TSP board to limit interfund transfers

[Frixxxx]

I was reading the FRTIB minutes from Aug http://www.frtib.gov/pdf/minutes/2008Aug.pdf

Thanks for reminding me to go out and see what was up with the Friendly Rookie Thrift Inept Board.

So what was this 3.8 MILLION dollar trading cost for the I fund in July 08??? And I don't understand this on page 3 last paragraph:

"... Trading costs for the I Fund were $2.8 million in July. These costs stemmed from a $200 million trade made before the 4th of July but not executed until July 7th. This single trade cost $3.8 million to execute."

So a trade cost 3.8 million, but total costs were 1 million LESS????

Believe it or not, trading the "I" fund costs money but, based on trade amount and number of trades, there are sometimes "credits" applied. I am interested on why the difference would be 1 million dollars.

What I like in the minutes are:

Ms. Ray reviewed the August 8, 2008 memorandum (attached), entitled "July 2008 Performance Review - G, F, C, S,I, and L Funds."
She noted that the I Fund had a tracking error of 54 basis points, primarily due to a fair value adjustment. What did she think we should do about it????

Twopoint four billion dollars were transferred into the G Fund in July. Mr. Sanchez remarked that no matter how much we try to educate our participants, many of them still chase after yesterday's news.

Um, I was planning on this crash happening back then????? Just not smart enough to be out by then?

Mr. Sanchez noted that he enjoyed reading the columns written by Mike Causey, a reporter on theFederal beat. What did he like about them????

The bright spot is the L Fund balances continue to grow and, in particular, in the longer dated funds. This may demonstrate that younger TSP participants are viewing the TSP as a long-term plan.
Or the new system creates a field of sheep. "So sayeth the shepherd, SO SAYETH THE FLOCK!!" mentality.

[James48843]

Yes, trading costs have soared since they imposed limits.

Tracey Ray is telling the board that it would have been worse, had they not imposed trading limits. That is exactly the opposite of the truth.

Had the board instead adopted our suggestion of 1. Leaving unlimited moves, and 2. valuing the "I" fund at 7 a.m. the following morning instead of 7 pm. the evening before, the 54 basis point error would have been reduced by - maybe 95%, and the trading costs likewise would have been reduced by millions every month.

The trading costs would have been less than 1 million for the month.


But "Tracey Ray says..." so they believe it.

Everybody should read every month's minutes. And then every person should contact the ETAC members, and demand that they relook the trading limits, and the time of day the valuation is done.

[Silverbird]

The more I look at this, the less I trust the FRTIB with international funds, and think if they allowed as many trades as we wanted and got rid of I as an option, there wouldn't be any problems.

We can invest our first 5% in Gov Bonds, U.S. Bonds, SP 500 and Wilshire 4500. They can match it, and if we want to invest in international markets, individual stocks, and industries, we can do it ourselves in an IRA. G, C, S, F, those appear to be the extent of their competency. This would keep expenses down too!

<----FRTIB trying to deal with exchange rates and FVA.

[Braveheart]

The more I look at this, the less I trust the FRTIB with international funds, and think if they allowed as many trades as we wanted and got rid of I as an option, there wouldn't be any problems.

We can invest our first 5% in Gov Bonds, U.S. Bonds, SP 500 and Wilshire 4500. They can match it, and if we want to invest in international markets, individual stocks, and industries, we can do it ourselves in an IRA. G, C, S, F, those appear to be the extent of their competency. This would keep expenses down too!

<----FRTIB trying to deal with exchange rates and FVA.

Now they are running to the Media using a SPIN campaign about the IFT limits and how ironic they stated there were 4000 members who made frequent trades. They fail to mention this was to save money my friigin arse. Tell us how much money was lost by the FRTIB since May 1, 2008. There is a reason members stay in the I Fund or C Fund or S Fund because once they move they lock in that loss and they keep pushing those L Funds what a friggin disgrace. THE L 2040 IS DOWN 29% SO FAR THIS YEAR. If the entire World can change how their markets work in a single day with this crisis why can't the FRTIB.

I will bet this TSP has lost 1 BILLION DOLLARS or MORE since May 1, 2008 but great Barclays saved about $10,000 on IFT'S. The SEC, FBI are going after those computers, files, emails all of it. Wonder why the FRTIB keeps changing those computers every 5 years & emails to members are not available so how do they communicate with each other at the FRTIB - The FBI will get those phone records, emails, hard drives ???????????????

[Mike]

The L2040 being down nearly 30% has nothing to do with anything. It's a bear market, this fund is aggressively invested in stocks, so of course it's going to take a beating.

During the next bull market (and there will be one no matter how gloomy people wish to get these days), I could start posting how crappy the income fund, F fund, and G fund are because the L2040 is running away from them with a 30% gain - but what would be the point of that?

Each fund is unique in its holdings, its risk, and its purpose. I'd happily compare my returns 30 years from now holding the L2040 vs whatever other people have been holding during the same period of time. I'll probably end up ahead of most of them.

