How to avoid TSP calamity if debt ceiling is not raised

[NigelSt.Hubbins]

This 2012 budget battle is only the opening salvo in the craziness to come, especially the raising of the federal debt ceiling. I have come to reluctantly conclude that the Republicans would be willing to totally undermine our fragile economic recovery if they think it is to their political advantage, so there is a fairly high chance that they will make unacceptable demands resulting in a failure to raise the debt ceiling.

Many financial experts have concluded that defaulting on federal debt would roil the world financial markets. Based on the last financial crisis, I could easily see the stock market taking a rapid 25% "haircut." My immediate questions are practical ones. As a retiree with most of my financial assets in my TSP (90% in various stock funds) where is the safest place (within the TSP) to redeploy these assets?

Do I need to move my funds outside of the TSP altogether to a different sort of investment to be really protected?

I am just trying to determine a prudent course given the reasonable possibility of something really "ugly" happening -- this strikes me as the wrong time to get greedy.

Thanks for any guidance anyone can provide!

[Birchtree]

Suggest migrating to the C fund and let the diversified S&P 500 take care of you. The only thing we have to fear is no fear.

[SkyPilot]

I have come to reluctantly conclude that the Democrats would be willing to totally undermine our fragile economic recovery if they think it is to their political advantage, so there is a fairly high chance that they will make unacceptable demands resulting in a failure to raise the debt ceiling.
:)

[Boghie]

NigelSt.Hubbins,

I would probably recommend the 'I Fund'. They are starting to make the hard decisions we are not. For example, the EU 'FED' has increased interest rates to head off inflation. Your stock funds will behave better than debt funds. And, the Treasury can raid your 'G Fund' assets to cover payroll for a short period of time. And, they will do so.

By the way, when we are going more in debt every month than 'W' went for all of 2006 we have problems that are not purely political.

Government HAS TO TAKE A HAIRCUT.

NOBODY is willing to pay us what we think we are worth.

We will have to cut about a Trillion make economic growth a feasible solution.

[goforit]

I have come to reluctantly conclude that ALL OF CONGRESS would be willing to totally undermine our fragile economic recovery if they think it is to their political advantage AND MONETARY ADVANTAGE, so there is a fairly high chance that they will make unacceptable demands resulting in a failure to raise the debt ceiling. we need to fire them all and get people in there that truely can change the way the government should be run. Some of the OLD Geasers need to go and get young enthusiastic blood in there(sorry if spelling is off)

[Birchtree]

It was the young and foolish kids that voted for hope and change. Let that be a lesson.

[Silverbird]

It's going to be the new blood that demands the debt ceiling stays in place, quite a few of the old blood got kicked out at the last election (from both parties) on this very issue. Bringing in the new may bring in the change that some people thought they wanted and are going to really regret.

Beware what you ask for...

[SkyPilot]

I have come to reluctantly conclude that ALL OF CONGRESS would be willing to totally undermine our fragile economic recovery if they think it is to their political advantage AND MONETARY ADVANTAGE, so there is a fairly high chance that they will make unacceptable demands resulting in a failure to raise the debt ceiling. we need to fire them all and get people in there that truely can change the way the government should be run. Some of the OLD Geasers need to go and get young enthusiastic blood in there(sorry if spelling is off)
... :)

[burrocrat]

If you're worried that .gov might 'borrow' your G money here's a way around it.

You can take out a general TSP loan for the amount of your contributions and earnings up to $50k (but not the free match money or it's earnings). And take up to 5 years to pay yourself back.

You can put the loan procedes in a low cost brokerage like Schwab or Scottrade and let it sit in cash without .gov getting to it to bridge the funding gap. You can find reasonable proxies for CSI funds that trade at no/low cost and stay invested if you want to.

You can leave the money sit and pay your TSP loan back at roughly the G rate from your salary, tighten up a bit, end result is you still have all the funds you started with, with a good portion of them available instantly from a private outfit that places no 2 IFT trading restrictions on you. And the extra loan payments from regular budget are kind of like a forced savings plan except you get to pre-fund the outside account.

Of course, I'm aware of the 'you have to put it in and leave it in so it's there for your retirement' arguement. On the other hand, if we were all so sure it will still be there for our retirment we probably wouldn't need a thread with a title like this.

I'm doing it right now, and I benefitted greatly from the increased peace of mind that the extra available resources gave me during the recent uncertaintity of the shutdown/furlough situation.

