rallying.   Now the questions I get are “Shouldn’t you get back in” and “Isn’t it time for stock funds.”   However, now, like back in February, my opinion is that my current TSP Allocation should remain, for now, unchanged.   Clear as mud ?   Let’s talk about this and clear up some mud…

As discussed in prior posts, the major challenges to the markets right now (indeed, they are going higher:  Elon Musk’s Falcon 9 rocket blasted off the pad pretty nicely also, but I am glad I didn’t hitch a ride) include the following:

Rising Interest Rates: a necessary evil when the economy is recovering

Trade Wars/Tariff Disputes with China: March-1 agreement “hard deadline” is now deleted, and progress is not clear

Slowing US Economy:  Some data, specifically GDP and Housing data, reflects a slowing economy

Political infighting at all levels:  “Just do your job” seems to be forgotten.

Let’s look at recent S&P 500 action, my benchmark barometer for the markets.  This index contains 500 companies, both from the NASDAQ and NYSE, in a variety of industries, to include technology, energy, healthcare, and others.  Here is a chart of the S&P 500 and the SPY ETF, which “tracks” the S&P 500 index.

“Bill, you sure are becoming a chicken, can’t you see the markets are up” a coworker grumbles to me as I reach for the coffee pot in the break room.

Plain as day is the fact that yes, the index is up.  Also apparent, to me at least, is that volume is average.  Without volume to sustain the action, things can fall apart.  What Mr. Market gives, Mr. Market can very quickly take, if the volume is not there.   Important to note is that the 2825 level is a key overhead resistance level.  This level was approached in 2018 on October 17, November 7, December 3, and in 2019 on February 25 thru present.  In all cases, the level was approached but not penetrated, with the index falling back lower.  A positive, convincing penetration of this level, with a closing price at or above 2825 would do a lot for my confidence.

Let’s talk about some “backdrop” and “structural stuff”.    The Yield Curve has displayed a tendency to “go flat” and “inverted” which is one in which the shorter-term bond yields are higher than the longer-term yields, which can be (not always) a sign of upcoming recession.   Some recent images below:

For a pretty good unbiased explanation of this behavior, the Wall Street Journal has a video at this link

Moving beyond yield curves, less cryptic indicators include GDP and Housing data:

Due to the government shutdown, GDP data was delayed, however Fourth Quarter 2018 (4Q) GDP came in at 2.6% percent change, reflecting a slowing GDP growth for 2018, and ostensibly, a slowing economy.

Moving into housing, home building starts fell to a more than two-year low in December as construction of new homes declined, the latest indication that economy may be losing momentum:

Now that I have touched on some economic red flags, let me discuss the US/China Tariff situation.  As many know, some of the things President Trump wants is to stop intellectual property theft, prevent technology transfer, and desires additional US investment to be permitted inside of China.  China’s only response so far is an agreement to buy more soybeans. This is being “presented” by politicians as a “good faith effort” by China but the fact remains that this was not part of the original proposal, nor is it known if US farmers can even produce the soybeans soon to be requested by China.  “Hey we asked, they couldn’t deliver” may be soon heard inside China’s Presidential Palace.  One would think credible pending orders and demand may impact prices- this “huge breakthrough” is being trumpeted as being good for the US farmer, but impact on soybean prices has been minimal:

Note that the previously discussed “hard date” of March 1 as a Chinese trade deadline is now two days into the past; missing a deadline is not a positive sign.   The next round of talks is a reported “US-China Summit” on March 27, 2019, to occur in Washington DC.

