Mike Causey is misleading Feds

[FundSurfer]

From the August TSP Board minutes:

"Year-to-date trading costs for the I Fund are only $3 million compared to $13 million for all of last year."​

"....the fact that 99 percent of interfund transfer activity was conducted via the web."​

"The year-to-date expense ratio is one basis point, but this will increase before year's end."
THIS IS VERY SMALL!!! ​

"Last Thursday, $730 million was transferred out of the I Fund. The overseas markets opened down on Friday and the trades were executed at these lower prices. Consequently, transaction costs for that one day were $9.5 million."​

If I'm reading that right, they MADE MONEY on transfers out of the I-fund!!!​

View attachment 2215​

LOOK at the numbers!!!! The frequent trading is put the trading cost POSTIVE through August!!!! The one basis point of cost has to come from ADMINISTRATIVE stuff and call center. F-fund and I-fund are positive 3.2 basis points and C&S are negative 0.5 basis points for a TOTAL of POSITIVE 2.7 BASIS POINTS!!!!​

Read the August minutes for yourself. http://www.frtib.gov/FOIA/minutes-board-member-meetings_2007Aug.pdf​

If you can't tell from my tone, I'm hot under the collar. Mike Causy doesn't know his rear from a hole in the ground. The board expressed concern over trading cost, as well they should have. Frequent traders are PAYING most of the admin cost this year through August!! Ole, Mikey is making is sound like frequent traders are costing everyone else a boatload of money. He obviously can't add / subtract / or do basic math!!!! What an idiot.

 

[FundSurfer]

http://www.washingtontimes.com/apps/pbcs.dll/article?AID=/20070904/NATION06/109040043

Mike Causey's article was written Sep 4 and had to be based on the public version of the Aug TSP Board meeting. WHERE in those minutes does it suggest that the board is "eye limits on trades"???

Liar.

 

[James48843]

Very good link that everyone should read- the August board minutes in their entirety:

http://www.frtib.gov/FOIA/minutes-board-member-meetings_2007Aug.pdf


Other things I picked up on- they mention August 16th as a date when a lot of people made a trade out of the "I" fund. For what it's worth, August 16th is a day that Ebb went TO the I fund, and kept it there for a few days.

So our Ebb trades INTO the "I" fund that day HELPED the TSP with costs, not hurt the TSP.

Something to keep in mind.

 

[SkiUtah]

Seems much dis-information out there on the cost of doing business.
I got the below article from our own TSP corner, and Ralph...states at the bottom of the article.

"trading costs for the month of August for the I fund: approximately $10.5 million.

I think we should take up a collection and send Tom to D.C. for the next TSP board meeting....they are open to the public, right?


TSP Corner with Ralph Smith

$2.9 Billion Traded from TSP Stock Funds in August

By Ralph Smith
9/18/2007
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As we noted in an article a couple of weeks ago, the TSP funds did pretty well in August. (See Volatility Can Be Good: TSP Funds Generally Up in August) But, despite the performance of the funds for the month, there was considerable volatility with swings in the triple digits becoming almost routine. So, while TSP investors continued to do well, what actions did they take with regard to their TSP funds? Did they leave the money in the funds or start moving it around--perhaps out of concern that the future direction of the market would be heading south?
Here is a quick summary of what actions participants took in the TSP funds during August:

• <LI style="MARGIN-TOP: 3px; MARGIN-BOTTOM: 3px">Participants transferred $2.9 billion from the equity funds to the more conservative F and G Funds. <LI style="MARGIN-TOP: 3px; MARGIN-BOTTOM: 3px">For the first time since they were started, participants started selling more shares of the lifecycle funds (the L funds).
• Despite the redemptions of the lifecycle funds, all L Fund balances continued to grow because of new money coming in from regular paycheck allotments.

The transfer of funds from stock funds (the C, S and I funds) into more conservative funds is not a big surprise. That usually happens when there is market volatility. As we have noted in previous articles, many of the TSP investors who try to time the market in this way often lose money in the long run but, human nature being what it is, leaving money in the funds is hard when there are big fluctuations in the market. ((See, for example, "Your TSP Stocks Dropped in February: Did You Learn Anything?")
But the number of participants who moved money out of the lifecycle funds is something of a surprise. The concept of these funds is that investors can put their money into one of the funds and let it ride. The funds are balanced between stocks and bonds with the more conservative funds, for those getting closer to retirement, having a larger percentage of their money in bonds. The more aggressive funds, for those investors further from retirement, have a larger percentage of investment dollars in stocks and less in bonds.
But, in an apparent attempt to time the market, TSP investors pulled money from the L funds and transferred these funds into the G and F funds. In effect, they are betting they can do a better job by guessing when the market will go up or down then they could do by leaving their investment funds in the appropriate lifecycle fund when the market is moving up or down quickly.
Whether jumping out of the lifecycle funds is a good idea remains to be seen. Trying to predict the future of the stock market is a risky business and very few people are able to time the market successfully on a regular basis. As we noted in a recent article about the financial results for mutual funds (not just TSP funds), the actions of most investors who attempt to buy and sell their funds usually results in a financial loss. "The average mutual fund had a 20-year average return of 10.7 percent. The average investor had a return in the same period of 3.7 percent."
The reason for the drastic difference between the fund performance and the performance of individual investors: emotion. Individual investors tend to panic during market slumps and sell their funds. When the market recovers, their outlook improves and they buy more stocks. The result is that these investors "buy high and sell low" which hurts their overall financial return.
Chances are, those TSP investors who bailed in August will eventually show lower financial results in the long term than those investors who buy and hold for the long term. But, while that has been the historical result, these investors obviously have different ideas. And, if they can sleep better at night after selling their C, S or I funds during a volatile month, perhaps they have made the right decision.
During the past few days, there has been considerable discussion on the FedSmith site about trading costs. In other words, how much does it cost when TSP investors start trading their funds in an attempt to avoid a major change in market performance.
The trading costs are higher for the international stock fund (the I fund). costs in the I Fund remain the highest of all of the TSP funds. Markets in Australia and Asia close before an order for that day is received so the trades are executed the following morning. When the stock market is moving up or down rapidly, this execution lag can result in significant trading costs.
August was a volatile month as noted above. The I fund had the most activity among the TSP funds. The total dollar amount traded in the I fund in August: $3,222,551,793. For those who are used to dealing with the small amounts in our personal checking and savings accounts, this is just over three billion dollars for the month. Total trading costs for the month of August for the I fund: approximately $10.5 million.

For comparison purposes, the total dollar amount traded in August for the C fund: about $1.5 billion. Total trading costs for the C fund during August: $928,344.

© 2007 FedSmith Inc. All rights reserved. This article may not be reproduced without express written consent of FedSmith Inc.

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[FundSurfer]

I read the September minutes of the board meeting and the cost basis for TSP will likely go up for next year by one basis point. The is because of need to upgrade the computer/software system currently being used NOT because of trading cost. This year the current budget is UNDER projections. There was NO discussion of having to change the budget to account for increased trading cost.

I'm sorry to keep harping on this but I personally think Mike Causey owes his readers an appology. I've sent his editor a letter suggesting such.

 

[FordMan]

Mike Causey is only a reporter. He's humble enough (just ask him) to realize that he's not a numbers guy. He's throwing it out there for US to run with. So, give him something to work with.