[James48843]

To all who appear concerned - I just want to make sure you all understand this-

If, for reasons of debt ceiling, the federal treasury guys decide to tap into the G fund holders and use that money for their own debt ceiling reasons... there is NO EFFECT on the ability to trade or move your TSP account money. You STILL can move your money, just like now. (Except for the two per month limit, which sucks). There is no ban on interfund transfers of any kind during those periods where the government takes our money.

At least, that is how it had operated on all past occasions.

If you want to move out of "G" and into "S", or "C" during the time they are taking our money, you STILL can do so.

Don't worry son, this is JUST AS GOOD AS CASH.

These here are I.O.U's from the U.S. Government!

[burrocrat]

You mean it doesn't matter where you put it because it's all just a dollar is a dollar is an I.O.U.?

And despite all it forms, they all are worth (or worthless) the just same?

[alevin]

Amazing. Amazing that TSP can't be bothered to tell us in writing that "if" they borrow G fund, that we can still keep making paper trades with our accounts, that they'll keep track of how much the official records (paper trades) say they'll owe us- according to the official IFT and contribution allocation records (paper trades) in the between times. Haven't seen anything in writing ever about that, James. If you have, could you point to the fine print?

Of course in previous times borrowing happened, I was unaware of the events and even if had known, had no worries about getting paid back in timely manner, had no clue about short-term account management either. I'm a lot more edicated about inflation and currency devaluation and shortterm account protection now than I was back then tho.

So if we go into even higher inflation/worse currency devaluation than is occurring at the moment, they can pay us back in cheaper $, no matter how many cheaper $ our accounts say we're due? So it doesn't matter how many nominal $ we accrue in official records? sounds like a plan to me. market goes higher in that case, right?

[FundSurfer]

BUY GOLD!!!!

Wow, how I wish we had a gold, silver, platnum, lithium, copper fund.

Fundamentally, I agree with James. The boys at the fed may play paper shuffle games but your money will be safely earning a couple percent interest in G.

If you think about it, nothing really changes. Right now "G" fund money is given over to the government with the promise of a return in interest. If the "G" fund gets tapped, then the only thing that really changes is the paperwork. The same entity still is on the hook for the interest ultimately.

Has anyone heard that they are working on extensions that would get us to July and not just add a month? How would they manage that?

Possibly, they could "borrow" the whole retirement fund and be on the hook for the appropriate amount of interest as if we had money in those funds. Now, the question is, would they have to sell our positions to use that money? That step would definitely dent the market.

[ArchAngel]

BUY GOLD!!!!

Wow, how I wish we had a gold, silver, platnum, lithium, copper fund.
Me too. I'm in AGQ silver right now. Although yesterday (and probably today) kinda stung, so far the reward has been well worth the risk. Here's to $50 oz silver!!!! :D

[NigelSt.Hubbins]

Thanks for the many helpful responses. It sounds like if one believes that the stock and bond markets could respond strongly and negatively to the debt ceiling issue -- regardless of which party is primarily at fault -- that one would be safe having shifted all assets to the G fund (even though it is very counter-intuititve to putting money into fund based upon U.S. government securities at a time when it may default on debt).

Given that the date that the U.S. will reach the ceiling seems to be somewhat ambiguous (early May) it sounds like shifting funds should probably be done sooner rather than later.

[FAB1]

. I have come to reluctantly conclude that the Republicans would be willing to totally undermine our fragile economic recovery if they think it is to their political advantage,

I am just trying to determine a prudent course given the reasonable possibility of something really "ugly" happening

Thanks for any guidance anyone can provide!
Hey Nigel I hate to tell you this but we are not all D's here. Have you noticed things have gotten really Ugly since Ubama was annointed? No, I guess not.

[NigelSt.Hubbins]

FAB1,

While I couldn't more strongly disagree with your feelings on the subject, I regret having provided any political commentary in my initial post because regardless of who is at fault the TSP financial concerns are much the same. I am much more interested in preserving my retirement savings than I am in getting in a "food fight" with Obama-bashers.

So consider me chastened, and if others have useful ideas on strategies for protecting our TSPs, please bring them on!

Nigel

[FUTURESTRADER]

It's going to be the new blood that demands the debt ceiling stays in place, quite a few of the old blood got kicked out at the last election (from both parties) on this very issue. Bringing in the new may bring in the change that some people thought they wanted and are going to really regret.

Beware what you ask for...

Exactly

[WorkFE]

Raise the debt ceiling or don't raise the debt ceiling.
I guess they vote yea or nay depending on which position they hold when it comes up for a vote.:laugh:
Either way unless someone has found a financial clerical error it will have to be done.