In summary, I remain 100% G-Fund in my TSP.   As a friendly reminder, what you do with your TSP is your business, if you feel you are “missing gains” or believe in your heart that G-Fund is not appropriate for you, that is entirely understandable.  This free site represents my opinion and personal analysis of things.  With that said, if the S&P 500 breaks 2825, and we have a US/China trade agreement finalized, and economic data does not worsen, I will most likely return to stock funds.  I can almost guarantee you that over a hundred professional investment managers, controlling mutual funds, hedge funds, and large accounts, are thinking exactly the same thing.  This may explain the lackluster volume in the markets.  The year has started well, but I believe some bona-fide “other stuff” exists which may impact things.  For those captivated by “strong lift-offs”, please look at Elon Musk’s Falcon 9 rocket lift off video and Super Bowl LI, when the Atlanta Falcons started very strong.  In both stories, the start did not write the ending.

I am 100% G-Fund in my personal TSP.   Thanks for reading, and please share with your friends and colleagues.   Next post hopefully sooner than five weeks away….

Thank you

-Bill Pritchard

Good Evening

We are now sufficiently into January 2019, with 2.5 weeks of trading action behind us, enough time for an assessment of the action.  A development since my last post on December 22, 2018: the still unresolved government shutdown, a situation impacting almost all of the subscriber-ship to this website.  For me (and speaking only for me, myself, and I…) the concept of “protect what you have” aka including the G-Fund in your toolbox of tools, rings loudly.   Unless I missed a memo, folks are not receiving paychecks, nor are they making any TSP contributions, nor receiving agency matching.  This is also why I advocate pushing the gas pedal all the way to the floor, when the conditions warrant, and pulling off the road when too many hazards are in the path ahead.  Indeed this may not work for all, but it helps me sleep at night: having left the stock funds back in October, my TSP is largely intact as we enter government shutdown Day #32.

Indeed the markets rallied (some) since December 26, 2018.   Many messaged me on Twitter or LinkedIn and asked if we are “missing out” on gains etc, but as I have discussed in the past, I am not day-trading my TSP, I am looking at larger trends, both on an economic basis (“backdrop” or the “climate”) and on a technical basis (chart patterns, trends, etc.).   My usually broken crystal ball looks at 90-day to annual trends, not one day to the next.   If the Dow drops 1,000 points in one day, sure that is an “attention-getter” but it only prompts me to look at larger scale action.

Moving forward, lets bring up some charts of the SPY Exchange Traded Fund (ETF).  This ETF is a very popular “proxy” investment vehicle to the S&P 500 Index, my default market barometer, and provides excellent volume and trend analysis of things.  Almost every mutual fund on the planet owns some SPY shares.  Note that the Dow Jones Index is heavily watched by the financial press, but it is only 30 stocks and does not represent the overall market.

As can be seen above, there is a lack of trading volume from January 7, 2019 thru January 17, 2019.  While markets can go down on their own (on low volume), they need volume to sustain vertical movement.  Volume has deteriorated since the rally on December 26, 2018.  Some have questioned “who” was behind the December 26 move, as most of Wall Street was out on Christmas break.  One thing is certain, since returning from break, volumes have not picked up.

On the economic front, a few events have occurred since January 1, 2019.   We are currently in the middle of the World Economic Forum, held each year in Davos, Switzerland.  The largest concern appears to be a believed global economic slowdown, with a slowdown forecasted in United States, amongst other countries.  The International Monetary Fund (IMF) recently released its World Economic Outlook, and stated that “…the global expansion is weakening and at a rate that is somewhat faster than expected.”

Additional negative signals exist, notably weaker housing data, with slowing home sales as reported by the National Association of Realtors (NAR) and a weakening in housing sentiment, as measured by the Housing Market Index, published by the NAHB, the National Association of Home Builders.  My point:  Two different real estate groups are both reporting a slowdown.  Charts/Graphics below, including of the screenshot of my excel file.

The excel file reflects deteriorating sentiment (scale from 1-100, the higher the more positive the sentiment) which began in November 2018.

An additional tool that I have begun to embrace (never stop learning…) is called the Economic Cycle Research Institute (ECRI) Weekly Leading Index.  This is a proprietary chart which has proven to be highly accurate at forecasting recessions.  Note, historically the stock market will crash before a recession is declared, the declaration being the responsibility of the National Bureau of Economic Research.  A primary component of a recession is negative GDP, which we do not have.  Based on the behavior of the Weekly Leading Index, some concerns for a recession do exist.

