Which way, and TSP limits
Stocks continued to pullback from the overbought condition, and we
will find out soon enough if the current support is going to hold.
The small caps were hit the hardest dropping over 1.5% yesterday, and
bonds (F-fund) rallied nicely.
The S&P 500 is now sitting just above the 20 and 50-day exponential
moving averages, as well as the recent inclining support line. It
is now forming a
rising wedge, which is actually a bearish formation that tends to
break to the downside.
Chart provided courtesy of
www.decisionpoint.com
Other than that, nothing has changed except that the NYSE is no longer
overbought, but rather is sitting in neutral territory, as are many
other indicators.
We have a lack of positive news and low volume so the market is devoid
of a stimulus to get it in gear. Earnings season will be in full
force shortly and that will help determine where we go next.
TSP Trading Limits
Yesterday was the end of the comment period for the
Federal Register to limit interfund transfers. The folks at
TSPshareholder.org did a
great job keeping us informed, and their petition ended up with just
short of 4000 signatures. I'd like to thank them for their
efforts.
The TSP did a nice job as well, making anyone who actively managed their
account come across as the bad guys. After sending out a few
warning letters in January, they ended up restricting 549 accounts from
trading online; making these folks use snail mail to make any interfund
transfers. Pretty drastic measures.
This data has been explained before before but I just wanted to show it
again to let you see just how much the TSP is going to save now that our
accounts are limited to 2 to 3 transfers per month, during one of the
most volatile periods we have see in over 5 years.
We all know that the S&P 500 is actually down 8% since the end of 1999.
It ended 1999 at 1469 and yesterday it closed at 1354. That's over
7 years with no gains. From some of the polls we have taken here,
there is a large portion of our readers who will be retiring in the next
10 to 15 years. Many of them will be FERS employees who will be
relying heavily on their TSP account balances to meet their retirement
goals. The market could do very well in the coming years, but if
instead it is flat to down, the government may have an interesting
situation on their hands when people opt to stay on because they have
not saved enough money to retire. Depending on the market can be
very risky.
In 2006, Mike causey did a
radio interview with the then executive director of the TSP, Gary
Amelio. The two of them talked about how foolish a small group of
frequent traders were, trying to time the market. They watched the
146 traders back in 2003 I believe, and decided they were losing money.
They talked about the new websites that were popping up to talk about
the TSP, and Mr. Amelio basically said, market timing was "nonsense",
and "I wish we could shut them [the websites] down."
Back then they wanted to shut these websites down because they thought, "the
substantial majority of them [market timers] lost money." They
have changed their tune since then, as many people are doing very well timing
the market, and are now focusing on the costs being the problem.
Here is a chart of the TSP expense ratio from 1988 through 2006.
It looks like there was an increase in 2003, but you can see that for
most part, the expenses have been declining each year. For
the record, TSP Talk started in January of 2004. In 2006, the
expense ratio was .030%, or 3 basis points. That is very low for a
fund.
Source
http://www.tsp.gov/rates/tspexpenseratio2006.pdf
So, you would expect to see huge increases in costs to cause the TSP to
make drastic changes, and to go so far as to restrict accounts of those
trading more than 2 or 3 times per month. I'm not sure exactly
what this 2007 administrative expenses figure includes, but it is what
is posted on the TSP website. It shows that costs were down to
0.015% or 1.5 basis points, and in fact each fund did better in 2007,
than the index they tracked.
Source
http://www.tsp.gov/rates/fundsheets.html
That means they somehow came out ahead. Again, that is all of
the information I could find on their site, and perhaps the folks at
tspsharholder.org can explain it better than I can, but something
doesn't seem right. Meanwhile, there are 549 participants
that can no
longer make transfers online, and told it could take 10-15
days to process their snail mail requests. If anyone needs it,
here is a link to the TSP's
Form TSP-50
to process interfund transfers by mail.
It's a shame. I was so very "gung ho" the TSP when I
started this site
four years ago, and excited to spread the word about this
great plan and its potential. Yet the TSP has looked upon us
with discontent almost from the start. I thought I was helping
participants but I ended up being investigated after the TSP
contacted my agency about TSP Talk linking to the share price page
on the TSP website and including information from their site on this
one. They did not like that but did not contact me directly
for months. They went right to my agency. That was when
I first realized my persona non grata status.
If they do in fact implement the two transfer limit as proposed, I will strongly consider cutting my contributions to 5% to get
my agencies match amount, then move the rest into an IRA. I
will also find out if there is a way to move any of our money that
is currently in the TSP, into that IRA. I feel we were misled.
I have contributed a lot of money over years with the understanding
that I would have unlimited transfers available if I needed them.
Now that the rules have changed, I feel we should have the right to
make a one time rollover without penalty. I wish things could
have been different.
I really hope they will read the comments that were sent to them and
make some kind of adjustment. The 2 (or 3) transfers is just
not enough. That is one buy, one sell per month. I would
say 4 or 5 would be sufficient. Or, keep them unlimited and
charge a transaction fee to cover the costs. If it's the
I-fund transactions that are causing the problems, limit the I-fund
transfers only. There are many alternatives that have been
proposed so I hope they take them into consideration before making a
decision that will affect us zealous TSP participants the most.
By the way, all three of our
premium services
have complied with the transfer limits so as to not put the
subscribers accounts at risk of being restricted. While the
limits made the services approach the market differently this year,
they have been able to outperform all of the individual stock funds
to date, with RevShark's services beating all of the funds making
only a few well timed moves:
2008 returns through 4/09/08:
|
G Fund |
F Fund |
C Fund |
S Fund |
I Fund |
|
0.98% |
2.60% |
(7.19%) |
(7.33%) |
(6.22%) |
|
L 2040 |
L 2030 |
L 2020 |
L 2010 |
L INC |
|
(5.32%) |
(4.48%) |
(3.60%) |
(1.62%) |
(0.37%) |
|
|
|
|
|
|
|
RevShark |
Fred |
Ebb TSP |
|
|
|
3.59% |
(3.11%) |
(5.79%) |
|
|
I mention this because some subscribers are cancelling because they
believe the limits will make it impossible to time the market.
Limits won't make things any easier, but it is not a deal breaker.
I'm still concerned about the market right now. Trader Fred
tells us there are signs that the smart money is starting to pick up
some stocks, and that tends to happen on the way down. They
don't always pick "the" bottom, as they will likely buy the dips
slowly, but they will also sell the rallies until the trend does
change.
That's all for today. Thanks for reading.
See you tomorrow!
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