Request For Comments

[Guest]

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Request For Comments >
Should TSP Participants Stay Out of Stocks for August & September?
Please share your thoughts and insights with me.

 

[Dave M]

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Hey WW, how's it going? I am in 60% at present. I intend to stay in. Lemme ask you, where do your new contributions go -- into the G?

Dave

 

[Birchtree]

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I wish DaveM would lend me that 40% cash he has so I could put it to work. As a contrarian now is the time to close your eyes and hold your nose and buy, buy, and buy some more. There are some big days coming our way. Just look at the Chicago PMI as a harbinger - interest rates - who cares. The situation is such that one has to have a certain leve of faith in our economic system - you have to be in to win. Being a cluck cluck is fine, you can always catch the next cycle 5 years from now. Actually for those that are now just starting accumulations that along with dollar cost averaging is their only option - so put it in the market and participate as much as you can. The BULL does not want the G folks on his back anyway - they will get bucked off the first hint of trouble. There will be many head fakes and corrections that will try to wear you down - stay the course unless you are a good pistol shooter.

Dennis

 

[ou81200]

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WW---

Today, I came out of stocks and went 100% F fund. As you know,summertime is historically poor with stocks. But this year for some reason is different. With the earning winding down after today.I don't see a catalyst for this run to continue. I could be wrong though. On our survey, I put down that it would be bullish next week. But that was before what the market was doing today. After next week, I may be able to give you a better mid term prediction.

Good Luck in your ventures

 

[GALLO1]

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I'm following BT's lead. I went 100%C 13 July and I've committed to stay at least until Jan 06. Now that I'm paying attention to the market I will have a harder time staying in the saddle.Before becoming a member here, I closed my eyes for 16 years being inTSP. I don't see why I can't do the same thingnow except this time I'm buying like I've never bought before. My gut tells me that this is the time to make as much $ as I canbecause I feel there will definately be tougher times down the road.

If Iwere only a good pistol shooter.

 

[Aslan]

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Gallo,

Why 100% C? Why not any exposure to S? I think your strategy of staying in may not be a bad idea at all. The little research that I've done shows that mostyears from Oct 1st-Dec 31st have been great times to be in, especially October which I think has been down once in the last 10 years (2002, I think) Even during "Bear" markets, October is a great month. Time will tell, though.

 

[GALLO1]

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Asian,

At some point I'd like to get into S and I, however, I wanted to get the most sharesthat I possibly could in equities and to build those shares up. If the market loses some steam Aug/Sep I'll get even more shares and that should make Oct-Dec that much sweeter.

 

[Spaf]

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Wonder Woman wrote:

Request For Comments >
Should TSP Participants Stay Out of Stocks for August & September?
Please share your thoughts and insights with me.

Each participant needs to make their own decision! Anytime in stocks is a risk, that everyone has to calculate for themselves

This decision should be based on understanding the fundamentals (the economy) that shapes the market, and the analysis of primary indicators (charts, etc).

Knowing some basics like The Dow Theory is a big plus in defining and understanding market actions.

As of the end of July the market is at a high. Money flow is in the positive range and strength is good. The economy is on par, and recent earnings reports have for the majority been good.

However, in the opposing couner we have the four horsemen: Inflation, rates, earnings, and energy. Monitoring Nymex for oil, the pricing on July 29th was $60.57 a barrel. Above 60 generally means bad news for the cap funds. Earnings are good, inflation is low. However, the Fed keeps rasing the rates; which hurts any bond funds.

The start of August 04, we were seeking lower lows. Ending July 05 we have a slight pullback from highs. The MACD (moving average convergence divergence) is very close and could turn either way.

Ifsomeone could put Krude in the can, I would be moderately bullish.

Rgds, and be careful! Spaf

 

[Birchtree]

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Aslan,

If you think October is so great you are not going back in time far enough. There was a period in 1977, 1978, 1979, when we had October massacres - enough to scare the life out of most people. These things were multi - hundred points straight down with no hint of a bottom in sight. Similar to looking down a dark well. And now a word of caution from a contrarian - we all know that the small caps and the midcaps have continued to rise and set new all-time highs lately, but history has shown that such a rise is not sustainable until large cap indices (and a blue chip index like the DJIA) confirm that rise as well. So keep your eyes wide open as you ride that pretty girl S fund. All you need on the Dow is 10,940.55.

 

[Guest]

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Birch, are you suggesting nothing in S Fund in that last post?