[tsptalk]

I am much more interested in preserving my retirement savings than I am in getting in a "food fight" with Obama-bashers.
I appreciate that. ;)

[nnuut]

CRAPOLA, they are preaching the end of the world, HA!!! They just know that this would ruin and deny their Progressive agenda. BRING IT ON!
We want our economy back.:cool:

[Boghie]

Folks,

The train has left the station. I really don't think the Treasury can control the bond market. They will not be able to keep interest rates low.

Soon enough Bernanke will raise short term rates. Even before he makes his move the huge bond and soverign funds will demand higher rates. PIMCO has made its move - how many other bond holding entities have made theirs.

We now have about $5 Trillion more in short/intermediate term debt than we had 27 months ago. We have grown our debt by 1/3rd in months. Yowser.

Soon, nobody will care what the Treasury does or what the FED does (if the FED does not defend the dollar).

This is going to be ugly. Especially for the 'F Fund'. And, I would NOT count on the 'G Fund' assets being liquid. How many folks thought their overleveraged Lehman Brothers money market funds would always be liquid assets? Yowser.

There are no good places to hide. My guess is the best will be either the C or the I funds...

[FAB1]

FAB1,

While I couldn't more strongly disagree with your feelings on the subject, I regret having provided any political commentary in my initial post
Nigel

:suspicious: Youre missing my point - you are strongly disagreeing with many peoples feelings on this MB. My post was a "shot across your bow" as a warning.

There are a lot of fine MBs to strongly disagree with conservatives, Im sure you can locate one to fit your needs. Or come see us on Beltway Talk - Jim needs all the help he can get over there. :laugh::laugh:

[NigelSt.Hubbins]

FABI,

You seem a little dim, so let me tell you again that I'm really only interested in conversing about financial matters on this website. I truly don't care if my presence here offends you (or the "many [other] people" you claim). There seems to be others who are in fact willing to share information civilly.

I know from what little you have written that the possibility of our having a meaningful dialog on political matters is remote at best, and I can't imagine why I would want to waste my time. So go off and try to bully someone else.

[PessOptimist]

FABI,

You seem a little dim, so let me tell you again that I'm really only interested in conversing about financial matters on this website. I truly don't care if my presence here offends you (or the "many [other] people" you claim). There seems to be others who are in fact willing to share information civilly.

I know from what little you have written that the possibility of our having a meaningful dialog on political matters is remote at best, and I can't imagine why I would want to waste my time. So go off and try to bully someone else.

Hmmm. Rerring to some one as "a little dim" seems to prove you cannot "share information civilly" Nice british accent thing in your posts. You do it well. You forgot to include all your awards from HRH in your name.

Cheers

[mick504]

Don't ya think the Standard and Poor's slaming the US Govt about their high debt might get our politicians from both parties I hope to say....yeah it's time we cut our debt. If the debt ceiling has to be raised....only if a debt reduction plan is in place. On the subject of worring about the TSP funds....well...if the market dumps....I'll just throw it into G...cause I can't really afford gold or silver...as it's not an option for the TSP...I wish it was...and I'm not buying individual stocks anymore cause I'm retired....! If the debt ceiling is raised or not raised...I personally don't see any major calamity....!

[FAB1]

FABI,

You seem a little dim, so let me tell you again

Dont spare my feelings, Nige :D

:embarrest: I am humbled in your presence so carry on, sahib.

Oh BTW its: FAB1(one) not FAB I (eye)

[FAB1]

I'll just throw it into G...cause I can't really afford gold or silver...!

Why would you buy it even if you could??

:mad: In 1933 FDR seized private gold holdings with an EO. Surrender your gold coin, bullion or certs - or enjoy a 10 yr stay in one of our placial Federal "hotels".

If they did it once they can do it again - no safety except in your own pantry. Buy Food and Provisions (bullets).

[jpcavin]

If they did it once they can do it again - no safety except in your own pantry. Buy Food and Provisions (bullets).

This brings to mind a guy that I work with. We frequenty discuss the economy, markets, and TSP. He always states that "you can't go wrong with bullets.":laugh:

[FAB1]

This brings to mind a guy that I work with. We frequenty discuss the economy, markets, and TSP. He always states that "you can't go wrong with bullets.":laugh:

In '33 in wouldnt be hard to hide your gold and sit on it a while.

But in this electronic age, dont think they wont know who has the gold.
Banks will be forced to open safety deposit boxes - theres a paper trail
to sniff you out and your floor safe, isnt safe.