Finally, political tensions continue to play a role in the mood of the markets.  For the purpose of this category, I will include trade wars/tariffs.  I will attempt to remain agnostic, however suffice it to say that grown adults (we are talking age 65+), from both parties, need to come together and work out a solution.  A closed government, with employees literally “paying the price” for elected officials who cannot reach an agreement, is not the solution.  I simply cannot see how a closed government solves anything.  How are we expected to negotiate trade deals with China and make peacekeeping strides with hostile nations if we cannot even agree with each other in our Capitol ?

Some economists believe the shutdown costs the economy $1 Billion a day.  Marriott International recently stated that they are seeing “double-digit declines” in occupancy rates in their hotels, and Delta Airlines stated (on Jan 15) that the shutdown had cost the airline $25M in lost revenue.  This figure will likely be $50M+ if the shutdown continues.   The human cost to employees and their families cannot be measured…I hope and pray that the shutdown is resolved soon.

In summary, my TSP remains 100% G-Fund.

Thank you for reading-  if you find value and have benefited from my analysis of things, please share my site with your friends, coworkers, and colleagues.

-Bill Pritchard

Well, I promised to be “off the air” but I when I watch the various financial websites claim we are “in a correction” it really gets my rockets going.   Saying we are in a “correction” would be like calling the ER via radio, enroute Code-3, with a bullet wound victim in one stretcher, and a paper cut victim in the other stretcher, and saying you are inbound with two blood loss victims.

The below definitions are “generally accepted” definitions used in the professional investment world:

Correction:  A loss in 10%, from the high, but below 20%, in an index.  Indeed these happen on a semi-frequent basis, the February 2018 market displayed this, note that I remained in stock funds in my personal TSP.

Bear Market:  A loss of 20%, or more, in an index.  (Indeed, to get to 20%, you must break 10%).  Also associated with oft-used dystopian terms such as “crash” / “meltdown” / “crisis” / etc.  These are infrequent in nature.

I see many sites claiming “this is a correction” , “a mere correction” , “after this correction, it will rebound”  etc.

For the record, Dow Jones Index and NASDAQ are both in Bear Markets.   The S&P 500, currently with a 17.8% loss, is close to a Bear Market.   Please see below images from Kiplingers, Zacks Finance, and Charles Schwab, all respected and well known in the investment sector.

Hope this clarifies the difference….Merry Christmas….going “off the air” (second attempt…)

-Bill Pritchard

Good Evening

As most know, the markets continued to crash this past week. Faced with the concerns of global economic slowdown, political uncertainty, rising interest rates, and an unknown tariff/trade situation, the market direction was not-surprisingly downward.  Note that in late October, I made the decision to move to G-Fund: this resulted in some minor scrapes and bruises on the way out, but I am pleased to be in the safety of the G-Fund while things continue to fall apart two months later.    Important to note that of all the various “TSP information sites” (Twitter, Websites, Etc) out there, this free one appears to be the only which correctly “called things.”

I made previous references to “the bottom falling out” of things, and apparently this has indeed begun.  The S&P 500 index is at all time lows for the year, and has “broken thru” the 2600 support level.  Additionally, the often watched “Bear Signal”, the 50-day and 200-day Moving Average cross, has occurred, on December 10.   See charts:

A “supportive indicator” of my Bearish opinion is the price of Gold.  Gold, a safe-haven currency, typically goes up when things are down elsewhere.   Also, because of its safe-haven nature, moves in Gold typically don’t happen as a result from a one week stock market panic, or because Facebook stock crashes.  Gold does not care about that.  Historically (not all the time, no indicator is guaranteed to be perfect…) gold moves when the wide-ranging consensus amongst bankers, economists, hedge funds, etc. is ominous.   Chart below:

Why is all this happening ?  I offer only my opinion, and do not claim to have some sort of magical crystal ball or secret recipe, but as stated above (and in past posts…), economic slowdown, tariff concerns, and interest rate hikes are all causing angst.    Ever heard of the company Federal Express (FedEx) ?  One could argue that FedEx is probably one of the “always-will-be-there” companies, possibly more secure than the federal government itself.   Lets take a look at their stock chart:

Apparent is the huge decline in the stock since January 2018, a loss of 40% in value.  FedEx, n US company (Memphis, TN), however indeed has “global exposure” due to shipping all over the world.   Some believe FedEx is a “proxy” for economic conditions.    We know that oil prices are not impacting FedEx, oil is at all time lows for 2018: $47 a barrel.  See Chart:

Cheap oil is fine for the retail consumer, mom and dad, who want to make that road trip, but big-picture wise, super cheap crude oil is bad for the industry.   I wrote about this in January 13, 2017 , expressing that $55-$65 is the “happy spot” which keeps prices at the retail pump fairly cheap, while still allowing oil companies to make a profit (and keep workers employed; all of them buy houses, cars, and spend money).  Many believe extended declines in oil are leading indicators for a recession.

On December 17, 2018, Houston Chronicle energy reported Jordan Blum echoed my sentiment that I made almost 24 months prior, stating that “…The dip below the $50 threshold places prices just below what’s considered necessary for most energy firms to make money…”  Pleased to see industry analysts come to the same conclusion as me, I also believe that layoffs in the oil sector would be problematic for the economy.   Why is oil crashing ?  It is all supply and demand.  If OPEC and other groups choose to “up” oil production, the supply grows, if they dial it back, supply comes down.   Demand consumes that supply.  If demand exceeds supply output, prices increase.

Regarding interest rates, the markets for some reason expected no rate hike in December, however as I anticipated, FOMC Chairman indeed delivered one.  Right, wrong, or indifferent, it is what it is:  a rising interest rate climate.   Low (or zero) interest rates are the medicine for the sick patient.  If the patient improves, the doctor reduces the medicine.   The medicine reductions began on December 16, 2015 , as interest rates began their rise:

Note that we cannot eat our cake, and have it too.   On one hand, we have politicians and others, bragging about the hot economy and “the great numbers coming in [data]” , but then we don’t like it when the FOMC raises rates, because, well, the patient is recovering and the medicine should be dialed back.  I do not offer any solutions to this, interest rates and investment dynamics are a complicated matter, if you need to sleep, a 99 page Harvard white paper which you can attempt to decipher exists at this link.

Note that the markets will be closed on December 25 and January 1.   They will be on a short trading day on December 24.   As such, expect much lower volumes in the markets over the next two weeks.   I too, will turn my attention away from the markets, and enjoy some family time during the holidays.  Barring exigent circumstances, I do not plan on another update for another couple of weeks.

I remain 100% G-Fund.  As a reminder, the G-Fund is an investment option if you would like to have all or a portion of your TSP account completely protected from loss. If you choose to invest in the G Fund, you are placing a higher priority on the stability and preservation of your money than on the opportunity to potentially achieve greater long-term growth in your account through investment in the other TSP funds.  Additional official guidance published on the TSP site:  https://www.tsp.gov/InvestmentFunds/FundOptions/fundPerformance_G.html

I wish everyone a Merry Christmas and Happy New Year.

-Bill Pritchard

Hello Folks

As most know, markets have gone deeper into the red.   The Dow Jones Index performed as follows:

12-7-18:    -558.72 Points

12-6-18:   -79.40 points

12-4-18:  -799.36 points

12-3-18:  +287 points (NOTE:  this is the day after reported “successful” Sunday meeting with China at G-20, and numerous messages from readers of this free site, asking me “if we are missing gains” and “maybe I am delaying too long” etc etc, “the G-20 summit is over, now what” etc etc.  “When are you gonna send out a new update?” etc.)   The rest of the week these messages mysteriously ceased, as the Dow crashed.