[Minnow]

The L2040 being down nearly 30% has nothing to do with anything. It's a bear market, this fund is aggressively invested in stocks, so of course it's going to take a beating.

During the next bull market (and there will be one no matter how gloomy people wish to get these days), I could start posting how crappy the income fund, F fund, and G fund are because the L2040 is running away from them with a 30% gain - but what would be the point of that?

Each fund is unique in its holdings, its risk, and its purpose. I'd happily compare my returns 30 years from now holding the L2040 vs whatever other people have been holding during the same period of time. I'll probably end up ahead of most of them.

Hey Mike... in 30 years, the L2040 will be the L2010 fund (in today's terms)... don't get too high on it's potential!

[Mike]

I'm well aware of what it will be in 30 years - and that is precisely the point of investing in it. I don't have to reallocate anything because it's done automatically. Again, I will gladly put up my returns using the L2040 over my career vs. anybody else's allocations during that timeframe. If you can top this fund over such a period of time, you're truly an investment guru and should be raking in the bucks managing a hedge fund or something. But I'm guessing most people will fall well short due to emotional selling/buying which rears its ugly head in the typical investor time and time again.

[Minnow]

I'm no investment guru... trust me. Anyone that's read virtually any post I've made knows this. But my returns are beating the L2040 in this bear market... and my returns last year (thanks to Ebb and a couple of others) beat the L2040 when the bull was in season. Can I do this over the long haul? Remains to be seen.

Enough about me... the L2040 is not bad so don't take it that way. I'm just saying perhaps the L's aren't the "be all ... end all" of the TSP. You meeting your individual goals is what's important and if the L2040 does that for you, then all the better. Just don't think that it's gonna beat me --- average Joe sixpack who has taken the time to educate himself but isn't necessarily a market guru.

[James48843]

Hey Minnow-

As long as I have been looking at them, the L funds have been an interesting study.

You mention "Joe SixPack".

Well, I really do think that for Joe, the L funds are very good long term investment vehicles, and I am glad that they are choices available to Joe SixPack. And to Sally SixPack too.

I work very hard trying to better the L2040- and, like you, have been able to better the L2040 both last year and this. However, I feel I have had to work a LOT to try and do that, and that for Joe and Sally, who may not have the time to educate themselves- or the ability to monitor (like Joe and Sally Servicemember, who are deployed serving our nation at the moment, and might not be watching the Dow today....) the L funds are great tools.

[Mike]

I wish you both good luck in trying to beat the L2040 when the market flips from bear to bull. The initial returns off bottom can be insanely large and happen quickly. Between that and the anticipation of another "bear market rally" that turns into something totally different is where I believe the timers are at a clear disadvantage to passive allocation.

I'm about to post a cool chart somewhere, but I haven't decided which thread to do it in. It'll add some perspective on what we are going through now and - if history is a guide - what we should expect in the future.

[Minnow]

Hey Minnow-

As long as I have been looking at them, the L funds have been an interesting study.

You mention "Joe SixPack".

Well, I really do think that for Joe, the L funds are very good long term investment vehicles, and I am glad that they are choices available to Joe SixPack. And to Sally SixPack too.

I work very hard trying to better the L2040- and, like you, have been able to better the L2040 both last year and this. However, I feel I have had to work a LOT to try and do that, and that for Joe and Sally, who may not have the time to educate themselves- or the ability to monitor (like Joe and Sally Servicemember, who are deployed serving our nation at the moment, and might not be watching the Dow today....) the L funds are great tools.

absolutely.... could not agree more. Guess I'm just sour over the whole 2 IFT thing and the fact that Ray, Long, et al pushed the L funds while denouncing the "day traders." I'm still a bit steamed (can't imagine how steamed YOU were even after putting up the good fight).

and, yes, it has been work and study to beat the L2040 but the education received (and am presently receiving thank you very much) was priceless not to mention all the great retirement advice on this site I would not have received until my agency decided to give me a f'ed up seminar full of lies and half-truths 3 years before my retirement date.

[James48843]

Folks- just a little note here.

When the invoked limits, I talked about "costs".

1. Costs to freedom sure. This is classic example. If you pull out now, and you've already moved once or more this month, you are trapping yourself locking in the loss until next month. That is one kind of cost on us they have imposed. So we all must stay in now, on the hopes we recover something before the end of october. We're already the biggest single month decline since the great depression, and there is no end in sight.

2. But the other kind of costs as well. We told them if they imposed limits- the trading costs would go up, not down. they didn't listen to us.
ANd guess what? The first quarter of data is now in. I'm studying it now.

And costs have soared.
Through July:

YTD costs for F fund went from 192,000 to 1,552,711
YTD costs for C fund went from -216,254 to +329,258
YTD costs for S fund went from -101,308 to + 367,371
and in July alone, I fund trading costs went from $248,847 to $2,796,494


All of the funds trading costs went up. As basis points, it went up. the dollar volume went down, but the costs soared.

I will be studying the numbers some more, and writing later about this.

You all should be ready to start writing some real angry letters soon.