Thread: Fed raises interest rates > But, TSP G Fund remains same!

RDL wrote:

I understand that the G Fund's rate of return is based on short term government securities.

What I don't understand is the fact that the G Fund has been giving an average monthly rate of return of between 0.37% to 0.39% for the past 2 years, [but] the Fed has increased the prime lending rate 8 times in the last year or so. Those 8 increases of a 1/4% per increase equals a very substantial total increase of 2.0%

Can anyone here explain this to me?

Confused, :%

It' a little more complicated that that. There is a very good explanation of how the rate is calculated on the TSP Website: http://www.tsp.gov/rates/fundsheet-gfund.pdf:^

Sorry: that link doesn't get you past the main TSP screen...go to "Returns and Share Prices, in the "TSP Fund Info Sheets" line click on the G-Fund Link...big PDF file explains the whole thing.

Regards /Dogdaddy

Thanks Dogdaddy. I will take a look at that document.

I guess I am just looking at this whole thing just too simply.

But in my mind, when I see the rates of return for the G Fund go downward at the same time the interest rates in this country slide downward like it had done in the past..... in my way of thinking, I would think that the G Fund rate of return would also start to climb as interest rates continue to climb as they have done in the past year ..... but obviously that has not happened.

Seems like kind of a one-way street if you ask me.

I agree, but the way they calculate it historically provides a real advantage over Treasury Rates (which is explained in the document I referenced).......... Where else can you earn 4.5% with zero risk...the fed 10 year rate is below 4% !

Regards/Nick

RDL,

Most rates in this country are tied to the 10 year Treasury bond. The bond rates have actually been trending down - which confuses the Fed - that is the conundrum. The market rates are telling the Fed there is below average inflation in the economy now and for the foreseeable future. We will be looking at a yield shortage in the future - hope we stay away from deflation. Regards

Dennis

Dogdaddy

Hi Nick, some guy named Palladin stopped by asking direction to Colorado. I pointed him toward the great state of Michigan.

However, there is a reason the republican mascot is an elephant.

As a point of interest, my wife wants you to know she is really embarrassed this week. Her FRS (Florida Retirement System) account put in a new high thanks to her small cap allocations. She actually feels humiliated about this situation and doesn't want anyone to know about her success except you. She says only you would understand, since your wife probably has the same progressive goal.

Just like you, my plan is to keep the wife working as long as possible - I will provide her comfort at the end of her long day. Serve her a cold Heineken - because she refuses to drink Coors. Take care my friend this is all in jest.

Dennis

Birchtree wrote:

Dogdaddy

Hi Nick, some guy named Palladin stopped by asking direction to Colorado. I pointed him toward the great state of Michigan.

However, there is a reason the republican mascot is an elephant.

As a point of interest, my wife wants you to know she is really embarrassed this week. Her FRS (Florida Retirement System) account put in a new high thanks to her small cap allocations. She actually feels humiliated about this situation and doesn't want anyone to know about her success except you. She says only you would understand, since your wife probably has the same progressive goal.

Just like you, my plan is to keep the wife working as long as possible - I will provide her comfort at the end of her long day. Serve her a cold Heineken - because she refuses to drink Coors. Take care my friend this is all in jest.

Dennis

Hey Dennis:

Not sure I always understand all of you comments, but do try. Also not sure how you pegged me as some sort of a "perma-bear" some time back..you really got that one wrong...I've always been bullish on the good ole USA. We have done very well over the years, but think it lacks a little class to throw real numbers around....but different strokes for different folks !

Glad you wife's FRS is doing well. My wifes TSP just hit a high, as well...we were in the small caps, as well, until COB Thurs...Are 100% in the G until this little correction peters out, then we'll be back in stocks. My Wife is still working only because she's 10 years younger than me, and can't retire until early 2009..If she gets an early out offer (which may happen in her Agency), we'll jump on it.

By the way, I'm ex-Army too...A-Team Demolitions Sargent, 6th Special Forces(ABN) 63-69. I understand from some previous posts that you were in the"Herd" (173rd Airborne Brigade-you actually said Division, which it is not)

Regards/Nick

PS: Most Coloradans don't drink COORS (we call it "sh__ Beer"). Actually largest Budweiser plant in the world is in Ft Collins, and is probably the beer of choice. My personalfavorite is Amstel.

Hi Nick,

We have settled - the sore point was the family comment. I see you do have integrity and honor. So I know you understand, appreciate your perserverance.

Don't think this market is going to correct much though. There are times when in actuallity the "dumb money" so to speak is correct. It's like the 50 million Frenchman when they move in tandem - not a good idea to be in their way. This market is watching the bond vigilantes and I think will pre-empt the Fed with a hugh rally from here before the 6/29 meeting. The shorts are being squeezed and the so called "smart money" will be chasing the train. It just has a feeling of a classic bullish deception - wanting to catch the majority off guard. Now my wife is telling me you can teach me some class. They are always right when it comes to good sense. Take care.

Dennis

Tell me one economic cycle where the fed raised 10 times and stocks did well?

:PWe have a classic bear trap.

Overlay May 2000 with May 2005.

Even the verbage is the same. Buy the dip. The worse is behind us.

Same people on TV saying the same thing.

Patterns never change.

Hope I am not scaring anyone?

If you are not a screaming bull here you are scaring people and your thoughts are not valued.

NASDAQ is still down 70% :shock::shock:.

DMA,

Now you know that is not true - your thoughts are valued - right along with all the other Bears on this board. You can help me remain cognizant to the frailties of the market. Do I get out of the sp500 at 1300, 1400, 1500, or preferably 1600? You will eventually be vindicated - only at what level. Help me if you can, I'm feeling down, sure do appreciate your being 'round. Do you remember the Beatles - that is how far back in time I go. I have my proprietary indicator that I monitor - hope he takes his time getting to 100% C fund.

Also, let me know when you throw in the white towel and join the bullish ranks - try and stay independently bearish for as long as you can, don't give up the ship that easily - especially if you don't need the money. There are so many Bears out there you should never be lonely. Right now there are only a few defiant Bulls roaming the boards - we really prefer to pasture alone - and smell the fresh money - like Ferdinand. I like your avatars and your personality- heck, I like you.

DMA wrote:

Tell me one economic cycle where the fed raised 10 times and stocks did well?

Just playing devil's advocate here, but I can't remember the last time the Fed raised 10 times and the Fed Fund Rate was stilljust 3%. In 2000 it was 6.5%.

And for the record, I am neither bullish nor bearish for the intermediate term or short term. Like last year the bigger rally should come towardtheend of the year, and we will likely see a lot of up and down action in between.

tsptalk wrote:

DMA wrote:

Tell me one economic cycle where the fed raised 10 times and stocks did well?

Just playing devil's advocate here, but I can't remember the last time the Fed raised 10 times and the Fed Fund Rate was stilljust 3%. In 2000 it was 6.5%.

We are still at emergency rates (under 3.5%) and the economy is not exactly humming along. Pretty soon people are going to through the towel in on the 10 year treasury and purchase 2 year treasuries.

This will caused the same thing that happened in 1987.