Ron

 

[Birchtree]

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Ron,

Only suggesting that if there is not a confirmation by a large cap index to support the small caps there is trouble not to far into the future. One has to remember that the small cap indices are putting in 7 year highs - they have been the outperformance group to date. They will continue to have gains but I believe the large caps will soon assume outperformance - it may take another 6 months or it could have already started this week. I've had my spin with the small caps and now it's time to move on to other groups. If I were younger and in accumulation mode I'd be 75%C and 25%I. and dollar cost average for as long as it takes to build a healthy position. But now that I have my large position I want to use 100% leverage to make money as a position trader- and stll continue my allocation contribution to dollar cost average into the value play - that is the C fund.

 

[Dave M]

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WW, I am beginning to think it is unwise to get completely out of stocks, ever, once one isin.

BT, I think of my 40%asa reserve whichIcan commit at any time.October is approaching, always a good month for me. Meanwhile I am buying 20-25sharesevery time, which helps.

Dave

 

[Quips]

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So long as there is a "measured pace" increase in interest rates the F fund will be affected the most in my opinion.

So far this year the returns on equities are poor to average. However, it is my guess that the yearly return will be 10% for the group. So, there is more upside coming. I do not try to micro-manage with interfund transfers with the risk of selling low and buying high

HenceI do hedge in the bond funds -- something like a combined 24-25% asset allocation now. Also rather than taking advantage of dollar cost averaging with all funds but the G, my strategy is to have the equity funds work to maintain its overall percentage of its asset allocation.

I try not to micro-manage via interfund transfers although I domicro-manage contribution allocations. Market gyrations have an irritatable effect on me.

 

[Birchtree]

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Quips,

Welcome to the fun house. Have you met DaveM yet - you both have similar type strategies.

Yes, everyone now thinks bonds are heading lower - that may be the reverse surprise for August. I think the Fed has a market surprise waiting in the wings- one more hike and then the pause. If that happens - buckle up. August has the potential to be down right explosive - looking ahead to a 5% GDP without inflation.

 

[Guest]

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Thanks Dave, ou81200, GALLO1, Birch, Spaf and Quipsand all

I'm doing fine Dave and Spaf thanks for your well thought out response.
I gathermostwould only attach a minor significanceto the historical trend here in the
Seasonality Chart

 

[Quips]

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You are much more bullish than most. Most are figuring on a 3 to 3.5% increase in GDP.

In my opinion there will be no pauses in the Fed's rate. I see 0.25% rate increases until rates are at 4.5%. I base that on the real estate market and its valuations and financings. It is pretty crazy in Florida.

The increase in interest rates may produce an inverted curve or at least a flat line between short and long terms. I don't think Greenspan will pause on the measured pace of iinterest rate ncreases just for a legacy of his departure.

I plan to renew my subscription to a market timing newletter after the start of 2006. Until then I see no big change coming; only better than gradual growth in equity funds.

 

[rokid]

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Wonder Woman wrote:

Request For Comments >
Should TSP Participants Stay Out of Stocks for August & September?
Please share your thoughts and insights with me.

Is this like an IETF RFC? Do we need to number them, i.e. RFC 1?

 

[Birchtree]

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Quips,

The preliminary GDP for the second quarter came in at 3.4% - that was minus the inventory numbers. If one includes inventory the GDP was close to 5.8% unadjusted. The preliminary figure more than likely will be adjusted upward. The third quarter may come in at 5% with low inflation.

I routinely have never trusted the Fed - they are no friends of mine. Even if they keep increasing at the .25% pace they are close to being done. The rates over time are putting in lower highs - this bull market recognizes the strength that is on the horizon and will act accordingly - big point moves are on the way - be ready.

 

[Guest]

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rokid wrote:

Wonder Woman wrote:

Request For Comments > Should TSP Participants Stay Out of Stocks for August & September? Please share your thoughts and insights with me.

Is this like an IETF RFC? Do we need to number them, i.e. RFC 1?

I know Rokid it gets so confusing. I can barely figure it out

[suP]You know once Birch gets involved one never knows where things are going to go!

[/suP]

 

[Quips]

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I believe oil prices will have more to do with economic growth from here forward rather than the Fed. I believe the Fed will keep on increasing it overnight leading rate by 0.25% until it gets to 4.25 - 4.5%.

Greenspan is still the inflation hawk; if oil prices drop to $55 a barrel, things will pick up in the economy. It willa high enough interest rateto off-setany drag such increases would have on real estate and construction and other reasons for borrowing. Greenspan keeps on talking about how strong the economy is; that is his justification for further interest rate increases.

The market so far has reponded favorable to modest job growth. This Friday another report will come out. It is my hope that the pace of its growth will continue. It will be bad news in the short term if it reflects an upward spike to correct lower inventory level.