Question about the F fund

**ATCMickey** · 08-12-2007, 07:55 PM

If anyone could provide any insight it would be greatly appreciated...Sorry for the lengthy post

With Trader Fred's call for a move to the F fund, I started trying to educate myself about a fund I have almost never used (the F fund). I had always thought of the F fund as being a good place to go if stocks are heading down. I figured people pulled their money out of stocks and went for a safer haven in bonds. Looking back at the 2000-2002 downturn, it seemed to hold true....

from the TSP web site

http://www.tsp.gov/rates/monthly-history.html

But then I started thinking...the 2000-2002 pullback was all about tech stocks going south. I don't remember many questions about the bond market being sound, solvent, or otherwise. But these days, some bonds are being called into question as a result of their being tied to mortgage instruments. So I tried to find out how our F fund is invested. The TSP website indicated it's tied to the Lehman US Aggregate Bond Index. From the Lehman website, that index is invested as follows (as of 4/1/2007):

Fixed Rate 34%
Treasury 23 1/2%
Corporate 18.6%
Gov't Related 14.1%
CMBS 4.9%
Hybrid ARMS 3.8%
ABS 1.1%

Also as of 4/1/2007, the quality index is as follows:

Aaa 79.8%
Aa 5.1%
A 8%
Baa 7.1%

I was reassured that the ties to Hybrid ARMS was only 3.8% and the general overall quality of the bonds it holds seems relatively high. But....

So finally on to the question I took so long to get to

Is the F fund the safer haven today that it seemed to have been in the past or do we have any reason for concern that it might be hurt by the mortgage/subprime/market crunch we seem to be encountering?

Thanks in advance for any education anyone might be able to provide,

ATCMickey

**rokid** · 08-12-2007, 08:51 PM

"Many big lenders package home loans into bonds and sell them to investors in what is known as the secondary market. The rising rate of foreclosures and delinquencies among sub prime borrowers, who generally have blemished credit histories, coupled with a drop in home prices, has made investors leery of buying those bonds." ----Today's Washington Post Business Section, Tomoeh Murakami Tse and Nancy Trejos.

http://www.washingtonpost.com/wp-dyn...89.html?sub=AR

It appears that the sub prime loans are sliced and diced for inclusion in these bonds for sale to banks and hedge funds. Since the bonds don't trade frequently, know one, now, knows how to price them. Consequently, most hedge funds and banks don't want them.

On the other hand, as you've stated, the F Fund holds high quality bonds. Consequently, the flight to quality may benefit the F Fund like it's benefiting government securities.

All of a sudden, risk is unpopular.

P.S. I'm traveling to Denver tomorrow on business. What's a good steak house?

**ATCMickey** · 08-12-2007, 09:15 PM

Originally Posted by rokid

P.S. I'm traveling to Denver tomorrow on business. What's a good steak house?

Thanks rokid...

If you're downtown, Denver Chop House is good (within a few blocks of Coors field). Also, if you're near the Denver Tech Center (south side of town), Brooks Steakhouse is good too.

Safe travels and thanks for your response,

ATCMickey

**rokid** · 08-12-2007, 11:00 PM

ATCMickey,

You're welcome. Thanks for the steakhouse tips.----Rokid

**Pill** · 08-13-2007, 04:32 AM

If you don't mind paying Ruth's Chris Steakhouse is wonderful.

**rokid** · 08-13-2007, 06:38 AM

Pill,

Thanks!-----Rokid

**rokid** · 08-16-2007, 05:26 AM

Originally Posted by ATCMickey

Thanks rokid...

If you're downtown, Denver Chop House is good (within a few blocks of Coors field). Also, if you're near the Denver Tech Center (south side of town), Brooks Steakhouse is good too.

Safe travels and thanks for your response,

ATCMickey

Unfortunately, I didn't get a chance to go to either steakhouse - I was with a big group and we had to reach consensus...

However, we did go to Beau Jo's in Idaho Springs. Great pizza! Great scenery! Neat little town.

Maybe next time for the Denver steak houses. Thanks anyway. You too Pill.----Jim

**weatherweenie** · 08-16-2007, 05:42 AM

Originally Posted by rokid

Unfortunately, I didn't get a chance to go to either steakhouse - I was with a big group and we had to reach consensus...

However, we did go to Beau Jo's in Idaho Springs. Great pizza! Great scenery! Neat little town.

Maybe next time for the Denver steak houses. Thanks anyway. You too Pill.----Jim

LOL, you drove all the way to Idaho Springs?!

Better scenery in Idaho Springs, but there's a Beau Jo's just north of Denver.

Did you try putting honey on the pizza crust?