What is a "FV" and how does it work?

[Gilligan]

So assuming nothing occurs in the USM on Monday, and the FTSE didn’t do anything either, the I fund could be down the 21 cents even with gains neutral. All hypothetically of course.

Thats correct. If the OSM and currency markets are flat then the I fund would lose 21 cents.

 

[budnipper1]

I caught my penny mistake on the G fund shortly after posting this while visiting the TSP site. It's about a day over due from the looks of past payouts. I’m trying understand this, without thinking of the implications however J
mY KEYBOARD JUST WENT ASCII ON ME!

I've stopped worrying about the G-penny payday. A $100,000 (hypothetical)TSP account balance, 100% invested in the G fund, would hold 8278.1457 shares at $12.08/share and earn a grand total of $82.78 on the next penny payday. For me, moving to G is only for avoiding losses in the other funds. Unfortunately, I never seem to do it at the right time.

mY KEYBOARD JUST WENT ASCII ON ME!
Sorry about that keyboard!​

 

[Rustynutt]

So assuming nothing occurs in the USM on Monday, and the FTSE didn’t do anything either, the I fund could be down the 21 cents even with gains neutral. All hypothetically of course.

I caught my penny mistake on the G fund shortly after posting this while visiting the TSP site. It's about a day over due from the looks of past payouts. I’m trying understand this, without thinking of the implications however J

mY KEYBOARD JUST WENT ASCII ON ME!

 

[Gilligan]

How does that relate to the FV?

Say, one night the Nikkei and FTSE are down. The US markets gain 3% on some great news. You run to your computer and go 100% I-Fund and you know that you are fixing to make a bundle. Now Barclays is getting tons of orders to buy I-Fund shares but the foreign markets that trade those shares are closed. So Barclays has to predict what they can buy the EAFE shares for when the markets open up. Since the foreign markets generally follow the US markets, Barclays imposes a 3% FV.

It's starting to make sense, and can understand why a lot here are calculating what the FV would be on a certian day after trading.

Let me build a word problem and see if I'm close. I'll use this past Friday as an example (08/24/2007).

Nikkei was down slightly at close.
FTSE were basically flat.
US Market had a bit of positive bounce.

So the I fund should get a +FV (minus a possible 3% to zero value, or I guess could be said no FV) on Mondays close, +/- any FTSE gain/loss.

My hedge is, the FTSE will rally somewhat on Monday, a decent payday.

My other hedge is (using market forcast data of course) the US Market bounce will fall back harder than an anchor onto a pillow filled with Chinese chicken feathers Tuesday after the FTSE closes. Think they call that the dead cat bounce here
:

It has been assumed that Barclays calculates the FV from the EAF from about noon to market close. EAF moved from 77.5 to 78.3 during that time frame for a change of 0.8, or just over 1%, that’s close to the .21cents that 350Z calculated.

Now Monday we should have a Fair Value Correction (FVC) of minus 21 cents, but the overseas markets should rally enough to take care of that. Now if the USM tanks in the afternoon and we close 1% or more in the red, we could see a –FV on top of the FVC.

I do an IFT to be out of the I fund Monday night. I get to take the FV (+ or -) with me to the other fund. Lets use G as an example. The G doesn't pay it's penny until Tuesday close, and COB the IFT picks up the penny.

Thats correct, but IMO the penny will pay on Monday.

STOP

Anywhere close?

Close enough,
I hope that I haven’t dazed and confused you any more.
Gilligan

 

[Rustynutt]

How does that relate to the FV?

Say, one night the Nikkei and FTSE are down. The US markets gain 3% on some great news. You run to your computer and go 100% I-Fund and you know that you are fixing to make a bundle. Now Barclays is getting tons of orders to buy I-Fund shares but the foreign markets that trade those shares are closed. So Barclays has to predict what they can buy the EAFE shares for when the markets open up. Since the foreign markets generally follow the US markets, Barclays imposes a 3% FV.

It's starting to make sense, and can understand why a lot here are calculating what the FV would be on a certian day after trading.

Let me build a word problem and see if I'm close. I'll use this past Friday as an example (08/24/2007).

Nikkei was down slightly at close.
FTSE were basically flat.
US Market had a bit of positive bounce.

So the I fund should get a +FV (minus a possible 3% to zero value, or I guess could be said no FV) on Mondays close, +/- any FTSE gain/loss.

My hedge is, the FTSE will rally somewhat on Monday, a decent payday.