Then your Lead will be more valueable than any Gold or Silver. :D

[SkyPilot]

FABI,

You seem a little dim,

"Dim"?

Clearly you do not understand the character and nature of this board. You are welcome to participate here, but your contemptuous attitude will isolate you. Maybe it is best if you read and learn for a while, then when you understand this is not a forum site that will long tolerate this silliness you may wish to try again.

[jpcavin]

In '33 in wouldnt be hard to hide your gold and sit on it a while.

But in this electronic age, dont think they wont know who has the gold.
Banks will be forced to open safety deposit boxes - theres a paper trail
to sniff you out and your floor safe, isnt safe.

Then your Lead will be more valueable than any Gold or Silver. :D

I could always use lead to protect gold. :D

[Boghie]

So, folks, what did we learn during yesterday's burp:

G Fund: +0.02 - However, I think that is the norm
F Fund: +0.19
C Fund: -1.10 - The best of our equity funds
S Fund: -1.48
I Fund: -2.00 - The worst of our equity funds

I postulated that the 'I Fund' would weather a United States sovereign debt crisis better than US equities or bonds. I was going the weather the barf storm in the 'I Fund'. Now, this little episode has demonstrated the fallacy in that.

I also thought the 'S Fund' would have a smaller plop than the 'C Fund' because it obviously has a smaller allocation in financials. Looking at the two of them in Schwab illustrated that this is not the case. Hence the failure.

The 'C Fund' is the equities winner. Ten days of yesterdays would result in a 12% loss. That is survivable, even for those who ride it all the way down. Why is this. Probably because these companies are multi-national and have large cash holdings. They will not need the borrow money or sell bonds at high interest rates for a while. The smaller companies still need liquid debt.

Still don't trust the 'F Fund'. The big holders will pump and dump it - leaving us little people slopping around in the mud.

Now, the 'G Fund'. My guess now is that the interest rate will increase during 'The Problems'. The assets have never been locked (even though they are borrowed against) before - but we have never run annual $1,600,000,000,000 deficits before. Things change:nuts:.

My current thought is to let things settle after the news and move to a 40% G and 60% C allocation. Still thinking. Think long, think wrong.:p

[alevin]

In '33 in wouldnt be hard to hide your gold and sit on it a while.

But in this electronic age, dont think they wont know who has the gold.
Banks will be forced to open safety deposit boxes - theres a paper trail
to sniff you out and your floor safe, isnt safe.

Then your Lead will be more valueable than any Gold or Silver. :D

Raiding safe deposit boxes wouldn't be anything new, they did that back in '33 too. We'll probably see currency controls at some point-to keep the big guys from moving funds out of the country too quickly. Brazil is already contemplating currency controls, read that the other day somewhere, don't recall where.

[grandma]

I could always use lead to protect gold. :D
-specific types of lead ? - like copper-coated? -if I remember the term correctly - :)

[FAB1]

I could always use lead to protect gold. :D

Your cash aint nothing but trash. When the stores are all bare, it wont buy you hash.

As for Buying Gold, well, pard, now ya been told.

And Lead may keep you well Fed and not Dead. :D

[jpcavin]

-specific types of lead ? - like copper-coated? -if I remember the term correctly - :)

I don't suppose it really has to be lead as long as it does the trick..
Lead
Copper
Depleted Uranium

Black Talon hollow points?:nuts:

[Boghie]

FAB1,

I have a mental picture of you on December 31, 1999 sitting outside the UniBomber cabin, in a wife-beater t-shirt, and a rifle across your knees. Drinking a cheap beer, banging the empty can on your head, and tossing it to the ground.:p

You will need lots of lead to stop the herd.

And, lots of long lasting food.

And, lots of water.


This is going to be a trading opportunity to make money on the margins. The American public is now aware of what needs to be done. We will adjust and overcome.:)

[jpcavin]

Fab1 in a wife-beater? Please say it isn't so.

[malyla]

This is going to be a trading opportunity to make money on the margins. The American public is now aware of what needs to be done. We will adjust and overcome.:)

The crucible is still not hot enough yet. Any solution now will be ill-formed and flawed until the underlying financial and tax loopholes are fixed. The amount of insulation around what the corporations and financial institutions are getting away with at the expense of the people has not decreased. Until that insulation is removed, the crucible will not get hot enough to forge a strong and equitable solution.