You may recall my evening post on 12-2-18, indicating why I am not comfortable returning to stock funds, as I prefer to continue to monitor things.   The Dow subsequently lost almost 1,500 points by the end of the week, I would say my nervousness was (once again…) justified.   Note I initially left the Titanic back in late October, and since then, things have not gotten any better.  It is quite interesting to see “other” sites continue to claim that this is a “buying opportunity” and that “things always come back.”   A frequently followed twitter feed of another site posted that “things are bouncing back soon” or something to that effect.  I asked them what information they have to come to that conclusion, and my inquiry was met with (not shockingly…) radio silence.  So for the majority of the folks in the press and on the other TSP sites, who apparently do not understand things, the easy answer is “do nothing” and “ride it out.”   Because, well, this is a temporary hiccup, and “things always bounce back.”  Sure, so do forests after a forest fire.   However can you wait 10 to 20 years for your balance to recover ?    I might add that I don’t think I have ever stated markets will never recover, if someone came to that conclusion, they do not understand my philosophy or are confused on my methods.   My apologies on that.  Lets take a look at a chart of Enron stock, I have inserted my comments onto the chart:

Enron went to zero (0) (value-less), and while the stock market indexes that our TSP funds are based on will never go to zero, the point to be communicated, at least in my view/opinion, is that capital (money) preservation and loss protection is critical.  The G-Fund plays an important role in that strategy.   No, I did not pioneer this idea, the official TSP site also supports it: https://www.tsp.gov/InvestmentFunds/FundOptions/fundPerformance_G.html

The “always bounce back” crowd is swiftly muted when you remind them of Enron, WorldCom, and other (admittedly extreme…) examples.

Lets discuss some recent market action…

As we know, the G-20 summit has concluded and one week later, nobody knows what was discussed or agreed to.  This “messaging” by the involved parties (or lack of messaging) does not serve to allay already existing market nervousness.

Other concerns such as December interest rate hikes, as discussed in my last post, are almost a guarantee, also the mainstream press is talking about the Yield Curve getting flat and inverting.  Note that I made reference on this free site to this topic months ago, in my posts dated July 15, 2018 and August 26, 2018.  I even stated that the Yield Curve was one “leg” supporting the market, if it gets weaker, the market will go down.   Here we are today, with a 1,500 point loss in the Dow.

Lets take a look at some charts of the SP 500 Index, and SPY Exchange Traded Fund (ETF), a useful proxy to analyze volume:

Quickly evident is that the 2600 level is our support level for the SP 500, while 2800 is overhead resistance.   Note !   This is a dynamic level and changes over time.   These are current levels, and may not be applicable in six months.  When I discuss levels like these, I am looking at the next 30-90 days.   (Some reader emails have brought this up, hence the FYI).  For now, 2600-2800 is our “zone” we need to watch, if the index goes above 2800, that is great, if it breaks 2600, that is bad.

Moving forward, let me promote my colleague Dan Jamison, CPA (and retired FBI Special Agent) of the FERS Guide.  As some may know, the 2019 version has been published, and it is packed full of benefits information.   I personally have great passion about the financial markets and watching the stock indexes, however my attention span tends to quickly drop off when the topics are annuities, life insurance, survivor benefits.    Dan is the answer and explains things is awesome detail, and does so with fluency unmatched anyway else.  Everyone should subscribe to his FERS Guide.   Included on his site are articles by a fellow DOJ’er, Chris Barfield.   These articles discuss the economy in general and common FERS topics, they are excellent and I learned something new from reading them.   A screenshot is below:

Did I say that everyone should be a member/subscriber to Dan Jamison’s FERS Guide?    Sign up is here:  https://fersguide.com/

In conclusion, I remain 100% G-Fund in my TSP.

Thanks for reading…

-Bill Pritchard