Dear Boghie,
I'm not really thinking too much about the private sector's reaction to massive federal spending cuts, though I thinking it would be a significant positive in both the short and long terms assuming it is a holistic approach designed to genuinely and significantly reduce the deficit. My decision to migrate to the G-fund was really motivated by the significant possibility that Congress will not be able to fashion a deficit reduction plan at all, and the corollary threat that default on U.S. debt could be (or appear to be) imminent. While President Obama has signaled his openness to large spending cuts, I don't see him agreeing to a "spending cut only" approach to deficit reduction. Given the apparently significant possibility that Republicans will not agree to increasing revenues, I'm not sure that leaves the resolution of the debt ceiling limit in a good place.
Well, I may not have called all of the "play by play" exactly right (e.g., I didn't think President Obama who take a deal involving no new revenues) but I did succeed in avoiding the immediate mess, that is, the loss of more than 15% of market capitalization over the past 10 days or so. (I wish I could say the same about my non-TSP, especially 529 accounts!) It is a great feature of the TSP that one can move assets around so quickly and without fees or tax consequences. Of course, most potential market crashes don't have the courtesy to provide the dates on which they will likely occur. The tricky part now will be to figure out when (if??) and how to come back into the market. I will probably eventually attempt to construct some sort of laddering/averaging approach, but I'm certainly not expecting a rally anytime soon.
On another note, it is hard to imagine anything that could more stoke a third party candidacy for president than the last couple of months of lunacy. However, any such third party candidate would need to find a way to build a Congress capable of functioning -- and that would seem to mean "bring your own."
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