My other hedge is (using market forcast data of course) the US Market bounce will fall back harder than an anchor onto a pillow filled with Chinese chicken feathers Tuesday after the FTSE closes. Think they call that the dead cat bounce here

STOP

I do an IFT to be out of the I fund Monday night. I get to take the FV (+ or -) with me to the other fund. Lets use G as an example. The G doesn't pay it's penny until Tuesday close, and COB the IFT picks up the penny.

STOP

Anywhere close?

 

[Gilligan]

We only had 2 FV’s in September; which is down from the normal 20% to about 10% of the time.

 

[ayla]

Forget my input here. It is wrong.

FYI- Here's some data to fill in for the more recent dates not posted by eino. I've got a spread sheet where I downloaded the MSCI EAFE data and did some calculations and came up with the FV numbers below.

Well, for anyone who has looked at my post of FV values very closely, (and is scratching their head) you will find that my data is bad. Somehow the dates I've downloaded from the MSCI EAFE site are not matching up with the dates for the calendar on the TSP site. Back to the drawing board, oh well.

 

[ayla]

Remember, many of these are corrections to an FV, and not an FV themselves.

Yes, please note the plus signs and minus signs on the amounts. They are significant for obvious reasons. What they give, they take away and vice versa.

 

[Wheels]

Remember, many of these are corrections to an FV, and not an FV themselves.

 

[ayla]

FYI- Here's some data to fill in for the more recent dates not posted by eino. I've got a spread sheet where I downloaded the MSCI EAFE data and did some calculations and came up with the FV numbers below. If the FV (or difference) in my calculations was less than 3 cents, I set it to $0.00 so there could be some errors there if they ever do a FV for less than $03.

23-Jun-06 -$0.15
26-Jun-06 $0.48
27-Jun-06 $0.53
28-Jun-06 -$0.55
29-Jun-06 -$0.20
30-Jun-06 -$0.43
3-Jul-06 $0.41
5-Jul-06 $0.00
6-Jul-06 $0.00
7-Jul-06 -$0.28
10-Jul-06 -$0.13
11-Jul-06 $0.06
12-Jul-06 $0.00
13-Jul-06 $0.00
14-Jul-06 $0.00
17-Jul-06 $0.46
18-Jul-06 -$0.17
19-Jul-06 $0.00
20-Jul-06 $0.05
21-Jul-06 -$0.16
24-Jul-06 $0.00
25-Jul-06 $0.26
26-Jul-06 $0.09
27-Jul-06 -$0.36
28-Jul-06 -$0.17
31-Jul-06 $0.40
1-Aug-06 -$0.38
2-Aug-06 $0.43
3-Aug-06 -$0.50
4-Aug-06 $0.27
7-Aug-06 $0.11
8-Aug-06 -$0.23
9-Aug-06 $0.00
10-Aug-06 $0.17
11-Aug-06 $0.15
14-Aug-06 -$0.08
15-Aug-06 -$0.17
16-Aug-06 -$0.12
17-Aug-06 $0.10
18-Aug-06 -$0.08
21-Aug-06 -$0.05
22-Aug-06 $0.05
23-Aug-06 -$0.05
24-Aug-06 $0.14
25-Aug-06 $0.00
28-Aug-06 -$0.07
29-Aug-06 $0.00
30-Aug-06 $0.07
31-Aug-06 $0.18
1-Sep-06 -$0.26
5-Sep-06 $0.00
6-Sep-06 $0.00
7-Sep-06 $0.00
8-Sep-06 $0.00
11-Sep-06 -$0.11
12-Sep-06 $0.10
13-Sep-06 $0.00

 

[Gilligan]

Oldschool provided this link in another thread:

U.S. Securities and Exchange Commission

Division of Investment Management:
April 2001 Letter to the ICI Regarding (FAIR) Valuation Issues

http://www.sec.gov/divisions/investment/guidance/tyle043001.htm

 

[The_Technician]

Tally of them fudging the daily I-fund prices in 2006

Hey eino, if you got that in a tabular form how about posting it....

 

[mlk_man]

One thing we've always agreed on greggy. Besides your comb-over that is.

 

[eino]

The FV means “Fair Valuation” or “Fair Value Adjustment” or “Fair Value Pricing”.

There's nothing fair about it !