[Boghie]

The crucible is still not hot enough yet. Any solution now will be ill-formed and flawed until the underlying financial and tax loopholes are fixed. The amount of insulation around what the corporations and financial institutions are getting away with at the expense of the people has not decreased. Until that insulation is removed, the crucible will not get hot enough to forge a strong and equitable solution.

Malya,

That insulation is what will protect your 'C Fund' assets. What kind of company will trade cash reserves for two year tax treatment extensions and the promise of ever more efficient government control of healthcare? These companies are smart enough to request waivers from The Black Swan Administration from the brilliance known as Government Whatever.

The cash holdings of the S&P 500 will make you extremely happy in this correction - or contraction - or crash. It is a hedge against The Black Swan. And, we have had one flying around for about three years.

The last depression hit the private sector because that sector was hugely leveraged and in a speculative boom. This one will hit the public sector because we are hugely leveraged and dumb politicians speculated that they could ride it out with more debt. This will be a hard time for us. And, nobody cares. I’m betting on the private sector!!!

[FAB1]

FAB1,

I have a mental picture of you on December 31, 1999 sitting outside the UniBomber cabin, in a wife-beater t-shirt, and a rifle across your knees. Drinking a cheap beer, banging the empty can on your head, and tossing it to the ground.:p

You will need lots of lead to stop the herd.

And, lots of long lasting food.

And, lots of water.


This is going to be a trading opportunity to make money on the margins. The American public is now aware of what needs to be done. We will adjust and overcome.:)

Cute, but you got me all wrong.

I quit Rocky mountain koolaid beverages in my teens, I only drink Imports. :D

[FAB1]

Fab1 in a wife-beater? Please say it isn't so.

A "wife-beater" tee shirt refers to whats left on my back after she lays into me with a hickory stick.:laugh:

[NigelSt.Hubbins]

Hmmm. Okay, FAB1 tries to run me off the website, and you complain about me pushing bit just a tiny bit with the use of the word "dim." I am curios -- what did you say to him about his attempted bullying? If the answer is "nothing at all" I am thinking you might be just another right-wing guy unwilling to do anything beyond subscribe to your right-wing orthodoxy and criticize those who you disrespect and depise -- I'm thinking of me.

If in fact you did chastise FAB1, I am surprised and humbled and will be sincerely ready to offer an apology. If not, well screw you. Seriously.

Nigel


"Dim"?

Clearly you do not understand the character and nature of this board. You are welcome to participate here, but your contemptuous attitude will isolate you. Maybe it is best if you read and learn for a while, then when you understand this is not a forum site that will long tolerate this silliness you may wish to try again.

[FAB1]

New posters might be well advised to heed the seasoned members of this board.

You were merely cautioned to leave your political feelings at the front door and that it wasnt a wise direction to start out here.

Stooping to insults is going to earn you unfavorable attention from Tom the Bouncer, he is the guys who owns the joint.

This transparent victimizing of yourself and heedless insults are more unwise choices on your part - its not going to work here though in this family, because thats what we are and we watch out for each other.

I hope you choose to stay and contribute but thats entirely up to you.

[SkyPilot]

Hmmm. Okay, FAB1 tries to run me off the website, and you complain about me pushing bit just a tiny bit with the use of the word "dim." I am curios -- what did you say to him about his attempted bullying? If the answer is "nothing at all" I am thinking you might be just another right-wing guy unwilling to do anything beyond subscribe to your right-wing orthodoxy and criticize those who you disrespect and depise -- I'm thinking of me.

If in fact you did chastise FAB1, I am surprised and humbled and will be sincerely ready to offer an apology. If not, well screw you. Seriously.

Nigel

You attempt to justify your acrimony by pointing and blaming. You do not apologize, and then you continue by fomenting your diatribe with a "Screw You" mentality. Before you ascribe titles and labels (which is a very low form of debate) you might want to spend some time in research by reading the post of those with whom you disagree.

I suspect you will not, and will be just another one of these flamers who appear on this site for a brief moment.

We already have participants that are willing to state the case that you already promote, but have the ability to function without the vitriol that you manifest.

State your case, but when you do so, observe the contract of decency and respect that is implicit in participation here (read post by James48843 and FireWeatherMet for a primer) You can agree to disagree agreeably. It may be that you lack the facility to be able to synthesize opposing and disparate views and process these divergent concepts and ideas into a cogent and reasonable thesis. So far, it is not evident that you do, and your offerings outside of that have not evidenced noteworthy contribution.

PS. FAB did not try to "run you off this site". However, your continued behavior will eventually seal your own fate. It has for dozens of others over the years, and you will be no exception. :)

[Show-me]

SNAP! :D