 

[eino]

Tally of them fudging the daily I-fund prices in 2006
======================================
Jan 03 Overpriced by 1.480%
Jan 04 Underpriced by 0.707%
Jan 05 Underpriced by 0.478%

Jan 06 matched MSCI (0.983% to 1.013%)
Jan 09 matched MSCI (-0.108% to -0.135%)
Jan 10 matched MSCI (-0.920% to -0.917%)
Jan 11 matched MSCI (0.820% to 0.844%)
Jan 12 matched MSCI
Jan 13 matched MSCI
Jan 17 matched MSCI
Jan 18 matched MSCI
Jan 19 matched MSCI

Jan 20 Underpriced by 0.498%
Jan 23 Overpriced by 0.513%

Jan 24 matched MSCI (0.165% to 0.145%)
Jan 25 matched MSCI (0.550% to 0.565%)
Jan 26 matched MSCI (0.930% to 0.888%)
Jan 27 matched MSCI (0.813% to 0.815%)
Jan 30 matched MSCI (-0.269% to -0.226%)
Jan 31 matched MSCI (0.647% to 0.607%)
Feb 01 matched MSCI (0.054% to 0.072%)
Feb 02 matched MSCI (-0.589% to -0.618%)
Feb 03 matched MSCI (-0.808% to -0.787%)
Feb 06 matched MSCI (0.054% to 0.078%)

Feb 07 Underpriced by 0.492% (-0.760% to -0.268%)
Feb 08 Overpriced by 1.047% (0.055% to -0.992%)
Feb 09 Underpriced by 0.497% (0.546% to 1.043)

Feb 10 matched MSCI (-0.652% to -0.623%)
Feb 13 matched MSCI (-0.3285 to -0.341%)

Feb 14 Overpriced by 0.698% (0.823% to 0.125%)
Feb 15 Underpriced by 0.769% (-0.653% to 0.116%)

Feb 16 Overpriced by 0.524% (0.877% to 0.353%)
Feb 17 Underpriced by 0.538 (-0.652% to -0.114%)

Feb 21 matched MSCI (on 20th MSCI = 0.0%, on 21st 0.437% to 0.430%)
Feb 22 matched MSCI (0.272% to 0.206% - this was actually a penny high but I'll let it slide)
Feb 23 matched MSCI (0.977% to 0.960%)
Feb 24 matched MSCI (0.000% to 0.041% - they could have paid a penny but maybe needed to make up for the 22nd extra penny)
Feb 27 matched MSCI (0.591% to 0.559%)
Feb 28 matched MSCI (-0.481% to -0.458%) Feb 21 matched MSCI (on 20th MSCI = 0.0%, on 21st 0.437% to 0.430%)
Feb 22 matched MSCI (0.272% to 0.206%)
Feb 23 matched MSCI (0.977% to 0.960%)
Feb 24 matched MSCI (0.000% to 0.041%)
Feb 27 matched MSCI (0.591% to 0.559%)
Feb 28 matched MSCI (-0.481% to -0.458%)
Mar 01 matched MSCI (0.215% to 0.157%)
Mar 02 matched MSCI (-0.322% to -0.318%)
Mar 03 matched MSCI (-0.215% to -0.264%)
Mar 06 matched MSCI (0.323% to 0.358%)
Mar 07 matched MSCI (-1.289% to -1.330%)
Mar 08 matched MSCI (-0.490% to -0.545%)
Mar 09 matched MSCI (1.148 to 1.151%)
Mar 10 matched MSCI (0.000% to 0.009%)
Mar 13 matched MSCI (1.297% to 1.247%)

May17th I-fund down -3.02%- MSCI down 1.929%
May 18th I-fund down 0.20% - MSCI down 0.885%
May 19th I-fund up 0.26% - MSCI down 0.897%
May 22 down 2.40% - MSCI down 1.811%
May 23rd I-fund up 1.52%- MSCI up 1.491%
May 24th I-fund down 1.29% - MSCI down 1.269%
May 25th I-fund up 1.41% - MSCI up 0.632%
May 26th I-fund up 0.67% - MSCI up 1.416%
May 30th I-fund down 1.28% - MSCI up 0.255% on Monday & down 0.646% today
05/31/06 I-Fund up 0.52%, MSCI down 0.425%
06/01/06 I-Fund up 0.21%, MSCI up 0.171%
06/02/06 I-Fund up 1.44%, MSCI up 1.434%
06/05/06 I-Fund down 1.78%, MSCI down 0.566%
06/06/06 I-Fund down 1.70%, MSCI down 2.922% <-- back to being even
06/01/06 I-Fund up 0.21%, MSCI up 0.171% <-- Matched
06/02/06 I-Fund up 1.44%, MSCI up 1.434% <-- Matched

06/05/06 I-Fund down 1.78%, MSCI down 0.566% - underpriced by 1.2%
06/06/06 I-Fund down 1.70%, MSCI down 2.922% - overpriced by 1.2% <-- back
to being even

06/07/06 I-Fund down 0.420%, MSCI down 0.485% <-- Matched

06/08/06 I-Fund down 2.586%, MSCI down 3.631% - overpriced by 1.0%
06/09/06 I-Fund up 0.650%, MSCI up 1.702% - underpriced by 1.0% <-- back to
being even

06/12/06 I-Fund down 1.668%, MSCI down 0.844% - underpriced by 0.8%
06/13/06 I-Fund down 2.956%, MSCI down 2.945% <-- Matched
06/14/06 I-Fund up 1.410%, MSCI up 0.599% - overpriced by 0.8% <-- back to
being even

06/15/06 I-Fund up 3.226%, MSCI up 1.996% - overpriced by 1.2%
06/16/06 I-Fund down 0.539%, MSCI up 0.614% - underpriced by 1.2% <-- back
to being even

06/19/06 I-Fund down 0.325%, MSCI down 0.34% <-- Matched
06/20/06 I-Fund up 0.217%, MSCI up 0.217% <-- Matched

06/21/06 I-Fund up 0.922%, MSCI up 0.367% - overpriced by 0.5%
06/22/06 I-Fund up 0.054%, MSCI up 0.58% - underpriced by 0.5% <-- back to
being even

06/23/06 I-Fund down 0.430%, MSCI down 0.39% <-- Matched
06/26/06 I-Fund up 0.054%, MSCI up 0.006% <-- Matched

 

[nnuut]

Some how making interest on the delay! Crooks! Why not, that can be a lot of money? Just having a little fun here, BUT!! Skipping a day to pay may pay well.:notrust:

 

[Wheels]

That explanation seems reasonable as far as it goes, but it implies that the price is correctly adjusted each and every day. Where do such concepts as "owing us some" and "paying it back in a few days" come from??

It is not correctly adjusted each and every day. Many days it is not "adjusted" at all. The concept of "owing us some" or "paying it back" comes from them having to correct these adjustments when they do happen. Let's say that the MSCI EAFE index goes up 1/2%, and we are all expecting the I fund to pay 9 cents. But Barclays applies fair valuation that day and the I fund only goes up 2 cents. They still have to pay us the other 7 cents. So you will see somebody on the board say, "they owe us 7 cents". Now the next day the MSCI EAFE goes up another 1/2%. You will likely see the I fund go up 16 cents. 9 cents for the 1/2% and another 7 cents that they "owed" us.

Dave
<><

 

[Pilgrim]

That explanation seems reasonable as far as it goes, but it implies that the price is correctly adjusted each and every day. Where do such concepts as "owing us some" and "paying it back in a few days" come from??

 

[Gilligan]

I think they are CROOKS!

I used to call the FV the “Unfair Valuation”. To me the FV was like price gouging, price manipulation, or insider trading. I have been burned by the FV in the past. I wanted to write my congressman and ask him to launch a congressional investigation into Barclays practices.



After studying the FV, I try to see it from Barclays point of view. Lets use a real estate analogy.



Lets say that you have 100 acres that you put on the market to sell and you list it with a realtor for $100k including the mineral rights. Now a wild cat drilling rig just struck oil next door and the oil exploration company will pay you $5k to $10k a month in royalties. Next thing you know your realtor calls you and says that he has a cash buyer and wants to close in 2 weeks. You tell your realtor that you have decided to up the price to $1 million because of the discovery of oil, but the realtor forces the sale for only $100k.

(A realtor cannot legally do that in the US, but similar transactions like that happen in some parts of the world.)



How does that relate to the FV?

Say, one night the Nikkei and FTSE are down. The US markets gain 3% on some great news. You run to your computer and go 100% I-Fund and you know that you are fixing to make a bundle. Now Barclays is getting tons of orders to buy I-Fund shares but the foreign markets that trade those shares are closed. So Barclays has to predict what they can buy the EAFE shares for when the markets open up. Since the foreign markets generally follow the US markets, Barclays imposes a 3% FV.



Now that was not the best analogy, but I hope you can see why Barclays has to impose the FV. Barclays has to predict what they can buy or sell EAFE shares for. And, no, I do not work for Barclays.

 

[Gilligan]

WHEELS and several members have tried to explain it. This thread will hopefully shed some light on the FV.

I should have said that Wheels has explained it but it takes a while for it to sink in to our thick skulls. In the “Playing the I fund” thread the FV is discussed several times and Wheels has given some very good explanations. I still don’t fully understand how it works, but as Wheels has said in the past that Barclays doesn’t want us to understand the FV.